Category Archives: cleaning contracts

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Risk Management for Cleaning Contracts – Avoid Corporate and Brand Damage

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It is critical that Corporations and Organisations develop strict criteria for Risk Management for cleaning contracts, whether they are existing or new contract arrangements.  FM Contract Solutions can help mitigate risk with expert consultancy in all areas of cleaning contract development, evaluation and PerformRisk management for Cleaning Contractsance management.

The Australian Cleaning Industry is largely unregulated and procurement of cleaning services can expose reputable organisations to significant Corporate risk and Brand damage.  The major risk is sham contracting arrangements that attempt to bypass employee entitlements, workers compensation insurances and state Payroll taxes in order to undercut competitors and to maximise profits.  When these arrangements are exposed both the cleaning company and, by implication, their customer can be named and shamed in the press and in Union and Fair Work Commission actions.  Companies that procure cleaning are procuring labour. Labour costs are regulated by the Fair Work Australia and the Modern Award.

A recent press report  http://www.abc.net.au/news/2017-04-27/hsu-accuses-cleaning-company-of-exploiting-workers/8473612  highlights the risk.  Another recent case created negative publicity for a major Retail organisation.  https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/may-2016/20160530-pioneer-personnel-litigation.   in 2015, Fair Work Australia reported that ‘1212 employees – including young workers, overseas workers and students – were found to have been short-changed almost $763,000.’  In 2016, an Audit of 54 Cleaning Service providers by Fair Work Australia found that 33 per cent of cleaning businesses were paying their workers incorrectly.

This is only the tip of the iceberg.  Reports in the media indicate that illegal sub-contracting is rife in Victorian Government schools with ‘Thirty-two Percent (of Cleaners..sic) are not being paid for their work and nearly one in five workers were working at schools and denied basic entitlements such as sick leave, annual leave and superannuation.’  As declared wages and entitlements form the basis for State Payroll tax then the unwritten implications are that Victorian Government may also be missing out on significant tax income in the form of State payroll tax, which is levied at 4.85% on businesses with combined Australian wages over $575,000 (YE June 2017).  This situation could have been avoided if Governments followed their own procurement guidelines and introduced stringent specifications into cleaning contracts and applied Performance Management principles to managing contract compliance and measuring and obtaining Value for Money.

Companies and Organisations that procure cleaning are procuring labour.  Labour costs are regulated by the Fair Work Australia and the Modern Award. The award rate for a Part Time Cleaner working between 6 pm and 6 am on a weekday is $24.57 per hour. When you add on Employee overheads including Holiday pay, sick pay, Long Service leave, Superannuation, Insurances, payroll tax, Operational Expenses and profit, the minimum cost for cleaning services is around $42 per hour plus GST.  If your organisation is paying less than this for outsourced after-hours cleaning services then there is cause for concern.

Contact FM Contract Solutions for expert assistance in procuring and Performance Management of Contract Cleaning Services.

 


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Government Cleaning Contracts not meeting Procurement Guidelines

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Photo Credit Alan Light at end of Tunnel Flickr.com Modified by logo addition

The Majority of Australian Federal, State and Local Government Cleaning Contracts do not adequately reflect Government Procurement guidelines.

Value-for-Money in Government Cleaning Contracts

In 2003 the Australian National Audit Office issued a report entitled ‘Property Management’[1].  The Audit examined the delivery of a selected number of property-related service contracts and Contract Performance Management in selected Government agencies, including a focus on Cleaning Contracts.  The report noted that ‘none of the organisations used Performance based contracts for the delivery of Property-Related Services’.

The Key recommendation of the Report included the following statements ‘ANAO recommends that organisations develop formal processes that will enable the consistent and timely management of the performance of all contractors providing property-related services’ and recommends that ‘organisations regularly assess the performance of their property-related activity across a range of performance measures, incorporating both financial and non-financial dimensions.’

The Australian Government Procurement policy has a central tenet that ‘Value for money is the core principle underpinning Australian Government procurement[2].  Its procurement Guidelines state that Value for Money can be achieved and measured by a number of factors including accountability and transparency of contract activities.

The Qld Audit office in its Dec 2013 Report to Parliament[3] made the point that Queensland Government Departments have a legal obligation to obtain Value for Money for their contracts.  The review covered 62 goods and services contracts across 3 Departments and found that the audited departments ‘could not consistently demonstrate that they achieved value for money’ and showed a ‘lack of regard given to supplier performance at contract establishment and inconsistent performance monitoring throughout the life of the contract.

Procurement guidelines for all states and Territories echo the value for money mantra and the need for relevant KPIs and Performance Management in Contracts, but there is little evidence that this is applied to cleaning and related soft service contracts.

