We’d be dumb if we didn’t: Embracing progressive procurement

The announcement of a Government procurement target for NZ Maori businesses is the stimulant needed to substantially improve access to Government procurement projects for all NZ businesses, writes Jennie Vickers of Zeopard Consulting.

Twenty years ago, the business community was all abuzz with talk about quotas for women and minority representation on boards. Twenty years ago, as an intelligent woman I objected to any idea that I might be seen as being on a board solely because I was a token quota woman.

Many women felt the same but… fast-forward to 2020 and still only 25 percent of listed company directors are women. Fast-forward twenty years and we may hear similar rhetoric objecting to the idea of a five percent procurement quota for Maori business suppliers announced earlier this month.

Reflecting back, maybe a quota would not have been such a bad thing? International experience with quotas showed they worked to change behaviours, and they delivered positive results.

In addition to the hot topic of quotas there are important recent updates most will have missed around NZ Government procurement. These are worth being aware of whether you’re an NZ or overseas business in procurement, contract management, or supply chain, including:

• Maori identifiers in the NZ Business Number Register.

• introduction of two new rules for inclusion into the Government Procurement Rules (PR2019) (effective 1 October 2021); Rule 18A being the most important for suppliers;

• Broader Outcomes – release of the results of the MBIE review of progress on implementation of the 2019 Broader Outcomes mandatory rules; and

• The five percent Maori business quota referred to above.

In November 2020, the Government’s Cabinet Business Committee made a number of critical decisions. While focused on the Maori economy, the cabinet paper does start with a proposition of using social procurement aligned with Broader Outcomes to increase wellbeing.

New 5% target “progressive procurement”

The reference in the papers to a Progressive Procurement Policy does specify a combination of supplier diversity with a social procurement approach, initially focused on Maori businesses. Importantly this does not exclude other NZ businesses, it merely recognises the need for catch-up.

The Labour Maori 2020 Election Manifesto included a range of commitments to support the Whanau Maori Economy through social procurement initiatives. The Cabinet meeting confirmed Te Puni Kokiri (TPK) and MBIE as the responsible agencies to develop guidance, and approved the enabling policy features, including:

• A definition of a Maori business for government procurement purposes as being one with at least 50 percent Maori ownership or a Maori Authority;

• An initial minimum procurement target of five percent of Agency contracts by number (not value);

• Confirmation of the intermediary (Amotai) to help deliver progress.

Importantly it specifically mentions a primary feature of the policy being “support for sustainable, long term behavioural change of government agencies and businesses.” This is, in my opinion, an important leap forward and a positive for all NZ businesses that have been seeking fairer access to procurement opportunities.

Where Broader Outcomes benefits have been disappointingly slow to be prioritised, this new policy might provide the kicker that was missing.

The supporting cabinet paper interestingly notes that this new policy will also support the shift from ‘value for money’ to ‘public value’ (as defined in PR2019). It is bemusing to note that public value replaced value for money back in 2019, but a random pick of procurements on GETS this week still refer to value for money.

NZ businesses have been waiting too long to see this mandated policy being implemented for real. The public value test should deliver a truly competitive playing filed where ‘show me the money’ stops being the driver.

In April 2021, TPK and MBIE published their Progressive Procurement – Buyers Factsheet and Guidance for Buyers. This work builds on the cabinet decisions which, without further detail, had caused concern in a few circles about the use of a quota that might discriminate against other NZ businesses.

A nice positive for all businesses is the clear statement by Cabinet that “Agencies must increase the diversity of their suppliers, initially by focusing on Maori businesses.”

It is important to note that Progressive Procurement does not take focus off the Broader Outcomes mandate. With “a long term sustainable behavioural change across government procurement, evidenced by greater supplier diversity” as a stated policy feature, the sustained focus on delivering procurement practice change is good for every NZ business.

Clarification may still be needed regarding the Maori business definition. The recent press release regarding the NZBN identifier for a Maori business implies a slightly different definition from that offered by the Cabinet Paper and Guide document. Once clarified, it is worthwhile for NZ businesses to understand the definition.

Connecting Māori and Pasifika businesses with buyers

Amotai was originally established in 2018 by Auckland Council, supported by partners who shared the vision of “promoting Māori and Pasifika entrepreneurship through smarter use of procurement and supply chains”. Now, Amotai is described as “Aotearoa’s supplier diversity intermediary tasked with connecting Māori and Pasifika-owned businesses with buyers wanting to purchase goods, services and works.”

Some of New Zealand’s largest organisations have already signed up. One of these is Microsoft, which has been guided by Amotai in building a closer relationship with its community and better partnerships with Maori and Pasifika.

“Amotai has guided us along this journey in terms of how we engage with local communities,” noted Dan Walker, Global Co-Chair of Indigenous ERG at Microsoft, in an Amotai press release.

Of interest, Amotai’s Ariana Paul delivered a presentation at the NZDIA IDEAS2020 Event, a video of which is available via the NZDIA website for Members and event attendees. It is worth a re-watch.

Earlier this month, Amotai ran a sold out inaugural Supplier Diversity Aotearoa Summit in Auckland. Future events will be held, and I recommend following https://amotai.nz/ for information. Maybe next time there will be fewer conversations about the continuing proliferation of impossible or ridiculous hurdles preventing Maori businesses joining the fray.

Greater inclusion of Maori and Pasifika will lift all businesses

This increased focus and scrutiny on involving Maori and Pasifika businesses in Government procurement might reasonably be seen as a threat to other NZ businesses. These businesses were led to believe that change was coming as a result of PR2019, but for many nothing has materialised.

