NZ Digital Technology Sector Procurement seminar findings

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In September 2015 NZRise co-hosted a Procurement Seminar with MBIE. In preparation for holding a followup event in 2017 it is worthy considering the report issued by NZRise highlighting key issues and opportunities for further development. The report below will be used to build the agenda for the 2017 event.

The half day event was well supported with ~100 attendees evenly spread across both the Private Sector and Government Agencies. We note some progress has been made since this event. However, for the most part, the findings remain largely unchanged, for example earlier this week we reported back on the cost of Government Tenders as a procurement method identifying significant cost to the economy.

getsLogoNote: This report was tabled with MBIE and DIA as the lead agencies for the Digital Technology sector. It seems this report fell into the cracks of Government with no direct response or programme to progress the insights by either agency.

NZRise are pleased to advise MBIE are again joining us to host a followup seminar in 2017 – dates to be advised very soon.

NZRise/MBIE Procurement Seminars

Notes from the breakout sessions

There were four primary themes that emerged from the table discussions as part of the two breakout sessions on the day. These themes were common across the earlier session (Challenges) and the later one (Solutions). Most of the commentary can be captured under these themes; where there were points that were raised that did not readily fit into one of these themes, the tenor of these comments have been included under the final section, Miscellaneous.

The four themes that emerged from the discussions were,

  • Access and Engagement: how government agencies and New Zealand businesses work together to deliver value.
  • Best practice: the procurement practices, on both sides of the ledger, should be promoted and how that can be achieved.
  • Innovation: how can this be applied to both the procurement practice and to the solutions that agencies are seeking.
  • Risk: the most effective ways to manage this appropriately for both agencies and suppliers.

Access and Engagement

There was general acknowledgement that, since the previous seminar in 2012, there has been significant progress made in terms of how government and New Zealand businesses interact around procurement; but there is still room for improvement. Some of the comments were:

  • “It’s too late if you hear about it on GETS.”
  • Early supplier engagement is critical. That includes:
    • access to people (decision makers)
    • access to forward work programmes
  • Openness to earlier, pre- and post-procurement discussions.
  • Update Annual Procurement Plans more frequently, “more visibility of the pipeline”.

MBIE hosts the Govt Business Growth Agenda reports, that include a list of planned actions:

http://www.mbie.govt.nz/info-services/business/business-growth-agenda

  • Involve multiple suppliers.
  • Unsolicited proposals: what are they and how can we use them more effectively?
  • Leverage existing fora:
    • GCIO Strategic Supplier Management Meetings
    • Joint sector group meetings with NZRise, IITP, NZTech, etc
  • Debriefs can be two-way: agencies might learn from talking to suppliers about their processes. Every respondent deserves a debrief.
  • Open panels reward innovation and avoid lock-in and commercial stagnation.
  • Is the GCIO requiring ICT investment plans from agencies?
  • “Speed dating” sessions are conceptually good, but could be tweaked to be a lot more specific/relevant: focus on a vertical, for example.
  • Engagement is need at the strategy phase: “before the formal procurement process”.
  • Identifying who is the right person to approach is challenging: agencies are complicated internally and access is hard.

Best Practice

The procurement profession has grown considerably in government over the last decade. Many of the larger agencies have established deep capability, yet there is still significant variability across the sector. The up skilling in government has necessitated a shift in supplier practices as well; with the same variability. This is most noticeable in the the smaller agencies and businesses.

Important for government “to be a good customer”:

  • tenders and contracts clear
  • managers and teams aware and supportive
  • good internal understanding of project needs
  • Establish and promote what constitutes “good” in procurement processes.
  • Publish pricing and risk-sharing guidance (MBIE/DIA).
  • Agency mentoring and partnering: mature agencies assist others to increase system capability.
  • Avoid unnecessary bureaucracy: repeated provision of the same information to different agencies.
  • Assessment should be looking at skills, not just size (although the former is much harder).
  • Agile is a challenge for government. “Agencies need support, internal support, for engaging with Agile projects”.
  • Reduce the “cost of procurement”:
    • Procurement is becoming a business, cost of engagement
    • Different processes between government departments
    • Different understandings of what can/cannot be done
    • Information sessions used to find solutions rather than understand capability of suppliers
    • Poison chalices – clauses to exclude groups of suppliers

Innovation

The Government has been consistent in its call for agencies to innovate, however, this rarely translated to innovative practice in either the procurement process or in the solution choice. This is, to some extent, understandable given the political environment and officials reluctance to embrace risk (see next section). There are ways to engender innovation, both in the procurement and delivery of solutions, and there are examples of that happening in our and other sectors already.

