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The Labour Movement calls for an enhancement to the Government Procurement Act to improve procurement practices for outsourced services. The enhancement will shape procurement behaviour and also set the stage for better service provider-service buyer relationships that will ultimately benefit our workers.
The outsourced sectors have long been plagued by low productivity and stagnating wages as a result of irresponsible outsourcing by businesses. A common practice is cheap sourcing, which has resulted in the industry being caught in a vicious cycle – service providers find it challenging to embark on productivity efforts given that their operating margins are very low, service buyers are on the receiving end of cheap yet less than ideal service outcomes, and workers’ wages are depressed as service providers find ways to cope with the increased cost by compromising on workers’ welfare.
The Progressive Wage Model mooted by the Labour Movement is an important first step that has resulted in a wage boost for our low-wage workers. However, more can be done to ensure our low-wage workers continue to benefit from sustainable real wage increases.
Principle of Proportionality
In particular, the Labour Movement proposes for the Act to be guided by the Principle of Proportionality, whereby the requirements and conditions of the contract must be in reasonable proportion to the procured services. In current practice, service buyers often dictate liquidated damages for service lapses, and this is often blown out of proportion or used as a ‘cost-saving’ measure. A Principle of Proportionality will therefore ensure that liquidated damages clauses are used as a professional tool to reasonably compensate service buyers for non-compliance of service standards.
In addition, it will address the issue of one-sided contracts, which, based on feedback from the ground, is common practice today. The Act can serve to enforce positive practices which will benefit both workers and companies, such as ensuring that procurement contracts contain the following:
a) A fair clause for a contract validity period to allow for prices to be agreed upon and also allow for price variation, including that for option years, should there be any unforeseen changes in government policy (e.g. mandatory adoption of PWM and announcement of NWC guidelines) during this period. This will allow service providers to factor in any cost increases.
b) A termination clause that allows for reasonable engagement by both parties to address any issues, as well as enable both sides to give notice for early termination based on the agreed terms and conditions should issues remain unresolved. This will ensure that the workers’ sense of job security is not compromised.
c) Provisions for service providers to be allowed to estimate the number and corresponding costs of VIP visits in a year or even include a quote upfront for additional costs should such piecemeal services be required, to be fair for all parties.
With greater transparency in contractual obligations, trust can be promoted between service buyers and service providers. Consequently, better relations between these key stakeholders will make space for them to amicably explore longer-term productivity solutions to elevate the standards of the low-wage industries. This will in turn allow our workers to benefit from better jobs and better pay.
In addition, the above measures will create a level playing field for all businesses and encourage better gain-sharing practices that will benefit workers when the worries of unnecessary costs are alleviated with fair contracts and best practices. This will also give provisions for parties to seek recourse for disputes arising from procurement and encourage service buyers and service providers to discuss these issues, which is a step towards professionalising the outsourced sectors.
First Step Towards Transforming Outsourcing Practices
The Ministry of Finance has in place a set of internal guidelines for the procurement of outsourced services with the Government and related ministries. But more can be done by the public sector in setting an example for the private sector to follow, particularly in terms of transforming the way contracts are structured, and especially in the low-wage sectors such as cleaning, security and landscape.
The Labour Movement calls for the Government to start the conversation on how procurement practices can adhere to these key principles, such as the Principle of Proportionality, and take the lead by adhering to the key principles before any amendment to the legislation. This will set in place industry standards that the private sector will be compelled to follow.
A tripartite mediation framework can also be set up to resolve issues between service buyers and service providers.
NTUC Assistant Secretary-General and U Care Centre Director Zainal Sapari said, “The enhancement of the Government Procurement Act will shape industry behaviour by addressing some of these key issues faced by the outsourced industries. Collectively, we can create an environment that will benefit everyone, including workers who can enjoy better employment terms and conditions.”
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