Optimising workforce management for Government contractors

For organisations to remain competitive, flexible and responsive in today’s global market, they’ve turned to contractors as an effective way of achieving their business objectives. Traditionally, the public sector has primarily employed permanent workers, but in recent times we’ve started to see increased numbers of government contractors.

In the last six years, the Australian Federal Government spent $2 billion on contractors. In the NSW state government alone, spend on contractors increased from $503 million in 2012 to $1.1 billion in 2016. In fact, today, the Department of Defence employs 11,200 more contractors than it does permanent staff.

Many government organisations are employing contractors because:

Why government departments use contractors

With government departments around the nation delivering large infrastructure projects in tight timeframes, contractors are an obvious solution.

However, a recent review of contracting arrangements, pushed by Labor MP Julian Hill, has identified some clear flaws with the current way the government is managing contractors. Mr Hill stated that ‘The explosion in the use of temporary casual labour, through labour-hire firms, raises serious concerns about waste and value-for-money’.

With increased public scrutiny of flexible working arrangements and an ongoing pandemic shaking up how we conduct work, what should government departments be doing to ensure their workforce is the optimal use of taxpayer funds?

In this article, we look at the various ways contractor management is falling short in the public sector, and ways government organisations can employ best practice, save money, mitigate risk and improve the efficacy of their contingent workforce.

Compliance failings for government contractors

As the use of contractors in the public sector increases, so too does their risk exposure. Government organisations have an obligation to ensure their contractor management practices are 100% compliant. However, the majority of contractors in the public sector are employed by a monopoly of recruitment agencies with minimal visibility.

From 2013-2018, four large recruitment firms won 80% of contingent worker contracts, worth $785 million. As Mr Hill stated, “It’s all very very well to say there is a competitive process yet this data reveals that a very small number of favoured firms get 80 per cent of the work through opaque panels.”

How does this open up the government to risk?

Recruitment suppliers tend to invest heavily in the front office and not the back office – by engaging and managing workers through various recruitment suppliers, it’s almost impossible to manage downstream risk. As multiple suppliers engage contractors, they’ll likely have different interpretations of associated legislation and an inconsistent experience for the workforce.

In recent years we have seen clients exposed to many risks including:

Risks of a contingent workforce graphic

In fact, according to senate estimate committees, hundreds of government contractors worked for periods longer than 12 months – at least the ones that had the data to report on.

What’s the risk of government contractors working for more than a year?

For organisations that keep a contractor relationship going for long periods of time, there’s a real risk that it might start to look like an employment relationship.

Government departments need to have complete confidence that the agencies managing their contractors are doing it right, as hiding behind a supply chain doesn’t protect you from illegal activities.

Rising contractor costs from minimal visibility

According to a recent report from the NSW Auditor-General Margaret Crawford, the NSW government has been overcharged by recruitment agencies to the tune of $1.3 million. The departments of education, industry and transport were particularly scrutinised for their inability to harness workforce planning for hiring contractors, and the lack of visibility the departments had over the workforce.

Additionally, the federal government’s use of IT contractors has risen to $1 billion in 2019, with some agencies doubling their spend since 2015.

We’ve previously talked about the dangers of a hidden contingent workforce, but if you need a reminder, not knowing how many contractors in your organisation can lead to:

Cost impacts for government contractors

Government departments need to constantly review their contingent workforce management programs, especially ensuring they have undertaken a detailed analysis of their current contractor numbers. At a minimum, this should include:

  • How many contractors they have
  • What their roles are
  • What they’re paid
  • Where they’re located
  • How long their contract goes for.

Once government departments have an understanding of what it takes to get particular jobs done, they’re better able to make informed decisions on their contingent workforce. This might include mapping the future job requirements for a given business unit, and projecting where skill gaps lie. When organisations are able to accurately understand which resource type they need (permanent worker, consultant or contractor) they can control costs with a greater degree of certainty.

Lack of performance tracking hindering redeployment

In many organisations, we’ve found that companies often don’t track which contractors are good workers, who complete jobs to a high degree of quality. This usually means that performing contractors, whose contract comes to an end, are let go by an organisation.

While a lack of performance tracking means losing good contractors, it also means keeping underperforming ones. According to the New South Wales Auditor-General report, ‘None of the agencies we reviewed had a system in place to monitor the performance of their contingent workforce at an agency level to ensure it delivers value for money’.

Hiring managers in government departments are not, on a consistent basis, assessing whether contractors were delivering services on time or within budget. This meant many of the contractors who were performing below expectations were rehired by other managers or different departments.

CXC partners with the University of NSW, an Australian public research university with over 100 contractors. According to Marcus Clark, Head of Talent Acquisition:

‘CXC provided us with a comprehensive contractor management solution that met our business objectives. The Talent Team and hiring community have complete visibility of contractor end dates, and access a simple online form to extend or disengage a worker’.

For many of our clients, we notify hiring managers that are coming up for extension and provide a simple rating system to assist with talent pooling and redeployment.

Additionally, CXC offers a talent pooling solution for our clients called Workforce Exchange. We keep track of all contractors who have successfully completed an assignment and provide our clients with a talent pool of proven, pre-qualified workers.

Should government departments improve their redeployment capabilities, they can reduce their onboarding costs and improve productivity from contractors already having knowledge of government practices.

As one of the world’s leading providers of contingent worker management solutions, CXC is well positioned to optimise all elements of your contingent workforce strategy. With operations in more than 50 countries across five continents and decades of experience, we can assist with every aspect of your program.

If you would like to find out more about how we can help please contact us here.