NZ government IT procurement strategy unclear, says NZ Rise

Chairman Don Christie says current government spending on procurement can be "incredibly positive or very damaging"

By Randal Jackson, Wellington | Wednesday, 22 February 2012

“It’s all been very quiet and seems quite fragmented about who is doing what.” Don Christie, co-chairman of NZ Rise says it is not at all clear what is happening with government IT procurement.

NZRise is a non-profit incorporated society formed by a group of New Zealand IT firm business leaders to ensure the global competitiveness of the New Zealand IT industry.

“We need to be clear that the aims of public procurement will be best served by the commissioning public agency seeking the best value for public money, irrespective of the locality of the supplier,” he says.

“We support and benefit from open procurement policies, both in New Zealand and other countries.”

To date, the Department of Internal Affairs has confirmed preferred suppliers for PCs and laptops, and for multi-function print devices. Revera and Datacom have been named to provide infrastructure-as-a-service, with negotiations still continuing with IBM.

Christie argues that there is a range of benefits in selecting local suppliers that need to be fully assessed when awarding contracts.

“Similarly, there are a range of artificial barriers that procurers – both public and private – put in place that prevent local suppliers from being able to consider bidding for work.

“These include unnecessary aggregation of projects, a ‘closed shop’ mentality, as seen with the rush to set up panels of suppliers, all-of-government contracts that are compulsory and unnecessarily rigid, with high liability requirements.”

He refers to Land Information New Zealand outsourcing all of its IT to Datacom. “You have to sub-contract to them [Datacom] to get any work, so there is no incentive. It’s not Datacom’s fault.”

Christie notes that the government spends between 30 and 40 percent of the country’s gross domestic product, which can have a hugely distorting effect.

“But if properly recognised, this could be used to have a very positive impact on the growth of the New Zealand IT sector.”

He refers to a New Zealand Industry Capability Network report on procurement, which says the development and implementation of local industry participation plans is not a government requirement.

The report quotes economic research from BERL that indicates that for every $1 million spend locally, 10.4 jobs are created or maintained in New Zealand.

Christie’s own company, Catalyst IT, commissioned a study which he says supports that report “in spades”.

The study shows that local IT companies are cost-effective, with a 25% to 35% cost advantage over Australian companies, and larger cost advantages compared to the US and the UK.

“We spend more than half a billion dollars a year on importing computing services, and $235 million on computing royalties and licence fees.”

The shared services model in Australia has largely failed to deliver and is being abandoned, particularly in Western Australia, he says.

“The New Zealand government spends a hell of a lot of dollars when it comes to procurement, and tries to ignore the massive distorting effect that can have on the economy.

“It could be incredibly positive or very damaging. Our fear is that it might be damaging.”

comments

"...government spending on procurement can be "incredibly positive or very damaging"...
I think the Govt and Govt Procurement is missing a golden opportunity here to look at the bigger picture.

Any old procurement team can negotiate a better deal on IT hardware just by aggregating the volume and commitment but is that the real issue in the NZ public sector?

I suggest that it isn't. OK, consistency of hardware makes some sense but the real issue is "new ways of computing". We have seen the recent explosion of smartphones, tablets and smaller lighter laptops but have failed to come to terms with how they can be incorporated into and ultimately change, IT infrastructure.

Nearly every IT Manager in the public sector is against "the cloud", owners' devices and real IT mobility. The savings these devices and the technology can make just in air travel within the public sector justify some investment in analysing how to do it better using the new technologies rather than fighting against them on (often) misplaced concerns about security, etc.

Yes, Procurement can add some real value. Procurement must stand up and say take a look at X, Y and Z and drive positive change. A well reasoned proposition will gain strategic traction and get on the agenda.

To sit back and just go to tender for hardware not only diminishes the value of procurement (and keeps it firmly "down" the organisation pecking order) but can also be "very damaging" to a better, more efficient future.

Mr Christie is absolutely correct saying that the IT strategy is unclear. I also suggest that to focus on hardware and shared services is off down the short term path and very operational - not strategy at all.
Posted by Marc at 10:40 on March 15, 2012

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The "massive distorting effect"
The Government is the largest single market maker of any economy, Christie highlights this when he states "...that the government spends between 30 and 40 percent of the country's gross domestic product".

Clearly that means the Government has the capacity to set prices for anything it chooses to in the economy, this is demonstrated by what Christie describes as "...the massive distorting effect..." of All-of-Government (AoG) IT procurement etc...

This is not a "massive distorting effect", it is a well documented and predictable phenomena of Government Monopoly Macro-economics.

The Government has set the price for IT procurement with the AoG project, the Government represents 30 - 40% (or larger) of the national IT procurement spend - the single largest entity. If the vendors want to share in that spend - they are required to accept the Governments prices or lose, simple monopolistic practice, in this case in favour of the New Zealand tax payer!

The Government could use this power for anything within our economy, from IT procurement to the interest cost of Government Private Bank debt financing of the New Zealand Government deficit.
Posted by Anonymous at 11:55 on February 22, 2012

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