Wellington and Auckland could go head to head to host a national agency that will provide back-office services and information technology systems for the country's 21 district health boards (DHBs).

The Government announced this month that it would establish the agency and says it will consolidate functions such as payroll and purchasing that are currently spread across DHBs.

It will set up an establishment board to decide on the agency's structure and its functions and where it will be based.

HealthAlliance, which provides services for Auckland DHBs, says it could take on the agency's functions or lead its development. Chief operating officer Nigel Wilkinson says it provides IT, payroll, financial, procurement and supply-chain services for the Counties Manukau and Waitemata DHBs and can draw on that experience to lead the agency.

Health Minister Tony Ryall has indicated the agency could use a shared services model – whereby DHBs provide systems and services to each other, outsource services or set up centres of expertise to provide them, he says.

Some services could be provided remotely at a national level, while others could be delivered locally, Mr Wilkinson says.

Nigel Kirkpatrick, chief executive of economic development agency Grow Wellington, says the capital is best-placed to host the agency. Wellington is home to many firms already supplying the public and private sectors with back-office services and systems, he says. "We've got really innovative companies like Xero, but we've also got the likes of IBM based here so we're pretty strong in those IT services."

Mr Ryall says officials are due to decide on the board's membership and terms of reference in the next few weeks. The board will decide which services should be provided locally, regionally and nationally, and whether the agency should be a standalone body, an entity within the new National Health Board or have some other structure.

The board will oversee and fund DHBs, including the planning and funding of health IT. The agency and board are among several new initiatives expected to cost between $5 million and $10m to implement, and save up to $700m over five years.

Economic Development Minister Gerry Brownlee has announced the Internal Affairs Department will be responsible for negotiating "all-of-government" contracts for computer hardware as part of a drive to cut costs.

The Economic Development Ministry says the Government spends $71m on new personal computers each year and estimates a government-wide purchasing contract would save 5 to 10 per cent. The ministry will negotiate government-wide contracts for passenger vehicles and stationery. The new contracts are expected to be in place by June.