What is the Government thinking ?
The Herald on Sunday reported that a $371 million government contract for the electrification of the Papakura to Pukekohe rail line was awarded to overseas companies, said to be a joint bid from Chinese-owned firm John Holland and South-African-owned McConnell Dowell. Construction companies Fletcher and Downer, which were originally New Zealand businesses but are now internationally-owned, were reported to be “fuming” after missing out on the work, which sources said would have saved many of the 1000 local jobs slashed in May due to the economic downturn caused by Covid-19.
The newspaper said it had been told that John Holland and McConnell Dowell had submitted a cheaper tender.
That report followed a Radio New Zealand story last week reporting that a consortium of local disability groups bidding for a $32 million telecommunications contract had lost out to an American call centre operator. Radio New Zealand said that the job running telecom and digital communications for thousands of deaf and hard-of-hearing people had been awarded to Concentrix.
Hearing New Zealand president, Tony Rush, said he believed that the Government had awarded the contract on the cheap, destroying the joint work of community-based disability groups who worked together to mount a tender based on the mantra “nothing for us without us.”
CCS Disability Action chief executive, David Matthews, told Radio New Zealand that the current, 15-year-old system was run by another American company and was not only outdated but poorly-resourced and promoted. Matthews said the local tenderers believed they had done a particularly thorough job with their bid and had hoped that the fact they were local organisations would have been giving weighting in the decision-making process.
IT business lobby group, NZ Rise, examined information released by the Ministry of Business, Innovation and Employment on 1 May 2020 about government contracts. NZ Rise said the statistics appeared to show that Kiwi firms were awarded contracts for smaller jobs, but overseas businesses were awarded larger tenders.
The material published by MBIE did not include full details, but the average value of contracts won by New Zealand companies was $209,978, while the figure for non-Kiwi firms was $654,288.
Aotearoa is haemorrhaging jobs and 1.6 million Kiwis have only been kept in work because of the Government’s wage subsidy. Many more New Zealanders are expected to lose their jobs in the coming weeks and months.
At the same time, Prime Minister Jacinda Ardern, Finance Minister Grant Robertson and Tourism Minister Kelvin Davis and other ministers are talking up the importance of supporting local businesses and domestic tourism as way of stemming job losses. Ardern has urged people to buy from local businesses and spent Queen’s Birthday weekend in Hawke’s Bay to encourage other Kiwis to travel regionally and spend money.
The Government only recently revised its procurement rules, with new provisions taking effect from October 2019. These state that procurement is to be leveraged to achieve broader outcomes. The four priorities listed are improving the access of New Zealand businesses to government procurement; increasing the size and skill level of the domestic construction sector workforce; improving conditions for workers in government contracts; and supporting the transition to a zero net emissions economy and significant waste reduction.
One of the specific changes made when the rules were updated was the addition of a section to ensure that agencies were aware of commitments to Te Tiriti o Waitangi, and how they related to procurement.
As well as the rules, there is a Government Procurement Charter and Five Principles of Government Procurement. All of them emphasise that contract decisions are not to be limited to price, but must take into account broader issues. For example, the five principles require government agencies to make balanced decisions in awarding tenders, by considering social, environmental and cultural outcomes.
It is hard to see how these goals are advanced by the way in which either the rail electrification contract or the telecommunications contract was awarded: indeed, the opposite appears to be the case.
The Government has the money and power to lead by example in supporting local jobs. Government agencies spend around $41 billion dollars a year on goods and service from third party suppliers. They need to be far more pro-active in ensuring that every dollar is squeezed to produce as much good as possible.
When the procurement rules were revised, the Government had the opportunity to include a provision stating that all firms awarded government contracts must pay employees and contracted workers the Living Wage. The Government chose not to do that.
If it continues to award contracts primarily on cost, there will always be an overseas business that will provide a cheaper price. But that does not advance the rules the Government itself says it applies to tendering.
Further, New Zealand governments have for decades promoted upskilling and the need to move away from low-paid jobs. But KiwiRail’s tendering decisions fly in the face of that. Dunedin’s Hillside rail workshop all but closed up in 2012 after KiwiRail awarded a $29 million contract to a foreign company.
In 2016, the KiwiRail chose overseas rather than local staff to carry out locomotive repairs. And KiwiRail group chief executive Greg Miller earlier this month said that there were no plans for any of the $1.2 billion rail work announced in Budget 2020 to be carried out by Hillside workshop.
Miller said that this country did not have the capability to build locomotives or ferries and it was unlikely that the specialist landside infrastructure for ferries, such as linkspans, could be built locally.
On Morning Report today, Miller defended the awarding of the Papakura to Pukekohe rail line electrification contract to overseas companies by stating that New Zealand workers did not have these skills.
He said that it was not just a matter of cost and that New Zealand staff would work on other rail projects which were “less technical.”
Asked by interviewer Kim Hill why New Zealand workers did not have these skills, Miller replied “It’s a tough one, isn’t it ? ”Actually, no. If local firms are never given the opportunity to work on specialist, highly-technical projects, those skills will never be developed in this country.
That means that New Zealand will never develop large numbers of highly-paid jobs.
Hill’s response to Miller’s reply was “You make us sound stupid.”
If the Government is not prepared to put its money where its mouth is in awarding contracts to local businesses, it should just admit that.
Cat MacLennan is a journalist, lawyer and researcher
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