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Government Procurement Reform Vehicle Sector Briefing 1 Agenda • • • • • • • 2 Background Machinery of government Procurement reform Business participation All of Government contracts Sector specific data Conclusion Background 3 Why reform procurement? • 30 – 70% of operating costs • Business feedback • Economic downturn • Unacceptable risk profile • Lost efficiency opportunities • Build strategic capacity 4 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 5 Governance • Expenditure Control Committee • Chief Executive VfM Group – Government Procurement Reform (MED) – Administrative Services Review (The Treasury) – Cross cutting Value for Money initiatives 6 Machinery of Government 7 Government Structure PUBLIC SECTOR STATE SECTOR STATE SERVICE PUBLIC SERVICE e.g. Ministries e.g. NZDF, Police, DHBs e.g. NZ Post, Meridian 8 e.g. Local Government 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 9 Procurement Reform 10 Procurement Reform 1. Cost Savings 2. Capability and Capacity Building 3. Enhanced Business Participation 4. Governance, Oversight and Accountability 11 Key Reform aspects • 4 Year programme • Supports other VFM initiatives • Transform procurement thinking • Strategic procurement capability 12 Enhanced Business Participation • Cutting red tape • Improving transparency • Increasing opportunities • Sustainable markets 13 Business feedback • Procurement capability • Conditions of contract • Standard documentation • Evaluation method • Futile bidding enquiries • IP risk • Engagement 14 All-of-Government Contracts 15 Target Areas Strategic Critical Streamline Tactical Sourcing Risk Secure Supply Value 16 All-of-Government Contracts • National/international market dominated • Common needs • Lower supply risk • Reflect other jurisdictional experience • Not syndicated contracts 17 Key Drivers • Need for change • Strong performance management • Reduce overhead • Total cost evaluation • Meet diverse customer needs • Maintain/enhance competition 18 Transition • Managed transition • Soon as practical • Aim for 100% by 30 June 2012 • Current contracts: – Extend till transition period – Re-tender 19 Centres of Expertise (CoE) • Additional resources • Dedicated category managers • Strong market knowledge • Relationship management • Key performance measures • Supplier incentives 20 Centres of Expertise (CoE) • Desktops/Laptops - DIA • MFD’s - DIA • Vehicles - MED • Stationery - MED 21 Key Data Phil Weir 22 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 23 Spend & Units by Sector – Vehicles Average Annual Spend (Millions) Passenger Cars 4x4 Ute's Vans Total Public Service $19 $2 $8 $3 $31 State Service $31 $3 $2 $5 $40 State Sector $5 $3 $4 $2 $14 Average Annual Units Passenger Cars 4x4 Ute's Vans Total Public Service 1000 100 200 100 1300 State Service 1600 100 200 200 2100 State Sector 300 100 200 100 700 Note: Number are rounded to $1M 24 Pareto – Significant Procurers Vehicles $70M $60M $50M $40M $30M $20M $10M $0 25 Vehicle suppliers: 15% 18% Hyundai 4% GSB Supplycorp Ltd Holden 4% 13% 5% Custom Fleet FleetPartners Local Car Dealers Honda 6% 11% 6% 8% 26 Volkswagon Toyota 10% Ford Other Timelines • Establish CoE team now • Market engagement • Firm up demand by Christmas • Out to Market quarter 3 • Contract award by June • Mobilisation from July 27 Challenges • Minister expectations • Diverse client base • Change management • Undermining activities • Sabotaging behaviour 28 Summary • Change management project • Strong agency support • Ministers will remove barriers to progress • Dedicated category management • Supplier incentives • Transition as soon as practical 29 Conclusion 30 Conclusion • Open dialogue • Centre of Expertise • Improve efficiency • Market sustainability • Better value for tax-payers 31 Contacts: Reform Project Manager: Christopher Browne – 04 470 2334 [email protected] 32