Responses to information requests. May 2014

Transcription

1 Directions to support a whole of government approach given by the Minister of State Services and the Minister of Finance under section 107 of the Crown Entities Act 2004 Responses to information requests May 2014

2 Table of Contents Procurement functional leadership... 3 Information request... 3 Potential whole benefits to the New Zealand government, including tax benefits, considered?... 3 Whole of life costs considered?... 3 Measures used for monitoring how well the Government Rules of Sourcing and their application are working... 4 Property functional leadership... 5 Information request... 5 Requirement to comply with space standard, not cost standard... 5 Confirmation that the space standard applies to departments... 6 Standards for government premises vs the private sector

3 Procurement functional leadership Information request 1 The Finance and Expenditure Committee (FEC) has requested the following information: a b Under the Government Rules of Sourcing, when making decisions on procurement: i are agencies required to consider potential whole benefits to the NZ government, including tax benefits (like income tax and GST)? ii are agencies required to consider whole of life costs? What measures are used for monitoring how well the Government Rules of Sourcing and their application are working, for example on number of contracts and extent of competition, and to ensure the right balance between efficiency, cost and market access for new players? Potential whole benefits to the New Zealand government, including tax benefits, considered? 2 The Government Rules of Sourcing (Rules) include the five Principles of Government Procurement, which agencies must reflect in everyday practice. 3 One of these Principles is to Get the best deal for everyone and states (among other things): Get best value for money account for all costs and benefits over the lifetime of the goods or services. Make balanced decisions consider the social, environmental and economic effects of the deal. 4 In applying this Principle, agencies can consider the potential whole benefits to the New Zealand government including tax benefits. Information on the consideration of these benefits in respect of specific procurement projects would be held by the procuring agency. Whole of life costs considered? 5 Yes, agencies are expected to consider whole of life costs when evaluating value for money or lowest price. 6 Rule 43 states that: an agency must award the contract to the supplier/s that has offered either the best value for money over the whole of the life of the goods, services or works (which isn t always the cheapest price), or lowest price, if price is the only criterion. 3

4 7 Value for money is defined in the Rules as follows: Value for money is not always the cheapest price. It is the best available outcome for the money spent. It means using resources effectively, economically and without waste, and taking into account: total costs and benefits of a procurement (total cost of ownership), and the procurement s contribution to the results you are trying to achieve. The principle of Value for Money when procuring goods, services or works does not necessarily mean selecting the lowest price but rather the best possible outcome for the total cost ownership (over the whole-of-life of the goods, services or works). Selecting the most appropriate procurement process that is proportionate to the value, risk and complexity of the procurement will help achieve value for money. Measures used for monitoring how well the Government Rules of Sourcing and their application are working 8 The Ministry of Business, Innovation and Employment (MBIE) uses a range of initiatives to measure and monitor the effectiveness of procurement across government. These include: a survey of businesses to provide feedback on the efficiency and effectiveness of government procurement, including the Government Rules of Sourcing. The information from the survey will be used to inform the MBIE s procurement capability and policy work programme; reviewing agency annual procurement plans, significant business cases, and influencing improvements to procurement practices through its role in providing general advice and guidance to agencies; implementation of a new Government Electronic Tenders Service (expected to be in approximately July 2014) which will enable MBIE to obtain reports on the contracts awarded by government agencies, including the number and value of those contracts. 9 MBIE will also be developing a procurement maturity index which will allow it to assess the procurement function in agencies using a range of metrics, including formal benchmarking capability reviews, Better Administrative and Support Services metrics, and participation in procurement functional leadership activities. The index is in the planning stage, with the completion date yet to be established. 4

