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Posts Tagged ‘government procurement’

The plan so far…

Posted by on August 8th, 2011

I did a post last night called the poverty trap laying out the bleak situation many people are finding themselves in.

Job losses, rising prices, shrinking incomes. Not a great future for Kiwis, let alone our kids.

Despite the government spin, the economy isn’t in good shape. Look at our government debt and how it has ballooned. And how it will balloon left unchecked.

We need a plan to turn things round. A bold plan to stop our valuable assets being flogged off overseas, to give hard-working Kiwis a break, pay off the country’s ballooning debt and grow our economy. Here’s what we’ve said so far.

People need wages they can live on. A minimum wage that allows people to keep up with the cost of living.

Labour promises a $15 hour minimum wage.

We need to increase our savings and investments in a productive economy. We need to rebuild our economy on the back of exports. Not by selling our assets.

Labour will not sell state assets. You’ll have to wait for policy announcements on the other matters.

We need a fairer tax system where everyone pays their share

The first $5000 of your income, will be tax free.

GST will come off fresh fruit and veges.

Labour will introduce a capital gains tax. It’s predicted the tax will raise $26 billion over 15 years that can be used to pay off
debt, cut taxes for most New Zealanders, save our assets and prepare for the mounting cost of our aging population.

Labour will also put the top tax rate back up to 39 cents for income earned over $150,000.
That’s likely to affect around 2% of the country’s top earners.

A CGT is already in use in nearly all developed countries, including Australia, the United Kingdom and United States.

And Labour  will use major government contracts to back New Zealand firms instead of exporting jobs offshore as National is doing.

Cost and quality will continue to be paramount considerations under Labour. But the new procurement policy will in future require companies like KiwiRail anf Govt depts and agencies to consider wider economic benefits rather than just taking a narrow accounting approach. As with CGT, most other countries have strong policies to back local industries and local jobs.

This is for starters. There’s more coming.

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Filed under: #ownourfuture, asset sales, Capital Gains Tax, Cost of Living, debt, economy
50 Comments

Kiwi jobs, Kiwi skills, Kiwi industries: Labour invests

Posted by on July 21st, 2011

A Labour Government will use major government contracts to back NZ firms instead of exporting jobs offshore.

We want people to stay in New Zealand and develop and use their skills. We want industries that are productive. And a Labour Government will invest in that.

Phil Goff announced Labour’s new procurement policy in Dunedin last night coinciding with the grim news of 18 forced redundancies at Hillside Rail. Skilled jobs. Tradespeople.

44 jobs in all have been lost at Hillside. That’s a quarter of the workforce.  Possibly up to $5 million a year in lost wages, and flow on spending into the local economy.

44 families potentially on the unemployment benefit. And an industry in decline, rather than in growth. All because of a stupid government policy that doesn’t match the policies of almost every other developed economy. The US, Japan, Australia to name a few. And developing ones.

Labour’s new policy will require companies like Kiwirail to consider wider economic benefits when making decisions about contracts, rather than a narrow accounting approach.

Kiwi firms deserve the right to bid for large govt contracts without being locked out on the basis of lowest price.

Government departments and agencies will be required to undertake a wider (economic) analysis of the impact of its preferred provider on the domestic economy, rather than a narrower (financial) analysis when making procurement decisions.

And have an apprenticeship/internship programme in place for NZ workers.

That’s for starters. For the whole policy see here

And for what other countries are doing see here

If New Zealand is to achieve its goal of closing the gap in wages and economic growth with Australia, we need policies that demonstrate a commitment to our economic development. Traditional manufacturing and “making” industries.

New industries. New technology. High tech. Not much commitment to that right now. This government isn’t even sure if it has a procurement policy.

Well Labour does. It’s not rocket science. It makes sense.

It’s about Kiwi jobs, Kiwi skills and Kiwi industries. It’s about our future. Owning our future.

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Filed under: #ownourfuture, economy, jobs
34 Comments

Says it all really

Posted by on July 20th, 2011

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Source: ODT Saturday 16 July 2011  Tremain

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Filed under: economy, jobs
3 Comments

John Key and Steven Joyce: Are you blind or something?

Posted by on July 20th, 2011

Two new developments in countries which are committed to investing in their own local rail industries. Read these extracts carefully, because it shows governments that understand the importance of the local industry. Why doesn’t ours?

In Australia last week:

The rail industry is gearing up for a richer, fairer and greener future, driven by strategies that will be informed by a recent report into the industry’s current state of play.

Launching the report Railway Manufacturing Industry – A Profile of the Rail Manufacturing Industry in Australia, Innovation Minister Senator Kim Carr said understanding the size, scale and structure of the rail industry was essential if the Government was to develop successful strategies to secure the industry’s future.

“The report, prepared by ACIL Tasman, shows that in 2008-09, the rail manufacturing industry comprised more than 330 firms, employed more than 15,000 Australians, generated $4.2 billion annual revenue and added $1.6 billion to the Australian economy annually,” Senator Carr said.

