John MacDonald: Government contract changes make sense to me

Patriotism or profit.  

Essentially, that’s what these changes the Government is making to the way it hires companies to do work for it come down to.  

It’s like “Buy NZ-Made”. The Government wants to make it easier for local companies to get on its books. But what’s more important? Getting the cheapest price from (potentially) an overseas company or paying a bit more to hire a local company?  

Patriotism versus profit. For me, when it comes to things like government contracts, patriotism wins hands-down every day. 

It’s like that argument people sometimes make about Kiwibank and why the Government doesn’t use it as its official bank. The answer to that is simple - the government can’t shop locally when it comes to its bank, because Kiwibank doesn’t provide the full-scale banking services that it needs.  

But it wants to buy locally more, and that is a good thing – even if it means paying a bit more for it.    

It is kind of weird though that —on the one hand— we’ve got the Government bringing all these foreign outfits to the big investment summit tomorrow and Friday. But today, it’s saying that it wants to give local businesses a leg-up or make it easier for local companies to get government contracts, by making changes to the hoops businesses have to jump through to get them.  

Nicola Willis kind of explained-away the weirdness on Newstalk ZB this morning, saying that she wants overseas companies coming here to invest, hire locals, and grow the local economy.  

So, what that would look like is we’d have a big foreign outfit coming over to build a motorway or some other piece of big infrastructure, and they’d have a whole lot of sub-contracts with local companies like Fulton Hogan and all the other usual suspects.  

But what I’m hoping these changes will mean is that we’ll see less of the usual suspects getting government contracts and the others —that probably feel on the outer a bit— getting their share of the work too.   

If you’ve ever put a bid in for work with the government —like I have, in a previous life— you’ll know that some of the hoops you need to jump through are ridiculous.  

In fact, my impression has been that if you’re already in the system, you’re sweet – if not, then the hoops can be enough to make you pull the plug. 

Which is why the Government plans to ditch 24 of those hoops.  

Big picture, it wants to prioritise hiring local outfits. It also wants to ditch some of the requirements that companies have to agree to, to get government contracts. Which are worth more than $50 billion a year.  

One of the proposed changes is doing away with the requirement that companies providing catering, cleaning, and security staff pay their workers the living wage.  

That’s one of the changes that I’m a bit torn on – because governments bang-on all the time about wanting to create a high-wage economy. And while the living wage isn’t a high wage (it’s currently $27.80 an hour), it’s better than the minimum wage.  

But a company that gets work with the Government probably does work for other people too and has staff working on other things other than the government work. So, the requirement to pay a living wage probably has quite a significant impact across the whole business and is probably enough to put some smaller businesses off going for government contracts.  

You can tell that Nicola Willis is taking to her new-ish job as Minister for Economic Growth, because one factor she wants the government to consider when awarding contracts is what’s called “the economic benefit test”.  

So government agencies will look at contract bids and base their decision on who to go with based on the economic benefit to New Zealand.  

So it would sign a potentially more expensive contract with a local company because it would deliver more economic benefit to the country. More local workers getting work, more work for local subbies and the profits staying in New Zealand.  

As opposed to a cheaper contract with a foreign outfit that might bring its own workers into the country and take its profits overseas.  

I'd choose patriotism over profit, any day. 

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Kerrywood and Morning's podcast from News Talks.

Speaker 2 (00:10):
He'd be profit or patriotism. That's what it all comes
down to, profit or patriotism. That's what these changes, essentially
the government is making to the way it hires companies
to do work for it come down to. It's like
buy New Zealand made. The government wants to make it
easier for local companies to get on its books. But

(00:32):
what's more important getting the cheapest price from potentially an
overseas company or paying a bit more to a local company,
profit versus patriotism. And for me, when it comes down
to it, when it comes to government contracts, patriotism wins
hands down every time. It's like that argument people sometimes

(00:53):
make about Kiwi Bank. You know why the government you
know why isn't the government using Kiwi bankers it's official bank,
instead of one of the big full banks. The answer
to that is simple. The government can't shop locally when
it comes to its bank because Kiwi Bank doesn't provide
the full scale of banking services that it needs. But
it does want to buy locally more and that's a

(01:14):
good thing, even if it means paying a bit more
for it it is. It is kind of weird, though,
isn't it That on the one hand, we've got the
government bringing all these foreign outfits to the big investment
summit tomorrow and on Friday, But today it's saying, Oh,
we want to give local businesses a leg up. We
want to make it easier for local companies to get
government contracts by making changes to the hoops that businesses

(01:37):
have to jump through to get them. Finance Minister Nikola
Willis well, she kind of explained away that weirdness when
she was on with Mike earlier, saying that she wants
overseas companies coming here that can invest to hire locals
and grow the local economy. So what that would look
like is we'd have a big foreign outfit coming over
to build a motorway or some other piece of big
infrastructure like that, and they'd have a whole lot of

(01:59):
subcontracts with local companies like Fulton, Hogan and all the
other usual suspects. But what I'm hoping these changes that
the government's making, what I'm hoping they will mean is
that we'll see less of those usual suspects getting government
contracts and the others that probably feel on the outer

(02:22):
getting their share of the work too. Now, if you
have ever put a bid in for work with the government,
like I have in a previous life, you'll know like
I do, that some of the hoops you need to
jump through they're just ridiculous. In fact, my impression has
been that if you're already in the system, you've already
got a purchase number, you're sweet. As if you're not.

(02:42):
The hoops they can be enough to make you pull
the plug, especially if you're a smaller outfit. Which so
the government's got its sights on those hoops and plans
to ditch twenty four of them. Big picture, the government
wants to prioritize hiring local outfits. Big tick from me.
It also wants to ditch some of the requirements that

(03:04):
companies have to agree to to get these contracts, which
are worth a truckload of money. They're worth more than
fifty billion dollars a year. One of the changes it's
bringing in is doing away with the requirement that companies
providing catering, cleaning, and security staff have to pay staff
the living wage. Now, this is one change that I'm
a bit torn on because governments they bang all all

(03:25):
the time down there about wanting to create a high
wage economy. That's what they talk about. We want a
high wage economy. And while the living wage isn't a
high wage, it's currently twenty seven dollars eighty an hour.
It's better than minimum. But a company that gets worked
with the government probably does work for other people too,
doesn't it, and has staff working on other things other

(03:47):
than the government work. So this requirement to pay a
living wage probably has quite a significant impact across the
whole business, across a whole business, and it's probably enough
to put some of the smaller businesses off going for
government contracts. You can tell that Nikola Willis is taking
to her new wish job as Minister for Economic Growth

(04:08):
with the Relish because one factor she wants the government
to consider when awarding contracts is what's called the economic
benefit test. So the government this is brilliant. The government
will look at contract bids from companies and sole traders
and one of the things that it will base its
decision on in terms of her to go with is

(04:29):
who would provide the most economic benefit to New Zealand.
And this brings us to the nub of this morning's
conversation profit versus patriotism, because it would under this way
of operating, the government would sign a potentially more expensive
contract worth a local company for the reason that it

(04:51):
would deliver more economic benefit to the country, more local
workers getting work, more work for local subbe's and the
profits staying in New Zealand, as opposed to a cheaper
contract with a foreign outfit that might bring its own
workers into the country. I would certainly take its profits overseas.
So for me, patriotism wins hands down over profit. It

(05:15):
is a taxpayer yourself. How do you feel about it?
Do you want the government signing the cheapest contracts possible
or are you happy to pay a little bit more
to give local outfits more work. We'll call me right
now and tell me and number for.

Speaker 1 (05:28):
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