5 Property functional leadership Information request 10 The Finance and Expenditure Committee (FEC) has requested the following information: a b c Why is there a Property requirement to comply with a standard based on square metres per employee rather than costs per employee, given the overall objective of cost savings? Why isn t cost one of the standards? Please confirm that the current rules as to square metres per employee apply to the core public service. When considering standards for government premises, what processes and considerations apply in order to compare with what is considered acceptable in the private sector? Requirement to comply with space standard, not cost standard 11 The Government National Property Strategy, published by the Minister of State Services, details the vision and strategic objectives of the property portfolio and the drivers for savings. The drivers for the property portfolio are to optimise efficiency and effectiveness of the workplace. The space used is one key measure applied, but is not a driver itself. 12 The requirement to comply with a space standard has several facets: a b c Appropriate cost variance between agencies. Different uses of space between agencies result in different cost profiles. For example; the Ministry of Health with 12 offices and no significant public interface has a quite different average cost per person then the Ministry of Social Development with its network of public interface sites which necessarily cost more per person. Often these types of spaces are blended together. Market forces. Average costs vary hugely between regions (for example Auckland or Wellington costs are much higher than Dunedin). Agencies with footprints weighted heavily toward Auckland and Wellington would have a very different cost profile than agencies spread across regions (for example a public interface site across all main towns). Availability of stock (related to market forces). Being a supply and demanddriven market; an agency will secure its required space at the best possible price, however it is market priced so there is a large portion of the total average cost that is uncontrollable (of course agencies undertake to get the best deal during negotiation). 13 For these reasons, it is not practical to maintain a single cost per employee measure that is comparable or meaningful across the public service, or indeed comparable to the private sector. Any suite of cost-per-employee measures established dependant on type of space, location and a number of other factors 5

6 would come with a long list of assumptions and caveats and would not present a robust or usable measure. 14 Complying with a space standard is industry standard and accepted practice. Some companies do measure a cost standard but it is far less frequent, largely for the reasons outlined above. 15 Space is the measure that can be followed apples for apples between agencies, yet allows for the effect of market forces on costs. Confirmation that the space standard applies to departments 16 The space standard already applies to all public service departments, plus the New Zealand Defence Force, New Zealand Police, New Zealand Security Intelligence Service and the Parliamentary Counsel Office. Standards for government premises vs the private sector 17 The Property Management Centre of Expertise (PMCoE) sees very little difference between private and public sector environments when setting standards for office accommodation. Best practice from the private sector is regularly accessed and benchmarked against when establishing standards and guidelines for public sector agencies. 18 There are two facets to premises standards: the building itself, and the working environment within it. 19 In relation to the building itself, the PMCoE has developed the Building Performance Specifications (BPS). The BPS are used during negotiations to set the standard expected by the agency for building performance. The BPS were developed in partnership with a private sector company, and have been vetted and checked by multiple additional private sector companies as well as government agencies (for example, the Energy Efficiency and Conservation Authority checked the energy section). 20 The BPS contain specifications that need to be tailored to each specific building to which they are applied, since every building is different; but they set the expected benchmark. 21 The BPS are based on industry good practice, have been used in the accommodation projects the PMCoE has undertaken, and have been accepted by the market. 22 In relation to the working environment within the building, PMCoE is developing the Workplace Standards and Guidelines (WS&G) for office space, which will be available for agencies use in The WS&G set standards for elements of the workplace which have a pivotal effect on agencies meeting the required space standard (for example, by setting 6

7 a maximum desk size). The WS&G also provide guidelines to assist agencies in making sound planning decisions and delivering a cost efficient and effective workplace. Agencies might historically engage a designer or architect to advise them of the information now provided in these guidelines. The WS&G were developed in consultation with private sector workplace strategists, designers, and architects, as well as through agency consultation. 24 The WS&G are based on industry good practice and have already been successfully applied in the accommodation projects that PMCoE has been managing. 25 PMCoE carries out a high level benchmark of cost comparisons to the private sector and publishes this in the Crown Office Estate Report annually. This is completed only as a general sense check and not used as a measure. The comparison shows the government total cost per workstation is virtually identical to private sector B grade accommodation, providing evidence the government is cost effective. 7