Government Procurement Reform

Government ProcurementReform

IT Sector Briefing

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Agenda• Background• Machinery of government• Procurement reform• Business participation• All of Government contracts• Sector specific data• Conclusion

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Background

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Why reform procurement?• 30 – 70% of operating costs

• Business feedback

• Economic downturn

• Unacceptable risk profile

• Lost efficiency opportunities

• Build strategic capacity

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Ministerial Support & Scrutiny• Hon Bill English (Chair)• Hon John Key • Hon Gerry Brownlee• Hon Simon Power• Hon Tony Ryall• Hon Stephen Joyce• Hon Rodney Hide

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Governance

• Expenditure Control Committee

• Chief Executive VfM Group

– Government Procurement Reform (MED)

– Administrative Services Review (The Treasury)

– Cross cutting Value for Money initiatives

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Machinery of Government

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Government Structure

PUBLIC SERVICE

e.g. Ministries

STATE SERVICE

STATE SECTOR

PUBLIC SECTOR

e.g. NZDF, Police, DHBs

e.g. NZ Post, Meridian

e.g. Local Government8

Reporting and barrier removal

• Quarterly reports to Cabinet

• Minister briefings

• Intervention reports to ECC as needed

• Ministers notified:– Good practice– Undermining behaviour– Ministerial intervention needed

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Procurement Reform

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Procurement Reform

1. Cost Savings

2. Capability and Capacity Building

3. Enhanced Business Participation

4. Governance, Oversight and Accountability

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Key Reform aspects

• 4 Year programme

• Supports other VFM initiatives

• Transform procurement thinking

• Strategic procurement capability

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Enhanced Business Participation

• Cutting red tape

• Improving transparency

• Increasing opportunities

• Sustainable markets

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Business feedback• Procurement capability

• Conditions of contract

• Standard documentation

• Evaluation method

• Futile bidding enquiries

• IP risk

• Engagement

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All-of-GovernmentContracts

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Target Areas

Value

Ris

k

Tactical Sourcing

Strategic CriticalSecure Supply

Streamline

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All-of-Government Contracts

• National/international market dominated

• Common needs

• Lower supply risk

• Reflect other jurisdictional experience

• Not syndicated contracts

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Key Drivers• Need for change

• Strong performance management

• Reduce overhead

• Total cost evaluation

• Meet diverse customer needs

• Maintain/enhance competition

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Transition

• Managed transition

• Soon as practical

• Aim for 100% by 30 June 2012

• Current contracts:– Extend till transition period

– Re-tender

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Centres of Expertise (CoE)• Additional resources

• Dedicated category managers

• Strong market knowledge

• Relationship management

• Key performance measures

• Supplier incentives

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Centres of Expertise (CoE)

• Desktops/Laptops - DIA

• MFD’s - DIA

• Vehicles - MED

• Stationery - MED

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Key Data

Craig Doherty

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Data Collection

• State Sector data

• 163 of 198 agencies responded so far

• Analysis based on information submitted

• Further validation to be undertaken

• Firm up demand during budget setting

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Spend & Units by Sector – IT Hardware

Note: Number are rounded to $1M

Average Annual Spend

Average Annual Units

Desktops Laptops Desktops Laptops

Public Service $11M $6M 8500 3100

State Services $20M $7M 14600 3600

State Sector $10M $4M 6900 1800

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Desktops: Total Spend over 4 Years

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

80% of total spend

2.0

4.0

6.0

8.0

10.0

12.0

$M

14.0

16.0

Pareto – Significant Procurers Desktops

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Laptops: Total Spend over 4 Years

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,00080% of total spend

2.0

4.0

6.0

8.0

5.0

7.0

$M

3.0

1.0

Pareto – Significant Procurers Laptops

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Desktop suppliers:

23%

14%

11%11%

10%

7%

4%

4%

3%

2%

11%

Dell

HP

Axon

Datacom

Gen-i

Cyclone Computers

Fujitsu

Silicon Systems

Acer

IBM / Lenovo*

Other

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Laptop suppliers:

13%

13%

12%

12%6%

6%

5%3%

2%

1%

27%

Axon

HP

Gen-i

Dell

Datacom

Fujitsu

The Laptop Company

Cyclone Computers

Advantage Computers

Lenovo

Other

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Timelines

• Establish CoE team now

• Market engagement

• Firm up demand by Christmas

• Out to Market quarter 3

• Contract award by June

• Mobilisation from July

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Challenges

• Minister expectations

• Diverse client base

• Change management

• Undermining activities

• Sabotaging behaviour

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Summary

• Change management project

• Strong agency support

• Ministers will remove barriers to progress

• Dedicated category management

• Supplier incentives

• Transition as soon as practical

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Conclusion

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Conclusion

• Open dialogue

• Centre of Expertise

• Improve efficiency

• Market sustainability

• Better value for tax-payers

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Contacts:

CoE Manager:Craig Doherty – 04 495 7267 coe@dia.govt.nz

Reform Project Manager:Christopher Browne – 04 470 2334chris.browne@med.govt.nz

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