$14m TB job up for grabs

By PHILIPPA STEVENSON

The $14 million annual contract for Bovine TB disease control is up for grabs for the first time, putting state-owned enterprise AgriQuality under pressure.

The former service arm of the Ministry of Agriculture and Forestry has had exclusive rights to the Animal Health Board's valuable contract for at least the past 15 years.

TB disease and vector (carrier) control was last year a $55 million business for the board, whose goal is to enable New Zealand to achieve the international standard for official freedom from Bovine TB - not more than 0.2 per cent of cattle and deer herds infected with TB - by 2013. The present level is 1.2 per cent.

The contract is significant income for AgriQuality, whose 900 staff include most of the foot soldiers who hold much of the technical knowledge on stand-by for major exotic pest or disease threats - biosecurity's so-called standing army. Last year the SOE's revenue was $61.6 million.

But observers say there is no guarantee AgriQuality will win the board work.

The loss of all or most of the contracts put out to tender next month would put a serious hole in its finances as well as risk weakening the standing army through job loss.

Board general manager Robert Isbister said the opening up of the contracts to others was driven "principally because our stakeholders have asked us how we know we are getting value for money".

"Under the process we run now we can't put our hand on our heart and say we know we are," he said.

The stakeholders - groups representing beef, dairy and deer farmers, their industries and local government - became more acutely concerned with cost effectiveness when the board doubled the levy on cattle slaughtered to $14 a head last July.

The Government agreed to increase board funding providing contracts were contestable, and the board's directors also agreed it was the right thing to do, Isbister said.

A review of the board's national pest management strategy also drew submissions opposed to the exclusive arrangement with AgriQuality.

The New Zealand Vet Association, for instance, said contestability could greatly reduce the annual cost for on-farm TB testing, surveillance at meat processors, administration of stock movement control, laboratory services and advice to farmers.

It calculated that cattle TB testing cost about $10.5 million, or about $2.26 a head, but could be done for $2.10 a head, saving at least $5.6 million over 12 years.

Five years ago, vector control, which is mostly done by regional councils, was made contestable. The new regime has brought lower services costs which could indicate that economies will also eventuate for the disease control programme, said Isbister, adding: "But we are not pre-judging the outcome at all".

He said about six responses had come in after advertising last week for registrations of interest in the tenders. Otherwise he had no idea who would "come out of the woodwork".

He said it was not about getting the lowest cost. "What we're looking to do is get a transparent process that provides both effectiveness and efficiency. If that results in lower costs then you might say that's a bonus."

The board would assess whether it invited all or some of those expressing interest to submit tenders, taking into account the need for parties to fit together in the overall scheme.

It was also starting small - splitting up the highest volume activity of TB livestock testing into three tenders covering 24 geographic areas.

One tender would involve 17 of the 24 areas, with the other two covering the remaining seven areas "to make sure our systems and the process we've developed is seen to be working", Isbister said.

The board was conscious of AgriQuality's role in emergency disease and pest response and if the SOE lost any of the board's business, and consequently staff, the new service providers would be required to make their staff available to MAF if and when required.

AgriQuality chief executive John Morgan said would-be competitors of the SOE had wanted for some time to have a "crack" at its work. Now they could "put up or shut up", he said.

"We'll find out really whether there is a better option."

AgriQuality had a remarkable record in pest management, achieving twice the expected result by reducing infected cattle herds to 332 when the target had been around 800, Morgan said.

AgriQuality recently formed an alliance with the 100 nationwide practices of the veterinarian groups CareVets and NZVets.

At the time, the general manager of AgriQuality's FarmNetwork, Jim Bailey, said the SOE would gain the skills of a huge resource of in-field operational vets to provide nationwide back-up for New Zealand and overseas emergency response and biosecurity surveillance.

Vets would also help AgriQuality with TB control and other disease programmes, animal welfare, food safety and environmental issues.

NZVet chief executive James Coddington said AgriQuality offered infrastructural support to vets and made the combined group "a strong contender for all national contracts".

Morgan said the partnership with CareVets and NZVets had been in the pipeline for a long time and was not just a response to the board contestability process.

The alliance meant the groups could help each other, rather than damage each other's business, he said.

CareVets brand manager Gavin Vercoe readily admitted the board contracts had been the prime driver of the alliance from the vet groups' point of view.

They had considered pitching for the TB contracts on their own but recognised that AgriQuality was ahead in experience and capability, particularly in administration.

"We thought rather than try and do everything, the best thing was to let everybody who was expert in their own field do what they should do."

Vercoe said AgriQuality had been doing a good job and the tendering process arose from political rather than practical motivations. Some groups were keen to win lucrative-looking contracts but cherry picking could compromise efficiency, he said.

"We have an 'if it's not broken don't fix it' sort of attitude. We would rather work in with AgriQuality, who are doing a very good job already."

Morgan said if AgriQuality failed to get any of the contracts "it would create issues but not insurmountable [ones]".

However, such a likelihood was remote and the company was working very closely with MAF to protect the standing army.

Morgan said AgriQuality aimed to strengthen its position through the tender process, not weaken it.

Biosecurity threats were an increasing concern but critics of New Zealand's capability, much of which rests with AgriQuality, underestimated the lengths MAF went to to protect New Zealand. The capability was as strong as ever but the threats were growing, he said.

Some critics have suggested AgriQuality did MAF's bidding but was not pro-active in suggesting improvements to systems.

"We're always discussing with them, and giving them advice on what we learn from an operational point of view [but] that stuff doesn't always get into the public domain," Morgan said.

The Livestock Improvement Corporation, best known for its dairy bull breeding, has said it is likely to be a contender for some of the board's contracts.

Corporation group manager of information Mark Jeffries said it could focus on tenders in which it already had expertise including the call centre, in-field force and information technology.

Other bodies suggested as possibly interested in some of the contracts are the meat inspection service Assure NZ, and Massey University's epidemiology training and research centre, the EpiCentre.

* There are approximately 66,000 cattle and deer herds registered in New Zealand.

Last year, approximately 4.8 million animals were tested for TB.

There were 332 infected cattle herds and 81 infected deer herds on March 30. After positive TB tests, 924 cattle and 982 deer were slaughtered between July 1 and March 30.