CDC Procurement Strategy

procurement Strategy

From strategy and procedures to advancing community well-being.

Mt Stuart Windfarm amidst the highly productive farmlands of the Clutha district.

Client: Clutha District Council

Background: Clutha District Council (CDC) is undergoing a significant period of investment into its infrastructure. The budgeted spend on Council services during the 2018-28 period is close to $300M. Much of this investment simply relates to the maintenance and replacement of infrastructure built in the 1960s to 1980s.

Problem: Many councils throughout New Zealand are also undergoing significant and sustained levels of infrastructure investment. Price inflation, a limited construction window and historical procurement methods are constraining CDC’s ability to deliver its budgeted works.

Mission: CDC wanted to enable a sustainable and more competitive marketplace of suppliers to deliver best public value. Utility was asked to improve the effectiveness of CDC’s procurement strategy and processes for all of Council, and in turn, instill greater confidence in the marketplace to invest in additional capacity.

Recent changes to the Government Rules of Procurement 2019 and its broader outcomes provided CDC with an opportunity to take a more proactive approach to procurement.

Results: Being a relatively small, rural council, Utility focused on designing methods that were simple and practical. The key recommendations were:

  1. Take a risk-based approach to procurement methods:
    Low-risk, low-cost procurement focuses on efficient of transactional throughput such as a purchase order system. High-risk, high-cost procurement follows a recognised process (such as a simplified business case approach).
  2. Use the 80/20 rule:
    Utility analysis also revealed a substantial bottleneck to throughput in NZTA’s and Council’s own $200k threshold for closed tendering. This threshold has since been lifted to $300k with an accompanying closed tendering process being designed as part of the 2021 Long Term Plan.
  3. Develop your marketplace:
    We recommended CDC take advantage of the government’s new broader outcomes mandate to develop a sustainable and competitive market place. The dominance of ‘Tier 1’ suppliers is an increasing threat to price competitiveness in remote areas. CDC are now considering how their procurement methods can better foster a competitive market place for all types of price and risk as well improve the well-being of their community.
  4. Monitor Procurement Performance:
    Utility developed some simple metrics to help monitor the transparency, fairness and effectiveness of CDC’s procurement methods. With an unprecedented level of infrastructure investment throughout NZ over the next 30 years, relying on status-quo approaches is no longer an option.

Lessons: Updating a statutory Council document presents many ‘rabbit-holes’ for a consultant to fall into. The key lessons for us were:

  1. Remain focused on the outcome:
    Ensure CDC’s community can continue to receive a good level of service from its infrastructure.
  2. Procedures are a means to an end:
    Keep the methods and the documents simple so they remain a means to an end, not the end in itself.
  3. Be brave enough to challenge ‘best-practice’ with what actually suits your organisation’s needs:
    Engage positively with statutory agencies and be brave enough to challenge the core purpose of their existing procedures. Too often it seems, councils find themselves lost in the quagmire of compliance and procedural requirements that add little value.
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