Govt tendering too expensive for small fry

Govt tendering too expensive for small fry

Summary: It's an outrage that IT organisations sometimes have to face spending more than NZ$100,000 on a tender process to gain work in New Zealand.

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It's an outrage that IT organisations sometimes have to face spending more than NZ$100,000 on a tender process to gain work in New Zealand.

Computerworld NZ has highlighted the case of Wellington City Council upgrading its website to allow some online payment services.

There were claims that it has cost one organisation NZ$50,000 to go through the request for information and request for proposal process to bid for the work. Other companies have said that they have spent more, as much as NZ$100,000 in one case. The NZRise lobby group of IT firms says that such costs discriminate against small, local firms.

Now, such costs do seem excessive, but the story provides no breakdown of how such costs mount up.

We also see nothing about what the actual contracts might be worth, whether it is a few hundred thousand or many tens of millions of dollars.

If the tendering process amounts to a couple of percentage points of the total contract, then it might seem fair.

After all, there have been quite a few government IT project failures and you can understand central and local government wanting to be absolutely certain that their supplier is going to be up to the job and will successfully deliver a project that will be on time, within budget and will do what the client seeks.

Even considering this, however, there's no excuse for cases where, after organisations have spent tens of thousands of dollars preparing their bid, the government doesn't go ahead with the work.

So there certainly seems a trade-off between the need of ensuring the job will be done well and placing an undue burden on potential suppliers, particularly small, local ones.

But when we see such huge costs bandied about, it looks like the balance is loaded too much against the potential suppliers, particularly the small ones.

Both central and local government need to see what they can do to make the tender process simpler and cheaper.

Topics: Government, Government AU, Legal, New Zealand

Darren Greenwood

About Darren Greenwood

Darren Greenwood has been in journalism, not all of it IT, since the days of typewriters and long before the web spun its way around the world.

Coming from Yorkshire, he can be blunt, and though having resided in New Zealand, as well as Australia, for quite some time, he insists he is not one of the 'sheeple!'

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  • Gaining any business has its costs, and tendering is one of those activities that accumulates costs rapidly. When the tendering costs are a few percent of the potential income then it can be seen as a reasonable cost.

    Of course, generally only one tenderer can win and the others have essentially sank their tendering costs. That's a commercial risk that has to be assessed pre-tender.

    Where the problem lies is the governments lack of understanding of the investment in time and money that commercial enterprises take when trying to win business.

    Issuing "Winner takes all' mega-RFTs disadvantages small organisations who cannot afford to invest so heavily into the tendering process, even when they are capable of satisfactorily delivering the contract requirements.

    Similarly, governments often risk mitigate to the extent they'll give no guarantee the work will ever progress and/or not be assigned to either an un-named supplier or internal agency. When this occurs, everyone who tenders in good faith is essentially wasting their time and money.

    Big and small companies alike can suffer when government agencies enter into a poor tendering practice. I've seen large organisations spend $10M AUD on tenders for projects that have neither proceeded or been deemed cancelled. I myself (small company) have wasted $30000 on tenders that several years later are still awaiting decision to proceed or cancel.

    This is not to say all government tenders are badly handled. Many are handled by professionals who understand commercial realities and will efficiently manage tender processes for the mutual benefit of the government and industry.

    What governments need to do is ensure they understand commercial business, ensure they are tendering for the right reasons, and fully intend to proceed to quick selection and engagement.
    Scott W-ef9ad