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NZAID Terms of Reference Guideline

Summary

This tool was revised and approved by the Tools Steering Group on 19 March 08.
Last updated 20/05/08.

When to apply this document?
This document is a guideline. NZAID Staff are expected to consult and apply this guideline when
developing a Terms of Reference (TOR). Exceptions to this guideline must be discussed with
your manager.

What does this guideline cover?
This guideline sets out general principles and good practice for the preparation of Terms of
Reference (TOR). It describes the information required, outlines the process for developing TOR
and identifies issues to be considered.

For further guidance on specific assignments see:
Developing Terms of Reference for Reviews and Evaluations
Developing Terms of Reference for MSC and TA

What will this guideline do?
This guideline helps NZAID staff follow and promote sound principles for developing quality
TOR, and ensuring good development outcomes. The context of each activity/assignment or
task requires careful consideration of the scope, the level of detail. For further assistance, staff
should discuss this with their Team Leader.

Who is this guideline for?
This guideline is for NZAID staff, our development partners and the contractors engaged to help
us in our work. In developing TOR, the key role of NZAID staff is to ensure a high level of partner
ownership while ensuring NZAID’s own policy, quality assurance, and accountability
requirements are met.

Guideline: Developing Terms of Reference
Effective from 24 April 2008
DocsOpen tor-new-1322966 Page 2 of 17

Table of Contents

Summary ......................................................................................................................... 2

What are TOR? ............................................................................................................... 4

Terms of Reference – standard format............................................................................ 5

Common requirements in TOR........................................................................................ 6

The process for developing TOR..................................................................................... 9

Annex 1: The TOR process ........................................................................................... 14

Annex 2: Some key points to consider when preparing TOR ........................................ 15

References .................................................................................................................... 17


What are TOR?
Terms of Reference (TOR) state clearly the requirements and expectations of a specific
assignment or contract for services and outline how it is to be implemented.

TOR are an extremely important tool for achieving effective and sustainable development
outcomes. TOR define the scope of work to be undertaken at each stage of the Activity cycle
and it is therefore critical that we get them right from the outset.

It takes time to develop good quality TOR to reflect shared understanding of the context, the
assignment objectives, the approach and the intended development outcome. Stakeholder
engagement is essential in the development of this key document.

The assignment may be undertaken by a contractor, NZAID staff, or a combined team involving
development partners and other donors. NZAID may also be involved in developing TOR for
Activities using our funding but which are to be led and/or managed by our partners. TOR are an
essential component of contract for service documentation and provide a basis for assessing
contractor performance.

TOR can be developed at all stages of the Activity Cycle. Assignments can range from specific
tasks (e.g. assessment of an Activity report) to multi-year management services consultancies.
Although each TOR document is unique, there are a number of common elements in the
information to be included and the process to be followed.

NZAID is a New Zealand public sector agency and as such a number of procurement related
requirements need to be followed in developing TOR. This guideline identifies when and how
they should be applied.


Terms of Reference – standard format
This section outlines the standard format expected for NZAID TOR.

Title
The title should be descriptive to people outside of NZAID and contain a “key word” to make a
search easy electronically.

Background (Why?)
A concise and clear statement (1-2 pages) linking the assignment to NZAID’s goal of poverty
elimination, NZAID and partner policy frameworks and the country/regional/sectoral strategy.
The Background should include a brief history of the programme/activity including reference to
any relevant reports/documentation; a summary of other related Activities and/or donor
engagements; any issues or constraints; the rationale for undertaking the current assignment; as
well as outlining Activity governance/management arrangements including the roles of the
partner, post and any governance committee and/or reference group.

Goal (What do we want to achieve?)
A statement providing information on “the bigger picture,” linking the assignment to a
development outcome, and describing the rationale for this.

Objectives (What do we want to know/do?)
Explains why we want to complete this assignment and how this will contribute to the goal. The
objectives (3-4) focus on the issues and/or questions to be addressed in this assignment.

Tasks (What do we need to know/do?)
A number of clearly defined activities to ensure the objective can be achieved. These must
include direction on analysis of mainstreamed and cross-cutting issues, and financial and cost-
benefit analysis.

Methodology (How?)
Describes the approach, reporting relationships and processes required to complete the
assignment.

Team composition, skills and experience (Who?)
Identifies the knowledge, skills, experience of individuals or teams.

