Hon Gerry Brownlee
Minister of Economic Development

28 October 2009 Media Statement

Reforms of government procurement

The Minister of Economic Development, Gerry Brownlee, has announced changes to the government procurement programme.

The reforms will see better co-ordination between government agencies when buying work place equipment such as computers, stationery, and cars.

“These changes will stop duplication of effort when state sector agencies make their purchases, and bring better value for money with government procurement,”said Mr Brownlee.

New Centres of Expertise (CoE) will be started. They are specialist teams to negotiate all-of-government contracts, particularly where government agencies are duplicating their spending.

“The Department of Internal Affairs will host the first CoE, which is responsible for establishing all-of-government contracts for IT equipment,” said Mr Brownlee.

“The Ministry of Economic Development will establish the second CoE, which is responsible for all-of-government contacts for passenger vehicles and stationery.”

“These organisations were chosen to host CoEs because they have senior level support and relevant procurement expertise. The first all-of-government contracts are expected to be in place by June 2010,” he said.

“By consolidating expenditure and leading contract negotiations on behalf of the state sector these CoEs are expected to achieve significant cost savings.”

In other jurisdictions an all-of-government approach to procurement has returned, on average, 5-10% cost savings”, said Mr Brownlee

The Government Procurement Reform agenda is a four-year programme that started in June this year.

It has four broad themes: achieving cost savings; building procurement capability and capacity; enhancing New Zealand business participation; and improving governance, oversight, and accountability.

While CoEs will be mainly focussed on driving cost savings in the first year, in the future they will also support procurement capability building and manage supplier relationships across key areas of government expenditure.

Questions and Answers

What will the Centres of Expertise do?

The Centres of Expertise will:

• manage key areas of tactical (low risk and high value) spending across government;
• develop a strategy to gain maximum efficiency for all-of-government/sector specific spend areas; establish and manage links with suppliers;
• implement agreed actions on behalf of government to improve efficiency (this may include letting or managing an all-of-government or sector specific contract);
• measure and report savings/efficiencies delivered through any all-of-government/sector specific approaches;
• manage all-of-government/sector specific contracts awarded to deliver improved outcomes; and
• work effectively with key businesses in relevant sectors.

The Ministry of Economic Development is responsible for the delivery of the overall Government Procurement Reform agenda. The CoEs are responsible for the delivery of their specific all-of-Government contract.

What is an all-of-Government contract?

An all-of-government contract will enable State Sector agencies to purchase common items directly from approved suppliers.

All-of-government contracting is an approach designed to achieve greater efficiencies in the way common goods and services are procured across government. They will streamline the purchasing process for agencies and eliminate the need for suppliers to respond to multiple tenders.

Why have these areas of spending been selected?

• The Centres of Expertise will negotiate all-of-government contracts in:
• IT equipment
• desktops;
• laptops; and
• multi-functional devices (i.e. printer, copier, scanner, fax combined)
• passenger vehicles; and
• stationery.

These spend areas have been targeted on the basis that:

• they are amenable to greater aggregation and standardisation across government because agencies are buying broadly the same items from the same national or international suppliers (i.e. agency needs are not unique);
• any supply problems in these areas are easily resolved; and there is good evidence from other jurisdictions that cost savings are achievable in these areas through an all-of-government approach.

Which agencies will be required to use all-of-Government contracts?

All Public and State Services agencies will be required to use all-of-government contracts. This includes Public Service Departments, NZ Police, NZ Defence Force, District Health Boards, and Crown Research Institutes.

Use of all-of-government contracts by agencies in the wider State Sector (including State Owned Enterprises and Tertiary Education Institutes) and school boards of trustees will be encouraged, but is ultimately optional. The contracts are unlikely to extend to local government, even at an optional level.

What savings are expected to be generated?

In New Zealand, initiatives such as the procurement improvement programme championed by chief executives of District Health Boards have demonstrated on a small scale the potential to achieve greater efficiencies and cost savings across government through spend aggregation, standardisation and improved procurement practice.

The negotiation of all-of-government contracts in other jurisdictions typically yields, on average, 5 - 10% cost savings and it is expected that similar results will be achieved here.

ENDS

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