Fragmented procurement hampers value delivery in the ANZ public sector

New research has identified persistent issues in public sector contracting across Australia and New Zealand, citing fragmentation, skill gaps, and limited technology investment as factors constraining value delivery. The study underscores that while contracting remains central to public value, agencies are struggling with outdated processes and resistance to change.

Rising uncertainty

Public sector agencies in both countries report uncertainty levels of 4.6 out of 7, reflecting a 15 per cent increase above private-sector averages. This is almost 40 per cent higher than what is deemed normal by the sectors surveyed. The climate of uncertainty is compounded by growing demands for value under tighter budget conditions driven by a mix of regulatory, market, and technological pressures.

Contracting satisfaction

Overall satisfaction with the contracting process remains low. Respondents in Australia rate the quality of the contracting lifecycle at just 2.8 out of 7, while New Zealand fares slightly better at 3.5. Adaptability also lags behind international cross-industry benchmarks, scoring 3.4 in Australia and 3.8 in New Zealand, compared to a global average of 4.2.

Regional contrast

The research highlights notable differences. In New Zealand, a formal Head of Procurement with national responsibility has supported reforms, with agencies showing greater adaptability and a higher readiness to experiment. By contrast, Australia's approach to improving procurement capability is more recent and lacks uniform structure, resulting in considerable variations in performance between agencies.

Structural limitations

Structural challenges remain the main roadblocks to improved public sector contracting. The problems include operational overload, ambiguous organisational ownership, insufficient data flows, and delays in engaging contract management teams. Immature data capabilities prevent agencies from consolidating or leveraging information effectively.

Most respondents-57 per cent-report no dedicated budget for contract management systems. A further 62 per cent of agencies have no plans to roll out or replace any contract management technology within the next 12 months. Limited investment has led to slow technology adoption, restricting agencies to basic digital solutions and impeding the uptake of advanced tools such as artificial intelligence.

Skills and adaptability

The research finds that practitioners increasingly recognise adaptability as by far the most critical skill needed over the next five years, with 77 per cent ranking it highest. Technological proficiency and communication capability also emerge as vital requirements, each cited by 69 per cent of respondents.

While teams are under pressure to keep pace with rapidly changing market conditions, outdated control-based models focused on compliance and risk transfer remain widespread. There is a gradual shift towards approaches that prioritise improved productivity and support organisational transformation.

ESG integration

The incorporation of environmental, social and governance (ESG) criteria into contracting is advancing. Emphasis is shifting from aspirational policy to accountability through consistent measurement and monitoring practices. However, there are gaps in embedding ESG capabilities and reporting into contract management, as highlighted by sector experts.

"The focus is now on establishing consistent measurement practices and monitoring environmental and social impacts. Very often, though, ESG capabilities and reporting will not be embedded in the contract management process," said Hadi Rezaei Vandchali, ESG and Procurement Services Consultant, Local Government Procurement.

Enablement

Senior public sector leaders indicate that greater adaptability and value depend on transitioning from traditional gatekeeping functions to strategic enablement, with emphasis on achieving specified outcomes. Organisations are being urged to strike a balance between stability, compliance, agility, collaboration, and the integration of people and technology.

"The future lies in transforming procurement and contracting from a process that controls to a system that enables, anchored in trust, guided by data and powered by people who understand where that true public value comes from," said Adam Bowles, Country Director for Australia and New Zealand, OneAdvanced.