Procurement and the Emperor’s New Clothes

An opinion piece by NZRise Board Member, Shane Ross.

The story about the Emperor’s new clothes was brought front of mind when I reviewed the proposed 4^th Edition of the Government Procurement Rules.

On first glance – and certainly the overall statement – this latest edition of the Procurement Rules really looks to deliver some broader outcomes to New Zealand:

“These Rules also align with the Government’s expectations that procurement can be leveraged to achieve broader outcomes. They focus on promoting public value, and include explicit requirements to for agencies to incorporate or consider the priority outcomes as part of their procurement opportunities.”

 

The priority outcomes are:

• increase New Zealand businesses’ access to government procurement;
• increase the size and skill level of the domestic construction sector workforce;
• improve conditions for workers in government contracts; and
• support the transition to a zero net emissions economy and assist the Government meet its goal of significant reduction in waste.

And there are some fantastic statements in the Procurement Rules themselves:

“leveraging contracts to promote the transition to a net zero emissions economy, supporting New Zealand businesses, promoting skills development, and ensuring compliance with employment and health and safety standards”

“ensuring that those who win contracts in New Zealand can compete in the international market. This increases exports and supports New Zealand’s economic growth.”

“Procurement offers the opportunity to support New Zealand businesses, including Māori businesses and Pasifika businesses. Procurement can also contribute positively towards achieving environmental outcomes by supporting New Zealand’s transition to a low emissions economy or reducing waste”

“supports innovation and helps create a competitive, productive supply base in New Zealand – that supports economic growth and development”

It’s all good stuff, until you start to look at the detail.

Pretty much what the Emperor and the realm needs – economic development, export potential, focus on Maori and Pasifika, climate change and environment management.  The advisors have every right to be proud of their work.  Well intentioned and ticks the right boxes however the devil is in the detail.

Opt Out

Agencies can opt out of the procurement rules. Legitimately. And in some cases they have to. For the New Zealand ICT industry where so much of Government ICT procurement is locked up in Secondary Procurement processes through Panel Supply and All-of-Government contracts this is a major concern. Under these agreements local ICT suppliers are not getting the transparency needed for them to prepare their businesses to meet the current and future ICT needs of Government agencies.

The trickle down effect is that they cannot reliably plan for staff development or additional employment particularly when looking at internships or education-leaver employment, nor can they make plans to position themselves to reduce the cost of bidding for work.

Exemption from Open Advertising

The rules allow an exemption from open advertising (read competitive bid processes) in a number of situations. Some make sense – an emergency for example and the (sometimes lengthy) procurement of the required good or service will cause further problems. Others not so much – or more how they can and have been applied. Only one supplier is one instance. With Government agencies dominated by solutions from large multi-national vendors the local providers end up scrapping over who supplies the better implementation and configuration services – not the bigger question of if the original solution itself should be challenged.

Payroll in New Zealand is a classic example. Plenty of good local contributors not able to get a foothold against established overseas providers despite having local knowledge on local pay legislation. Another instance is where a competitive tender was issued a year ago and not fulfilled. In a world where technology and our use of it evolves daily a year is too long? Concerning too that secondary procurement – an opt out vehicle – again features as an exemption.

Equal of Overseas Suppliers

Remember that focus on New Zealand business, Maori and Pasifika? Fades – a little bit like the emperor’s new clothes – with the requirement to treat suppliers from another country no less favourably than New Zealand suppliers. Including the wee gem of:

Suppliers must not be discriminated against because of:

1. the country the goods, services or works come from

2. their degree of foreign ownership or foreign business affiliations.

Admittedly there is the emphasis on the comparison of public value. One of the concerns that NZ Rise has raised in our submission is who reviews the decisions that have been made when applying the public value criteria. For some – cheapest price has historically been the definition of public value, at least when it comes to prudent Government spending.

So…where are the clothes?

There are some really great aspects of the 4^th Edition of the Procurement Rules. The focus on Broader Outcomes, the requirement to plan, the (recently topical) focus on growing and supporting the construction industry. We can almost see the garments of fine silk and embroidery being layered on the Emperor. The advisors – well intended – have created the scene well.

And then it all gets horribly undone by a few sweeping clauses on opt outs, exemptions and the exclusion of preferences for local business.  Bit like the boy calling out ‘but mummy, the Emperor has no clothes’.

 

Shane Ross holds the procurement portfolio on behalf of NZRise, and is the General Manager for Customer Success at The Testing Consultancy.

This is an opinion piece and not necessarily the opinion of NZRise and was originally published in our newsletter.  For any questions or comments, please contact the Co-Chairs.