The Excuses!
Authored by Kahurangi Malcolm and Frae Cairns
Having worked with over 100 Buyers we hear and see the good, bad and the ugly. Don’t get us wrong, most of the organisations we work with are amazing and there are some fantastic initiatives going on to embed supplier diversity. Most understand “what supplier diversity is and why it matters in Aotearoa”.
But, on the odd occasion we do come across those that don't share our enthusiasm and look at us blankly when we talk about impact, equity and affirmative action. These are usually specific individuals as opposed to organisations as a whole, (unless it's the leader of the organisation) that don’t yet understand the what, why and how of supplier diversity.?
In our last article we covered “Why organisations are implementing Supplier Diversity'', in this article, we will go over the “why nots’” a.k.a the top myths that we hear and how we handle them.?
Māori and Pasifika businesses are small and don't have the capability?
97% of all New Zealand businesses are small, so like all New Zealand businesses there are some Māori and Pasifika businesses that are small. However, there are also large businesses.. They are not all the same and shouldnt be put into one bucket. The average size of a Māori and/or Pasifika business is between 11-15 staff. Some businesses are sole traders and some have 300+ staff. Some want to double their workforce and turnover and others are happy maintaining their current position. It’s important that due diligence is done on businesses as per standard procurement processes to ensure the right business is engaged for the right opportunity.?
The government rules of sourcing doesn't allow us to do supplier diversity
That’s incorrect. The government rules of sourcing do enable supplier diversity and should be used as an enabling tool. In fact Rule 17; increase access for New Zealand businesses, specifically calls out increasing access to opportunities for Māori and Pasifika businesses.????
Also, following a cabinet directive to increase Māori business access to government contract opportunities there is now a target for all mandated agencies to ensure that at least 5% of the total number of annual procurement contracts are awarded to Māori businesses.?
It’s important to note to those that use the rules as an excuse that supplier diversity does not mean you can’t run a competitive and transparent process. Our favourite line is that this isn’t a hand out, it's a hand up. As a procurer you are trying to find ways to enable Māori and Pasifika businesses to compete for work.
Supplier Diversity is another job on top of our already busy job, it's a burden.?
Organisations don’t need to make significant structural or organisational changes to their procurement policies and processes in order to achieve supplier diversity quick wins. Good procurement already expects that procurement professionals are thinking of additional value, doing market scanning and opening the door for alternative solutions and suppliers. Really simple questions can be added to procurement documents to extract more value and include social outcomes. Rather than represent an additional “burden”, supplier diversity can:??
A 5% target for Māori businesses is not fair
Māori make up 16.7% of the population and we haven’t even been able to award 5% of our public sector spend with this population group. Currently, the playing field in public procurement is not fair and is not even. Māori businesses are not well represented among government suppliers. We know that buyers often prefer to work with those they know and reward suppliers that have a track record with them as part of the evaluation criteria. What this means is that diverse suppliers are often locked out of being able to compete for work.
Developing a strong Māori supply market that ensures a greater diversity of suppliers can bid for contracts is not anti-competitive, but pro-competitive, ensuring that the supply markets remain dynamic and diverse. It's important to understand that all Māori businesses still need to be assessed, compete and win based on their own merits, this is not a handout.??
Additionally it creates so many benefits not just for Māori businesses and communities but for Aotearoa as a whole. If the Māori economy prospers then we all prosper.?
There’s not enough Māori and Pasifika businesses out there, the market is too small?
The Amotai database of verified Māori and Pasifika suppliers is on track to hit 1000 suppliers? by December 2021 (currently 850). The latest Te Matapaeroa report by TPK identified that there are around 10,200 Māori businesses in Aotearoa. We know that the number of Māori businesses is growing nationally and expect that to grow further as interest in buying from diverse businesses grows.
Supplier Diversity means a compromise on the quality of goods and services.?
This is not true. Using diverse suppliers does not mean that quality drops nor should it mean that organisations drop their expectations of quality. The same due diligence should be done on a diverse supplier as any other supplier to ensure they meet the quality standard. Quality standards should be clearly stated and talked through with the suppliers and if they fail to meet those requirements they may not be awarded the contract.?
