Feature: Respondents say govt tender system in dire need of shakeup

Feature: Respondents say govt tender system in dire need of shakeup

The tender process used by the Government Electronic Tenders website (GETS) was designed to be transparent, efficient and encourage competitive bids. However, judging by the comments from IT industry members some consider it is anything but.

Executives at a number of suppliers canvassed by Reseller News are frustrated, claiming that the tender process is expensive and longwinded. There are also allegations that tenders are written with specific companies in mind and that Wellington-based organisations are given preference.

A former high-profile CIO, who is still working in the industry as an IT consultant — but asked not to be identified due to concerns his comments could prejudice future work from his clients — says an overhaul is required.

“[The bureaucracy] sometimes gets taken to silly extremes. There was a significant shift two or three years ago. There was the request for proposal [RFP] process and the request for information [RFI] process that had gone on forever and always will. But at one time, if you won an RFP and they liked you, generally they would offer you more work, without public tendering.

“It works the same for every vendor – if you manage to win an RFP, the odds were that if you did a good job you were going to get flow-on work out of it.”

However, this changed when the State Services Commission (SSC) tightened up the procurement regulations, says the former CIO. “This followed on from some high-profile procurement gaffes in the public sector. The Ministry of Health was in the press a few years ago for awarding contracts to former employees who’d set up companies.

And then of course you had that Michael Swann in Dunedin. [The former Otago District Health Board CIO who was found guilty of massive fraud last year]. Not surprisingly, the SSC got very concerned about procurement in the government sector and tightened things up very dramatically — for very good reasons, obviously, but like many things there are unintended consequences.”

Ministry of Economic Development Government Procurement Development Group manager Phil Weir, says he is aware that procurement practices across government are “variable.”

But he says there are some mandatory rules that government departments have to follow. “Compared with other countries, New Zealand’s government procurement policy framework is only minimally prescriptive. Individual government departments or agencies are responsible for their own purchasing decisions.”

This means the ministry’s role is to promote good practice based on best value for money over the whole of the technology’s life, along with open and effective competition, full and fair opportunity for domestic suppliers and improving business capabilities, rather than policing, says Weir.

Website good, process bad

Lexel Systems managing director Noel Simpson says the GETS website is a better way of finding tenders than was available five years ago, when tenders were advertised in newspapers. “The problem is the tendering process that sits behind it.”

The company has been dealing with the New Zealand Defence Force for 15 years and Simpson says it keeps up to date with the NZDF tenders posted. “We’re aware of all the bigger ones, which we’ve either been selling upfront or been involved in some way. [Tendering] is a bit of a necessary evil and it’s about staying close to your customers, so you can be successful with the process. But if you respond to everything on GETS, then you’re less likely to be successful.”

Gen-i’s head of public sector Robert Monteith, who is based in Wellington, says tenders are written with IT clients in mind, but this is because the client has already engaged with the organisation. “Some organisations are saying ‘that was clearly written for an organisation, because they can deliver XYZ’. For it to have got to that stage, the client has been engaged with the organisation to look at requirements and they’ve determined they need that requirement so they have excluded some organisations.”

Simpson agrees some tenders are written in favour of a company’s product being successful in a tender. “Typically, we don’t respond to any tender unless we have been involved with the customer on it from the inception. We have a lot of clients who end up having to put their bid process up on GETS, because they are required to. Most of those tenders are written around someone’s product and most of the time they have someone in mind they would like to do the business with.”

Unless a tender response contains “something extraordinary”, companies are “generally wasting their time” putting in a tender, Simpson claims.

Weir concedes that while process management by procuring agencies could be improved, he says suppliers need to improve their tendering skills. “The procurement environment is more complicated than it used to be; for instance because of global trade and standards regimes. Suppliers need to respond by learning how to market themselves better and build relationships early, well before a tender process begins. So there are improvements that could be made to the professionalism of participants in the procurement process.”

