The art of the done deal. Photo / Getty Images
COMMENT
Local councils always want us to buy local and support local businesses after the economic hurricane that arrived on the back of Covid-19.
Good on them, all for it.
But when it comes to dishing out long-term, sometimes multimillion-dollar contracts, these same organisations don't seem to always give local operators a look in.
Last month, the Rotorua Lakes Council found itself in a storm of community controversy when it awarded a street-lighting maintenance contract to the incumbent, a company headquartered elsewhere in New Zealand (though, of course, having an office and employees in Rotorua).
One of the unsuccessful tenderers for the 10-year contract was David Sefton, the owner of a long-time Rotorua-based company who touted his focus on keeping profits in his community.
"The council are pushing 'tatau tatau' and go local and they don't practise it themselves," he told NZME at the time.
Many in the community got behind him, criticising the council's choice. But the council said the procurement process was fair, robust and competitive and included a weighting towards local operators.
Now two of Rotorua's western neighbours find themselves in a similar boat.
This week the Tauranga City Council announced it had awarded EnviroWaste the contract for its new citywide rates-funded kerbside rubbish and recycling collection service.
The Western Bay of Plenty District Council had previously signed up the same company for its new kerbside service, which is part user-pays and part rates-funded and covers most of the district.
The Tauranga and Western Bay councils - which took a joint approach to procurement - have refused to reveal the total value of the contracts, yet.
But with both being up to 10-year terms, I think we can safely say - and I am going to use the technical term here - we are talking about megabucks.
EnviroWaste is an established and major player in the New Zealand municipal solid waste scene, having several council contracts around the country.
The company was founded in New Zealand, but in 2013 it was acquired by Hong Kong-based CK Infrastructure Holdings Limited.
The global infrastructure behemoth is part of the business empire of billionaire Li Ka-shing and his family. Long considered the richest man in Hong Kong, he was bumped to second place in a Forbes Asia ranking in February.
On the other side of the fence is John Cruickshank, who started Kleana Bins in Tauranga 20 years ago.
He had a rough day in 2018 when the council decided to bring in a rates-funded service, a move he expected to remove a huge chunk of his market.
Loyal though they might be, his customers weren't going to pay him for a service when they had to pay for the council's version through their rates.
He said then it would cost jobs. People were concerned and he had support, but the deal was not yet done so the outrage was tempered.
Reality hit home this week when news broke that EnviroWaste had won Tauranga's contract.
Some people were outraged to see the work go to a Hong Kong-owned company, but Cruickshank was not surprised.
In his view, the size of Tauranga's citywide tender and expense associated with some requirements gave small operators no chance to begin with, because they could not raise the necessary capital.
He projected that if he couldn't find a new market, up to 13 jobs - 60 per cent of his staff - would have to go. Mostly drivers.
Tauranga's council has noted EnviroWaste will be hiring locally.
That's a nice sentiment, conjuring up visions of a happy ending where each local laid-off driver will step into a shiny new job with equal pay, conditions and benefits.
That seems to me unlikely to be the reality, however, given the more streamlined services and the fact that there are currently a half dozen operators licensed in each council area that will surely all be losing business.
It's worth noting that we are talking services for New Zealand's fifth-largest city with more than 56,000 dwellings, according to Stats NZ. An another population base of more than 22,000 in the Western Bay of Plenty District.
The councils have said the procurement process to service was competitive, fair and open to industry bids, including from local businesses.
They also said Government rules meant they could not treat foreign-owned suppliers less favourably than Kiwi suppliers and the decision had to be based on achieving the best public value.
Curiously, however, the Rotorua Lakes Council, in its own defence back in August, emphasised the pro-local weighting in its procurement process.
"Our procurement process is based on best practice principles, which includes a weighting towards local services and suppliers."
That makes me think the relevant rules are not quite so black and white.
Councils need to realise things are different after Covid-19.
Billions in taxpayer dollars have been pumped into the Kiwi business sector to "soften the blow" of the economic hit from the pandemic and the massive disruption to international markets.
We are all invested in keeping businesses afloat and supporting our local economy through this recession, and every spending decision matters.
Of course, there are a lot of factors in play in any procurement process. The system must be fair and winners capable of doing the job at a fair price. And there will always be losers.
But the community doesn't want to see the profits made off their rates dollars sent overseas or even, ideally, out of the district.
I think councils need to practise what they preach to shoppers and find new ways to open their procurement purses to local businesses that can do the jobs and are committed to keeping profits at home.
Maybe it will cost a bit more sometimes, but if the community can be shown how that balances against the local economic benefit, I think they can make room for that.
And if national procurement rules are stopping the councils from doing this, then central Government needs to urgently step up and cut the red tape.
Rotorua Airport and Air NZ say they are working to address challenges.