Government procurement policy must consider total economic cost

The Government must consider the total cost to the economy, rather than just the upfront cost, when determining where to source public work say the New Zealand Manufacturers and Exporters Association (NZMEA). Public money can be spent carefully and not just chase the lowest price – lifetime costs, maintenance, repair, protection of capacity and capability development are all criteria worthy of consideration in what are ultimately Crown decisions.

NZMEA Chief Executive John Walley says, “I am mindful of the first Obama stimulus package that was specific on a 25 percent benefit before the work was lost to the United States. A similar hard line is required in New Zealand to emphasise local preference.”

“With the dollar at a highly overvalued level currently we are seeing some Government contracts move offshore. When the dollar drops off again New Zealand firms will once again be competitive, but if that capability is lost in the meantime we won’t see it return.”

“It is short sighted and damaging to move contracts offshore on the basis of short-term gains. A longer term policy that considers the impact of transient issues like exchange rates, the stability of capability in the economy, the maintenance of capacity in economy and the whole of life cost is needed.”

ENDS

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