1. Government Procurement Reform MFD Sector Briefing 1

2. Agenda Background Machinery of government Procurement reform Business participation All of Government contracts Sector specific data Conclusion 2

3. Background 3

4. Why reform procurement? 30 – 70% of operating costs Business feedback Economic downturn Unacceptable risk profile Lost efficiency opportunities Build strategic capacity 4

5. 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

6. Governance Expenditure Control Committee Chief Executive VfM Group –Government Procurement Reform (MED) –Administrative Services Review (The Treasury) –Cross cutting Value for Money initiatives 6

7. Machinery of Government 7

8. Government Structure PUBLIC SERVICE e.g. Departments STATE SERVICES STATE SECTOR PUBLIC SECTOR e.g. NZDF, Police, DHBs, Crown Entities e.g. NZ Post, Meridian, Uni’s e.g. Local Government 8

9. 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

10. Procurement Reform 10

11. Procurement Reform 1.Cost Savings 2.Capability and Capacity Building 3.Enhanced Business Participation 4.Governance, Oversight and Accountability 11

12. Key Reform aspects 4 Year programme Supports other VFM initiatives Transform procurement thinking Strategic procurement capability 12

13. Enhanced Business Participation Cutting red tape Improving transparency Increasing opportunities Sustainable markets 13

14. Business feedback Procurement capability Conditions of contract Standard documentation Evaluation method Futile bidding enquiries IP risk Engagement 14

15. All-of-Government Contracts 15

16. Target Areas Value Risk Tactical Sourcing Strategic CriticalSecure Supply Streamline 16

17. All-of-Government Contracts National/international market dominated Common needs Lower supply risk Reflect other jurisdictional experience Not syndicated contracts 17

18. Key Drivers Need for change Strong performance management Reduce overhead Total cost evaluation Meet diverse customer needs Maintain/enhance competition 18

19. Transition Managed transition Soon as practical Aim for 100% by 30 June 2012 Current contracts: –Extend till transition period –Re-tender 19

20. Centres of Expertise (CoE) Additional resources Dedicated category managers Strong market knowledge Relationship management Key performance measures Supplier incentives 20

21. Centres of Expertise (CoE) Desktops/Laptops-DIA MFD’s-DIA Vehicles-MED Stationery-MED 21

22. Key Data Craig Doherty 22

23. 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

24. Spend & Units by Sector – IT Hardware Note: Number are rounded to $1M 24 Average Annual SpendAverage Annual Units Public Service$6M900 State Services$10M2200 State Sector$4M300 TOTAL$20M3400

25. 2.0 4.0 6.0 8.0 10.0 12.0 $M 80% of total spend Pareto – Significant Procurers MFDs 25

26. MFD suppliers: 26

27. 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

28. Challenges Minister expectations Diverse client base Change management Undermining activities Sabotaging behaviour 28

29. Summary Change management project Strong agency support Ministers will remove barriers to progress Dedicated category management Supplier incentives Transition as soon as practical 29

30. Conclusion 30

31. Conclusion Open dialogue Centre of Expertise Improve efficiency Market sustainability Better value for tax-payers 31

32. Contacts: CoE Manager: Craig Doherty – 04 495 7267 coe@dia.govt.nz Reform Project Manager: Christopher Browne – 04 470 2334 chris.browne@med.govt.nz coe@dia.govt.nz chris.browne@med.govt.nz 32