Outputs (What and When?)
Assignment outputs reflect the tasks and time frames of the assignment.
E.g. presentations, debriefing, facilitating meetings, written reports


Annexes
Any additional information or documents
Eg correspondence, reports

Drafted by: Date:
Advice received from: Date:
Approved by: Date:
Document #:
Comments: Date:
(eg: content advice comments)

Common requirements in TOR
TOR are developed for a range of different tasks. While most commonly they will guide
assignments to be undertaken by contractors, they also will be required for assignments carried
out by NZAID staff as well as for partner-led, NZAID-funded, Activities. This section of the
Guideline identifies common requirements for NZAID TORs and the key steps the Agency
expects to be followed in the development of TORs.

Level of detail
The level of detail and guidance in the TOR will depend on the scope of the assignment and the
nature of the contract. It is important that lines of communication, expectations by all parties, and
reporting relationships are clear. The TOR must be specific, focused, and agreed by all
stakeholders before the assignment is initiated and any goods and/or services procured.

NOTE: Contractors can only be held accountable for what they have been specifically asked to
do – take time to ensure there are clear links between the goal, the objectives and the tasks.

Approach/methodology
Most TOR include some direction on the preferred approach or methodology expected, although
there will be some exceptions such as for short, task-based assignments. Overly prescriptive
direction on the approach to be followed may also not be appropriate where particularly
technical, specialist expertise is being sought. In general, however, most TOR will need to
ensure that those carrying out the desired tasks:
• give effect to the overall NZAID goal of poverty elimination,
• follow specific direction on the integration of mainstreamed and cross-cutting issues
• use participatory approaches and build partner ownership for the Activity.

If these principles and issues are not explicitly addressed in the TOR, those carrying out the
assignment, particularly external contractors, may fail to adequately consider them and the
desired development outcomes may be compromised.

TOR must ensure that the outcomes sought have a clear poverty elimination focus and are
achieved in ways that advance aid effectiveness according to the Paris Declaration on Aid
Effectiveness.

The Screening Guide for Mainstreamed and Other Cross-cutting Issues should be used to guide
decisions on the particular direction that the TOR should give to ensure that these issues 1 are
appropriately considered. The Screening Guide contains specific questions on each of these
issues.

TOR should also direct attention to ‘value for money’ requiring appropriate financial and/or cost
benefit analysis.

The reporting relationship
The TOR clarify who will manage the contractual and reporting relationships. TOR need to clarify
the roles and responsibilities of the team or individual(s) carrying out the assignment, and to
describe their reporting relationship with those managing any contracts. The TOR state when
and how the assignment team will usually report - to the DPM (Wellington), the NZAID Manager
(in-country), our partners and/or a coordinating committee/ steering group.

TOR should include agreements regarding NZAID and partner commitments in support of this
assignment like participation in field trips, or time frames for feedback on draft reports.

NOTE: It is important not to make any informal commitment regarding contracts or time frames
or outputs before the terms of reference are finalized and the preferred consultants identified.

See Procurement, Contracting & Grant Funding Policy and Managing Consultants for further
information.

Timeframes
TOR need to provide an allocation of time for specific tasks such as:
• document reading and preparation
• travel time
• briefings at Post
• consultation with stakeholders and organisations
• report preparation
• finalisation of a report following debriefing.

Team composition, skills and experience
Most TOR will include a section on team composition, skills and experience.

The success of any assignment is often determined by the degree of ownership by key
stakeholders and by engaging the appropriate contractor(s). During development of the TOR, it
is important to consider:
• the knowledge, skills, experience and personal attributes required
• local expertise
• team composition – gender, off-shore/local balance
• the involvement of counterparts and/or in-country contractors
• the need for a reference group.

The majority of assignments will require a team involving partner country participants to confirm
and strengthen partner ownership and leadership. An increasing number of assignments will be
partner led. The range of skills and experience required will depend on the nature of the
assignment. Good local expertise is essential to support effective participatory processes.

Sometimes it may be useful to set up a reference group to provide additional expertise. In these
cases the role of the reference group and the relationship of the contractor need to be clearly
specified in the TOR.

The selection criteria for assignment team members should be specified in the TOR and could
include:

Attributes
• understanding of NZAID’s goal, policies and operating principles
• ability to work in a multidisciplinary team
• commitment to participation of key stakeholders
• understanding of and commitment to cross-cutting issues.

Skills and experience
• experience relevant to tasks
• development knowledge and experience
• country/regional experience.

Activity planning and management skills
• analytical and reporting skills
• facilitation and negotiation skills
• cross-cultural communication skills
• institutional strengthening/capacity building skills
• sector or technical expertise (specific to the assignment)
• experience in evaluation, research and review.

Team Leader selection
• wide development experience and knowledge
• strategic capability
• previous team leadership experience
• people management skills
• demonstrable commitment to NZAID’s policies and principles.

