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Why don't New Zealand Companies win government tenders?

Ian Apperley, Guest post. 02 August 2016, 7:19 am
Why don't New Zealand Companies win government tenders?

I've worked with government for over 20 years and sponsored tenders in that time or been involved in the process of analysing RFP responses. I've written them from the vendor side as well. It is my considered opinion that New Zealand technology companies don't get a look in, when they should, and while I don't understand all the reasons why, I do know a few things about it. In my 20 plus years I can count the number of tenders won by local technology companies on one hand. 

Several years ago I was doing some work for a large government agency. Part of that work included setting up a tender for a major services contract, managing it through, then choosing and recommending a vendor to the CIO. What we didn't know was that the CIO had already chosen the vendor. 

The process to complete that RFP took nearly a year. We made a number of mistakes along the way. That included having only two IT people on the panel, the rest were accountants, contract managers and the CIO's patsies. We were watched by an auditor from New Zealand Audit, a man of much credibility and experience. 

As it transpired we chose two vendors to take through to the next level. The NZ Audit man signed off on the process. Then the CIO threw our findings out and went with the vendor they had already chosen. The final result was three years of pain for that agency because they chose the wrong organisation to support them. 

A lot of startups and smaller technology companies ask me how it is that they can engage and win work in government. My first response is usually "Don't". If you want into a large government agency you need to go through an intermediary.

The reason for that is that large agencies have onerous, limiting, often ridiculous contracts that a small company can't sign. Tenders are often stacked with accountants, contracts people, and other (non-IT) people who are incredibly risk averse, trying to "save money", and whose only negotiation skill consists of trying to create a "win - lose" situation. 

Money often comes first for agencies. Again, because they've allowed accountants to be in charge of IT, not IT professionals. We know from studies that choosing the lowest bid in a tender is pretty much a guaranteed way to failure. The accountants will be there when you fail by the wayside, throwing rocks at you. 

We have a curious phenomenon in New Zealand I call the "Gisborne Gold Effect." 

Sunshine Breweries have a large production centre in Gisborne City that produces up to sixteen different beers. Almost none of that beer is sold in Gisborne. The locals just don't buy it. Sunshine's largest market is Wellington. 

We seem to have the same phenomenon with government and local technology companies. In New Zealand we have tech companies that are supporting overseas governments, large private corporations, individual consumers and some massive deals including with the US government and Mexican government. 

Smart local technology companies are moving straight to export and skipping the local market. 

So why is it that government chooses international companies over our own local technologists, who are now outstripping dairy or tourism in terms of GDP?

Fear is the first factor. Any CIO that backs the wrong horse has a perception that they will be publicly executed. Unfortunately, in government, you have to do something particularly dumb to get the sack. Non-performance is routinely rewarded in some agencies. 

That leads to the "Plausible Brand Deniability" stance. It works like this. If I hire a multi-national brand, say IBM, Oracle, or Deloitte, and my project falls to pieces I can say "But I hired the best in the world!"

Large multi-nationals have the budget to wine, dine, woo and give travel to agencies. This creates a relationship that small companies in New Zealand can't compete with. It wasn't that long ago that most large agency CIO, CFO and CEOs were treated this way. I haven't been close enough to it in the last few years to know if it has changed. I doubt it. 

My experience with the corporate, NGO, or private sector is quite different. They seem to be far more open to local companies. And it works for them because buying local has massive advantages. 

Local companies can turn on a dime whereas multinationals "need to call Sydney" to get a discount on a quote. Local companies are far more honest ("we can't do that") whereas multinationals are more likely to drop their price and promise the earth, then charge like a wounded bull for "change control." Local companies are far more likely to sign a partnership, shared agreement, or other smart relationship contract than multinationals ever will. 

Local companies move fast. Multinationals are dinosaurs that are trying to turn their oil tanker and in some cases, failing horribly. Here's an example, Garner says that ERP's will be dead by 2018. I say that ERP's are dead now and Gartner is being kind. Look at HP and IBM if you want to see how a multinational gets itself into a major fail point. 

Agencies need to get over themselves and write simple tenders, simple contracts. A big up to MBIE for their form contracts, two pages of contract versus 700 pages of DIA contracts for certain services. 

Seriously, 700 pages. 

The entire world is moving to a Service Broker model with "everything as a service", this is where New Zealand companies could make a big difference. That onerous contract model is dead internationally, SaaS has replaced it, but we still seem to want to hold onto it. 

Hooking up with your local counterparts will also tell you very quickly whether it is a true tender or a rigged one. Everyone in Wellington talks and I guarantee you'll find someone who can give you the inside word on a tender. 

That same network will be able to tell you which agencies are more transparent than others. Don't get me wrong. There are a lot of agencies that are progressive, open, malleable and true. There are a handful you do not want to engage with. Ever. 

My advice would always be focus on your export market, focus on private enterprise in New Zealand, join a group like IITP, NZ Rise, or similar to get your intelligence, and leave government as an option down the priority list. 

Ian Apperley is well known to many in the ICT industry as both participant and commentator and craft beer apologist. He blogs on all matters IT related at WhatIsITWellington.


Comments

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David Lane 02 August 2016, 2:46 pm

Very well put, Ian. Your experiences sound very familiar to me, too. I know I bang on about this, but a good way to create a level playing field, that'll benefit *everyone* in NZ is for the gov't to mandate open standards compliance for all gov't IT procurement. It's a no brainer, and it'll bring the megacorps to heel (who traditionally try to saddle every project with proprietary non-standards to ensure multi-generational lock-in). Amazingly, doing this (as the UK did in 2014, and as much of the EU are looking to do) would cost almost nothing. See openstandards.nz for more info on this proposition.

