Govt to shake up its $30bn procurement system

The Government will revamp its $30 billion procurement practices and policies in an effort to save money, cut red tape and open procurement up to smaller businesses.

Commerce Minister Simon Power today announced a proposed reform of state sector procurement practice and policies over four years.

Reforming the procurement agenda would drive cost savings, releasing fiscal savings to be used in other areas, he said.

Money would be saved with the establishment of "centres of expertise" within lead agencies to negotiate all-of-government contracts in common-spend areas, he said.

"At the same time, work will be undertaken to cut red tape in procurement processes, improve capabilities of procurers, and enhance opportunities for businesses to win government contracts."

He told the Chartered Institute of Purchasing and Supply's 3rd Strategic Procurement Forum the Government's procurement spend was about $30b a year.

The Government Procurement Reform Agenda was based around four key themes:

* Cost savings;

* building procurement capability and capacity;

* enhanced business participation; and

* improved governance, oversight and accountability.

"Government is a procurer of substantial scale, and in some areas will need cutting edge and complex products.

"By contracting in sufficient volume, the Government can give industry enough of a market to justify investment in labour, equipment, and research and development. This can lead to innovative products being produced and greater opportunities in export markets," said Power.

Over the next three months the focus would be on deciding the priority actions, setting up the resources in lead agencies to deliver all-of-government contract savings, and ensuring that all procurement policy activities are closely aligned and integrated.

Getting the best value for money was vital in the current economic climate, he said.

"With the state sector alone comprising some 30 per cent of our economy and the Government being the largest single purchaser in a number of our domestic markets, procurement-driven improvements have the potential to make a significant contribution to making this plan a reality.

"I have to concede, however, that the public sector doesn't have the best track record in providing innovative procurement solutions. Rather, we often tend to be viewed as overly compliance-focused and process-driven.

The freedom government agencies had to determine their own procurement procedures resulted in a wide variety of approaches across central and local government, he said.

Suppliers said that made it frustratingly difficult to do business with government, and the cost this added to servicing the Government as a client, he said.

Business leaders attending the Job Summit called for the Government to "rapidly reform government procurement processes" in order to, cut red tape, increase tender opportunities, and make it easier for small and medium sized enterprises in particular to bid for government business, said Power.

Cabinet had agreed in principle to a Government Procurement Reform Agenda which, provided tangible cost savings can be demonstrated within one year, would form the basis of a four-year change programme, he said.

Typically, procurement reform involves creating a large centralised procurement unit but Power said he was not convinced that was warranted or appropriate for New Zealand.

"The model that I proposed New Zealand adopt is more consistent with our devolved public management system."

Centralised governance and oversight will be balanced by devolved responsibility for implementing specific reform agenda actions to a small number of Centres of Expertise hosted within procuring agencies.

- NZPA