Westpac's NZ Govt deal up for grabs
Westpac faces competition for its lucrative New Zealand government-wide banking contract for the first time in 24 years.The Ministry for Business, Innovation and Employment (MBIE) and Treasury issued a discussion document on Thursday proposing a new "All of Government" (AoG) contract for core transactional banking services and a competitive tender over the next year."This should provide access to economies of scale, better value-for-money, process efficiencies, and better interaction for financial payments between government, business and taxpayers and ratepayers," the said in the discussion document.The contract would be wider than the existing master contract deal, which Westpac has controlled since 1989. The New Zealand Government is budgeted to spend NZ$82.8 billion in the year to June 2014 and receive NZ$79.4 billion, which is the equivalent of around 35 per cent of GDP. The discussion document said the current contract related to 91.5 million transactions per year. There was no estimate of the value of the contract to Westpac.MBIE and Treasury said the winner of such an AoG contract would have to have a minimum credit rating of at least A- and be a direct participant of settlement systems. Only the big four banks, NAB's BNZ, Westpac, ANZ and CBA's ASB are seen as potential candidates.The deal would apply to all Public Service departments, State Service agencies, State Sector agencies, about 2,500 schools and the wider public sector, including regional, district and city councils."Our preferred option is that core transactional banking services currently under the Master Contract should be ring-fenced as its own AoG solution given the Crown's consolidated cash management requirements, the specific banking requirements of a number of Public Service and non-Public Service departments and other complexities," they said.However, there could be a panel of banks to provide services for a variety of sub-categories. "A panel arrangement, if viable, would also give government agencies optimal choice in respect of quality of service, value, price and capability, all on standardised terms," they said.Such a contract would be for at least five years given the potential costs of transition, with the potential for two extension periods of two years each, they said.In April Westpac renewed its contract to act as the NSW government's banker. It currently holds government banking contracts in Victoria and the ACT and is also seeking the Queensland government's banking contract.