New Zealand government disaster insurer EQC selected Salesforce as its engagement platform without openly advertising because it was considered a "prototype".
The rules of government procurement include a series of exemptions from standard requirements to openly advertise planned purchases, under section 14.9.
In this case, EQC invoked section 14.9e, which allows the purchase of a prototype for "research, experiment, study or original development".
The procurement emerged as the Ministry of Health found itself under fire from Orion Health CEO Ian McCrae for procuring a Salesforce platform without an open tender under another part of section 14.9, its emergency provision.
McCrae said the ministry had squandered $35 million and called on the Auditor-General to investigate.
As for EQC, original development under section 14.9e may include limited production or supply if this was necessary to carry out field tests and incorporate the findings, or to prove that goods, services or works can be produced or supplied in large numbers to an agreed quality standard.
"This exemption does not apply to quantity production or supply to establish commercial viability or to recover research and development costs," the rule states.
"Once the contract for the prototype has been fulfilled, an agency must openly advertise any subsequent procurement of the same goods, services or works."
EQC implemented what it called a "Salesforce as a system of engagement prototype", a minimal viable product that it said had "demonstrable functionality" to support critical EQC and insurer interactions as part of its new operating new model.
That operating model came about as a result of severe service failures in the wake of the Christchurch earthquakes in 2010 and 2011. EQC's ICT systems came in for heavy criticism in a subsequent enquiry
An EQC spokesperson told Reseller News an "assessment" had been carried out across a number of customer relationship management solutions against four uses to be developed in prototype.
The Salesforce platform was then developed over a 12-month period to fully assess its functionality.
"The cost of the prototype is less than $1 million and minor enhancements or support may be required over the next 12 months as the operating model evolves," the spokesperson said.
Last week, EQC did advertise to create a services panel to support and enhance its Salesforce platform.
"As there is no all of government panel available for Salesforce, an open market engagement (RFP on GETS) is required to create a panel of suitably qualified suppliers for current needs and any future services," EQC said.
However, it has not so far advertised to procure the platform itself to put it into full production.
The spokesperson said it was EQC’s intention to openly advertise any subsequent system of engagement related procurement.
"We plan to do so on completion of the prototype," they said.
"In the meantime we require support services during the prototype phase, and this is what the RFP on GETS is intended to cover.
"Our intention is to use this prototype phase to fully explore EQC’s requirements for the system of engagement, prior to any further open market engagement."
Detailed requirements for EQC's new operating model were being co-designed with third parties in parallel to delivery, the spokesperson said.
"By prototyping a tool, it enables us to deliver the current business requirements as well as providing agility to test the tool to meet other requirements as they emerge through this co-design," EQC's spokesperson said.
"Once the tool is stable we will be able to assess the effectiveness of this tool."
Analysis from NZRise, which represent local technology companies, has found that more than 97 per cent of IT contract awards are not being published and when they are almost 70 per cent do not specify the contract value.
In a post, NZRise co-chair Victoria MacLennan recommended the removal of all exemptions from procurement rules and the full publication of details of contracts awarded.
The group also advocates the removal of closed procurement panels in favour of open and more transparent panels such as All of Government and The Marketplace.