Following up on our previous posts regarding government procurement, here is a breakdown of the 2021 data, observations as to the awarding and transparency of contracts, and the limitations to access that this places on kiwi businesses.

Contract award notices have been published as Open data on the MBIE website since June 2019.  Government agencies are required to publish information on contracts awarded, including the supplier and the value of the contract.

A total of 386 contract award notices that cover the IT sector have been published over the last 2½ years, with a published value of $136 million, a tiny fraction of the annual government expenditure on ICT.

Digital Technology (IT) sector in 2021

For the Digital Technology Sector, 212 contract award notices were published in 2021, and the total published value of contracts awarded in 2020 was $58.4 million, less than 2% of estimated government IT expenditure. The data is summarised below.

 NZ owned[i]Not NZ ownedNot known[ii]Total
Number of award notices807520175
Award notices with value1318637
Value of award notices$9.4m$36.6m$12.3m$58.4m
Average value of award notice$727,566$2,034,443$2,054,987$1,578,602

We have published the detail of the award notices, with supplier and contract value, that make up these totals. The conclusions from the data are stark:

  • More than 98% of IT contract awards are not published
  • Almost 70% of published award notices do not specify the contract value
  • Awards to NZ owned companies are for small contracts with foreign owned companies securing the larger contracts.

Looking forward

We make the following recommendations to enable the government to improve transparency and access to government contracts for New Zealand, Māori and Pasifika owned businesses:

  • Removal of all exemptions from procurement rules.
  • Publishing of contract value with all award notices (already required in the rules).
  • Publishing on GETS of contracts awarded and their value on the Marketplace
  • Publishing on GETS of individual contracts and their value for panel contracts.
  • Removal of closed procurement panels in favour of open (and more transparent) panels such as All of Government (AoG) and The Marketplace.

We highlighted such issues in July 2019 “The new Government Procurement Rules will NOT lead to more “wins” for Kiwi software businesses” where the rules may disadvantage kiwi businesses in favour of multinational companies. These include, but are not limited to:

  • The use of anti-SME contractual terms and conditions such as required $25M guarantee (for many projects).
  • Moving forward high cost activities to the start (rather than the end) of the tender process, creating high cost of entry barriers.
  • Requiring an existing, working interface to a specified multinational’s system (often not an open standards interface).

Exacerbated by COVID

With reference to the published 2020 post “The impact of Government Procurement exemptions” we also highlighted the current government policy which is documented in the Government Rules for Procurement 4th edition which require agencies to:

  • Seek opportunities to include NZ businesses and promote inclusive economic development within New Zealand (Rules 16 & 17).
  • Openly advertise on the Government Electronic Tenders Service (GETS) any procurement over $100,000 (Rule 35).
  • Publish a Contract Award Notice on GETS within 30 days of contract award, including the expected spend under the contract (Rule 48).
  • Publish award notices for emergency procurement on GETS (Rule 14 and MBIE guide to Emergency Procurement).

These rules are in line with global best practice, but the level of compliance by government agencies is low. The total published value of contracts awarded in 2020 was $1.016 bn, or 2.5% of government expenditure.

We again published the “Call for Improved Transparency in Government Procurement”, where we asked for transparency with regard to Government Entities:

  • All Panels they operate
  • Membership of those panels
  • Whether the panel is open or closed
  • Value of work $ transacted via each panel per annum
  • Number of secondary procurement processes via each panel per annum
  • List of all other suppliers to the agency via other contract mechanisms
  • Value of expenditure with NZ Businesses vs value of expenditure with Overseas Businesses per annum
  • Top 10 supplier by $ value per annum
  • Number of advertised opportunities that do not proceed/aren’t awarded
  • % of projects that were in Annual Procurement Plans (or not)
  • % by $ value of contracts awarded via GETS vs via other mechanisms

This request still stands especially, as of publishing this post, no material improvements have been made.

Previous Recommendations

As previously stated in our posts, software procurement is not a simple process  so an integral part of a new monitoring regime should be a Software Tender Review Board.  As a first step the Board should look at major awards of software by the government over the past three years to assess the balance between NZ and overseas software suppliers, the decision processes used and the implications for the NZ software industry.  Based on this, the Board could consider whether changes to software procurement could better support development of the NZ economy.

A well balanced board should be made up of public and private sector representatives who have experienced  large software projects failure, and how smaller innovative projects can be successful. The board would need a mandate to provide advice to agencies prior to tending, provide oversight and – if MBIE does not hold the mandate of enforcement – provide the role of enforcing the rules of sourcing.

[i] A business that originated in New Zealand (not being a New Zealand subsidiary of an offshore business), is majority owned or controlled by New Zealanders, and has its principal place of business in New Zealand (MBIE).  This definition was developed jointly by NZRise and MBIE.

[ii] Not known: the supplier name is withheld or multiple suppliers are listed.

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