Professional services

Introduction

This section defines Professional Services costs and provides examples, advice and links to useful resources for the approval, delivery and accounting for these costs.

Definitions

The following definitions relate to land transport activities that the Transport Agency funds. They may not be relevant in any other context.

Professional services are integral to an activity approved under s20 of the LTMA The Land Transport Management Act 2003, as amended from time to time. . For Transport Agency funding purposes, these are treated as an input, and the cost is charged directly to the activity. They are services provided by a person (or persons) skilled in the particular field for which they are engaged.

Expenditure on in-house professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. is exempt from procurement procedure A procurement procedure approved under section 25 of the LTMA. requirements where approved by the Transport Agency(Planning & Investment).

Outsourced professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. must be procured using an approved procurement procedure A procurement procedure approved under section 25 of the LTMA. .

The cost of all activities advised to the Transport Agency(Planning & Investment), 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 Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. costs, regardless of whether the cost is an in-house cost or incurred through a contract with an external supplier.

Examples of professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. costs

The following are examples of cost or services that will commonly be classified as professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. under the above definition of professional services:

• preparing contracts and evaluating tenders for works and services
• investigating and resolving public enquiries related to activity planning, investigation, design and delivery
• evaluating proposed activities including data collection, outcome evaluation, assessment of risks, submission of activity-specific information to the Transport Agency
• gathering information for activity management systems
• investigating activities for inclusion in regional land transport plans (RLTPs Regional land transport plans, prepared under Part 2 of the LTMA, as from time to time amended or varied. )
• gathering / managing asset and service condition information
• consulting with affected parties
• managing contracts
• managing activity delivery
• managing Total Mobility services and Total Mobility users
• managing activities with community groups
• obtaining building and resource consents
• preparing plans and strategies for the management of activities or assets, safety, the environment, projects, customer education, etc
• reporting on project feasibility, project development, contract performance, asset management systems, asset service condition, public transport services and service performance, etc.

Obtaining approval to claim funding assistance for expenditure on professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity.

Approved Organisations and the Transport Agency(State Highways) must have specific approval from the Transport Agency(Planning & Investment) to include the cost of in-house professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. in the cost of approved activities when requesting or claiming funding assistance for those activities. The conditions discussed below under accounting for the cost must be met.

To obtain and retain that approval, Approved Organisations and the Transport Agency(State Highways) must address how professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. are to be procured, including which services (if any) are to be obtained in-house, in their Transport Agency(Planning & Investment) endorsed long term programme wide procurement strategy A document required by the NZTA that sets out each approved organisation's strategy for procuring services and infrastructure using funds from the National Land Transport Fund. . The requirement to develop and document a strategic approach to procurement is set out comprehensively in the Procurement The purchase of works, goods or services. Manual.

Applications for approval to obtain professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. in-house are to be made to the Transport Agency’s Regional Manager, Planning & Investment.

When a procurement strategy A document required by the NZTA that sets out each approved organisation's strategy for procuring services and infrastructure using funds from the National Land Transport Fund. is amended in a way that has a significant material impact on the scope, scale or manner of delivery of professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. obtained in-house then the change must be brought to the attention of the Transport Agency(Planning & Investment). Approval to continue to obtain professional services in-house will need to be confirmed.

Delivery of in-house professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity.

All Approved Organisations and the Transport Agency(State Highways) must have a formal, documented management structure for in-house services operations. Typically a single management structure will apply to both in-house professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. and administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. .

The Transport Agency(Planning & Investment) requires all Approved Organisations and the Transport Agency(State Highways) to manage their in-house service delivery in a way that ensures both efficiency and effectiveness. The Transport Agency(Planning & Investment) does not, and will not, specify how Approved Organisations and the Transport Agency(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 (SNZ HB 9213:2003).

In-house professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. staff and assets will typically be part of a department or semi-autonomous business unit.

In-house professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. cannot be delivered through either a council controlled organisation (CCO A council organisation as defined in section 6 of the Local Government Act 2002. ) or a council controlled trading organisation (CCTO). Neither are considered to be ‘in-house’. Where professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. are procured from either a CCO or a CCTO those services must be treated as being outsourced and procured in accordance with a Transport Agency(planning & Investment) approved procurement procedure A procurement procedure approved under section 25 of the LTMA. .

Accounting for the cost of in-house services

All Approved Organisations and the Transport Agency(State Highways)must have a documented methodology covering how costs for in-house services, including associated overheads and administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. , 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 the Transport Agency(State Highways) must make documentation of their management accounting methods, plus accounting source documents and records, available to the Transport Agency(Planning & Investment) on request for audit purposes.

The Transport Agency(Planning & Investment) expects Approved Organisations and the Transport Agency(State Highways) to account for in-house services costs in a manner that is reasonable and appropriate for a public sector entity. 

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
  
• The Price is Right – The Kiwi Version  

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 A type of activity – not confined to a particular activity class, e.g. new roads (work category 323) appears in:

* activity class 12 – local road improvements
* activity class 13 – state highways improvements .

The cost of professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. will in many instances be time based. Approved Organisations and the Transport Agency(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 The components of activities that are reasonably provided in administering the delivery of land transport-related activities. ‘time’ from professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. ‘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 project may devote time to both professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. 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 A type of activity – not confined to a particular activity class, e.g. new roads (work category 323) appears in:

* activity class 12 – local road improvements
* activity class 13 – state highways improvements . 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.