Government ProcurementReformVehicle 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

Phil Weir

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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 – Vehicles

Note: Number are rounded to $1M

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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 UnitsPassenger 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

Pareto – Significant Procurers Vehicles

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$0

$10M

$20M

$30M

$40M

$50M

$60M

$70M

Vehicle suppliers:

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18%

13%

11%

10%8%

6%

6%

5%

4%

4%

15%

HyundaiGSB Supplycorp Ltd HoldenVolkswagonToyotaCustom FleetFleetPartnersLocal Car DealersHondaFordOther

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:

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

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