Rule 8 for an ICT procurement

A government agency is starting an information and communication technology (ICT) project that includes the development of an in-house contract management system (product/service mix) as well as a basic five-year support package for the new system.

The estimated value of the lifetime of the contract is $475,000. There are several providers in the market who could potentially deliver the contract, including local and international organisations.
 
The agency’s procurement policy states that an open procurement process must be used.

Deciding how to apply Rule 8

As the procurement is above $100,000:

• the agency “must seek economic benefits to New Zealand (…) to be evaluated as part of the assessment of public value.”
• the procurement must include a minimum 10% weighting on economic benefits for evaluation purposes.

How this agency integrates economic benefits in an ICT procurement

Identifying the strategy

The IT solution comprises a relatively specialised solution with multiple supplier options, but it’s not a large contract.

Due to the value and nature of the proposed work, creating significant or additional economic benefits within the contract is limited.

The agency decides to take a proportionate approach where procurement will seek broader and more generic economic benefits.

These benefits will be more ‘value-add’ in nature, that is, benefits you would expect to inherently get from working with a supplier, rather than new additional outputs with potential costs attached.

Identifying economic benefits

Economic benefits that align with wider agency and sector aims were considered and shortlisted by the agency.

The economic benefits identified for this contract could be:

• job creation and retention
• supporting existing worker capability pathways and growing expertise
• supporting intellectual property (IP) development and potential for growth of businesses (including exports).

These outcomes align with those of the broader ICT sector (for example, talent development). Due to the size of the contract, these have been prioritised and shortlisted to two of these economic benefits. This example carries forward job creation and talent development as specific economic benefits.  

Confirming the approach to market

A single-stage Request for Proposal (RFP) approach is being used for the project.

Given the project could attract different sized suppliers, the procurement documentation clearly describes the specific economic benefits that are being sought in this project.

The tender documentation also uses a simplified process with support available for first-time respondents.

The tender documents provide specific guidance on:

• the expected response to the economic benefit questions including clear expectations for the specific economic benefits
• how suppliers can show that their current activities align with specific economic benefits (as a value-add to delivering the contract)
• how suppliers can share other value-add activities that provide economic benefit.

Economic benefits are given a 20% weighting, alongside other attributes such as experience, track record, methodology and price.

Example responses to the ICT procurement

Suppliers are asked in their response to:

• describe what skills and expertise the supplier will gain from delivery of this contract and how this will enable further growth of the business.
• outline how the contract will support the agency’s talent development approaches, particularly for NZ workers.
• provide information on their current approach to creating these benefits, and any other economic benefits.

Suppliers who responded:

• Supplier A is a local business who outlines that the contract will keep two programmers busy for 6 – 12 months. The company has a strategic relationship with their local polytechnic who provide ongoing short-course training and upskilling, as well as work experience opportunities for students. They also state that the contract is their second with the New Zealand government, and that contract management expectations are growing so there is a good opportunity for future work with other agencies that will be strengthened by this experience.
• Supplier B is a global technology provider with a well-established graduate programme. They describe how they will employ a new graduate in their NZ office to be involved in this project, alongside describing their global product and track record with the NZ government.
• Supplier C provides a limited response outlining that they will provide economic benefits, without any detail on what they will be or how they will be delivered.

Evaluating responses

The agency’s evaluation focusses on the supplier’s understanding of economic benefits, the proposed benefits on this contract and the credibility of their proposed approach.

The evaluation team scores each supplier out of 10, ranging from 10 (high trust in supplier delivering proposed benefits) to 0 (no response). Guidance was developed for the evaluation team.

Although it's a subjective process, evaluating economic benefits responses is similar to evaluating other attributes, such as methodology.

The agency considers the economic benefits scores alongside the other attributes. In this case the agency chooses Supplier A based on the combination of the economic benefits proposed (20% of the evaluation) and their track record, experience and price (80% of the evaluation).

The agency adds a contract clause outlining the proposed economic benefit (sustained employment of two programmers) to the contract with the supplier.

Award and manage the contract

Economic benefits are part of the quarterly supplier relationship meetings with Supplier A.

The agency provides feedback to the supplier through contract management.

Reporting is more qualitative in nature and the supplier provides an update on how their programmers are being upskilled, their involvement in the project and the ongoing relationship with the polytechnic.