Supplier management and performance Supplier management and performance

An overview of our contact management procedures.

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Supplier Relationship Management (SRM)

SRM provides a holistic view of supplier management, looking at the management and performance of individual contracts, through to strategic alignment and collaboration in achieving one or more of the AT Value for Money drivers. The value ultimately realised by organisations from any supplier relationship is determined not by one single standalone contract or event, but from a series of highly inter-dependent, sequential activities which require close co-ordination.

Commercial success often comes down to the relationship between the buyer and supplier. Our SRM Framework aims to benefit this relationship by providing:

• Improved visibility of safety and supplier risks, and development of appropriate risk mitigation strategies and controls.
• Allocated resources focused to ensure suppliers deliver as expected.
• Clearly defined roles on both the buyer and supplier side.
• Regular governance meetings that drive access to new innovative approaches to business.

The aim of our SRM framework is to focus on our key suppliers and the relationship we have with them. Within the SRM Framework suppliers will be segmented into four supplier tiers as described below:

Tier 1 – Alliance

Suppliers with highly complementary business strategies, with whom there is a high level of inter-dependency, and who have both the capability and desire to jointly invest in new opportunities to deliver aligned outcomes for both organisations.

Tier 2 – Strategic

Providers of goods and services which:

• Are directly associated with the delivery of one or more existing Transport Services, and who’s performance can have a measurable impact on both customer experience levels and, brand equity, or
• Are of critical importance to AT in the effective running of day-to-day operations and support of front line services, and would require significant time, cost and/or resource to switch from.

In addition to effective contract compliance and risk management, the focus here turns to continually improving performance against existing contracts and seeking out new opportunities between both parties.

Tier 3 – Operational

Suppliers of goods and services which contribute towards the effective day-to-day running of operations within AT, but which make little, or no traceable contribution to the performance of frontline Transport Services or brand equity. The main focus with all but a small percentage of suppliers in this Tier is purely to ensure that all pre-negotiated contractual negotiations are fully complied with and, all risks which could potentially disrupt ongoing supply are effectively dealt with.

Tier 4 – Tactical

Suppliers of goods and services which make an indirect contribution to AT’s organisational performance. Overriding focus with these suppliers is to minimise the amount of AT time, human effort and cost required to engage with them.

Contract Management

A key part of SRM is the process that enables us and our suppliers to meet the objectives required from our contracts.

This means ongoing tracking and monitoring of safety performance, delivery and costs, managing risks and actively managing the relationships between AT, the supplier and key stakeholders. This process continues throughout the life of a contract and involves managing proactively to anticipate future needs as well as reacting to situations that may arise.

We manage suppliers based on where they sit within the “tier system”, as outlined in the Supplier Relationship Management section above.

Health and Safety

AT recognises its obligations as a principal under the Health and Safety in Employment Act 2015. As such we will take all practical steps to ensure safe work practices are employed by our suppliers. We require all suppliers we engage with to comply with these requirements and actively explore ways of promoting best practice Health and Safety through the procurement lifecycle and across their extended supply chain, including sub-contractors.

Insurances, Bonds and Retentions

The use of Insurances, Bonds and Retentions are all methods that we use to protect ourselves from the risks associated with supplier performance. The level of protection will be determined by assessing the risks involved in delivering the services. We are mindful of the need to exercise caution when setting limits, as excessive limits will deter from the objective of obtaining Value for Money.

Contract Performance Assessments

Monitoring and evaluating the performance of supplier engagements is an important element to contract management, as it ensures that safe outcomes are delivered, risks are managed and value for money is achieved. It also enables poorly performing suppliers to be avoided in future engagements.

The aim of contract performance assessments is to:

• Work with suppliers collaboratively, on the premise that a mutually beneficial relationship will create better outcomes for both parties
• Provide a means of systematically monitoring performance of AT’s contracts
• Facilitate performance related discussions that can focus on specific performance issues or barriers to improving performance
• Provide a record of historical evaluation scores for future reference and analysis
• Provide a historical database to assist in and provide consistency in, the assessment of the track record non-price attribute in future tender evaluations

We have implemented a formal contract performance evaluation system called ATPACE (Performance Assessment by Coordinated Evaluation) for all infrastructure category contracts. Detailed information about ATPACE can be found on the procurement page of our website.

Contract performance incentives/disincentives

Where appropriate, we will include performance based incentives/disincentives into contracts. This will be particularly visible in strategic relationship based collaborative contracts. Examples of where this is being implemented are:

• PTOM Contracts
• Road Corridor maintenance and renewal contracts
• Physical Works Supplier Panel

Contract Reviews

These are an important part of the overall procurement process. An effective review process can improve procurement management and demonstrate public accountability by providing an honest appraisal of the procurement, the delivery of the contract and the outcomes achieved. We expect to undertake formal contract reviews on all contracts valued over $5 million.

Key questions to be considered in any contract review process include:

• Were safe outcomes achieved?
• Have the anticipated benefits been received?
• Did the initiative represent value for money?
• Are there opportunities for further improvements?
• What lessons can be learned and how can these be implemented?

Contract templates

Our Procurement Framework contains a range of standardised contract templates for use by our staff. These templates are based on standard form contracts and will have been through a legal review by the Auckland Transport Legal Department. Where a standard contract template exists the expectation is that it will be used when engaging with suppliers. Standard contract templates that we use include:

• NZS3910:2013 – Conditions of contract for building and civil engineering – Construction.
• NZS3916:2013 – Conditions of contract for building and civil engineering – Design and Construct.
• NZS3917:2013 – Conditions of contract for building and civil engineering – Fixed Term.
• CCCS:Aug 2009 – Conditions of contract for consultancy services.
• ACENZ/IPENZ: Mar 2012 – Short form agreement for consultant engagement.
• PTOM (Participation, Regional Partnering and Unit) agreements.
• Auckland Transport specific contract templates.

Recent years have seen a drive toward collaborative ways of contracting. Our general conditions of contract play a role in encouraging this collaborative behaviour and we will continue to review these with this in mind.

Maximum contract terms

The term of a contract describes the length of time a particular contract is operational. This includes any allowable extensions after the initial term.

We will apply the following maximum contract terms to our contracts. Use of longer contract terms in exceptional circumstances will require specific approval by the relevant governance channels.

Contract Type	Maximum Term
Capital expenditure	The time to complete the works
Operational expenditure – with the exception of the below	5 years
Public Transport contracts not procured under PTOM	6 years
Regional road and streetlight maintenance and renewals, and technical support	8 years
Public Transport rail operator contract	15 years
PTOM like-for-like transitional contracts	12 years
PTOM commercial units and units procured through open tender	9 years
PTOM units procured through direct appointment	6 years
Operational leases	Based on value for money

Record keeping

Under the Public Records Act 2005, all public organisations are required to create and maintain full and accurate records in accordance with normal, prudent business practice. This includes activities carried out by contractors on our behalf. For procurement this means that all records relating to the planning, approach to market, supplier selection, negotiation, award of contract, contract management and review must be retained.