Government Cleaning Contracts not meeting Procurement Guidelines

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Government Cleaning Contracts not meeting Procurement Guidelines

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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

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