“This demonstrates just how substantial the national contribution of the Australian railway manufacturing industry is in terms of investment, jobs, skills and innovation. It is a diverse sector, with a wide-range of skill sets across Australia, particularly in regional areas.

In South Africa in April:

Addressing a well-attended meeting in Gauteng on 5 April, transport minister Sibusiso Ndebele announced an impressive programme to procure new rolling stock for the Passenger Rail Agency of South Africa (Prasa). To be rolled out over 18 years, the declared aim is to reposition rail as the “backbone” of public transport.

A feasibility study is in hand; the results are to be submitted for cabinet approval as soon as it is complete.

Prasa CEO Tshepo Lucky Montana emphasised that the R25 billion provided by the state in recent years merely “stabilised” the business – in decline due to years of under-investment and neglect. But Ndebele stressed that the government does not have the sort of money needed – in excess of R90 billion: “Therefore, a significant and sustained commitment from local and international financiers will be required to complete the rolling stock renewal programme.”

The proposed upgrade cannot be postponed, Montana warned. Without it, the railway could “collapse” in less than 10 years.

According to the minister, the government is committed to striking a “delicate balance” between the trains it needs and
the commercial interests of financiers and rolling stock manufacturers. The procurement process is seen as hinging on the injection of private finance ahead of March 2012, when work is to begin on selecting a preferred bidder – to be announced by August and confirmed in September. This is in the hands of an interdepartmental task team drawn from the Departments of Transport, Trade and Industry and Public Enterprises, as well as the National Treasury,

The meeting on 5 April was set up to gauge the interest of local and foreign manufacturers and financiers in the proposed rolling stock acquisition plans.

According to Prasa’s Piet Sobola, it is hoped to have the first of 6,600 new coaches to be in use during 2015, followed by deliveries continuing until 2030. Of these, 4,600 will comprise commuter rolling stock for Metrorail. The remaining 2,000 will be for Shosholoza Meyl’s intercity fleet.

A 65% minimum level of local content is to be a precondition. The market engagement process will seek to gauge the technology and financing options available “within South African ownership and infrastructure constraints”.

The NZ Rail Maritime Transport Union’s Wayne Butson said that the successful tender for Auckland’s Electric Multiple Units is due to be announced within weeks, and the RMTU would be watching very closely to see whether KiwiRail honoured the local involvement pledge it made during the tender process.

I have an inkling there will be a few crumbs tossed towards local NZ  procurement to shut us all up.

I doubt it’ll be targeted at Dunedin’s rail workshops though. And I doubt it will show a serious commitment to the local rail industry

Hat tip: RMTU

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Filed under: economy, infrastructure, jobs
7 Comments

A compelling case for local investment

Posted by on July 17th, 2011

“…it is completely inappropriate for the New Zealand Government to prefer New Zealand companies over international companies. If we did, we would be a very, very small trading nation, because countries would not want to trade with us.”

So says Steven Joyce (on behalf of the Prime Minister) in response to a question by Annette King on 23 June about why the govt would not consider seriously the economic flow on effects of building railway wagons at Hillside workshops in Dunedin and Hutt workshops in Lower Hutt.

Let’s have a look at what other countries do. Many of these we trade with. And unpick the lies that Joyce and his government have been telling NZ about why they can’t possibly support Kiwi industry and Kiwi jobs when it comes to procuring big contracts.

China’s Government Procurement Law (GPL) issued in 2002 states that government agencies and entities must purchase domestic goods, works and services except in rare circumstances when:

the required items cannot be obtained within China under “reasonable commercial terms” defined as 20 per cent more expensive than foreign products.

Though the GPL provides for a wide variery of ways to procure goods and services – open and selective tendering, competitive negotiation, single-source procurement, and request for quotation – few foreign enterprises have been able to compete successfully in China’s public procurement market. For more see here

The Buy American provision in the stimulus package became law in 2009. Section 1605 of the American Recovery and Reinvestment Act of 2009 (ARRA) requires that all of the iron and steel and manufactured goods used in ARRA funded projects for construction, alteration, maintenance and repair of a public building or public works be produced in the United States. For more see here

This provision can be waived under certain circumstances, only when buying American would increase by 25%, not merely for the cost for the specific input, but the cost of the total project. The differential is considered so large, that in practical terms it is unlikely that the exception would be invoked.

The Indian government allows a price preference for local suppliers in government contracts and generally discriminates against foreign suppliers. In international purchases and competitive bids, domestic companies get a price preference in govt contracts and purchases.

Although over 20 countries have signed onto the World Trade Organisation’s (WTO) Agreement on General Procurement (China has not) it is scarely followed at all. This article is worth a read

Norway: the most recent statistics are from 2005. Of the USD 1.215 million procured, only 1.3% of supply, 6.9% of services and 1.3% of works contracts went to foreign companies

Japan: 98% was procured domestically in 2008.

