procurement new zealand case study world bank. nz = 4 million people, $30bn pp spend
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Procurement New Zealand Case Study
World Bank
NZ = 4 million people, $30bn PP spend
Kiwi approach
Establishing Procurement Reform
• Cabinet support – prove yourself!• Change perceptions
– Plain language– Commercial– Engaging (use new media)– Beat stereotypes
• Self funding program• Not just centralized procurement
Case Study – New Zealand Procurement Reform
Procurement Reform Programme
3 elements:
Programme Establishment• 2.0M + 6M Euro LoanProgramme Funding• 1.5% levy on AoG spend
Case Study – New Zealand Procurement Reform
Policy: Principles of Procurement
Case Study – New Zealand Procurement Reform
Understand where the ‘value’ is
Government Branded Collaborative contracts
All of Government
SyndicatedCommon Capability
Governance: Cabinet direction for each category through PFLAG
Form: single panel contracts between Crown and Suppliers
Use: mandated unless there is a good reason not to
Lead: PFL through GPB Centres of Expertise
Lead cost recovery: yes
User costs: agency pays administration fee on each purchase (collected by suppliers)
Authorised buyers: Public Sector plus ‘Eligible Agencies’
Governance: Cabinet direction through Procurement Functional Leadership Advisory Group (PFLAG)
Form: multiple:a. single supplierb. panel contracts
Use: voluntary
Lead: any agency
Lead cost recovery: no
User costs: free
Authorised buyers:
c. Public Sector plus ‘Eligible Agencies’
Governance: mixed:a. Cabinet mandatedb. through Approved Functional
Leader
Form: multiplec. single supplierd. panel contracts
Use: mixed:e. opt-out (for mandated
agencies)f. opt-in (for voluntary
agencies)
Lead: relevant Functional Leader
Lead cost recovery: usually
User costs: mixed:g. administration feeh. levy
Authorised buyers: mixedi. Public Sector plus ‘Eligible
Agencies’j. Authorised private sector
providers (“Authorised Agent) acting on behalf of agencies
31 2
All-of-Government Contracts
Products & commodities
ProfessionalServices
Creative Professional Services
Upcoming Categories
• Office Consumables• Vehicles• Desktops/Laptops• Mobile Voice and Data• Printers
• Legal• Recruitment• Energy Mgmt
• Advertising
• Air Travel• Electricity• Industrial Consumables
• Financial Services• Reticulated Gas• Building Materials• Consultancy• Rental Cars &
Accommodation• Health
Case Study – New Zealand Procurement Reform
Syndicated Contracts (90+)
Case Study – New Zealand Procurement Reform
Cost savingsDriving value for money
Building critical mass
Participation – Require
Public Service29 Departments &
Ministries
Case Study – New Zealand Procurement Reform
Participation - Require, Expect
Public Service
State Services (127)
Police
Defence
HospitalsSchools
Arts, TV & Radio
Research29 Departments & Ministries
200 Crown Entities
Parliamentary Services
Reserve Bank
Case Study – New Zealand Procurement Reform
Require, Expect, Encourage
Public Service
State Services (127)
State Sector (50)
Public Sector (78)
Police
Defence
HospitalsSchools (2500)
Post
ElectricityMining
Universities & PolytechnicsGas
Arts, TV & Radio
Research29 Departments & Ministries
Local Councils
Regional Councils
200 Crown Entities
Parliamentary Services
Reserve Bank
Case Study – New Zealand Procurement Reform
Getting the right results
Strategic Procurement – create the right strategy
• Business Needs Analysis– Data gathering
• Market Analysis• Risk Analysis• Vision of future supply market• Gap• Options analysis• Reverse marketing and procurement
Case Study – New Zealand Procurement Reform
Business needs and Supplier Market Analysis
Customer (our business needs)• Who is buying?• What are they buying? Changing patterns?• What is driving their selection criteria?• Volumes?
Supplier• How attractive is our business to each potential supplier?• Where do we sit in their business model? (i.e. When Hyundai increased their
sales targets a consolidated AoG approach offered an easy way to achieve their new target).
• How can we improve how attractive we are?
