Findings and Discussion | Procurement Methodol

What You Will Find?

By selecting the tab below, you can explore the Findings and Discussion of the research. This area highlights emerging themes from the data, connects them with existing literature, and outlines the implications for procurement and risk distribution in infrastructure delivery.

The interviews confirm that traditional Design–Bid–Build (DBB) under NZS 3910 still dominates New Zealand’s procurement landscape. Clients remain highly risk-averse, often pushing risks such as geotechnical uncertainties, design flaws, or site conditions down to contractors. This aligns with international research showing that transactional procurement models often misallocate risk, leading to inefficiencies, disputes, and underperformance (Flyvbjerg et al., 2004; Buganova & Simickova, 2019).

P3 and P5 described how poor documentation and lump-sum contracts create significant vulnerabilities, particularly for SMEs. Literature underscores that this is unsustainable: Ng & Loosemore (2007) argue that transferring risks without considering the receiving party’s capacity leads to inflated costs and disputes. The insolvency wave in New Zealand’s construction sector further validates this risk misalignment.

Discussion: The persistence of NZS 3910 reflects institutional inertia and political preference for apparent cost certainty. Yet, the evidence shows this approach increases systemic fragility. Literature and interviews converge on the need for more straightforward risk allocation guidelines where responsibility is borne by the party best able to manage or prevent the risk (OECD, 2023).

Several participants highlighted the value of Early Contractor Involvement (ECI) and Alliancing, especially in identifying risks early and fostering innovation (P4 & P5). The Christchurch rebuild, as Botha & Scheepbouwer (2015) note, demonstrated how alliancing and adjusted Target Outturn Cost mechanisms allowed flexibility and collaboration in a highly uncertain environment.

However, adoption remains inconsistent. P2 and P4 noted that local councils often revert to competitive tendering, driven by lowest-cost imperatives. P6 observed that alliancing bids focus on value, people, and methodology rather than price, which contrasts with transactional DBB approaches. Literature supports this: relational procurement models outperform transactional methods in complex, uncertain projects by embedding flexibility and risk-sharing (Walker et al., 2002; Abidin & Pasquire, 2005).

Discussion: The findings suggest a cultural and governance gap. While literature affirms that alliancing and ECI are better suited for uncertainty (Osipova & Eriksson, 2011; Gransberg, 2013), practical uptake is hindered by political cycles, lack of client capability, and comfort with familiar models. This mismatch highlights the need for policy interventions and structured pilot programs to normalise collaborative procurement.

Participants consistently noted that procurement performance is often judged on cost and time delivery. However, (P2, P3 and P7) argued that this is insufficient: procurement should be assessed against broader business case objectives, benefits, and resilience.

The literature echoes this shift. Williams et al. (2019) emphasise front-end planning and benefits realisation, noting that procurement must align with organisational capacity and long-term outcomes. Similarly, the Treasury’s Better Business Cases framework stresses benefits as central to public sector procurement success. Yet, many consultants still evaluate success based on bid “strike rates” rather than delivery quality (P6).

Discussion: Findings highlight a disconnect between academic frameworks and industry practice. Literature demands outcome-based evaluation, but practice remains transactional and input-driven. Embedding benefits realisation metrics—such as reduced insolvency, dispute frequency, and stakeholder satisfaction—into procurement evaluation could bridge this gap.

Contractor insolvency emerged as a critical finding. Participants noted that SMEs often lack financial resilience and contractual literacy, making them vulnerable when risks are pushed down (P5). Literature corroborates this: Rasheed et al. (2024) found that PPPs and traditional contracts in New Zealand often allocate risks that SMEs cannot manage, increasing insolvency risks.

Market pressures also reinforce lowest-price tendering. P2 and P3 highlighted that affordability constraints and political cycles push agencies back to cost-driven decisions. This mirrors international evidence (Naoum & Egbu, 2016), where lowest-price approaches undermine quality, innovation, and supply chain stability.

Discussion: Both literature and interviews point to a need for capacity building. Training SMEs in risk and financial management, along with providing supportive procurement environments (panels, long-term partnerships), is necessary to prevent the exclusion of local suppliers and protect community value.

Interviewees noted that while NEC contracts are not yet widely used in New Zealand local government, they are beginning to appear in major projects and are perceived as offering a more balanced approach than NZS3910. P1 observed that NEC promotes more explicit risk allocation and stronger collaboration, while still maintaining contractual discipline. Similarly, P3 pointed out that NEC provides transparency and proactive risk management through early warning mechanisms, which helps address issues before they escalate.

The literature supports these views. NEC is often described as a hybrid model: more relational than NZS3910 but less intensive than the alliance model. It embeds structured collaboration through tools such as risk registers, early warning notices, and programme obligations, encouraging all parties to manage risks jointly rather than unilaterally (Regan et al., 2015; Wamuziri & Seywright, 2005). Compared to DBB, NEC better aligns with the principle of allocating risks to those best able to prevent or control them, while still providing legal clarity and accountability.

Discussion:
Findings suggest that NEC could be a stepping stone for New Zealand councils and agencies hesitant to adopt alliancing or ECI. It formalises collaborative behaviours without requiring the profound cultural shift that alliances demand. Literature and interview data converge on the idea that NEC, if scaled more broadly, could rebalance risk allocation and build trust across supply chains, while maintaining governance oversight. However, adoption barriers remain, minimal familiarity among clients and consultants, and a political preference for lowest-price procurement.

The integration of literature and interviews paints a consistent picture of New Zealand’s procurement environment.

Transactional procurement (DBB/PPPs) continues to dominate and often misallocates risk, placing burdens on parties without the capacity to manage them. This undermines supply chain sustainability and contributes to insolvency trends among SMEs.

Relational procurement (Alliancing/ECI) is better suited to complex and uncertain projects, enabling shared risk registers, collaborative decision-making, and innovation. However, uptake remains limited, particularly in local government, due to institutional conservatism and political preferences for lowest-cost procurement.

NEC contracts emerged as a promising middle ground. They formalise collaborative behaviours through structured mechanisms such as early warnings and risk registers, while retaining contractual discipline and transparency. Interviewees noted that NEC can rebalance risk allocation and foster trust without requiring the full cultural shift of alliancing, making it a pragmatic step forward for councils and agencies seeking reform.

Performance evaluation remains too narrowly focused on cost and time, neglecting broader outcomes such as benefits realisation, resilience, and long-term value. Embedding benefits frameworks into procurement planning and evaluation would align practice with the expectations of the Treasury’s Better Business Cases and international best practice.

SME fragility continues to be exacerbated by current practices, as small contractors often lack the financial resilience and contractual literacy to absorb risks shifted onto them. Capacity-building initiatives, combined with fairer risk allocation, are critical to strengthening the sector.

In summary, the findings affirm the central argument in the literature: procurement must evolve from transactional compliance to relational and balanced approaches, where risk is distributed according to capability and long-term outcomes, rather than short-term cost pressures. Achieving this requires cultural change, governance reform, sector-wide training, and greater use of collaborative models such as NEC, ECI, and Alliances.

Disclaimer: The results presented here are based on ongoing research and are subject to change upon the finalisation of the full research report.