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Labour leader Phil Goff says giving New Zealand companies a better chance of winning government contracts won't end up costing taxpayers more.
Mr Goff today announced Labour's new procurement policy, which would require companies to consider wider economic benefits rather than just focussing on cost.
That would give local companies a better chance of winning government contracts when running against foreign bidders.
Unions have welcomed the policy as long overdue and a boost to the economy.
It comes after KiwiRail gave manufacturing tenders to foreign firms, leading to redundancies at its Hillside workshop in Dunedin.
KiwiRail said it would cost about $36 million to build new wagons in New Zealand compared with $29m to buy them from China.
Mr Goff said the Government spent billions of dollars procuring goods and services and it was in New Zealand's interests to support local companies wherever possible.
Keeping contracts in New Zealand had wider benefits to the community in terms of innovation, jobs and revenue from income tax and GST.
"What we want is a government procurement policy that does take into account the wider cost and benefit of New Zealand companies providing these services, and a lot of other benefits aside," Mr Goff told NZPA.
Asked if there was a danger that favouring New Zealand companies could end up costing more, Mr Goff said cost and quality would still be the paramount considerations.
"I'm not saying that you should always buy New Zealand regardless of cost. I'm simply saying that where the cost is within a certain level of competitiveness against the cheapest bidder, that it may still be in New Zealand's interests to go for a slightly dearer bid that employs New Zealand workers, increases the productivity of the production in New Zealand, and increases the taxation revenue that the Government gets.
"It's got to look at it in the wider context, not simply the narrow context."
The policy was compliant with World Trade Organisation rules and compatible with free trade agreements signed with China and Asean, he said.
Other countries had stronger procurement policies and guidelines than New Zealand, he said.
Rail and Maritime Transport Union general secretary Wayne Butson welcomed the policy as urgently needed.
"Value for money is not just purchase price. It is also about the primary and secondary jobs that are created, the industries that are supported and the contribution to reducing our balance of payments deficit that can be made," he said.
Council of Trade Unions economist Bill Rosenberg said a procurement policy that made use of government buying power to develop high value services and manufacturing was long overdue and would be vital to New Zealand's economy.
"We welcome the fact that it requires government agencies to take into account the wider economic impacts of their buying decisions, rather than narrow lowest-cost choices that look only at the interests of the agency or department's budget."