Strategic suppliers - Understanding and managing the risks of service disruption

Auditor General's overview - Strategic suppliers: Understanding and managing the risks of service disruption - Office of the Auditor General

We support the OAG’s focus on government procurement and after reviewing the report’s findings, want to give you an update.

The report looked at practices across the public sector, focusing on the collective understanding and management of strategic supplier risk. It looked at how well the public sector understands and manages the risk of service disruption if a strategic supplier fails to deliver goods and services.

Strategic suppliers provide goods and services that are critical to the delivery of public services and are not easily replaced, eg water supply and waste disposal, education and emergency services. Some strategic suppliers provide essential goods and services to many public organisations, eg an ICT company that supports public organisations' key information systems.

The Auditor General’s report provides recommendations to New Zealand Government Procurement (NZGP) and the broader sector. According to the report, important public services will remain vulnerable to unexpected failure unless the public sector makes improvements to the way it manages strategic suppliers.

• The report found that most public organisations know which suppliers they rely on and are managing the associated risks.
• It also found out that the public sector does not have a good understanding of which suppliers are government strategic suppliers.
• It also lacks visibility of the risk of disruption to important services if a government strategic supplier fails to deliver.

Over the past year, we have already been working to address many of the issues highlighted in the report, including improvements to supplier relationship management (SRM) and significant service contracts (SSC) reporting.

The report recommended that public organisations regularly assess how they manage their relationships with their strategic suppliers. It concluded that supplier relationship management is a key strategy for managing risk. There is a need for a co-ordinated approach across central and local government to ensure that risks are well understood and managed, including reporting to Ministers.

NZGP started a Government Supplier Relationship Management Programme in September 2020, to mitigate system risk and leverage relationships to deliver more value for government. With the support of a community of practice and working group, we are working on a roadmap to create a toolkit to lift capability within agencies, provide guidance and promote consistent supplier relationship management practices across the public sector.

Government Supplier Relationship Management programme

Mandated agencies report their significant service contracts to NZGP to provide visibility of critical contracts across government and within agencies. As recommended in the report, we are working to improve the tool and process for reporting on these contracts, and improve the information available on these contracts and the government’s strategic suppliers.

Some of the challenges identified in the report align with our discussions around the future of procurement: greater collaboration, improved data analysis and sharing of insights and leading greater co-ordination across government.

We are committed to continuous improvement of government procurement practices and collaboration with key partners across the system, and welcome feedback from you in relation to the findings of the report. If you have questions or concerns, please reach out to your account manager or any other member of the team.

Supplier relationship management practices in the public sector