The Government is shaking up procurement in the public sector and has just announced a four year programme of procurement reform. What does this mean for New Zealand Suppliers? Is it an opportunity or is it a threat?

The Chartered Institute of Purchasing and Supply (CIPS) recently held its 3rd annual conference in New Zealand. The event was attended by in excess of 170 Procurement professionals representing both the public and private sector. The theme of the conference was ‘Managing Procurement in difficult times’ and it was the forum at which the Commerce Minister, Simon Power announced the Government’s proposed reform of state sector procurement practice and policies. For more information see www.procurement.govt.nz

Procurement experts and Procurement Managers from some of New Zealand largest companies presented and shared strategies to deliver savings and improve the efficiency of the organisations they work for. Far from being negative many of the strategies discussed pointed toward a maturing of the Procurement profession in New Zealand. A number of colourful analogies were presented that help explain the implications of a maturing procurement profession for suppliers.

Many companies and government departments are putting aside the norms and experiences of the past and actively challenging the status quo. As one speaker at the conference colourfully noted “The sacred cows in many organisations are being thrown onto the barbecue”

It is important to learn from past experience, but is equally as important to regularly question the status quo. Organisations that in good times did not have a strong incentive to challenge the status quo are very eager to reduce waste and avoid unnecessary costs now. Innovative suppliers are capitalising on the opportunity to demonstrate how they can introduce process or supply chain efficiencies.

A concern that was raised at the recent job summit was that the public sector in particular can be difficult to deal with. Many small to medium sized companies and some larger firms no longer tender for government work as a result of the overly bureaucratic and process driven approach many have experienced.The new Government procurement reform programme is actively seeking to change this. With central government support and a growing capability amongst public sector procurement professionals, it is a good time to knock on doors that may have been firmly shut in the past. The Government’s procurement spend is approximately $30 billion a year and there are opportunities for suppliers of all sizes.

The Government has noted it expects to see increased two-way communication between suppliers and government departments and a more outcomes focussed approach to procurement.

The role of procurement in many Government departments has often been to only facilitate the tender process in order to negotiate reduced pricing. Tough times require new solutions and organisations are increasingly turning to their procurement teams to work with suppliers in generating new innovations or ideas. It is a good time to approach public sector customers who may not have wanted to talk to you in the past about the ideas you have to reduce costs or increase efficiencies.

If you are struggling financially you may find a more supportive reception from your customer than you might expect. Bankruptcy of a key supplier is the ultimate bad news story for customers. The pressure of tough economic times is causing a considerable amount of innovation and helping build closer relationships in some sectors.