Conflicts of interest (COI) in property procurement
Learn about identifying and managing conflicts of interest when buying construction works and/or consultancy services for schools.
| Level of compliance | Main audience | Other |
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Required
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If an actual, potential or perceived COI exists, it must be declared and correctly managed. In procurements valued at $50,000 and more, all school representatives and people involved in a procurement (like the Project Manager) must sign a declaration before the procurement begins.
For managing conflicts while buying goods and services for schools, see the guidance below.
- Identifying a COI
- Why a COI must be managed
- Declaring a COI
- Managing a COI
- When project managers can provide additional services
- Awarding a contract where a COI exists
- Further information
Identifying a conflict of interest
A conflict of interest is a circumstance in which someone’s personal interests, obligations or relationships will or may influence the decisions that they make on behalf of the school that they represent.
When a person has a conflict of interest, their decisions could be (or perceived to be) biased. Decisions could be (or perceived to be) made in their own personal interests and not in the interests of the school that they represent.
There are three types of conflicts of interest.
| Type | Description |
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Actual
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The conflict already exists.
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Potential
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The conflict will, or could, happen in the future.
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Perceived
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A neutral person outside of the situation could interpret the circumstances as a conflict of interest.
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A conflict might arise from:
- family relationships
- professional or personal relationships
- interests in businesses
- interests in trusts
- interests in other groups or organisations
- the acceptance of gifts or other benefits.
The existence, or perception of, an incentive to act in a particular way on a school’s behalf is a potential problem.
It does not matter if the person would actually act on their incentive.
Examples
| Scenario | Issues |
|---|---|
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Example School is seeking an electrician to re-wire a block of classrooms.
A person on Example School’s supplier evaluation panel is a friend of the owner of Example Electricians.
Example School selects Example Electricians to complete the work.
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The evaluator’s judgement of Example Electricians’ offer may have been (or seen to have been) biased in favour of the company’s owner.
Example Electrician’s pricing or services offered may be (or seen to be) not the best match for the school’s needs, compared to the offerings of other electricians.
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Example School is looking for a demolition contractor to destroy a caretaker’s shed and garage.
The principal of Example School is the procurement owner and is also on the evaluation panel.
The principal’s brother used to work for Example Demolition, though resigned because of conflict with the manager.
Example School turns down Example Demolition’s offer.
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The principal’s evaluation of Example Demolition’s offer may have been (or seen to have been) biased against the company’s manager.
The demolition works purchased from another company may be (or seen to be) less suitable for the school than Example Demolition’s offer.
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Example School is looking for a construction contractor to build a new artificial turf.
A person on Example School’s supplier evaluation panel is a part-owner of Example Construction.
Example School selects Example Construction to complete the work.
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The evaluator’s judgement of Example Construction offer may have been (or seen to have been) biased, due to their financial interest in the supplier.
Example Construction’s pricing or services offered may be (or seen to be) not the best match for the school’s needs, compared to the offerings of other suppliers.
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Example Security are installing a key-card access system across the entirety of Example School.
Since awarding the contract to Example Security four months ago, Example School’s project manager has begun playing in a rugby team alongside Example Security’s installation manager.
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If the installation is not completed as specified, the project manager may be accused of having not managed the execution of the contract appropriately due to their friendship with their teammate, the installation manager.
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Why a conflict of interest must be managed
Mismanaged conflicts of interest make it appear as though a school is not acting fairly, ethically and impartially.
This can reduce confidence in the school’s buying decisions and can impact the school’s reputation.
If a school has a bad reputation, suppliers may be less likely to want to work with the school.
When fewer suppliers want to work with a school, competition amongst suppliers is reduced and the school is less likely to get a good deal on their purchases.
Declaring a COI
Staff involved in buying who have a conflict of interest must declare their COI and complete a management plan.
If the value of the purchase is $50,000 or more excluding GST (either immediately, or over a 12-month period), all staff involved in the purchase must sign a COI declaration (not only the staff with a conflict to declare). This confirms that they have no COI. It must be signed before the purchasing process begins.
The template below must be used to declare the presence or absence of a conflict of interest and when a conflict exists, record a management plan.
Procurement Conflict of Interest Declaration & Confidentiality Agreement [DOC, 120 KB]
Commercial Conflict of Interest Declaration [DOCX, 43 KB](for suppliers to complete)
Managing a COI
When a conflict is declared, the person with the conflict, the procurement sponsor and the procurement officer must all agree to a management plan. This plan must then be endorsed by the procurement leader.
The procurement sponsor and leader must confirm that the:
- proposed treatment is appropriate
- plan includes a periodic review to ensure that the treatment remains appropriate.
The procurement evaluation team should also be advised of a declared conflict.
If the procurement sponsor has the conflict, their manager or the school’s board must approve the management plan instead.
See more on Roles in property procurement.
The conflict management plan is located at the bottom of the declaration document.
Procurement Conflict of Interest Declaration & Confidentiality Agreement [DOC, 120 KB]
Commercial Conflict of Interest Declaration [DOCX, 43 KB]
Periodically review conflict management plans to ensure that they remain effective.
The management of a conflict must be noted in the Procurement Recommendation Report, which is prepared shortly before a contract is awarded.
Management methods
Conflicts can be managed by the methods below.
| Method | Description |
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Restricting
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The person’s involvement in the procurement is limited.
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Removing
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The person is removed completely from the procurement.
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Relinquishing
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The person gives up their private interest, so that they no longer have a conflict.
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Resigning
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The person resigns from the role in which they represent the school, or the role which is creating the COI.
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When project managers can provide additional services
Schools may get the best value by allowing their appointed project manager to provide other professional services, such as design or quantity surveying.
The project manager can provide the additional service only if both:
- they have no conflict of interest
- the maximum possible value of the other professional service is less than $50,000 (excluding GST) over a 12 month period.
Project managers must be approved to provide an additional service. Procurement sponsors can apply for this approval from the Ministry's school property advisor when submitting the project manager’s conflict of interest declaration to them.
The project manager cannot provide the additional service when either:
- they have a conflict of interest
- or, the maximum possible value of the other professional service is $50,000 or more over a 12 month period.
Awarding a contract where a conflict of interest exists
Schools might still choose to buy from a supplier where there exists a conflict of interest for a staff or board member, after that staff or board member has disclosed their COI and it has been managed.
For example, a buying staff member may be perceived to have a biased preference for a local demolition company. They would then disclose their COI and distance themselves from the buying process. Later, the school may find that the demolition supplier who the staff member had a potential biased preference for has made them the best offer and awards them the contract.
If this is the case and the value of the purchase is more than $25,000 including GST (either immediately, or over a 12 month period), and the person declaring the conflict of interest is a board member, then the purchase must have prior approval from the Secretary for Education.
The Secretary must be satisfied that the board member who has a COI has not influenced the purchase, even after making their COI declaration and distancing themselves from the purchase.
The school’s application must include evidence that:
- all reasonable steps have been taken to ensure that all potentially interested suppliers have had an opportunity to tender for the contract.
- all tenders have been evaluated and the preferred choice can be justified on the basis of its cost and quality.
- the school has made an agreement to accept the contract only if the purchase is approved by the Secretary for Education. Both the school and supplier are therefore aware that the purchase is conditional on the Secretary for Education’s approval.
- the person with the COI clearly declared their COI and has been distanced from the purchase.
Send this application to school.finances@education.govt.nz.
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