What are the benefits of this all–of-government approach?
The increased use of AoG contracts delivers benefits to agencies, suppliers and, ultimately, the New Zealand taxpayer. These contracts deliver cost-savings to agencies, the government and taxpayers; provide productivity gains for agencies and suppliers; and ultimately improves competitiveness.
Cost savings for agencies, the Government and taxpayers
By harnessing the collective buying power of over 200 State sector agencies, government becomes a ‘customer of choice’ and is able to achieve substantial cost savings. The savings are retained by agencies to be redirected to other priorities, with a small portion of the savings (1.5%) funding the on-going reform programme - including the establishment of additional AoG contracts that will save the Government and taxpayers further money.
Productivity gains for agencies and suppliers
These contracts streamline the purchasing process for agencies and eliminate the need for suppliers to respond to multiple tenders from the 200+ organisations that make up the NZ State sector. While agencies buy directly from selected panel suppliers and maintain a day-to-day operating relationship with them, the contracts are managed via dedicated ‘Centres of Excellence’ (CoE).
This approach reduces the cost of doing business with government for suppliers. It also frees up agency purchasing capacity to focus on the more strategic contribution that procurement can make to achieving organisational and wider economic objectives.
Government is a procurer of significant scale, and in some areas has needs for cutting edge and complex products. By contracting in sufficient volume, government can give industry enough of a market to justify investment in labour, equipment and research and development. This can lead to more innovative products being produced and greater opportunities in export markets. Similarly, working with a demanding customer such as government can build suppliers’ experience and credibility to win contracts with other clients, including overseas.