NOTE: During the development of the terms of reference, it is useful to record the date in the
footer to ensure all stakeholders are working with the same version.


Reports
The TOR should state clearly the expected length of the report (usually no more than 20 pages,
excluding appendices) and the timeframes for drafting and finalising the final report.

Written reports are expected to respond to all tasks identified in the TOR.

The written report format might include:
1. Title Page (authors, date, activity, location).
2. Executive Summary (including background, key findings, methodology, recommendations).
3. Main body of the report (description of the background, the stakeholders, results of
analyses, findings, the key issues, methodology (including who participated, how and at
what stage), conclusions and recommendations.
4. Appendices, Glossary, acronyms, Terms of Reference, list of participants and sources of
data, diagrams, drawings, photographs.

See Structure of Review and Evaluation Reports. See Activity Reporting (in development) for
guidance on report format and content.

The process for developing TOR
There are a number of steps required to initiate, develop and sign off TOR. See diagram in
Annex one: The TOR process.

1. Identify the need
A specific assignment may be initiated by any one of the key stakeholders. Prior to preparing
detailed TOR it is important to discuss and reach agreement between key stakeholders on the
need for the assignment and how best to meet stakeholder expectations.

NZAID staff at post have a key role in managing these preliminary discussions with our partners.
It takes considerable time to clarify and discuss expectations, priorities and the preferred
approach before the detailed terms of reference are drafted on paper. These conversations are
a critical part of the planning process and experience demonstrates that they have a significant
impact on the successful outcomes of the assignment.

2. Initiate discussion with the Programme team
At this planning stage, it is also useful to discuss some of the practical issues like:
• context and clarity of roles: is the assignment partner- or NZAID-led?
• the skills required to complete the assignment,
• any contracting requirements
• the selection process,
• how any contracts will be managed,
• the budget,
• how the costs will be met,
• what support is required to ensure the assignment is successful,

• how responsibility will be shared between post and Wellington,
• managing risks, and
• quality assurance.

3. Initiate discussion with all stakeholders
These preliminary meetings can confirm some of the practical issues listed above and agree on:
• assignment objectives and tasks
• assignment outputs and milestones
• contract management
• reporting relationships
• team composition

4. Seek advice from Team Leader, SAEG, Contracts
During the drafting stage you are encouraged to seek advice from partners, SAEG advisors,
programme team leaders, and contracts advisors. For workload planning and contract
management advice, Wellington staff are advised to create a draft instruction in Koru during this
preliminary planning stage.

5. Draft TOR
Following these discussions, partners and/or NZAID can draft terms of reference for sign-off in
Wellington. NZAID would encourage our partners to take the lead in developing the TOR and
could support that process by sharing this guideline and adopting a participatory approach to the
drafting task. Take time to work with all stakeholders and agree on the questions, the issues,
and the intended outcomes. A simple, but effective check is to ask if the objectives are:
• Specific
• Measurable
• Achievable
• Results orientated
• Time bound

All TOR need to follow the standard format provided in this guideline.

When using the Approved Contractor System, staff are required to follow the templates to
complete Assignment specification and are encouraged to consider the wider issues and
guidance provided in this NZAID tool.

The draft terms of reference can be developed by either the partners and/or NZAID staff. NZAID
encourages our partners to take the lead in developing the TOR and could support that process
by sharing this guideline and adopting a participatory approach to the drafting task.

All stakeholders are expected to actively engage in the drafting process through discussion,
written feedback and drafting text. Investing time to address all issues, resolve concerns, and
pay attention to detail will result in quality terms of reference and satisfactory outcomes. There
are no effective short cuts.


Should the TOR specify that NZAID will purchase goods or services, the Mandatory Rules for
Procurement by Departments, (Ministry of Economic Development, May 2006) apply. These
rules require all NZAID procurement to:
• enable open and effective competition,
• encourage full and fair opportunity for potential suppliers,
• recognize NZ’s international trade obligations and interests
• result in best value for money.

This requires ensuring that goods or services are specified:
• in terms of performance and functional requirements, rather than design or descriptive
characteristics
• based on international standards, where applicable, or otherwise on national technical
regulations, recognised national standards, or building codes
• by using full titles and listing acronyms when they are unavoidable.

Annex 2: Some key points to consider when preparing TOR identifies a number of common
pitfalls in TOR drafting, including those relating to New Zealand public sector procurement rules.

6. Finalise TOR
NOTE: It is advisable and courteous that final drafts of TOR are seen by the advisors involved in
providing advice at step 4.

