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.
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