Govt procurement should encourage local industry: NZRise

ICT lobby organisation recommends more open and transparent government procurement processes

More open and transparent government procurement processes and the appointment of an Ombudsman to help sort out procurement disputes are two recommendations from an exercise coordinated by NZRise to improve the effectiveness of public-sector procurement, particularly on the ICT front.

The ICT lobby organisation and its industry and government collaborators also recommend that "evaluation criteria should include the macro-economic assessment of the cost to the taxpayer of each solution." Such evaluation would take into account the benefit to the economy of encouraging the growth of local industry and knowledge.

"By acknowledging as part of the evaluation criteria the benefits of investing in local industries, the public sector can contribute to a vibrant and sustainable IT sector, one that is increasingly able to generate export dollars in the weightless economy," says the report.

The document comes out of a workshop on government procurement that NZRise held in August. This attracted 25 officials from central and local government and 35 ICT industry representatives. Computerworld was invited, but under the condition we made no detailed report at the time. About half the time was spent in presentations from local and overseas experts in public-sector procurement and the other half in round-table discussion of the several themes that emerged. Discussion groups were asked to identify the barriers to effective and innovative procurement and then to produce and rank principles for improving the procurement process.

Imbalance between technical knowledge of the provider and the government-agency client is another barrier highlighted at the workshop. "Given the fast changing nature of the technology sector, it is inevitable that expertise, especially as it relates to newer and more innovative technologies, will predominantly reside with providers -- the specialist implementers of these technologies," says the report.

"Agencies, without early engagement, therefore find it difficult to articulate requirements that acknowledge, or encourage, innovative approaches."

Possible remedies lie in earlier engagement between client and supplier, a more transparent tendering process and a role for provider representatives in the governance of the project during its implementation. "Joint ownership [of the project's deliverables] would be initiated in the design phase of the project to ensure that the expertise necessary for innovation was developed from the beginning and that, from this stage and each subsequent one, there was the opportunity to transfer knowledge and build capability through the life of the project," says the report.

Agencies seeking innovative solutions should be prepared to co-fund the development of prototypes, the document says, pointing to the benefits of collaborative "lightweight prototyping" as "a strategically astute way to deliver innovation in a risk-controlled way."

Advocating a more open and flexible process of provider qualification to replace the currently favoured "panel" system, the report points approvingly to the direction taken by the state government of Victoria, with its open register of suppliers.

The funding model for MBIE's procurement group encourages it to seek all-of-government solutions. This, the workshop participants suggest, means pressure towards a commoditised "one-size-fits-all" approach.

Agencies often see small local companies as more risky, and this increases the tendency to aggregate projects so they are more attractive to larger companies, says the report. "This increases the risk of failure, capture and long term commitment to high costs." To mitigate the risk, aggressive contract terms are often put in place "which essentially ensure that many projects end up as battlefields and the chance of a collaborative approach is lost right at the initial engagement."

The workshop's conclusions were critiqued by NZRise members, and government officials have also been given a chance to comment. The final report has been sent to the Ministry of Business, Innovation and Employment to be fed into government's existing procurement reform deliberations.

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"Govt procurement should discourage use of vendors who pay minimal income tax"



The current structure put in place across government is farcical. This entire drive toward panel based selections is killing the smaller ICT players in New Zealand while costing the country billions of dollars.

I talked to an SME recently who wanted to apply to get on to panels around town, but at a cost of $50,000 a go, they can't afford it.

Another example I saw recently was the cost of contracting staff to government. The reason it costs so much is that an independent contractor can't go directly to government agencies. They have to go through a panel provider. Often, they can't go directly to the panel provider, because they have a panel. What ends up happening is that contractors frequently go through two or more companies, each clipping the ticket, to get the work. A quick note on the back of a beer coaster gives you an idea of the cost. Let's say there are 2,000 contractors (conservative) and they are paying $200 a day going through an average of two companies. That works out to over one hundred million per year. That's the cost of "probity" ladies and gentlemen while at the same time as cutting out our local ICT companies from the money.

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