All stakeholders need to agree on the TOR. In parallel with the development of selection criteria,
the programme team should also have developed weightings to guide the selection process.
These should be agreed by all stakeholders along with the TOR.

The partner government/organisation needs to agree (preferably in writing) with the TOR before
they are finalised and ready for Team Leader approval. This can take considerable time.

NOTE: It is important to plan ahead, to allow adequate time and to maintain ongoing
communication with all stakeholders at every stage of the process from developing terms of
reference through to the conclusion of the assignment.

7. Seek Team Leader Approval
All NZAID managed Terms of Reference are signed off in Wellington. The Team Leader is
responsible for approving all TOR for their direct reports. If the Team Leader is preparing Terms
of Reference then the Director is responsible for approving the TOR.

8. Seek Assistance from your Contracts Adviser
If undertaking a tenders process, arrange a meeting with your Contracts Adviser.

9. Select Contractors


10. Negotiate contract and finalise TOR
Amendment of TORs used in supplier selection processes should be avoided. This is because
not all tenderers have had the opportunity to bid against the amended TOR, undermining the
principles of fairness in the process so re-tendering could be required. However, if during
negotiations, minor variations to the TOR (or work plan) are suggested that will better achieve
the objectives of the assignment these may be incorporated into the TOR (or ideally the work
plan).

Any amendments to TOR must be agreed (by all stakeholders) in writing and MSG advised. The
amended TOR must be dated and approved by the same Team Leader, attached to the Koru
workflow, and printed for file.

It is important that any amendments are agreed prior to finalising the contract to avoid
unnecessary variations and ensure better understanding and focus with the contractor.

11. Draft Contract and agree milestones
At this stage you will be required to agree milestones and confirm time frames.

Milestones can be any of the assignment outputs. The outputs may include any of the following:
• meetings with key stakeholders
• feedback to key stakeholders e.g. through a workshop or meeting prior to completion
• draft and/or final report
• workshops
• manuals
• draft TORs
• strategy documents
• draft agreements between stakeholders
• debriefing NZAID and key stakeholders
• presentation of key findings to stakeholders.

12. Finalise Contract

13. Brief contractor
A detailed briefing ensures shared understanding of objectives, methodology and intended
outcomes. The location of this briefing — in Wellington or at post — will depend upon particular
programme management arrangements. Care should be taken to include key staff in both
locations in briefing arrangements.

During the briefing it is important to ensure that non-NZAID assignment team members,
particularly contractors, are made fully aware of:
• NZAID’s goal, operating principles , and all relevant policies and strategies, particularly
those that are mainstreamed or cross-cutting
• NZAID Activity Cycle Management Guideline and other relevant tools
• how NZAID works (e.g. NZAID structure, roles and relationships; expectations of the nature
and amount of contact with the Post while in-country),

• who they should talk to if they have any problems,
• key people we expect them to meet,
• information on the political situation, and any sensitive issues.

Note: If the assignment involves field travel, it is helpful ensure that the Post has briefing notes
to ensure a consistent message,

Briefings should outline the expectations of NZAID and partner for each of the key stages in the
assignment:
1. Gathering information
- Briefings with relevant NZAID staff (Wellington or Post) and others e.g. technical
advisers or the Management Services Contractor (MSC)) prior to commencing work.
- Review of documentation. Partner country and NZAID policies, country strategy paper,
partner government development plans, other donor Activity documentation where
appropriate.
- Meetings with key stakeholders e.g. partner government officials, beneficiary
communities - both women and men, NGOs including women’s organisations, other
donors.
- Field visits.

2. Analysing information

3. Presenting information for discussion and feedback

4. Finalising report/findings

NOTE: In general it is good practice to have the assignment team present initial findings to key
stakeholders whilst they are in-country. If this proves difficult, an alternative is to ensure the
team leader returns to discuss the final draft report with key stakeholders.

14. Commence assignment


Annex 1: The TOR process
Figure 1: Key steps in the NZAID TOR process

TOR | Terms of Reference Process
INITIATOR OF TOR APPROVER OF TOR
DPM / DPO (Wgtn) Contracts Team | CT
Team Leader | Wgtn Manager
NZAID Manager/DPC (Post)

1. Identification of need

2. Initial discussion with
manager

3. Stakeholder discussion
between initiator, wgtn/post
staff, relevant partner
organisation to agree
objectives & outcomes
4. Seek advice (if required)
from sector/technical
manager, advisors and
Contracts Team

Check back with
5. Draft TOR Check back with
advisors
advisors
Check back with
Check back with
advisors
advisors
6. Finalise TOR (After
agreement with all
stakeholders)

