What you need to know:

• NSW master media tender aims to consolidate everything with one agency or holding group.
• Scale of $73m account effectively rules out independents from buying – and by default planning and strategy.
• Favouring multinationals means all NSW media money will go overseas.
• Questions raised over potential breach of government’s own procurement rules.
• Independent agencies furious, lobbying minister Victor Dominello to reissue tender.

Limiting factor

NSW Government is drawing heavy fire for effectively precluding Australia’s independent media agencies from tendering for its $73m master media account for buying, planning and strategy.

Unless the Department of Customer Service walks back its position and reissues an amended expression of interest, only multinational holding companies are in the running.

That means the fees for the account, one of the largest in Australia, will be pocketed by companies headquartered offshore, with Australian firms shut out – arguably directly counter to NSW Government’s own procurement guidelines.

The expression of interest (EoI) was quietly published last month and a “kick off session” held 23 July. As of this week, most independents were unaware the tender had been launched and are now applying significant pressure to Victor Dominello, Minister for Customer Service and Minister for Digital, to reverse the decision.

The EoI states: The NSW government wishes to engage a single media agency supplier or panel of agencies from one media agency holding group to provide media strategy, planning and buying services.

Asked to clarify that statement, a spokesperson from the Department of Customer Service responded:

“The term ‘holding group’ is in reference to the intention of having a contract with one service provider that can meet all the business requirements as stated in the statement of requirements. It could be any service provider who can put forward a valid proposal demonstrating the capability and capacity to meet the requirements.”

Procurement breach?

While technically a ‘single media agency’ could include an independent, no indie has the resource to manage buying at that scale. There may also be legitimate concerns about counterparties’ balance sheet strength, given the sums involved. However, by stipulating a single agency or holdco, the government is also shutting the door on independents taking any portion of planning or strategy – the "thinking" aspect – potentially breaching its own procurement rules.

The NSW Government Small and Medium Enterprise and Regional Procurement Policy states:

“The SME and Regional Procurement Policy (the Policy) aims to increase SME participation in procurement opportunities within the NSW Government and improve economic, ethical, environmental and social outcomes through a range of initiatives.

Specifically, for goods and services contracts valued at $3 million or more, a NSW Government agency must include in the non-price evaluation criteria as a minimum:

• 10 per cent allocated to SME participation; and
• 10 per cent allocated to support for the NSW Government’s economic, ethical, environmental and social priorities.

It adds: “We ensure that SME participation is supported through major procurements. SMEs are considered for opportunities to work with government directly or through subcontracting.”

Mi3 has sought clarification from Customer Service on whether its approach contravenes SME procurement policy.

“Shut out”

Some with knowledge of the media procurement process have questioned whether the department’s media advisory panel, understood to be comprised almost entirely of holding company media executives, has clouded its judgement. Others suspect a management consultant’s hand.

As things stand, Atomic 212, the only independent on the current arrangement alongside multinationals Wavemaker, Havas, OMD and UM, is resigned to losing government business.

“Based on the scope of the tender, we won’t qualify. In fact, no Australian agency will have a genuine chance and it is a significant concern for all Australian independent agencies that the NSW Government put that criterion into the tender process,” said Atomic Managing Director, Claire Fenner.

“The current panel allows NSW Government to access a broad range of each department’s requirements. Instead, what the NSW Government will end up with from this process is 4-5 responses from the main agency holding companies and the numerous Australian owned independent operators will be shut out.”

“Anticompetitive, un-Australian”

Other independents questioned how the state government could claim to support small businesses on one hand yet exclude them from its tender on the other, especially as the state is now having to provide financial handouts to firms buckling under the pressure of a bungled lockdown.

Most of those approached by Mi3 were unaware the EoI had even been issued. One suggested that the tender had been “snuck out under the cover of covid … It is anticompetitive, and frankly un-Australian. We have the Premier claiming that her number one priority is to support Australian businesses. Well, this tender will see all of the money for media go overseas”.

IMAA, the umbrella group representing 80 Australian independent media agencies, said members are stunned at the department’s stance, though are pinning hopes on a swift reversal.

"The IMAA would definitely like to see the NSW Government support Australian owned businesses, including with its master media request for tender,” a spokesperson told Mi3.

“Independent Australian owned media agencies were hit hard during the pandemic and ongoing lockdowns, and need support during this period as they recover and rebuild. Australia is lucky to have a strong and vibrant independent media agency sector. We'd like to see it stay that way."

Perverse outcomes

Jimmy Hyett, founder and CEO of indie agency This Is Flow and board member of the MFA, which represents mainly larger media agencies, agreed the approach appears ill-conceived and suggested that government’s well intentioned drive for efficiency risks perverse outcomes.

“Consolidating financial structures under one entity makes sense,” said Hyett. “Realistically, no single independent agency could handle buying. But diversifying the thinking part – planning and strategy – would create huge benefits.”

Even if NSW was to open up the tender to all agencies, it “may end up in the same place, i.e. with holding companies. But government should be supporting the entire industry – and that requires a level playing field,” said Hyett.

“Diversity of thought is what you get from a broad mix of indies and multinationals. Independents bring a challenger mindset, they survive by making a big impact with tight budgets. Holding groups bring scale,” he added.

“There are probably sound motives that drove [the department] to this conclusion – financial pressure, risk management, a desire for efficiency. But for best results, they should be using a cross section of agencies to deliver the work.”

According to the EoI, NSW Government in 2020 spent $73m on campaign media, plus $4.5m on non-campaign advertising.

The EoI is currently scheduled to close 18 August with the pitch running to late 2022, when the new contract will commence.

Whether Australian-owned agencies stand a chance of making the roster is now down to Victor Dominello’s department.