Mixed reaction to govt procurement rules

NZ Rise says the new government rules for procurement have a lot to recommend them to the local ICT industry

The principles of new government rules for procurement have much to recommend them to the local ICT industry, says Don Christie of Catalyst, president of local industry lobby NZRise.

Economic Development Minister Steven Joyce’s tone in the announcement of the rules late last month gives encouragement to local ICT companies that they might get as fairer go in bidding for government contracts, but “we don’t see much of a link between those principles and the rules as they’re written,” Christie says.

For example, he says, Rule 4, about non-discrimination between suppliers, particularly those from different countries, is phrased in a way that seems to apply more to overseas suppliers than to locals. “Agencies must treat suppliers from another country no less favourably than New Zealand suppliers,” says the rule, adding “suppliers must not be discriminated against because of: the country the goods, services or works come from [or] their degree of foreign ownership or foreign business affiliations.”

The text of the rules explains that the first sentence is “a standard phrase in international agreements and has significant meaning in that context. So while it’s not plain English, we need to include it in the Rules!”

A major point in the new rules is to take the emphasis off the up-front price of the goods or services tendered up-front and direct purchasing agencies more towards long-term total cost. “Value for money isn’t always the cheapest price,” the rules say.

“Value for money means using resources effectively, economically, and without waste, and taking into account: the total costs and benefits of a procurement (total cost of ownership) and its contribution to the results you are trying to achieve.

“The principle of value for money is about getting the best possible outcome over the whole-of-life of the goods, services or works.”

Under the new rules, Joyce says, buyers will “get more information about government procurement opportunities and have longer timeframes for responding to tenders. This means they should have more time to put together a response or collaborate with other businesses to submit a joint response.

“The rules also promote greater use of model tender documents and contracts, which will reduce time and money that suppliers spend responding to tenders. These changes will be particularly helpful for small and medium-sized enterprises.

“The new rules and supporting guidance from the Ministry of Business, Innovation and Employment will encourage agencies to seek innovative solutions and award new intellectual property to the party that’s best placed to commercialise it,” Joyce says. “This should give businesses more opportunities and incentive to develop new products or services that enable them to grow and enter new markets.”

Must try harder

“The rules around pricing could be made more encouraging,” Christie says. The public should know how government agencies are spending their money, he says, yet there is still a good deal of emphasis on non-disclosure and the use of terms such as “commercial in-confidence”. NZRise is not saying the price of every last component should be revealed, he says; even if costs are disclosed in aggregate form it will give the public and potential bidders more information than at present.

Supplier panels — selected groups of suppliers in a given area from whom purchasers may choose a supplier for a particular contract without further tendering — do not appear to have been significantly opened up, as was the hope of a lot of the local companies involved in an NZRise-organised procurement workshop last year, Christie says. In his opinion, all panels should be open, that is anyone should be free to join the panel at any time, not just during the tendering period.

Rules 52 to 54 concern panels and pre-qualified suppliers. They do point out the difference between open and closed panels, so tacitly accommodate the open panel, but government ICT panel contracts to date have been closed.

A section of the new rules deals with all-of-government contracts (AoGs) concluded by a group of agencies through MBIE’s Government Procurement Branch. Such a contract opens its price and other terms to all relevant agencies.

“All agencies must purchase from the AoGs, unless there is a good reason not to,” says Rule 55. This, in Christie’s view, puts too much emphasis on AoG arrangements. “They should be used very cautiously,” he says, or we run the risk of deals which are widely at variance with the needs of some agencies and unduly restrictive.

Christie suggests there could be a conflict of interest in having the economic development part of MBIE in charge of procurement policy while at the same time it has a brief to encourage AoGs.

NZRise’s campaign for further improvements will continue, he says. In the near term, it will be targeting local government contracts, with two workshops planned in that area; but the effort to introduce further flexibility into central government ICT purchasing will not slacken, Christie says.

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