By Fawwaz Baktee
Service buyers must change their mindset when dealing with contracts and the Government should take the lead in making this change, urged NTUC Assistant Secretary-General (ASG) Zainal Sapari in his latest blog post on 1 March 2016.
The post saw ASG Zainal addressing the issue of having unfair and “one-sided” contract clauses between service buyers and providers, with loopholes in the contracts often working to the service buyers’ advantage.
“Collectively, if we can change this practice, we can create an environment that will benefit all parties, including workers who can enjoy better employment terms and conditions,” he added.
Higher-Moral Ground
ASG Zainal suggested the Government should lead by taking “the higher moral ground” to ensure that its contracts are reasonable and fair.
He also cited a recent incident where a school specified in its quotation documents that the potential vendor must provide unlimited changes in creative services. ASG Zainal commended the Ministry of Finance’s (MOF) statement that such a clause is unfair and MOF’s intention to issue “a circular to remind all government agencies of standing procurement principles, which includes ensuring all procurement specifications are reasonable and fair.”
“Perhaps with the government taking the lead to promote reasonable and fair contracts, it would play an instrumental role to shape the behavior and practices in outsource contracting,” said ASG Zainal. He also reiterated this point in a radio interview with 93.8 Live on 4 March 2016.
Further Measures
ASG Zainal also called for a review of the standard criteria of what constitutes reasonable and fair clauses in contracts and suggested clauses to carry quantifiable measures for better service and assessment of damages.
“As a rule of thumb, any required service expectation must be specific enough to allow prospective service providers to estimate the cost so that they can factor it into their quotation price. The next rule of thumb is mutual reciprocity.
“For example, if service buyers want the right to terminate a contract after giving a notice period, likewise, they must accord the same right to the service providers,” explained ASG Zainal.
He also suggested an independent body, similar to the Consumer Association of Singapore (CASE), to mediate contractual disputes.
Parliamentary Questions
In the Parliamentary sitting on 1 March 2016, one of the questions ASG Zainal posed to the MOF was if there were guidelines given to ministries or statutory boards to ensure clauses in government contracts were fair to service providers, and if liquidated damages commensurate with the non-delivery of service.
He also asked if there were avenues for service providers to flag out unfair or one-sided clauses in tender specifications.
In reply, Senior Minister of State (SMS) for Finance Indranee Rajah said that government agencies should always conduct procurements in a fair and reasonable manner.
“To guide agencies, the Ministry of Finance provides templates on the contractual terms and conditions for common types of buys which agencies make. Agencies can choose to use these templates or adapt them accordingly to cater to their specific unique needs.
“From time to time, these templates are reviewed, taking into account feedback that we receive and any appropriate industrial norms,” explained SMS Indranee.
She added that clear guidelines are also given to agencies stating that liquidated damages should not exceed actual damages or loss suffered in the event of a breach and highlighted that there are contracts that do not impose liquidated damages.
“Whichever the case, government agencies are advised to work closely with their contractors to resolve issues early. As far as possible, agencies and contractors are not to let problems escalate to the point where contractual non-fulfilment is reached,” she added.
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Every worker hopes to have a fair wage package that rises over time. We hear from two service providers on contracts and what they think can be done to improve their workers’ lives:
Ramky Cleantech Services
To achieve a long-term sustainable relationship, service buyers should treat service providers as “partners” with equal rights, urged Director and Head of Ramky Cleantech Services Milton Ng. He is also the president of Environmental Management Association of Singapore.
To be able to shift towards best sourcing, he suggested looking into the Price Quality Method (PQM) of evaluating tenders for contracts.
PQM is a tendering evaluation framework to help potential buyers to determine the best value by balancing the price and quality factors.
“Currently, most major and government tenders state that they use PQM, but if price is weighted at 60 per cent or more, it is still cheap sourcing,” said Mr Ng.
Mr Ng suggested that quality should be given more weightage in PQM and that it would help if the price factor is weighted at 45 per cent instead.
For longer-term contracts, Mr Ng suggested that they provide for year-on-year salary adjustments.
He explained: “Currently, most contracts have a fixed lump sum for two, three or five years. Having a transparent wage cost for every year will assist both service providers and buyers to achieve a win-win situation.”
Mr Ng also urged service buyers to evaluate if the wage package stipulated in tender documents are realistic.
“Verify whether provisions for statutory requirements are included [such as annual and medical leaves and CPF]. This will ensure workers are not exploited,” he said.
KH Security Agency
KH Security Agency believes that the way forward is to sign contracts that last more than one or two years.
According to its Senior Business Development Manager Gary Haris, long-term contracts would benefit not only the provider and the workers, but also the service buyer.
“If companies have the assurance of long-term contracts, they will be willing to invest in automation to improve productivity,” explained Mr Haris.
The option to review such contracts to adjust to the ever-evolving industrial environment should also be given, he said.
Mr Haris also highlighted that it is common practice for service buyers to use liquidated damages clause to their advantage.
“Some service buyers give high prices when hiring services, but they make use of liquidated damages to get back some of the money. I don’t think that is very fair,” he said.
Touching on the National Wages Council (NWC) recommendations, Mr Haris said: “KH Security provides our officers the yearly increment that is recommended by the NWC. It would help if buyers look into factoring NWC recommendations into our contracts and play a part in helping our security officers earn a better living.”
Source: NTUC This Week
