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Ad agencies scramble for asset sales contract

Published: 3:08PM Thursday December 29, 2011 Source: BusinessDesk

  • Prime Minister John Key (Source: ONE News)
    Prime Minister John Key - Source: ONE News

Advertising agencies are working through the Christmas holiday period to meet a Treasury request for proposals to provide the advertising and communications campaigns that will accompany the Government's partial privatisation agenda over the next three years.

While no budget is given for the contract, it is likely to be one of the largest new pieces of Government-funded advertising work agencies have seen for some time, but they have been given just 28 days to respond over the traditional shutdown period of Christmas and New Year.

A formal Request for Proposals was issued on Decermber 15, with a deadline of January 9 for responses, leading industry veterans to suggest the Treasury has already made a choice of agency, but needs to follow Government rules requiring a tender process.

Advertising consultant and agency developer Mike Hutcheson says it is likely the Treasury already knows who they will give the job to, and this kind of fast-tracking is typical of such Government contracts.

"It's a bit of a charade that Government departments and local authorities always go through because their choice is quite limited. There will be relatively few who can actually handle it," said Hutcheson.

"Government departments have to go through a process and in fact it's meant to be quite a transparent process, but usually it's pre-determined.

"There will be someone in Government who would favour someone for sure. They'll want someone to win, and whoever it is generally knows in advance."

The Treasury RFP seeks "marketing, design, and communications services", with pricing, relevant credentials for marketing share offerings, and evidence agencies have a high level of security.

Treasury is advertising separately for a marketing and communications director over the same period.

The contract is scheduled to begin on February 2 and is offered for three years, although the RFP says the asset sales programme may take "three to five years", depending on economic conditions and the companies' readiness for partial sale.

While agencies have asked the Treasury whether the deadline could be extended, as they would have to ask staff to reconsider their holiday plans, Treasury said no extension would be possible, given their own tight deadlines.

Major agencies Saatchi & Saatchi and Ogilvy could not be reached during the holiday period, while Clemenger BBDO said they could not comment on the RFP.

There is no guarantee the Treasury will hire anyone for the job, reserving the right to suspend or cancel the RFP process and not to enter any contract.

The agency which succeeds in getting the contract would co-ordinate with each of the companies being sold and their separate communications agencies, to organise and design a marketing scheme for the programme.

Jeremy Taine, whose agency String Theory was behind the Labour Party's election campaign advertising attacking the asset sales programme, says the tight deadlines are standard Government behaviour for RFPs, and is certain he won't be applying for the job.

"The Government is looking for freelance artists to help paint lipstick on a pig. It's a distasteful message and they want to get it out of the way and counter the arguments against it.

"But it is a very strange time for them to be putting out an RFP."

The Treasury's request describes a two phase process for the asset sales, each about a month long.

The initial phase would give an opportunity to pre-register to receive an offer, and would be supported by a campaign advertising the closing date and where to register.

The second phase would allow potential investors to review the offer and decide whether to invest or not.

"National advertising throughout this period will increase awareness of the offer and its closing date but also inform potential investors of the merits of the offer and an investment in the respective company," the document says.

The Government proposes to sell minority stakes of up to 49% in the four state energy companies Genesis, Meridian, MightyRiverPower and Solid Energy, as well as a further sale of shares in Air New Zealand.

The energy companies paid the Government $732 million in 2010, which made up 96.1% of the revenue received from all the state-owned enterprises combined, according to figures on the Treasury website.

MightyRiverPower is expected to be offered first between June and September next year, with an estimated six to 12 month gap between offers. The Government will keep a controlling stake of at least 51% and no other shareholder will be allowed to own more than 10%.

A survey in May by Deutsche Bank and Craigs Investment Partners, who are advising the Government, said experienced retail investors were very positive about the investment opportunity and estimated there will be enough demand to reach the Government's $5 billion to $7 billion goal.

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