Government Cleaning Contract Procurement

As Procurement Consultants specialising in contract engineering and contract performance Management, we have examined many of the high value tenders for Government cleaning, waste and associated services issued by all levels of Australian Government over the last 5 years.  The  majority of tenders we examined for cleaning and related services issued by Government Agencies have used outdated and inadequate specifications, do not incorporate an adequate Performance Management framework and are generally not structured to ensure that Value for money, transparency and accountability of contractor activities can be measured and achieved.

The delivery of Cleaning and similar service contracts is primarily about labour management, with direct and indirect labour costs making up around 75% contract pricing.  The industry is adept at minimising labour to increase profits and less scrupulous operators cheat their clients and cut corners by withdrawing labour and flouting employment laws. Illegal sub-contracting arrangements are rife and contractors use these arrangements to underpay workers and circumvent state payroll taxes and Workers compensation requirements.  This can provide increased profit returns in excess of $10 per labour hour and exposes their clients to unacceptable levels of social, economic, corporate and legal risks.

As labour forms the highest cost component of these contracts it should be intrinsic in cleaning tenders to measure and benchmark labour and supervision allocations, contract on-costs and overheads as well as overall contract pricing to enable quantitative evaluation of tender submissions.  However, this essential metric is completely overlooked in many Government tenders.

The inability of Government agencies to measure and substantiate labour allocations makes Performance Management of these contracts virtually impossible.  This lack of transparency is compounded by inadequate specifications, poorly described outcomes and, in many cases, the contractor is responsible for measuring and reporting on their own service levels.  KPIs are generally related solely to the number of complaints and rather than the measure of service delivery, contract compliance and mitigation of risk.

The Private Sector has struggled with the lack of transparency of and the risks associated with the unregulated Cleaning Service industry.  This has given rise to the Cleaning Accountability Framework[4], and commercial property cleaning tenders are increasingly Outcome-based and are underwritten with detailed and prescriptive specifications coupled with cost and labour benchmarks to determine value for money and sustainability of offers.  Similarly, the contracts are structured in a Performance Management Framework with clear metrics and real time measurement of outcomes to enable consistent measurement of contract service standards and contract compliance and hence establish value for money.

Choosing the right Cleaning Consultant

These risks can be avoided by engaging Independent Contract Procurement Consultants.  An Independent procurement consultant can guide clients through the pitfalls of outsourcing services and provide a contract framework that enables transparency, accountability and measurement of service delivery.

A word of warning.  There are Companies operating in the procurement consultancy sphere that are owned, funded and/or managed by Facility Service providers that are advertising similar services for Facility Managers.   With these direct or indirect tie-ins to Service providers there is a potential conflict of interest, especially in the preparation and evaluation of Public or Private Sector Tenders.

 

Brian Clark is the CEO of FM Contract Solutions .  FM Contract Solutions provides Independent Procurement consultancy services, contract engineering, contract Management and contract management Software for soft service tenders and contracts.

This article was also Published in the March/April Edition of FM Magazine

[1] Property Management. The Auditor-General Audit Report No.19  2003–04 Business Support Process Audit. https://www.anao.gov.au/sites/g/files/net616/f/anao_report_2003-2004_19.pdf

[2] Commonwealth Procurement Rules. Australian Government Department of Finance. http://www.finance.gov.au/procurement/procurement-policy-and-guidance/commonwealth-procurement-rules/

[3] Contract management: renewal and transition:. Report to Parliament 10:2013-14 Qld Audit Office http://www.parliament.qld.gov.au/documents/tableOffice/TabledPapers/2013/5413T4168.pdf

[4] Cleaning Accountability Framework www.caf.org.au

Some consultants are owned by
Contract Cleaners


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The case for Performance Management of Cleaning

Performance Management of cleaning contracts and other building service cRisk by Paul Cross 400ontracts is essential to  minimise the risks associated with illegal subcontracting. Illegal subcontracting or ‘labour hire’ is rife in the building service industry and it is critical that companies that participate in this practice are identified and eliminated in the tender process.

Performance Management and Illegal Subcontracting

The recent case where Myer terminated the contracts of its cleaning service provider after a Fairwork Australia investigation uncovered under award payments has yet again shone a negative spotlight on Australia’s cleaning Industry.

Illegal Subcontracting has caused, and continues to cause, significant damage to the reputation of cleaning industry. Building owners and building managers are responsible for the health, safety and working conditions of building occupants including contractors.  Cleaning Service providers who use ABNs to evade the payment of correct wages and entitlements, workers compensation and payroll tax expose not only their business but also their customers to significant risks and liabilities.  This risk has never been greater with ongoing crackdowns by Fair Work Australia,  the Australian Tax Office and State and Federal agencies.

