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Government Procurement Reform MFD 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 SERVICES PUBLIC SERVICE e.g. Departments e.g. NZDF, Police, DHBs, Crown Entities e.g. NZ Post, Meridian, Uni’s 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 Craig Doherty 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 – IT Hardware Average Annual Spend Average Annual Units Public Service $6M 900 State Services $10M 2200 State Sector $4M 300 TOTAL $20M 3400 Note: Number are rounded to $1M 24 Pareto – Significant Procurers MFDs MFDs: Total Spend over 4 Years 12.0 $12,000,000 80% of total spend 10.0 $10,000,000 8.0 $8,000,000 6.0 $6,000,000 $4,000,000 4.0 $2,000,000 2.0 $M $- 25 MFD suppliers: TOP 10 MFD Suppliers 2% 1% 0% 1% 2% Ricoh Canon 4% 8% Konica Minolta Fuji Xerox 30% Axon Gen-i Sharp Datacom Fujitsu GSB SupplyCorp 14% Other Suppliers 13% 25% 26 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: CoE Manager: Craig Doherty – 04 495 7267 [email protected] Reform Project Manager: Christopher Browne – 04 470 2334 [email protected] 32