A recent survey by the New Zealand Council for Infrastructure Development (NZCID) evaluated procurement processes of some of New Zealand’s leading public organisations. The diverse pool of respondents included 32 senior industry leaders across the full spectrum of industries – contracting and construction, engineering, banking and finance, and professional advisory services.
Survey results, revealed at the NZCID Building Nations Symposium in August 2015, gave insight into which of our public sector organisation are perceived to be excelling in their procurement practices. It also identified those that are believed to be lagging in the field – jump-starting a conversation on the work that’ll be required to achieve best practice across NZ’s public sector infrastructure procurement activities.
So how do public sector procurement practices stack up?
The perception held by key industry personnel regarding infrastructure procurement performance within New Zealand’s public sector varies widely across the different organisations. The practices of some of the bigger names, including Ministry of Defence, Ministry of Justice and CERA are generally perceived as well below par, as are those of our major Councils (Auckland, Wellington City and Christchurch City). This is in contrast to the smaller city and metro councils, the Ministry of Education, Transpower and Department of Corrections, whose procurement activities are all widely agreed to be above average.
The NZCID survey identified the NZ Transport Agency as the outright star performer in the New Zealand public sector – scoring them particularly highly with regard to communication, innovation and the use of a fair and contestable procurement process.
Communication, organisation, and fairness led the field
In-depth interviews conducted with a small selection of the survey’s respondents offered greater insight. Good communication, project organisation and a sense of an ‘equal playing field’ were key factors behind a positive perception of the procurement process.
On the other hand, poor communication, uncertainty around funding and future work programmes, and unnecessarily complicated and disorganised processes inevitably led to poor reviews.
The NZ Transport Agency, as the currently identified benchmark within the industry, was perceived as professional, well organised and consultative. Feedback rated their consistency, transparency and willingness to merge innovation with previously proven models.
Factors for success
The best scoring agencies scored exceptionally highly on the following criteria:
- Early advice of forward work programmes
- Innovation in procurement
- Timely and effective communication
- High level, outcomes focussed approach to the project.
And the worst areas?
The worst scoring agencies were attributed very low scores across the board, but in particular regarding:
- Ex-post evaluation of project performance
- Prioritising whole of life value over capital cost
- Cost of the bid.
Public vs Private sector
Compared to private sector organisations, procurement expertise was seen as generally lacking in the public sector. Only 22% of survey respondents rated public sector procurement expertise as ‘Good’, with 28% rating the expertise as ‘Fair’, 41% ‘Neutral’ and 9% believing the public sector is ‘Poor’ in this regard. Consider this against 53% of respondents who believed procurement expertise in the private sector was ‘Good’, 3% ‘Excellent’, 35% ‘Neutral’ and only 3% stating that the private sector had ‘Poor’ procurement expertise.
A number of factors were identified as requiring change to improve outcomes across procuring organisations. At the top of the list was the need for organisations to provide a forward works plan of future procurement opportunities. This was closely followed by the need to engage with suppliers to understand market trends, and the need to adopt consistent standards and tools across public sector procurement. Reducing tender timeframes and establishing more panel and/or framework agreements were also recommended. Sound familiar?
Looking forward – a more collaborative approach?
Given the option of MBIE, Treasury, Government departments and local councils or business and/or community leaders, an overwhelming 53% of respondents felt that a collaborative working group – made up of representatives from each of these areas – should be established to oversee best practice procurement development in NZ. The next highest ranking options for oversight were MBIE and Treasury, both on 13%.
There is a clearly identified need for changes and improvements within the existing procurement models of the various public sector organisations. However, there is some division among the sector, reflected in these survey results, around how best to support excellent infrastructure procurement in New Zealand. While 28% of respondents believe in a continuation of the existing model, with each organisation responsible for their own procurement, 22% support the designation of a lead agency for each sector and 19% favour the establishment of a centralised procurement function in a single agency. There is also minor support for contracted private sector delivery of procurement expertise, establishing an on-going entity for particular types or significant projects or establishing a one-off entity for particular projects.
While we can take a lot of positives from the survey findings, it’s raised some key points around vital areas in need of improvement. Keep these results in mind as you develop your tendering strategy for 2016 and beyond.