In 2009, the then Minister of Agriculture and Forestry launched the Primary Growth Partnership initiative (PGP). The purpose of PGP is to increase overall investment in innovation, and the economic growth and sustainability of primary sector industries.
As at 30 November 2014, the Crown and industry partners together had committed $680 million to PGP. The Crown had committed $322 million to 18 multi-year programmes, $129.5 million of which had been spent up to 30 November 2014.
The Primary Production Committee asked my Office to consider looking at PGP. In particular, the Committee was concerned about PGP's transparency, including how well it was being managed and was achieving its objectives.
PGP got off to a mixed start and initially encountered a number of challenges. In my view, PGP partnerships are now generally working well and the management of them has improved in the past five years. More is required, in particular, to achieve clear, simple, and understandable public reporting on individual programmes and the PGP portfolio.
The objective of PGP is to bring together the public and private sectors in partnerships to innovate and generate value for the New Zealand economy. Innovation by its nature cannot be a "paint by numbers" exercise. Our audit took this into account.
We audited how the Ministry for Primary Industries (the Ministry) has implemented and managed PGP so far. The six programmes that we reviewed have a combined Crown and industry commitment of $491.3 million. These programmes are showing some encouraging results. For example, a prototype fishing net has been tested that aims to harvest high-value fish in a low-fatigue, low-damage way. There are direct supply contracts in place for fine and mid-micron wool, and seed trials have resulted in increased crop production under conditions of high drought and disease stress.
PGP was set up quickly but was not always smooth. There have been learnings along the way, some positive and some less so. I hope the lessons learned will be useful to other public entities. In the six programmes we reviewed, we saw examples of partnerships that appeared to work well from the beginning and others that experienced difficulties. These difficulties included prolonged business case development, long contract negotiations, and staffing shortages.
The Ministry has taken a flexible approach to setting up and managing partnerships with industry to take account of the diverse nature of the work and the people involved. Examples include introducing good-faith clauses to contracts, agreeing to programme activities starting before the programme contract is confirmed because the activities needed to be carried out in a specific season, and sharing intellectual property with the industry partner to save time and money.
This flexibility is appropriate. In my view, when forming new partnerships, managing new relationships between partners in a way that fosters trust and appropriately manages risk is more important than rigidly keeping to a set formula.
In our audit, we focused on transparency by reviewing how the Ministry supported the assessment of proposals and business cases, whether it used good information to support the governance of programmes, and importantly how it shared results with the public.
The Investment Advisory Panel is responsible for assessing proposals for PGP funding against conditions and criteria approved by Cabinet. The Panel made decisions about whether proposals met the conditions and criteria for PGP funding and made recommendations to the Director-General about whether to approve business cases. However, the Ministry did not always clearly or comprehensively record the underpinning rationale.
Before 2012, understanding of how to apply the conditions and criteria when assessing proposals and business cases continued to evolve. The Ministry assisted the Panel in reaching a view about how to apply some of the conditions and criteria, and made other improvements to better support management of PGP.
To date, PGP monitoring has focused on individual programmes. Internal information and reporting has appropriately supported governance of those programmes. Since late 2013, the Ministry has been introducing a system to measure and report on PGP programmes as a portfolio. The Ministry expects this system to be operating by mid-2015.
In my view, the public reporting of the results of individual partnerships started late and, to date, has not been suitable for a public audience because it is inconsistent and too technical. Public reporting needs to be simpler and more readily understandable to appropriately inform members of the public about the performance of PGP programmes. I recommend improvements to this reporting to aid transparency and accountability.
It is too soon to observe the economic benefits of PGP programmes, and it will be at least five to 10 years before we see the extent to which New Zealand's primary industries achieve the anticipated economic benefits.
When we reviewed the business cases of the six programmes, we saw a range of economic benefits expected to be achieved by 2019 and beyond. The results being delivered now do indicate some progress towards the expected long-term benefits. For example, in the programmes we reviewed:
- direct supply contracts have been enhanced to supply products to domestic and international markets;
- prototype products have been made and tested; and
- some consumer products and new brands have been launched.
I thank the Ministry and its staff for their time and co-operation during our audit.
Controller and Auditor-General
2 February 2015