  • Recognize and embrace innovation with incentives.
  • Focussing on the outcome, not the solution, creates an environment for innovation.
  • Courage is needed to stop things: this can be difficult.
  • Break deliverables/outcomes into their (smaller) constituent parts and manage risk down that way. “Big isn’t always best”.
  • Invest in pilots and proof-of-concept development before committing to larger, riskier projects.
  • Involve smaller suppliers: innovation doesn’t exist in massive organisations.
  • Encourage consortia and partnerships: blending ideas, people and capabilities breeds new thinking.
  • Acknowledge that innovation will entail change: that is a culture process, not a technological one.
  • Alliance model works well for construction industry: how can it be applied successfully in our sector?
  • Fail fast. And fail small.
  • Assess the spin-off benefits of innovative projects: eg, innovation creates export opportunities for New Zealand businesses.

Risk

Risk has to be appropriately managed by both agencies and suppliers. Each will have their own controls and mitigations. Importantly, a common understanding of where that risk for each party overlaps, and how they can effectively manage that together is fundamental to a successful relationship and the likelihood of a positive outcome for the project.

  • Drive genuine partnerships by linking risks and rewards and ensuring that everyone benefits from successful projects and the cost of failure should be equitably shared as well.
  • Loss of IP is not a risk: the Crown’s position is that it doesn’t default to government and needs to be determined on a case by case basis.
  • The procurement process should not be considered a magic wand to eliminate risk (“no- one ever got fired for buying X”).
  • Cost is a factor: be transparent about your budget in your procurement process.
  • Clarity around outcomes is the best way to understand and manage risk.

Miscellaneous

Some of the other comments that did not immediately appear to align with the themes covered above.
  • Create an App Store for SaaS (Software as a Service) that can be used by agencies.
  • Panels make it much harder for smaller suppliers.
  • “Procurement is an art: finding the sweet spot between demand and supply.”
  • More regular workshops and engagements of this sort: GCIO to arrange?
  • Issuing an RFP for shearing may be quintessentially Kiwi; but it isn’t going to fleece any sheep.

 Conclusions

  1. A significant focus for the discussions was around access: ensuring that government has access to the best capability and that New Zealand digital companies are fairly considered as part of the procurement process. A focus for NZRise in future engagements with MBIE and other agencies will be around measures that can increase access for New Zealand suppliers and reducing the barriers to their participation. Improved access will have a direct impact on the New Zealand economy and will open government up to a broader array of capability and potential for innovation.
  2. The procurement practice in government has matured over the last several years, under MBIE’s functional leadership. NZRise will continue to support the sharing of best practice and growing the overall capability of the profession in government.
  3. There are still significant advances to be made in both the way digital goods and services are procured, and the incentive structures to underwrite successful delivery. The alliance model used in the roading sector is one such model that deserves further investigation for adaption to our sector.
  4. Further progress can only be achieved by continuing engagement and dialogue, and a willingness on both sides to identify opportunities to improve our respective approaches to procurement. NZRise is committed to that engagement.

Next Steps

There was sufficient consensus on the day to continue to advance these conversations. The progress that we have seen over the last two years is extremely encouraging, but there is opportunity to accelerate both our effort and the rate of change. The points documented here provide an agenda for ongoing discussions that could be fruitfully brokered for agencies by MBIE and DIA and for the sector by NZRise.
NZRise will share this document with MBIE and work with them to coordinate an ongoing program of engagement.
Victoria MacLennan, Co-Chair NZRise – Thanks to Paul Ramsay of Equinox and Jason Ryan of Catalyst for their time spent co-ordinating this event and preparing this report.

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