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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