Professional services policy

Expenditure on in-house professional services is exempt from procurement procedure requirements where approved by Waka Kotahi (planning and investment).

Outsourced professional services must be procured using an approved procurement procedure. 

The cost of all activities advised to Waka Kotahi, either when applying for funding approval or when claiming funding assistance for an approved activity, must be the full cost of the activity, including any professional services costs, regardless of whether the cost is an in-house cost or incurred through a contract with an external supplier.

The following are examples of cost or services that will commonly be classified as professional services:

To obtain and retain that approval, approved organisations and Waka Kotahi (state highways) must address how professional services are to be procured, including which services (if any) are to be obtained in-house, in their Waka Kotahi endorsed long-term programme wide procurement strategy. The requirement to develop and document a strategic approach to procurement is set out comprehensively in the Procurement manual.

Applications for approval to obtain professional services in-house are to be made to Waka Kotahi.

When a procurement strategy is amended in a way that has a significant material impact on the scope, scale or manner of delivery of professional services obtained in-house then the change must be brought to the attention of Waka Kotahi. Approval to continue to obtain professional services in-house will need to be confirmed.

Waka Kotahi requires all approved organisations and Waka Kotahi (state highways) to manage their in-house service delivery in a way that ensures both efficiency and effectiveness. Waka Kotahi does not, and will not, specify how approved organisations and Waka Kotahi (state highways) should structure or organise themselves to do that, but it expects these organisations to be guided by the Standards NZ publication, Guide to Local Government Service Delivery Options(external link) (SNZ HB 9213:2003).

In-house professional services staff and assets will typically be part of a department or semi-autonomous business unit.

 In-house professional services cannot be delivered through either a council-controlled organisation (CCO) or a council-controlled trading organisation (CCTO). Neither are considered to be ‘in-house’. Where professional services are procured from either a CCO or a CCTO those services must be treated as being outsourced and procured in accordance with a Waka Kotahi approved procurement procedure.

All approved organisations and Waka Kotahi (state highways) must have a documented methodology covering how costs for in-house services, including associated overheads and administration, are to be determined and allocated to work categories and, where appropriate, to individual approved activities. The method of allocating costs, including overheads, must be consistent with recognised management accounting practices.

Approved organisations and Waka Kotahi (state highways) must make documentation of their management accounting methods, plus accounting source documents and records, available to Waka Kotahi on request for audit purposes.

The cost of in-house services must be determined in accordance with recognised management accounting practice taking into account generally accepted accounting practice (GAAP) principles when allocating costs.

Specific guidance on the determination of the cost of services (by public bodies) is available from The Office of the Auditor General (the OAG) and from the Society of Local Government Managers (SOLGM). 

• Charging fees for public sector goods and services(external link)
• The Price is Right – The Kiwi Version(external link)  

An in-house services operation will be expected to break even and neither over nor under recover actual incurred costs.

Professional services are integral to approved activities. They are a direct cost and therefore will be allocated, with their associated overhead, directly to an approved activity or work category.

State highway and local road maintenance professional services are funded under work category 151: Network and asset management, rather than under the individual work categories, except for:

• Work category 123: Operational traffic management
• Work category 141: Emergency works.

The cost of professional services will in many instances be time based. approved organisations and Waka Kotahi (state highways) will need to have a rational, well documented and consistent method for attributing time based costs to approved activities.

For some in-house staff a system for attributing time-based costs will be used to separate administration ‘time’ from professional services ‘time’. Where staff members also work on tasks that are not related to approved activities, for example, tasks related to what approved organisations often refer to as the ‘unsubsidised programme’, then a time-based cost recording system should be used to separate out these costs.

Time-based overhead costs may sometimes be treated as a direct cost to an approved activity for the purposes of establishing the funding assistance claim cost. For example, an in-house staff member employed exclusively on a large project may devote time to both professional services and time to administrative tasks. Both will be a direct cost to the project. There will be no need, for the Transport Agency’s purposes, to distinguish professional services time from time spent on administrative tasks.

Other overhead costs may also be a treated as direct cost to an activity or work category. For example, an annual licence fee for specialist software used exclusively to aid staff working on a single work category would be a direct cost that should be charged to that work category.