In the technology sector, New Zealand has many high performing businesses operating on the world stage, but too many we talk to, do not bother even engaging with NZ government procurement processes.

World Commence and Commercial (WorldCC, formerly IACCM) has for over 20 years been championing the need for all economies to be underpinned by high performing and trusted trading relationships.

Principles around building trust, long term relationships, innovation between customers and suppliers and delivering on visions of a world where all trading relationships deliver social and economic benefit, have long been discussed by the commercial community across the World.

Gradually, we’re seeing change, as more countries, governments and companies embrace a less adversarial way of trading. Evidence of the benefits and results of more collaborative approaches are plentiful.

As part of the discussion about the benefits of collaborative contracting, it is worth focusing on productivity and the extent to which Government procurement policy may have contributed to New Zealand’s relatively poor productivity.

In April 2021, the New Zealand Productivity Commission published New Zealand Firms: Reaching for the frontier, a report that includes findings from several separate studies focused on identifying higher performers and policy changes needed to increase productivity through innovation. The focus was on a defined set of ‘Frontier Firms’.

In the report’s fourth chapter, “Insights from Maori Firms”, the findings from a study of Maori Frontier Firms by Mill and Millin demonstrate that Maori Frontier Firms have higher rates of innovation and R&D, and that common values and features help bring Maori businesses together around shared goals.

The Mill and Millin study identified that Maori values such as Kaitiakitanga (guardianship), rangatiratanga (leadership, ownership), manaakitanga (hospitality), and whanaungatanga (relationship/kinship), together translate into an intergenerational view that is in turn reflected in long term business strategies and approaches.

It is no coincidence that the benefits being experienced by WorldCC Members and Maori Frontier Firms are ahead of their curves and that the elements of success are similar.

The Frontier Firms Report also notes that Māori businesses and iwi commonly refer to a “multiple bottom line” approach. This approach balances multiple values and objectives – spanning social, cultural, financial, environmental, spiritual and political domains.

This sounds pretty similar to the objectives of the Broader Outcomes approach, and it is worth noting that the Mill and Millin study further identified that most interviewees did not see multiple bottom lines as a disadvantage.

During May 2021, WorldCC invited Helmut Karewa Modlik, CEO of Kaiwhakahaere Matua, to join a panel to discuss supply chain diversity. Commenting on the Productivity Commission Report and my suggestion that all NZ businesses can learn from Maori businesses and vice versa, he noted: “as recently publicised, the Māori economy is in some respects leading the way in New Zealand.”

“The motivation of Māori investors, business leaders and entrepreneurs is more than just financial. Overall wellbeing, prosperity and mana of whānau, hapū and iwi, plus the wider community underpins most Māori economic endeavour. Government and industry can therefore concurrently progress the achievement of both economic and wider social aims by targeting Māori businesses for selective procurement and partnered approaches. Overseas this is called ‘community wealth building’; here we just call it ‘smart’!”

Conclusion

While recognising that COVID-19 hit during the two years since the new Government Procurement Rules were published, the conclusion that government agencies’ performance in embracing Broader Outcomes has not been good enough is not an unreasonable one.

The PR2019 changes were introduced with critical and lofty goals to change procurement behaviours towards NZ businesses and to ensure good behaviour by suppliers. A disappointing observation is that agencies quickly imposed the Supplier Code of Conduct from PR2019 (thereby potentially putting more obligations and risk onto suppliers) but did little to change their own behaviours or work to their new Charter.

Now with the introduction of new Rule 18A, the five percent quota, and the political weight (and risk) of election pledges, we might finally see Broader Outcomes being embraced properly. And if this were to happen, all NZ companies will see the benefit. Nothing would make this author happier than seeing this improve.

The Productivity Commission recently noted: “The Government’s new 5% target for the number of public service contracts awarded to Māori businesses is a great start. To achieve its full potential will require deliberate action to build capability on both sides of the procurement equation. This means providing culturally-appropriate support to Māori businesses to participate in government procurement, as well as training staff in procuring agencies.”

Finally, last month I attended an event run by the Costume and Textile NZ Association. One of the speakers presented on rare and special Taniko woven cloaks gifted to various envoys from the three Captain Cook voyages. This weaving technique and the cloaks created were an important part of the story telling of their communities.

In speaking about how much we have to learn from both the weaving techniques and the respect signified by the gifts, the presenter shared this whakataukī (proverb) written by Ngai Tahu Kaumatua, Kūkupa Tirikatene:

E kore e taea te whenu kotahi ki te raranga i te whāriki kia mōhio tātou ki ā tātou. Mā te mahi tahi ō ngā whenu, mā te mahi tahi ō ngā kairaranga, ka oti tenei whāriki. I te otinga me titiro tātou ki ngā mea pai ka puta mai. Ā tana wā, me titiro hoki ki ngā raranga i makere nā te mea, he kōrero anō kei reira.

The tapestry of understanding cannot be woven by one strand alone. Only by the working together of strands and the working together of weavers will such a tapestry be completed. With its completion let us look at the good that comes from it. In time we should also look at those stitches which have been dropped, because they also have a message.

This whakataukī perfectly encapsulates the benefits and the learnings to be gained by better integrating these collaborative contracting philosophies and more Maori and Pasifika businesses into our government supply chains and, importantly, how much we have to learn from each other.

For detail on the recent Procurement Rule changes and Broader Outcomes progress, visit the Defsec website www. defsec.net.nz

Jennie Vickers is CEO of Zeopard Consulting, the immediate past CEO of the New Zealand Defence Industry Association, and an experienced international commercial lawyer and relationship and contract specialist.