7. Manager approves TOR

8. Seek assistance from your
contracts advisor

9. Select contractor(s)

10. Negotiate Contract and
11. Draft contract and agree
finalise TOR
milestones
(if required)

13. Brief contractor(s) 12. Finalise contract

14. Commence assignment


Annex 2: Some key points to consider when preparing TOR
Good TOR are essential to ensure that providers, NZAID and our partners are clear about the
requirements of an assignment, particularly when TOR define contractual agreements. Problems
may arise if the following issues are not adequately covered:

Clarity of purpose
The assignment team should be able to read the TOR and readily understand the required
outcomes without needing to interpret or seek further advice to resolve ambiguous or unclear
meaning. TOR must clearly define the outputs that are required, by when, by what methods, and
to what standard. If contracting is involved, this will also include the price for which outputs are
required. Unclear or ambiguous expression of TOR requirements, particularly for contractors, is
likely to result in a different understanding of the assignment and risk not achieving the desired
outcomes.

Clarity of tasking
Incomplete or unclear TOR are likely to cause delays in starting the assignment, particularly for
TORs involving contracting or other forms of procurement. These will require additional
discussions, negotiations and re-writing the TOR before the procurement process can begin.
Ambiguous TOR for RFTs can also result in proposals that do not address NZAID’s needs,
leading to the possibility of having to re-tender. Delays in establishing a contract can have
financial implications as well as impact upon operations.

Scoping the assignment
Poorly scoped and written TOR may result in a service provider underestimating the work
required. Subsequent discovery that the work is more complex and challenging than expected
creates risk that the provider will not be able to deliver work on time, or that LOVs will need to be
prepared to extend contracts.

Delivery delays can have serious flow-on effects for programme delivery and partnerships.
Delays can also have financial implications — funding allocated for an assignment or
consequent work, in one financial year cannot always be carried to the next if the assignment
has not be undertaken. Poor TOR can therefore impact on budgets for the next financial year.

Determining the appropriate level of direction
TOR which are overly prescriptive, either in terms of specifics of outputs, or how work should be
undertaken, increase the risk of disputes, failure to achieve desired outcomes, and potentially
limit innovation and competition. NZAID expects all its assignments to be carried out according
to our operating principles and policies. Some of this will require reference in the ‘methodology’
section of the TOR. However some procurements will relate to very technical areas of speciality.
Under these circumstances, while there are occasions where it is appropriate to prescribe
specific methodology, recognised good practice is to specify required outcomes only.


The importance of milestones and clear payment schedules
In many cases NZAID links scheduled payments to delivery of milestone achievements. These
must be clearly specified, either in the TOR or accompanying payment schedule. Vague
milestones make it difficult to track progress on contracts, and increase the risk that NZAID will
pay providers for carrying out substandard work, or even for work which has not occurred.

TOR guidance to contractor selection
Poor TOR for contracting can result in difficulty in the contractor selection process, because
information required for assessment and scoring may not be present or clear in the proposals or
tenders received. There are legal risks in these situations. Tendering often involves a lot of
unpaid work for contractors and they expect a fair, transparent, and efficient process from us.
Unsuccessful tenderers for contracts frequently seek justification when their proposals are not
accepted, and they have rights of appeal through legal process if they conclude that fair process
was not followed during selection.

NZAID must be able to demonstrate that an objective assessment was conducted when tenders
were selected. Poor quality TOR can hinder this process.

Implications of New Zealand public sector procurement rules
The NZAID Procurement Policy sets out the expectations for all NZAID procurement (establish
link). In respect of TOR, those being managed by NZAID should not:
• create unnecessary obstacles to international trade or domestic supply (such as referring to
a particular specific origin, producer or supplier)
• require trade mark or trade name, patent, design or type, unless there is no other sufficiently
precise or intelligible way of describing the procurement requirements unless, in such cases,
words such as “or equivalent” are included in the tender documentation;
• seek or accept advice to be used in the preparation or adoption of any TOR for a particular
procurement from a person that may have an interest in that procurement, if to do so would
prejudice fair competition
• use jargon – appropriate suppliers may be turned-off by its use
• be overly prescriptive or, equally, unfocused as they may limit the number of suppliers able
to comply.


References
Acknowledgements
This guideline draws on the guidelines of a number of other agencies, in particular: AUSAID
Activity Management Guidelines, EC Project Cycle Management Guidelines and DFID Tools for
Development.

Endnotes

1
Human rights, gender, environment, preventing conflict and building peace, and HIV/AIDS


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