Saving cents still doesn’t make sense to Labour

Boat builders are upset that the government has awarded an $8 million ferry contract to a Bangladesh company rather than locals.

Economic development minister Steven Joyce told the Herald the difference between the New Zealand tenders and the successful Bangladesh bid was around $14 million.

“The numbers here were just too big to bridge, whatever way you want to cut it. If we were to prefer New Zealand suppliers at any cost, it would be a recipe for economic disaster,” Joyce said.

Saving that many cents make good sense but Labour still doesn’t care about that:

Over at Keeping Stock, Gosman points out that the boat building industry is doing well without public subsidies:

. . . The turnover in the industry as in 2012 was around 1.7 billion dollars. Just to put it in to perspective for you if this contract had been awarded for 23 million dollars it would have been worth around one percent of total turnover. The industry doesn’t need government money to survive so why demand they get special treatment than firms from other nations? . . .

Labour wants subsidies for an industry that’s doing very well without them.

Once more it shows it’s not learned from its mistakes and still isn’t concerned about wasting taxpayers’ money.

6 Responses to Saving cents still doesn’t make sense to Labour

  1. Dave Kennedy says:

    Procurement is a complicated area and I don’t think this Government does due diligence to the long term benefits and risks. A road contractor recently informed me that too many contracts being won by the cheapest tender when the rule of thumb generally was that you never look at the cheapest or most expensive options. The cheapest tender generally manages to keep costs down by limiting the overall quality of the job and this has been proven so many times, including the trains and rolling stock we had made in China.

    The difficulty with giving jobs to overseas companies is that in increases our current account deficit and does not support local jobs and industries. The spin offs to our domestic economy from supporting a local business is no different from the rebuilding of Christchurch and building motorways, it creates an economic boost that benefits many communities and associated businesses.

    “Saving that many cents make good sense”

    Not necessarily!


  2. Paranormal says:

    Yet picking winners with government largesse and subsidising local businesses will ultimately destroy our businesses international competitiveness. New Zealand has come a long way and grown so much as a nation since the times of Muldoons fortress New Zealand.

    Why do you want to take us back to those dark days with all the pain they cause?


  3. Dave Kennedy says:

    There is no comparison between what I was suggesting and what you are comparing it with. If you have a chat to any local contractor who is continually losing out to the lowest tender you will get the general picture. It is just common sense that the lowest tender may not be the best. I take the same approach when I compare plumbers and builders for myself and generally find you get what you pay for when you also go for the lowest price,


  4. Paranormal says:

    I have been a tenderer and purchaser of tenders for many years. I know exactly what you are talking about – in your first paragraph, but you are not correct regarding the cheapest or any tenderer. You have made a generalisation based on an assumption. Your assumption is there is only one way of doing things and the cheapest tenderer may actually be providing a quality product or service that is cheaper because they have discovered a better way of doing it. That’s where the skill comes in tender analysis.

    But your second paragraph prescription is to lead us back into the protectionism that was fortress New Zealand. Spin it as you wish, it’s still protectionism and it doesn’t work.


  5. Dave Kennedy says:

    I agree with you regarding tender analysis but I think we will have just agree to disagree that the Government is doing due diligence, it hasn’t been reflected in the many botch ups elsewhere. We are also told that price was the major factor and they definitely haven’t looked fully at the benefits of local contracts when the expertise exists.

    All countries protect their local industries to various degrees for good reason, it means the money invested will benefit local people and the local economy when the work can be done to a reasonable standard. We should still have assurances regarding quality but a few million saved by going elsewhere may actually not be as beneficial as is assumed.


  6. Paranormal says:

    And therein lies the problem with relying on Gummint of any hue as they are spending opm for other peoples benefit.

    “All countries protect their local industries to various degrees” and it will be those countries that are struggling to recover post GFC. Protectionism detracts from a business’s competitiveness and the business ability to respond to changing times. What you suggest also brings with it a bubble economy and we’re back into fortress New Zealand all over again.

    Just because other countries do it doesn’t make it a good thing. You need a bit more perspicacity in your analysis.


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