ACT Government – Hiding from a Poor Decision

ACT Government – Hiding from a Poor Decision

ACT Government – Hiding from a Poor Decision

The ACT Government’s behaviour around changes to labour hire engagements is getting stranger.  What began as a procurement process where the terms of engagement were kept extremely quiet until the eleventh hour, has now switched to a complete stonewall of industry bodies and local suppliers.

The ACT Government is changing the way agencies engage contractors and provide essential services across the Territory. In efforts to be better organised and more efficient, they have moved to a centralised model by engaging a third party MSP (Managed Services Provider). Unfortunately, they forgot to discuss their plans to slash margins with contractors or agencies, and now the shutters have been put up.

Ministers are refusing to engage on the matter.  Letters and correspondence from ACT recruitment suppliers and National Industry bodies remain unanswered. Surprisingly, even calls from news outlets such as the Canberra Times and WIN News have also been ignored.

Recruitment Industry bodies the RCSA and APSCo have approached the Chief Minister and other Minsters through email, letters, and phone calls, as have local suppliers.  They have all fallen on deaf ears.

There is clearly something fishy going on here.  We can only assume that the Government are hiding from an ill-conceived and hastily implemented ‘penny smart, dollar stupid’ decision.

Inquiry into dodgy labour hire practices on the back of the SLASHING labour hire margins

To add further irony to the situation, the ACT Government has announced it will conduct an inquiry in to why some labour hire operators cut corners, in what appears to be a move driven by the unions.  Whilst personally I welcome any common sense driven improvements to regulation of the recruitment sector to drive up quality, it astounds me this is being done at the same time as slashing margins.

It is absurd to slash margins by up to over 50% and then ask why the quality of service has dropped. 

The recruitment industry needs to be profitable if it is to continue to provide high quality contracting staff in our region.  By driving down margins, the ACT Government is killing service quality and opening up opportunities for non-professional operators who will naturally ‘cut-corners’ in an effort to be commercially viable.

To add further irony, one of the terms of reference for the inquiry is:

3ii.  the extent to which the ACT Government’s tendering and procurement arrangements are and could be used to encourage best practice in industries where insecure work arrangements have become common;

I would hazard a guess that slashing margins would not be an intelligent way to promote quality in any industry.

Read the full Committee release here: Inquiry into the extent, nature and consequence of insecure work in the ACT

What are we seeking?

Whilst we recognise this is a busy time of year, all we are asking for is:

  • A chance to discuss this massive change. It should not be too much to ask, particularly when you are a government espousing your support of small business
  • Recognition that the change is far more complex than what the hastily implemented solution pretends to be. There are major risks that are not being recognised that need to be managed.

We are looking to meet with the Chief Minister, and/or the Minister for Small Business to discuss how to minimise the damage to the ACT Government employer brand.   We are keen to work collaboratively with them to ensure a better design of Contractor Central so the ACT Government do not completely lock themselves out of access to talented contractors in this extremely candidate short market.

Both the RCSA and APSCo have a track record of working with state Governments to remodel poorly designed labour-hire centralised arrangements by ensuring a committed, partnering approach with industry. But it is critical to act early before the panel arrangements severely and permanently damage the ACT Government’s employer brand.

Re-open the shutters and let’s together get on with designing an effective, centralised, contractor supply model that works for the ACT Government.

A quick recap for those wanting to know more

Why is this a bad move for the ACT Government employer brand?

Here is a link to my original article on this issue that details why

ACT Government Voluntarily Opts Out of Quality Recruitment Outcomes.

These issues were reported in the Canberra Times recently by by Katie Burgess:

Recruiter predicts contractor squeeze after ACT government slims labour hire margins

Why will this create a shortage of labour hire contractors for ACT Government?

Here is a quick reminder of some of the ‘features’ of this panel arrangement and why top recruiters will not send their high value labour hire contractors within a bulls roar of ACT Government.

Extremely low margins

A mandatory set margin of 7.05%….less than half that offered by Commonwealth Government employers in the region.

For long term contracts of > 12 months, expect a margin of only 5.14%…1/3 of the margin offered by Federal government!

Low volume

Agencies can’t make up for loss in margin through volume. With no limitations to the number of firms to join the panel, you can end up being 1 of 100 firms vying for around 450 contractor vacancies per year (maximum).  The panel remains open for new suppliers to join as long as they meet very basic prerequisites (e.g. 3 year’s of financial statements, referees, insurances).

Untenable commercial arrangements

If a recruiters contractor wins a role with the ACT Government after being steered towards applying for a permanent merit selection process by their employer, no release fee is payable. Even if they win the role they are contracting in, the ACT Government won’t recognise the agencies introduction of the contractor and the opportunity cost of losing that valuable resource.

Risk losing all your contractors

If the ACT Government choose to, they can take one agencies contractors and assign them to another supplier with no compensation or justification required. They call it ‘transitioning’.

Additionally, the panel agreement reserves the right to move contractors onto a 3rd party payroll provider, off agencies books altogether.

Increased administrative burden

The burden of upkeep of payroll/timesheeting data on the contractor central system (Fieldglass) is pushed onto recruitment agencies, duplicating their own timesheeting/payroll administrative efforts.

So the question must be asked.  How would the ACT Government even be able to get this procurement through to implementation stage without a riot?

Here are the tactics of the process trap employed by Comensura (the Managed Service Provider – MSP) in cooperation with the ACT Government to try and push this procurement through

A reminder

Currently, it is optional for ACT Government agencies to sign up to this agreement. We would recommend any Government agency considering signing on should think very carefully about what this means for their employer brand, and what hidden costs are involved in the change.

Early reports from within ACT Government are that whilst a number of recruitment companies are signing on (they are seemingly forced to…..otherwise they lose their existing ACT Government contractors), the quality of candidates being received is already diminishing.