Red tape slows process

The former CIO says from his experience, panel selection RFPs are also not worth tendering for. “For a vendor they’re a real pain in the ass. What agencies are doing now is putting out RFPs for vendors to become accredited on a vendor panel, so that when they need them they can then tap them quickly.

“I’ve answered a couple of these and I’ve decided I’ll never answer another panel RFP again, because I think they’re a complete waste of time.”

He says it means putting effort in for a job that isn’t there, in the hope that one day there might be.

“I’ve also spoken to other vendors and to some hiring managers who’ve put out these RFPs and they said that even when they’ve gone through it, they haven’t been able to award any subsequent work to any of the vendors they’ve picked on their panel.”

Monteith says panels are becoming more common because the procurement processes are expensive and time consuming. “The vendor panels are being established through a contestable process, so there is a smaller group of organisations that they can go to for particular services. But the process is contestable, so everyone has the opportunity to take part.”

One of the Ministry’s aims is to help government procurers manage their tender process in relation to the nature, complexity and risks of the procurement, says Weir. “Sometimes we find that a ‘one size fits all’ approach to tendering makes the process unnecessarily difficult or complex compared to the desired outcome,” he admits.

Pay to play

Another problem with GETS is the cost involved, says Simpson: “You can easily spend five to 10 thousand dollars on a tender,” he says, adding most companies which respond to tenders know it has been written to cater for a particular company or specific software.

Monteith says some of the large procurement opportunities Gen-i pursues can cost between $50,000 and $100,000. “Sometimes those processes can extend for much longer than first indicated in the RFP process. You have to make the hard qualification to commit to the RFP and the end result can be that the cost to the organisation running the process will be more than the total value of the contract.”

He adds that having a Wellington office is useful for tender bids. “You’d have to say that if you were serious about doing business with government, you’re going to have a presence in Wellington because that’s where the decision makers are. If you hear they’re interested in something or you see an RFP and the process allows it, you can go and talk to them.”

The former CIO has experienced price wars first-hand. “I have had and still have, a government client that uses me on and off over the years for various things. I got a call out of the blue one day, saying they’ve got a piece of work for me. They tell me what it is and I say, ‘Sure, I’d be happy to.’ They’re all set but then the CFO gets his mitts on this and gets the accountants involved. They then tell the hiring manager who’d contacted me that they couldn’t just do this, we need to go public on this. But the hiring manager says, ‘Look, this guy’s worked for us before, he knows us, he’s done a good job, it’s not an enormous piece of work. What’s the point of going public? You’ll just delay us.’

Nevertheless, the CFO forced the bid to go public. “The whole process gets delayed by two months, so it cost them time to get the work done. In the end, I didn’t get work. They had another contractor answer who came in at $1500 cheaper, and the CFO ordered them to take the cheapest price.”

Simpson believes government departments judge how companies respond to a tender, rather than how well they can provide the service. “Some people focus too strongly on the tender proposal and don’t take a real world perspective on who is actually good at doing this work.”

How the process could be improved

As reported on page one, Weir says the Ministry is considering the recommendations of the review of the GETS process.

“The review found that stakeholders were saying the basic functionality of the system was okay, but they wanted the service to be enhanced. For example, through the provision of information and templates to guide GETS’ users through the entire procurement lifecycle, including the tender process.”

Monteith says things can be done to improve the tender process and reduce the costs of doing business with government.

“There are issues around the types of services they go out for and the steps they put in process for the responding organisations. There has been some work already done in that space in terms of standardising some of the RFP clauses, which are than backed up by standardised contract clauses.”

Another aspect that could be improved is the time taken with the tender process.

“If you go into a process that changes on you when you’re in it, that’s a problem. For example, you find out it’s going to be another three months of work just to get to the end and you go if we’d known this in the beginning we wouldn’t have gone in for it’,” adds Monteith.

The former CIO says the lengthy process raises this question.

“At what point does the process get in the way of the outcome? You can’t quantify it, but there’s a balance between a good process and an overweight process, and in the last year I’ve answered one RFP. I was always quite selective about the ones that I would answer, but up until about two or three years ago I would answer up to five a year.”

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