Gordon Milne 03 August 2016, 12:29 pm

Many NZ organisations find it hard to believe that the people here can do the work. They automatically believe that overseas is better instead of overseas being "not us".

As for 700-page contracts; who has the time to read that kind of rubbish in detail? I could not justify taking the time to read such a huge lump of material. How can organisations justify the creation of such monumental lumps of dead tree? Business relationships based on detailed contracts are the perfect way to ensure that the final outcome will be poor. Less verbiage and more working together to work out what needs to be done leads to a better outcome.

Tim Marshall 03 August 2016, 1:14 pm

It's not just local companies that miss out when they are passed over for central or local government contracts. The UK's New Economics Foundation has researched the value to the whole local economy of buying locally sourced services and calculated it to be worth 400 per cent more than purchases made from external suppliers. See www.neweconomics.org/press/...

Mike Balemi 04 August 2016, 9:52 am

Fantastic article Ian. "A prophet is never accepted in his own country."

What I have also found in addition to all that has been said is that local companies are just better. I have spent many years supporting POS systems. One is very big in pharmacy in NZ and remains the best experience I have ever had, before or since. Later dealings with overseas based companies in other situations have been clunky, inefficient and a nightmare to get hold of.

I do not believe Novopay would have happened with a local company.

Ian Apperley 04 August 2016, 5:11 pm

Thanks for your comments. Someone privately messaged me the other day and said that my post was "suicidal."

Career suicide in other words.

I have personally blacklisted some agencies that I won't ever work for again.

I find that most agencies are actually genuinely sypathetic to running the process well. However, the interference from "make job" roles often causes issues.

I guess you have to "speak truth to power" and I find that the Ministers that I talk too, in my life as a commentator, are straight up, understanding, and willing to learn.

That's where we should focus our efforts.

We also have to get over this fear of being blacklisted by agencies because of what we think.

We are technologists. We are professionals. Dare I say that if an agency blacklists us for asking questions, offering advice, and proferring constructive criticism, that they aren't worth dealing with?

Rob Lupy 05 August 2016, 9:52 am

What so the government doesn't contract with Datacom, Foster Moore, Tungsten Web, Silverstripe, inHouse, Techtonics, to name a few off the top of my head?!

Also, when the govt does contract with big IT multinationals (for right or wrong reasons), it contracts with the NZ subsidiary of the multinational. The NZ subsidiary which employs NZer's, pays NZ tax and usually has NZ offices etc.

If you keep telling NZ IT companies not to bother tendering for govt contracts, then I imagine they'll find it more difficult to win NZ govt contracts, so thanks for all your help there.

Ian Apperley 05 August 2016, 12:04 pm

Thank Rob,

Everyone is entitled to their opinion.

"If you keep telling NZ IT companies not to bother tendering for govt contracts, then I imagine they'll find it more difficult to win NZ govt contracts, so thanks for all your help there."

Not following that logic at all. They are more likely to be able to put their resources into other work rather than waste their time on tenders that are often pre-decided, in my experience.

Frankly, the way that the Technology Industry gets treated in New Zealand is appalling and the overwhelming feedback I have had is that this is a widely shared opinion.

You suggest there is no problem and that to act as if there is will create more of a problem.

That's completely wrong.

Rob Lupy 05 August 2016, 1:45 pm

How much do you charge the government when you work for them Ian? $150 an hour?

That's completely wrong.

Such terrible treatment for Technology Industry professionals should be reported to the government.

Paul Matthews 05 August 2016, 1:56 pm

Hi Rob,

This is bordering on ad hominem. We absolutely welcome the debate, but please refrain from personalising it. Thanks

Paul Matthews (CEO, IITP)

Rob Lupy 05 August 2016, 2:22 pm

Apologies - it wasn't meant as a personal dig at Ian (who I don't know btw).

I was more just annoyed by his comment that the Technology Industry professionals are appallingly treated when in fact they earn a very decent amount, and yes I know this because of the shortage of decent talent and also that $ isn't everything.

Ian Apperley 08 August 2016, 3:35 pm

Because I am transperant, I am happy to tell you that I charge $120 per hour. I can also tell you that my rate hasn't changed in six years.

I think that's fair given that I have about 25 years experience in the game.

What's interesting is this; if I have to go through one of the "Panels" to engage with a customer that hourly rate can go as high as $300.

So let me explain that.

The tender process that is in place for contractors requires that you sign up for panels of authorised suppliers.

I can't afford to do that.

So an agency that wants to engage me either has to get the CEO to signoff on it (and they sometimes do) or find an approved party to go through.

Some years ago I was charging that rate and the company I was going through, a multinational, was adding $180 per hour to the bill.

That is why we need to change this process. Because that is common.

Mike Dennehy 11 August 2016, 4:07 pm

Another way to ask this question is perhaps: why is Government IT procurement so bad? I presented a session on this at ITx, although unfortunately - judging by the number of knowing nods and the absence of embarrassed squirming - largely to an audience only too well aware of the scale of the problem.

Until and unless government IT procurement is radically improved, the situation won't change. Government will continue to buy either the wrong thing or nothing (yes, I'm generalising, but only slightly), and the incredible waste of time, effort and money will continue. But hey, it's not their money, so why should they change?

Ian the final result for the agency you mentioned wasn't just 3 years of pain after they chose the wrong vendor. It also needs to include the cost of your time, that of the panel, the auditor and all the effort that went into making a best recommendation, that was completely ignored. All taxpayer dollars, and all wasted. Where's the accountability?


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