Auditor-General's overview

Using “functional leadership” to improve government procurement.

E ngā mana, e ngā reo, e ngā karangarangatanga maha o te motu, tēnā koutou.

We estimate that public organisations spend about $42 billion each year on procurement. To get the best outcomes for taxpayers and ratepayers, it is critical that public organisations successfully manage this spending. They need high-quality procurement and capability to effectively and efficiently deliver services, innovate, and achieve public value.

Since 2012, New Zealand Government Procurement (NZGP), a business unit in the Ministry of Business, Innovation and Employment, has provided procurement functional leadership – that is, responsibility for leading improvements in government procurement.

NZGP has successfully laid the foundations for effective procurement functional leadership. NZGP has introduced rules, guidance, and activities that have helped public organisations improve their procurement practices and take a more consistent approach to procurement than previously. It has also done work to increase the number, and improve the quality of, procurement professionals in the public sector.

NZGP has shown that having a single public organisation lead improvements to government procurement has benefits. This is a significant achievement because cross-agency work is challenging and complex. However, public organisations now have higher expectations of NZGP's leadership, which NZGP is not yet meeting.

In introducing procurement functional leadership, Ministers wanted public organisations to regard procurement as a strategic activity. In my view, NZGP has made good progress in some areas, but its engagement with public organisations needs to be as a strategic partner to make this shift. This means that NZGP needs to provide closer and more nuanced support, be more responsive, and jointly set goals and priorities with public organisations.

NZGP needs to build on its goodwill and support to provide stronger leadership and strategic direction, do more to support collaborative working, and improve its communication with public organisations. We have identified some important areas for NZGP to focus on to further improve public sector performance and to be seen as the centre of excellence for procurement in the public sector.

NZGP needs to be clearer about how it is going to influence public organisations to see procurement as a strategic activity focused on achieving public value, rather than as a set of requirements to comply with.

Although cost savings are important, the public organisations we spoke to consider that NZGP has focused too much on making savings and not enough on improving public sector procurement capability. This is needed to improve the quality of procurement decision-making, promote more mature and streamlined procurement, and promote innovation among public organisations.

NZGP has set clear goals for improving government procurement. It now needs to put in place the essential elements of good governance to provide transparency and accountability for improving government procurement, including monitoring and reporting of its planned national procurement strategy. Effective monitoring and reporting is needed to provide assurance that government procurement is continuing to improve.

The State Services Commission needs to clarify its role in setting expectations for procurement functional leadership and reviewing NZGP's performance. There are currently five functional leaders in the public sector, including NZGP. Although their mandates vary, sometimes considerably, we still expect that they:

  • can clearly explain their leadership role;
  • know who their stakeholders are and involve them effectively; and
  • have in place the essential elements for providing transparency and accountability on performance to public organisations, Ministers, Parliament, and ultimately the public.

I am pleased to note that NZGP will use my report to support its work. It already has actions under way to address some of our recommendations. I have discussed my findings with the State Services Commission, which is considering the implications of this report for other areas of functional leadership in the public sector.

I thank the staff in the public organisations and suppliers involved in our audit for their support, co-operation, and openness.

Nāku noa, nā

Signature - JR

John Ryan
Controller and Auditor-General

26 November 2019