South Korea: In 2004 (most recent data) procurement contracts were valued at USD 25 billion. Less than 1% wnt to foreign-based firms.

Australia. In June 2009 the NSW Govt released its revised govt procurement plan setting out its intention for procurement to be used to develop local industry capability and support local economic activity while achieving value for money.

It says substantial economic benefits are said to “flow from buying Australian or NZ goods and services and maximising opportunities for local service providers to compete for Govt business on the basis of value for money.”

It said value for money is about broader economic benefits and not just lowest price.

Couldn’t have put it better myself. What the hell is wrong with this National-Act government and what game are they playing with our local productive economy?

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Filed under: economy, jobs
15 Comments

Just what deals are being done to build trains for Auckland?

Posted by on September 13th, 2010

Just over a week ago Kiwirail made a quiet announcement. Without any fanfare it had surprisingly extended the number of bidders from 4 to 10  for the $500m of Govt money to build trains for Auckland’s electrified system.

Now that might not have caught attention, except that an independent  group of people led by an Aucklander Danise McEvoy had several months before been charged with deciding on who the short-listed bidders would be based on a rigorous process. They had announced a group of four in July.

Yet inexplicably on 3 September, Kiwirail changed the goalposts and when the RFP was announced six more companies were included (several of which I understand had been excluded first time round). The big question is why? And who will gain? I suspect the original four won’t.

In his media release Kiwirail CEO Jim Quinn said the number had been increased because:

“in extending the number to receive the documentation from an initial shortlist of four,  we have reflected on the critical importance of securing the best possible whole of life outcome taking account of quality and cost.”

Whatever that means! Despite him claiming otherwise, it’s my understanding that the six new companies did not meet KiwiRail’s original qualifying criteria.

I also understand that at least once of the four companies on the original short list are considering their options given the change in the bidding process. (Update: that view has since been reinforced strongly)

And you’ve got to admit it looks pretty damn odd. Even dodgy. And just who decided to include the six new bidders?

They are:

  • CSR Zhuzhou Electric Locomotive Co Ltd The Chinese company was founded in 1936. In 1958, ZELC successfully developed and manufactured the first main line electric locomotive in China. In 1978, it switched to electric locomotives. It calls itself the main development and manufacturing base of electric locomotives in China.
  • CSR Nanjing Puzhen Ltd. It build this high  speed train in time for China’s Olympics.
  • UGL Rail Services Limited – the largest end-to-end rail technology solutions provider/integrator in the Asia Pacific region, and Australia’s largest supplier of outsourced asset management and lifecycle engineering services. Its clients include RailCorp in New South Wales, Yarra Trams in Victoria, MTR Corporation in Hong Kong, Queensland Rail (QR) and Pacific National (PN).
  • a consortium of  Japan’s Sumitomo Corporation and Nippon Sharyo Ltd,
  • China’s LORIC Import & Export Corporation Limited and
  • Downer EDI Rail Pty Ltd (which has been producing passenger vehicles for use throughout Australia since the mid-1800s).

Thankfully there’s a blogger in Auckland called Jon C who writes a blog called Aucklandtrains and pays pretty close attention to this stuff. He points to increasing speculation about China chasing infrastructure work in New Zealand, especially after transport minister Steven Joyce and prime minister John Key both visited China recently. The NZ Herald has written about this. So has the ODT. You’d think it would be a bigger story. Not sure why the media haven’t hopped into it more.

Last Thursday, my colleague Darren Hughes asked why:

“At the eleventh hour, KiwiRail decided to increase the short-list of prospective tenderers for a $500 million contract to build Auckland’s electric trains doubling the number of interested parties and lessening the chances of a successful Kiwi bid.

“Steven Joyce’s latest move as Transport Minister has been described by the industry as ‘mind boggling’ especially when figures released today show manufacturing is at a 10 year low.*

“This bizarre move raises questions about the integrity of the tender process, the priorities of this government and the transparent nature of the Minister’s dealings.

You’ve got to ask yourself why the govt (and I bet it wasn’t just Kiwirail) made the decision to include four more players in the Auckland train bid. Isn’t that intereferring in a tender process?

Given this development, just what chance does a substantial NZ build have? Is there a preferred bidder? Is it going to be a largely overseas build? What about Kiwi jobs?

I reckon the government needs to be pretty careful here. The media may not be watching closely (yet) but there’s a bunch of Labour MPs, industry reps and Chambers of Commerce who are, who care about Kiwi jobs and the sustainability of Kiwirail’s mechanical division and our rail engineering capability in this country. Because it’s not just Kiwirail jobs at stake. There’s a wider engineering industry. They’re Kiwi jobs.

And it’s NZ’s reputation in being able to run a credible tender process.

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Filed under: #OpenLabourNZ, economy, infrastructure, jobs, Rail
18 Comments