Government contracts for IT products and services favour non-NZ owned companies

This is the conclusion from the data published as Open Data by MBIE on 1 May 2020 about contract award notices on GETS.  The information shows only 30% of published contract value was awarded to NZ owned firms, even though they were awarded more contracts.

It appears that government agencies award contracts to NZ owned companies for smaller jobs, but seek suppliers from overseas from larger contracts. This will have to change if the New Zealand digital sector is to be a significant contributor to GDP.

There were a total of 2,159 contract award notices published covering the period July 2019 to March 2020; 224 are “digital sector” contracts[1], awarded by 71 agencies. The Government Rules of Procurement (Rule 48) states that:

An agency must publish the contract award notice on GETS within 30 business days of all parties signing the contract/s. The contract award notice must include:

• the agency’s name and address
• the successful supplier’s or suppliers’ name/s and address/s
• a description of the goods, services or works
• the date the contract/s was awarded
• the term of the contract/s
• the expected spend under the contract/s

Agencies are expected to complete information on the status of the contract (Awarded/Not awarded), the supplier(s) awarded, and the estimated value of the contract.  In many cases, government agencies provide this information as free form text in a Comments field.

How much expenditure did government report?

A summary of the published data is shown below

NZRise applaud the following nine agencies that published the value of all the contracts they awarded.

• Kāinga Ora – Homes and Communities
• Matamata-Piako District Council
• Ministry of Foreign Affairs and Trade
• Ministry of Transport
• Museum of New Zealand Te Papa Tongarewa
• New Zealand Qualifications Authority
• Pacific Cooperation Broadcasting Limited
• Real Estate Authority
• The Treasury

On the other side of the ledger, the following 54 agencies did not publish information on the value of any  contracts they awarded:

Who received government expenditure?

In total, 188 contract award notices containing information on the company that received the contract were published.  We have analysed the notices to assess the use of NZ owned companies by government agencies.  A NZ-owned company is “A business that originated in New Zealand, is more than 50% owned, controlled or operated (directly or indirectly) by New Zealanders (citizens or residents), that has employees who live in New Zealand, and has its principal place of business in New Zealand.”

Of the total of 188 contract award notices:

• 91 contracts were awarded to NZ owned companies
• 90 contracts were awarded to non-NZ owned companies
• 7 contracts were awarded to panels

NZ owned companies tended to be awarded smaller contracts, and shown in the following table analysing the 38 contract award notices where the value is published.

It is impossible to get a good picture on government expenditure in the digital sector with the current level of transparency. In addition to the low quality of data published on GETS (as described above), much government procurement is not published on GETS.  The government procurement rules contain exemptions where an agency:

• has established a panel of suppliers (Rule 57)
• is purchasing under an All-of-Government contract (Rule 58)
• is purchasing under a Syndicated Contract (Rule 59)
• is purchasing under a Common Capability Contract (Rule 60).

The Department of Internal Affairs has previously published information on government expenditure on all of government contracts, but this data has not been updated since June 2018.  It shows a similar picture, that the average expenditure with an overseas company is twice that of a NZ-owned  company. We praised this action at the time, and are disappointed that DIA have chosen to stop publishing the information.

What does this mean for the IT sector?

Government has identified the digital sector as having the potential to contribute to our future growth; this will be critical to rebuilding the NZ economy as we emerge from the pandemic. Data about government expenditure on digital products is a critical input to planning for future growth of the sector.

Government agencies must comply with government procurement rules and publish the data on contracts that they have awarded in full.  We also encourage government to consider removing the exemptions to improve the transparency of digital procurement.

[1] The definition of digital sector was included in a previous article on GETS data published in March 2020.

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