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Emily Mason owns a consulting company in Wellington called Frank Advice. It’s a small Kiwi women-owned start-up, exactly the kind of innovative new business you’d expect the government to support.
Instead, the former official says that even with her experience with the Wellington bureaucracy, navigating the $ 42 billion government consulting market is an expensive and depressing experience thanks to a closed shop system that will only get worse if new plans from the Ministry of Business, Innovation and Employment (MBIE) forward.
Any government contract worth more than $ 100,000 must be awarded to companies in pre-selected “panels”. And some of those panels have been closed since 2016, which means no new or growing companies are allowed in.
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Emily Mason’s company, Frank Advice, has had frustrations with the government’s approach to bidding.
Critics of the system say it ensures that work reaches large multinational companies, while preventing smaller New Zealand companies from even bidding for the job.
Often times, New Zealand companies end up circumventing the rules by outsourcing company work on panels, allowing big players to slash the ticket along the way.
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There are currently open consultations to expand the system beyond government departments and state agencies, perhaps even to local government and school boards.
In October, MBIE said that the expansion of the procurement rules would generate “potential benefits and opportunities.”
A cabinet document from former Economic Development Minister Phil Twyford said an expansion would give the government more control over contracts and allow more leverage to support a post-Covid economic recovery.
However, MBIE has admitted that the change could reduce flexibility, increase operating costs and leave “less scope for direct sourcing.”
Government procurement rules require that all suppliers be treated equally (including non-local ones, so as not to violate free trade agreements), but also to “seek opportunities” to engage Kiwi companies, including regional companies and owned by the Maori and Pasifika.
A cabinet decision on Sept. 16 said government agencies must now consider, when hiring work, how to create jobs for “displaced workers and traditionally disadvantaged groups such as Maori, Pasifika, people with disabilities and women.”
Robert Kitchin / Things
A small business owner says navigating the $ 42 billion government consulting market is an expensive and depressing experience, one that will only get worse if new plans are carried out.
Getting love for the panel
The panels from which contractors are chosen are not required, but are widely used. There are 20 All of Government panels designed to secure volume discounts on everything from office supplies to car rentals, as well as panels for specific areas.
Their terms and conditions and the duration for which they are set must be published, although the latter are often difficult to decipher.
The accounting, economics, and fiscal work panels, among others, have not been updated since 2017. Other panels include policy research, HR, marketing, and public relations. Most of the panels feature large foreign-owned companies such as Deloitte, Accenture, KPMG, Beca, and Aecom.
One panel, the Policy Consulting, Research and Development sub-panel, had not been updated since December 2016. After questions from Things, MBIE said it had “been planning an update to the consulting panel for a while” and expected to go to market this month with a continuous update over the next six months.
Frank Advice’s Mason has come to terms with the system, but says: “I have 20 years of experience in Wellington, and even with those connections, navigating government procurement rules has added massive cost to our business. It has been a real barrier to entry and growth for organizations like mine ”.
She made a presentation and wrote to the new small business minister, Stuart Nash. “They should have a rolling gate to the panels, or just get rid of them. It stops innovation, it stops efficiency, it stops diversity, and it stops competition for those already in it. “
Another who will make a presentation against the system is Victoria McLennan, co-chair of NZ Rise, an advocacy group that brings together Kiwi digital technology companies.
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Victoria MacLennan, Co-Chair of the Rise Digital Services Group, will advocate for a better system on behalf of her members.
McLennan will appear on behalf of its 45 members advocating for greater openness.
The panels, says McLennan, “just entrench very large multinational players.” She says its members are frustrated by the lack of transparency: There are no targets for joining the panels, public analysis of the companies on the panels, and no rules on when they should open. “In these times of Covid, the government should focus on how to support New Zealand-owned businesses,” he says.
Expanding the scheme without opening the panels would “push the goals further” of local businesses and deny them another key source of income.
Kiwi companies need government contracts not only for the money, but also for the prestige. Work for government departments provides a good reference for securing other jobs, particularly overseas, where they will be asked, “Why is the government not your client? Send a bad message ”.
McLennan says the existing system does not offer efficiencies, but instead builds up by handing out large contracts to major players, rather than splitting them up to use specialists. The way companies run the system right now adds fat to trim tickets.
“The government spends a lot: they want to stimulate the economy, they need to buy from New Zealand companies instead of going abroad.”
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Economist Kirdan Lees says the system is “quite frustrating.”
Kirdan Lees, a partner at the economic advisory firm Sense Partners, a group that also includes prominent economic commentator Shamubeel Eaqub, says that when they started in 2016, it took two years to get to the required panels. He was told by three different officials that his company had lost a job in the meantime.
“They told us quite clearly that we were missing work because we weren’t on a panel, it was quite frustrating.” He says now being on two panels was “good for the insiders, but if I’m honest enough, it’s not how it should be.”
By taking a “snapshot” of the market, the government loses innovation, competition, and the choice and opportunity to use specialized vendors for a specific job. “There is a really simple solution,” he says, which is to open the panels. “The government is really missing an opportunity.”
Lees says the system deters startups and that opening up competition would be good for everyone.
“If more people are pitching for the job, that makes you sharpen your pencil and your thinking about how you’re going to approach it as well. So it’s not just about helping small businesses, it’s saying that the government will get a better deal on this by having a wider range of providers and by motivating existing providers to improve their game. “
In a statement, MBIE said that the consultation on the extension of the procurement rules closes on November 23. He welcomed the public submissions, but did not comment on possible comments from the submitter during the consultation process.
It did not respond to a list of questions, including why the panels had not been updated in several years, whether there was a published list of requirements for panel members, and whether the system favored large multinationals.