Supplier diversity costs more and takes too long
Initial implementation of the practice may take longer than usual because there is some learning to be done. However, this is not true in the long run. In fact, supplier diversity extracts more value from the same amount of spend.?
We often have people tell us “but Māori and/or Pasifika businesses cost more”. We always push back on this and say supplier diversity is an opportunity for buyers to look at the total value of their purchasing decisions rather than just the lowest cost. What we often see is this ‘race to the bottom’ where Māori and Pasifika businesses are expected to underprice in order to win work. However, they often pay living wages or above, they often train staff and this additional value should be considered as part of an evaluation, particularly when spending public money.
The market is not ready and doesn't know how to respond to supplier diversity requirements.
Yes they are. The market has been responding to supplier diversity requirements in Aotearoa for the past few years with early adopter buyers like Auckland Council, Auckland Transport, Ministry of Education and Kāinga Ora. The construction industry in particular is becoming increasingly used to seeing and responding to these requirements. With the Government's 5% supplier diversity targets, private enterprises are becoming more aware of the need to respond and are upskilling and accessing the database of Māori businesses through Amotai.??
Supplier Diversity requires changing the whole procurement process and impacts all contracts.?
Not necessarily. Supplier Diversity may not be appropriate for every contract and should be tailored to suit each project. Supplier diversity targets wouldn’t be appropriate in areas with low supplier numbers or in contracts that require offshore niche purchases. It does mean that additional value can be extracted from contracts.?
There's a lot of myths out there about supplier diversity. Sometimes we need to interrogate what's fact and what's fiction. We find that most of these can be dispelled with a korero and a cuppa. Happy to do Zinu with anyone that needs myth busting support.?
Article Series
This article is part of a series of thought pieces on the topics of social procurement and supplier diversity.??
This series focuses on how individuals and organisations can use their procurement power to deliver impact, the growing profession of social/sustainable procurement professionals wanting to make a difference and how we can redefine value in Aotearoa collectively.
The aim is to share our learnings and insights to help grow this movement.
Authors
Kahurangi Malcolm (Ngāti Te Ata, Te Waiariki)
Kahurangi was schooled in total immersion Māori at Te Raki o Pukekohe and Te Kura Kaupapa Māori o Waiuku. She holds a Bachelor of Science and Master’s in Business Administration and completed her research on Māori Economic Development. She previously worked for Waikato’s Economic Development Agency supporting business growth and has held numerous roles in health and social services. Kahurangi founded the Charitable Trust, Te Ara Rangatahi, a youth organisation supporting youth in Franklin, South Auckland into education and employment. Kahurangi is passionate about systemic change and loves seeing Māori businesses succeed.
Frae Cairns (Ngāti Kahu, Te Aupōuri)
Frae grew up in Kaikohe and Tāmaki Makaurau supported by a whānau of wahine toa and imbued with an ethic to create positive change for her community. She has had a number of roles in the retail sector in management, sales, international shipping and operations. After living in Canada and Japan she went on to work in procurement for Auckland Council where she supported the development of the Auckland Council Sustainable Procurement Objectives. This led her to support the establishment of He Waka Eke Noa, now Amotai, where she currently works. Frae is passionate about social equity and delivering impact through procurement activity to enable greater opportunities for Māori and Pasifika.
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License
References
Chief Executive Officer at MTANZ (Medical Technology Association of NZ)
3 年Frae we need a bit more information about supplier diversity in the med tech sector. I’d love to connect and discuss if you have time.
Great work
Managing Partner at Ernst & Young Tahi Limited
3 年Ka rawe kōrua. Great article. Haere tonu. Kia kaha koutou ??? Anthony Ruakere, Kohe Ruwhiu, Amy Crookes, Cate Mork
Manager - Social Outcomes at Kāinga Ora - Homes and Communities
3 年Truthful, insightful and educational article from you and Kahurangi. Thank you for taking the time to share wisdom mixed with real life example of the good, bad and ugly. True champions of this space. ????
Ngāti Kahu, Te Aupōuri | Delivering social outcomes through procurement
3 年Patricia (Trisha), Dallas, Junior, Lisa, Alice, Melanie - Do people use the govt rules of sourcing as a reason not to do supplier diversity? Have you had any other excuses?