Case Study – New Zealand Procurement Reform
Total SavingsFY11/12
Forecast Savings FY 12/13
Total Forecast Savings by 31
June 2013
Total Forecast Savings over Contract Life
Original Projected Savings
Office Consumables $7.9 $6.0 $13.8 $25.6 $30.0Vehicles $11.9 $9.0 $21.03 $41.0 $18.5Desktop/Laptop $8.7 $5.8 $14.5 $26.5 $45.6Print Devices $3.7 $7.1 $10.8 $25.2 $20.7Air Travel $0.8 $7.5 $8.3 $64.3 $70.0Legal Services $0.9 $4.2 $5.1 $44.5 $108.0
Mobile Voice & Data $0 $3.0 $3.0 $30.6 $60.0
Travel Management (note 1) NA NA NA NA NA
Recruitment NA $5.0 $5.0 $54.0 $28.0
Electricity (note 1) NA NA NA NA NA
Total $33.9M $47.8M $81.6M $311.9M $380.8M
Case StudyAoG Recruitment Services
AoG Contract – Recruitment Services
You Tube Video’s
Case Study – New Zealand Procurement Reform
Objectives
• Delivering better value for money on external recruitment services
• Delivering more efficient/cost effective market engagement
• Building capability to effectively purchase external recruitment services
• Maintaining a sustainable and competitive market
• Identifying and promoting best practice external recruitment
• Ensuring Participating Agency external recruitment needs are met
Case Study – New Zealand Procurement Reform
Temporary Staff
Permanent Staff
Focused on High Spend Areas of Common Need
Contractors
Admin
Examples:PAs
Call Centre
IT
Examples:Developer
Tester Analyst
Corporate
Examples:ManagersAccountsLawyersPolicy
Roles Unique to one Sector of
Government
ExamplesTeachers, Nurses
Police
Co
ntin
ge
nt
L
ab
ou
r F
orc
e
In Scope Areas: Common skill sets across most Government Agencies
Out of Scope Areas:
Case Study – New Zealand Procurement Reform
Tender Evaluation Process
Phase 1
Quality EvaluationTender Response
Survey of Clients and Candidates
• Shortlist Created for Each of 9 Lot
Price NegotiationE-Negotiation for each LotPhase 2
Panel Chosen by LotOn Basis of:
Value for MoneyHighest Quality ScoreAdding Lowest Price
Panel Structure
• Oversight by Probity Auditors and Governance from a Client Advisory Group
Case Study – New Zealand Procurement Reform
Solution Outcome
9 ‘LOTS’ – Offering Choice
ADMIN CORPORATE IT
Perm
Temp
Contractor
• Total of 44 Providers appointed to provide services in 1 or more Lots
• Significant Choice to Government Agencies • Negotiation of free ‘value-added’ services
24 Providers
30 Providers
16 Providers
18 Providers
19 Providers
15 Providers
23 Providers
29 Providers
23 Providers
Case Study – New Zealand Procurement Reform
Achieved Significant Reduction in Supplier Costs
Before: After:
Table show Provider mark ups
Base Supplier Fees – 50% reduction some casesExample Temp range of 18-37% to now 9-20% mark up
Case Study – New Zealand Procurement Reform
AoG Relationship Model and Transition
AoG Contract and Relationship Model
Case Study – New Zealand Procurement Reform
Relationship Management
Case Study – New Zealand Procurement Reform
AoG Contract Structure
BA OUTCOMESRBA OUTCOMES
RBA OUTCOMES
Participation Memorandum of Understanding (MoU) between CoE
& Government Agency
Purchase Order or Statement of Work between Government
Agency & Supplier
Mutual performance & contract management obligations
LoA (5)
LoA (4)
LoA (2)LoA (3)
PO/SoW (5)
PO/SoW (4)
PO/SoW (3)
PO/SoW (2)
Supply Agreement between CoE & Supplier (AoG Contract)
Case Study – New Zealand Procurement Reform
How agencies transition onto an AoG contract
Panel Provider Example: External Legal Services- Corporate & Commercial• Competition• Consumer• Contract & Tendering• Corporate Governance• IT• Intellectual Property• JV’s/PPP’s• Overseas Investment• Takeovers, M&A• Other (Corporate and
Commercial)
Case Study – New Zealand Procurement Reform
Supporting the agency buying decision
In order to help agencies make informed decisions and make it easy to purchase from AoG contract panel’s we have developed documents and tools: • Panel Directory’s • Value-for-money ranking’s • Effective hourly rate calculations• Legal Services Order’s• Benchmarking Report’s
Case Study – New Zealand Procurement Reform
Benefits
Benefits of Centralized Procurement
• Build capability (Centres of Expertise)• Strategic rather than tactical procurement
(adequate resourcing & market intelligence)• Establishment of a common contract and
governance framework• Stronger centralised leadership and support• Common savings measurement
Case Study – New Zealand Procurement Reform
Benefits of Centralized of Procurement continued
• Circa USD $300M of savings in common areas of government spend for goods not made in NZ
• Participation grew as agencies became aware of the value being provided.
• Greater consistency of policy implementation and engagement with business
• Improved ability to influence capability and capacity development
• Great things can come from working togetherCase Study – New Zealand Procurement Reform
Potential Pitfalls of a Centralised Approach
• Aggregation of requirements can be a viewed as a barrier to SMEs winning govt business
• Perceived lack of control and influence by government agencies
• Perception that large internationals will enter the NZ market at the expense of NZ companies
• Too strong a mandate can be dangerous
Case Study – New Zealand Procurement Reform
Questions?
www.procurement.govt.nzCase Study – New Zealand Procurement Reform
$ Savings through centralized
procurement is the oxygen of New
Zealand’s procurement
reform
Whaia te iti kahuranga ki te tuahu koe me he maunga teitei
Aim for the highest cloud so that if you miss it, you will hit a lofty mountain