Responses to our recommendations about strategic suppliers

We requested this update because we want to provide public transparency on progress with addressing our recommendations.

In 2021, our report Strategic suppliers: Understanding and managing the risks of service disruption looked at the public sector’s collective understanding and management of strategic supplier risk. Strategic suppliers provide goods and services that are critical to the delivery of public services and are not easily replaced. New Zealanders expect these public services to be available when they need them, particularly during personal or national emergencies.

In our 2021 audit, we looked at:

• whether the Government knew which suppliers were key strategic suppliers across the public sector;
• what processes were in place for assessing and mitigating the risk of important public services being disrupted by strategic supplier failure and responding to identified risks and issues; and
• what reporting was provided to the Government on strategic supply risks to the delivery of public services.

We also looked at the understanding and management of strategic supplier risk within a selection of public organisations.

Overall, the public organisations we spoke to generally knew which suppliers they relied on and were managing risks, but there was no shared understanding of which suppliers the public sector as a whole relied on to help deliver important services. We also found a lack of visibility of the risk of disruption to important services if a strategic supplier failed to deliver.

In our 2021 report, we made five recommendations. We recommended that:

1. the Ministry of Business, Innovation and Employment:
   • improve the reporting tool for significant service contracts to improve the information available on these contracts and government strategic suppliers; and
   • regularly analyse, share, and report to the Government on this information;
2. the Ministry of Business, Innovation and Employment, the Department of Internal Affairs, the Department of the Prime Minister and Cabinet, the Treasury, the National Emergency Management Agency, and other agencies as appropriate:
   • consider how the public sector, including local government, can build on existing initiatives to ensure that strategic supply risks affecting important public services are well understood, managed, and co-ordinated; and
   • work with Te Kawa Mataaho Public Service Commission to ensure that roles and responsibilities are clearly assigned;
3. the Ministry of Business, Innovation and Employment provide further guidance to help public organisations identify their significant service contracts and strategic suppliers;
4. public organisations regularly assess which of their suppliers are strategic suppliers, the resilience of these suppliers, and how they manage their relationships with them, both in normal circumstances and in emergencies; and
5. public organisations have adequate processes in place for reporting strategic supply risks to their senior leaders and governing bodies.

Read what the Ministry of Business, Innovation and Employment, Te Kawa Mataaho Public Service Commission, the Department of Internal Affairs, the Department of the Prime Minister and Cabinet, and the National Emergency Management Agency have said about their progress.¹

We have not audited the information in their updates.

Our Sector Managers will continue to discuss progress on our 2021 recommendations with these public organisations as part of their usual engagement work. We also intend to request another formal update on progress in 12 months’ time. We may consider doing further audit work in the future.

1: The Treasury contributed to the Ministry of Business, Innovation and Employment’s response, and did not send us a separate letter.