Corporate Australia and Government is becoming increasingly frustrated and disillusioned with the cleaning industry and is taking a tough stance against suppliers generally whose actions may expose them to risk and damage to their brand. Risk mitigation has fuelled a need for accountability and transparency of building service contracts and facility managers are now demanding to know what actually goes on in cleaning operations.

FM Contract Solutions has developed and introduced comprehensive contract performance management systems and software for cleaning contracts and building service contracts that allows Facility Managers to ensure and monitor that contractors adequately address OH&S, risk management, environmental impact and sustainable work practices in line with sustainable purchasing guidelines.

Performance management of Cleaning Contracts incorporates the introduction of exacting specifications for cleaning coupled with key performance measures (KPMs) for tasks, equipment, environmental performance, safety and training which, in turn, are audited to provide measurement through key performance indicators (KPIs).  This ensures that there is a framework in place that accurately describes the work to be performed and how outcomes will be measured and quantified.

The outcome of Performance Managed Cleaning Contracts is better value for money, improved service standards and minimal risk.

For more information, contact Brian Clark 0448 341 935 or by email.

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Performance Management of Government Cleaning Contracts

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conditions-680x400Performance Management of Government cleaning contracts is essential for Government Departments who have a legal obligation to obtain best value for money from their contracts.  This is especially true with soft service contracts and in particular, Government facility cleaning contracts. Cleaning is a key factor in building maintenance as cleaning, or the lack thereof, can have a massive impact on asset life cycle, the Health and safety of building occupants and users and the productivity of building workers.

The standard of cleaning in Government buildings is critical to protect public assets and  public health. The implementation of Contract Performance Management for Government Cleaning contracts will bring about measurable outcomes and high standards  of service delivery.

Guides to Contract Performance Management

The Queensland government Department of Housing & Public Works Procurement Transformation Division has published an excellent guide on managing & monitoring supplier performance.  The document is intended to serve as a guide to Queensland government procurement officers.  However, it is a handy guide to had to any government or business seeking to procure goods or services.  It addresses the need for contract-specific auditing to identify risks associated with supplier engagement and to take action to mitigate those risks.

The guide also recommends regular contract specific audits to monitor performance and identify and manage risks. FM Contract Solutions specialises in development of sustainable soft Service Contracts for cleaning, waste and grounds maintenance services.  FM Contract Solutions also supplies Audit Services including Cleaning Audits, Grounds Maintenance Audits and contract compliance audits.

The Queensland Government guide also recommends that contractors provide ‘written reports on performance as one of the contract deliverables, for example, consultancies‘ as an additional mechanism for monitoring and managing the supplier’s performance.  FM Contract Solutions recommend the implementation of CiMAS Contract Performance Management Software for monitoring and report generation.  CiMAS offers a configurable reporting dashboard that enables viewing of contract performance in real time combined with powerful Data filters which enable users to drill down on data and deliver meaningful comprehensive performance reports quickly and easily.

The Australian National Audit Office (ANAO) also publish a handy guide to developing contracts and contract performance management.

All Government Departments and Organisations have a legal obligation to obtain value for money from their contracts.  Contact FM Contract Solutions now for more information on how we can assist in developing and implementing Contract Performance Management strategies to make cleaning and other soft service contract activities transparent and accountable.

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Customer Service in the Cleaning Industry

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restroom audit cropFM Contract Solutions help Facility Managers develop sustainable service contracts that enable positive outcomes and long term contractual arrangements and high standards of customer service from cleaning service providers. The reader may notice that we prefer to refer to cleaning contractors as ‘Cleaning Service Providers’. As Contract Performance Management specialists, we believe that a proactive approach to customer service provides a massive advantage for contractors.

Good Customer Service provides a critical Point of Difference in winning and maintaining contracts for Cleaning Service Providers. A online article by Ron Kaufman highlights the importance of leadership in developing a customer service focus and emphasises that ‘A strong service culture leads to sustained improvements to customer experience, and a sustainable competitive advantage for organisations.’

Unfortunately, many cleaning service providers have a slap dash approach to customer service and regard customer complaints as an annoyance, rather than as an opportunity to improve their business and add value to the relationships with their customers.   Furthermore,  there seems to be a reluctance from some cleaning contractor management teams to understand customer service and place more emphasis on this critical part of doing business.

Over the last 30 years, the team at FM Contract Solutions have seen many contractors lose tenders and customers through poor customer service. The CEO of FM Contract Solutions, Brian Clark, has published an article on Customer Service in the Cleaning Industry which cleaning service  providers should read.

To read the article click here