Part 3: Essential elements for transparency and accountability

Using “functional leadership” to improve government procurement.

In this Part, we discuss:

Summary of findings

NZGP has been slow to put in place the essential elements for providing transparency and accountability for improving government procurement. It has begun to remedy this situation. For example, NZGP has clarified the strategic goals of government procurement in 2019.

In our view, the next steps are for NZGP to:

  • prepare a prioritised national work plan to achieve the strategic goals that:
    • clarifies the roles of public organisations and NZGP; and
    • is endorsed by executive leaders;
  • prepare a suitable performance framework to monitor:
    • implementation of the national work plan; and
    • progress towards the strategic goals; and
  • publicly report on the performance indicators to:
    • public organisations, which provide 68% of NZGP's total annual funding;
    • suppliers; and
    • Parliament and the public, who need assurance that procurement is well-managed and delivers the expected outcomes.

Putting these elements in place will help NZGP meet public organisations' expectations of its leadership. It will also support good governance, which is important given NZGP's public-sector-wide responsibilities and influence.

Strategic goals for improving procurement

The 2019 edition of the Rules states that the strategic goal for government procurement is to achieve public value. The Government Procurement Charter is included in the Rules. It sets out national priorities for improving public value. This is the first time NZGP has brought the strategic goals for improving government procurement together in one document.

Before this, public organisations did not consistently understand the strategic goals. People we spoke to broadly agreed that the strategic goals were: saving costs, building public organisations' procurement capability, and making it easier for suppliers to do business with public organisations. However, people did not always agree on a definition of value for money. Some people we spoke to thought that value for money meant achieving strategic outcomes at a good price and others thought it meant prioritising cost savings before other goals.

Planning to achieve the strategic goals

At the date of writing this report, NZGP has not published a single national work plan to direct its work and the work of public organisations. Since 2012, tasks listed in Cabinet papers directed NZGP's work programme, and NZGP launched projects when it saw a need for action. This has sometimes meant that the rationale for NZGP's work and how it links to strategic outcomes was not always clear.

For example, NZGP set up the Commercial Pool to provide procurement consultancy services to public organisations that did not have adequate internal procurement capability to help improve their capability.15 The public organisations we spoke to said that knowledge transfer can be limited because they sometimes used the Commercial Pool because they were short on staff.

NZGP has recognised the need for a national work plan. It plans to introduce a national procurement strategy to fill this gap. NZGP plans to consult public organisations on the draft procurement strategy in late 2019. In our view, NZGP should consult with more than the mandated public organisations.

NZGP's national procurement strategy should:

  • describe priorities and, as a consequence of these, the sequence of work;
  • make clear what work NZGP will co-ordinate or do and set clear expectations for what public organisations should do;
  • explain how NZGP will monitor and report on the strategy's implementation;
  • explain how NZGP will report on public organisations' progress in achieving the Government Procurement Charter; and
  • show how NZGP co-ordinates its resources to achieve its priorities.

The public organisations we spoke to said that they sometimes found out about NZGP's work and plans in a piecemeal way, which affected their ability to plan their work efficiently. NZGP needs to regularly review the strategy and update it in response to progress and as circumstances change.

Stakeholder engagement will be critical to the strategy's success. The strategy needs to have the widest possible influence and include all public organisations whether they are mandated or not. The strategy also needs to reflect NZGP's leadership role.

Indicators to monitor progress

Effective monitoring is needed to report on implementation and progress towards achieving strategic goals. This is important where work is being done throughout a system and where the visibility of success, challenges, and barriers is critical to achieving progress. Monitoring helps to confirm whether strategic goals and activities are right or should be revised.

After the national procurement strategy is finalised, NZGP needs to identify a set of performance indicators to monitor progress against it. The indicators need to link to the overall goal of public value and the Government Procurement Charter.

MBIE reports NZGP's performance against its performance indicators in its annual report. In 2018/19, two indicators were about all-of-government contracts, and one indicator reported on suppliers' assessments of public organisations' procurement practices.

These provide only a narrow picture of improved procurement. For example, there are no indicators for improved procurement capability. In Appendix 4, we discuss the performance indicators in more detail, their reliability, and their usefulness in guiding further improvements.

Reporting on performance

NZGP is not required to separately report on improvements in government procurement.

Other than the three performance indicators described in paragraph 3.15, MBIE's annual reports have not produced a consistent picture of NZGP's work and improvements in government procurement. NZGP has separately published reports analysing suppliers' comments from its annual survey.

NZGP should publish a regular report on government procurement, which would provide greater transparency and accountability to its various stakeholders. The report could comment on achievements, challenges, and barriers to progress. It could provide the foundation for the periodic reviews of procurement functional leadership discussed in Part 2. NZGP told us that it planned to publish a report on government procurement in 2019.

Public organisations said that they would appreciate getting a report on opportunities for improvement in government procurement because they want to understand the changes that are happening at the system level. The reports would recognise NZGP's and public organisations' combined successes, provide further encouragement where needed, and highlight any barriers to progress that need addressing. Public organisations also want to know how NZGP uses the administration levies it collects through the all-of-government contracts (see Appendix 1).

Recommendation 4
We recommend that New Zealand Government Procurement:
  • put in place its planned national procurement strategy to give direction on priorities;
  • put in place performance indicators that would help it to monitor performance in improving government procurement; and
  • prepare and publish a regular report on government procurement.

15: The Commercial Pool prices its services to recover costs, including overhead costs. NZGP told us that the Commercial Pool competes with private firms for work. However, we are aware, because it is part of NZGP, that public organisations sometimes contact only the Commercial Pool for services. This means that private firms do not get an opportunity to bid for the work. This is not good practice.