The Auditor-General is concerned that important public
services will remain vulnerable to unexpected failure unless
the public sector improves how it manages its strategic
A new report, Strategic
suppliers: Understanding and managing the risks of service
disruption, looks into how well the
public sector understands, and manages, the risk of
disruption if a strategic supplier fails to deliver goods
Strategic suppliers are companies that
provide goods and services that are critical to the delivery
of public services. These suppliers are not easily replaced.
They can include, for example, companies that can build
major infrastructure, provide highly specialised medical
equipment, or IT systems that hold important
The Auditor-General found that most
public organisations know who their own key suppliers are.
However, many of these suppliers support a wide range of
important public services and, as a whole, the government
lacks understanding and visibility of which strategic
suppliers it relies on. It also lacks visibility of the risk
of disruption to important services if a government
strategic supplier fails to deliver.
“I am concerned
about the current state of strategic supplier management
across the public sector. A significant failure of a
government strategic supplier could affect many public
services and thousands of New Zealanders,” says
Auditor-General John Ryan.
An important first step is
to improve the information available about strategic
suppliers. Some public organisations are required to report
their significant service contracts to the Ministry of
Business, Innovation and Employment (MBIE). MBIE is working
to better understand which suppliers are government
strategic suppliers. However, MBIE needs to do more to
improve the process for reporting significant service
contracts. Without better information, the Government will
remain uninformed about some of the risks it
There is also a need for a co-ordinated
approach across central and local government to ensure that
risks are well understood and managed.
identifies the need for better communication with government
strategic suppliers about which public services to
prioritise after an emergency.
highlighted New Zealand’s vulnerability to global supply
chains. Understanding and managing strategic supply risks is
an important part of ensuring that services to New
Zealanders are not interrupted. More broadly, I also expect
public organisations to consider their preparedness for
shocks to ensure that important public services continue to
be delivered in an emergency,” says Mr Ryan.
report has five recommendations to help improve information
on strategic suppliers and reporting of risks to the
Government; ensure the public sector – including local
government – takes a co-ordinated approach to strategic
supply risks; and improve how public organisations identify,
manage, and report on their strategic suppliers and
strategic supply risks.