One of the NZ Transport Agency's recent road safety ads.
Some of our best-known ads and contracts might be in for a facelift as the Government pares back prices and creates a new panel of preferred suppliers.
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Several top advertising agencies have been cut or are missing from a new panel of preferred creative suppliers for Government departments and other public agencies as part of a wide-ranging cutback in taxpayer spending.
The advertising industry has been left fuming by the actions of the Ministry of Business, Innovation and Employment (MBIE) - the Commercial Communications Council says the process has been “utterly disingenuous”, with quality, capability and expertise pushed aside for criteria that are based little more on price.
Comms Council chief executive Simon Lendrum said dealing with MBIE’s procurement team “has, at times, felt like discussing gravity with flat earthers”.
But MBIE has defended its actions, saying it has been acting in the best interests of taxpayers, with expected savings of 20-22% for public sector companies.
Government contracts are some of the most important and lucrative deals in the advertising industry.
Take, for example, the likes of NZ Transport Agency (Waka Kotahi) and police with their road safety advertising and, during Covid, the likes of the Ministry of Health’s “stay home” messaging.
MBIE has now confirmed a new panel of 200 companies and agencies to supply creative services, including creative strategy, ideas and execution, ie, making the ads.
But big names missing from the creative services list include award-winning agencies such as Dentsu, EightyOne, FCB, Ogilvy, Special, Stanley Street, The Monkeys, and VML.
Many of these agencies have previously handled or currently handle significant government accounts, for example, FCB with Waka Kotahi; VML with Te Whatu Ora, ACC, and Stats NZ; Ogilvy with the Human Rights Commission; and Stanley Street with the Ministry of Education and Tourism New Zealand.
Only last week, Special created a bold post-Olympics campaign for High Performance Sport NZ.
“I’m deeply disappointed with both the process and the outcome of the AoG [All of Government] Panel RFP,” said Lendrum.
“The establishment of panels from which government agencies can select partners was intended to enable government agencies to ‘select providers on the basis of expertise, capability, and value-for-money as identified through the evaluation results of this RFP’.
“Unfortunately, the RFP contained no quality, capability or expertise criteria by which MBIE could evaluate providers. In short, if a provider says they can deliver the services, that’s good enough for MBIE.”
Lendrum said he understood MBIE’s need to follow cost-cutting directives but in reality, this was an “exercise in optics versus outcomes”.
“In professional services, hourly rates are only one component of any value-for-money equation. The real test is the total cost of delivery (hours x hourly rates) coupled with outcomes delivered.”
The consequence of such a “blunt” process was that some agencies with the most experience in “government public awareness and behaviour change campaigns” had missed out on individual panels.
“MBIE has been resolutely unfazed about this outcome, citing the increased size of the panels overall. It demonstrates their utter lack of understanding of our industry,” said Lendrum.
He said there was no suggestion agencies had been charging too much in the past.
“It’s a case of what happens in any power inbalance. MBIE demanded discounts on commercial rates; it didn’t provide transparency on ‘acceptable’ rates, so the process drove the entire industry down on ratecards. But of course agencies want to work with government, so they were compelled to drop their ratecard prices – to arguably unsustainable levels. It also suggests that price is the only thing that matters to government – regardless of outcomes – which is absurd.”
MBIE is unapologetic about its approach and is aware that it might affect agency jobs (the Comms Council says no one is reporting job losses).
“MBIE is aware that some providers on the previous panel were not successful in their application to join the new panel, and that this may have an impact on roles at those agencies,” said MBIE NZ Government procurement general manager Liz Palmer.
“The total number of providers on the panel has increased, providing more providers opportunities to work with government. The new panel includes a range of providers, from sole traders through to large providers.”
She confirmed existing contracts would be honoured, until their expiry dates.
There is also hope that agencies who missed out on the creative panel, or one of the others (such as content production, media strategy, cultural competency, and social media services) might still get work. “Some government agencies are required by Cabinet to use AoG contracts while others are encouraged to, but not mandated,” said Palmer.
She said MBIE would monitor the performance of providers and the panel “to ensure it is working as intended”.
Earlier, MBIE said it expected savings of between 20 and 22% on hourly rates.
“MBIE advised in the tender documentation that we were seeking rates no more than 20% above the average tender response rate received for each activity,” said Palmer.
“Respondents who met the mandatory criteria, but initially failed to meet the pricing threshold, were given an opportunity to revise pricing levels.”
Palmer said sole traders and registered companies “were each assessed separately for pricing, to address the concerns around scale”.
She said AoG contracts were established in 2009 to leverage the Government’s purchasing power “to deliver better outcomes for New Zealanders”.
“Given the significant savings that government agencies have been directed to achieve, having an increased focus on financial considerations was a key objective of this process.”
Asked directly to respond to claims of an “utterly disingenuous” process, Palmer said the intention of the panel was to establish a broad range of providers to meet the “varying needs” of government agencies.
“With cost being a key driver of the RFP, in addition to clear mandatory criteria, this was an important factor. The RFP was transparent regarding these criteria and was subject to independent probity to ensure fairness throughout the process.”
But Lendrum said the Comms Council had voiced concerns about multiple aspects of the process with all levels at MBIE, “including significant dialogue with the chief executive”.
“However, their response has been to deny any shortcomings whatsoever. At a time when our prime minister is talking about better collaboration between the public and private sectors, speaking to the procurement team has at times felt like discussing gravity with flat earthers.”
Lendrum said no one was reporting job losses as a result of the decisions.
“It’s just going to require careful navigation, as is the case across the whole commercial sector at present. It will likely stifle innovation and make working with government less appealing. Ultimately, as MBIE has demanded discounts on commercial pricing, given the choice, commercial clients become more appealing.”
The reaction from individual agencies approached by Media Insider has been mixed.
FCB Wellington chief executive Sean Keaney, Ogilvy group managing director NZ Steve Kane, and VML managing director Fleur Head did not wish to comment. Kate Maher - a spokeswoman for Accenture, owner of The Monkeys - said legally they could not comment.
EightyOne managing director and partner Matt West said: “We’re a small independent agency that operates almost solely in Wellington. So it’s worrying that we find ourselves on the outer of Government.
“We thought we’d followed the process and discounted our rates back 25% but apparently we were still beyond the threshold, despite being below industry standards. I would have thought the role of MBIE is to encourage business, however taking a blunt spade to all providers, regardless of their capability, size and scale, means Government agencies have less to choose from. More in number, but fewer agencies with the credibility to deliver effectively for Government. And that means we all lose.”
Dentsu chief executive Rob Harvey said they did not anticipate any material impact to their business: “This process has given rise to some legitimate questions and concerns, however we remain a service provider on multiple AoG panels across the breadth of our capabilities.”
Special chief executive Tony Bradbourne said his company was on the AoG cultural competence panel and “therefore available for any Government agency work as part of that”.
“Kiwi-owned Special is the only major creative company to have invested heavily in Wellington in recent years, with most foreign-owned agencies doing the opposite over the past decade, with resulting closures and redundancies. But Special Wellington continues to grow quickly, and create highly effective work for our Wellington-based clients so we see no reason to step back from the proven success of this model.”
Stanley Street has not yet responded.
Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor and has a small shareholding in NZME.
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