Coronavirus: Government warns on IT procurement

Workers at an Apple manufacturing plant in Austin, Texas. American factories expanded in February for the second straight month, despite disruption caused by the coronavirus outbreak. Photo / AP

Government agencies are being warned about Covid-19's impact on buying tech gear - although MBIE has dialled down its language since its initial alert.

A February message on the Government's procurement website, spotted by Chinese-owned trade publication Reseller News, read:

"The delay in factories being reopened has affected the IT hardware supply chain which will result in supply issues in the upcoming weeks.

"Please don't send in large orders as this will only cause more issues."

"With this in mind we are asking that you limit work with your supplier to urgent requirements you have, or any planned procurements you have already in progress."

But that warning has now been taken offline.

Asked for the Government's updated advice today, an MBIE spokesman offered the more moderate, "New Zealand Government Procurement, as the Government functional lead for procurement, is currently monitoring the impact of Covid-19 (novel coronavirus) on the supply of products and services to government agencies under the All-of-Government contracts.

"We are working to understand where the supply chain may be prevented from meeting the demands of government agencies - specifically critical sectors - under these contracts.

"We will update government agencies as information becomes available."

The situation remains murky. Apple for example, works with contract assembler Foxconn and some 200 suppliers based in China, and warned on February 18 it was unlikely to meet its second-quarter financial guidance because the viral outbreak in China has cut production of iPhones.

But estimated delivery times on Apple's website for its iPhone 11 Pro - made by Foxconn near the epicentre of the outbreak - and many other products remains the usual three to five days for New Zealand buyers.

While many of Foxconn seasonal workers were left stranded in their hometowns by coronavirus lockdowns, the company says half of its seasonal workforce has now returned, and that it expects to be back at full capacity by the end of this month as, in China at least, the outbreak eases.

And Samsung told the Herald late last week that there are no supply issues with any of its gear.

Local suppliers say tech has been cushioned to a degree by the stockpiling that always occurs ahead of the Chinese New Year slow-down, which happened to coincide with the initial outbreak.

But according to an FT report, only those brands able to pay upfront and work closely with component suppliers, such as Apple and Samsung, would be able to secure enough production capacity, as shortages ripple through the supply chain.

Brands further down the pecking order, in everything from PCs to networking gear, are finding it takes up to three times as long to get products delivered, the FT says, with delays sometimes running to weeks.

Here, IT industry lobby group NZRise last week asked Communications Minister Kris Faafoi and Economic Development Minister Phil Twyford to order Government departments to buy local IT products and services where possible. The group said that would help ease procurement concerns and help boost the tax take, buoying the economy.

Twyford told the Herald that a new procurement rule introduced in October 2018 states that "agencies must consider how they can create opportunities for New Zealand businesses."