Detection and Prevention of Malpractices in Outsourced Non-Works Government Services

1. Detection and Prevention of Malpractices in Outsourced Non-Works Government Services Outsourcing in HKSARG Simon Lam 6 November 2006

2. Outline of Presentation (內容大綱) • Overview on Government Outsourcing (政府外判概覽) • Contract Management (合約管理) • Protection of Non-skilled Workers (保障非技術性工人) • What’s Next (下一步)

4. Outsourcing Policy (外判政策) Use the private sector, where possible, to achievevalue for money in delivery of public services

5. Outsourcing Activities (外判活動) • Outsourcing is an important part of service delivery in government • 71 (92%) of departments outsourced in 2004 • 4,512 contracts • $214 billion in value • $47 billion in annual expenditure (or 16.7% of government spending) Source: Outsourcing Survey 2004

6. Distribution of Contracts (合約數目分佈) Source: Outsourcing Survey 2004

7. Outsourcing Trend on Non-works Services(外判非工程服務的趨勢) Source: Outsourcing Survey 2004

8. Non-works Services Outsourced (已外判的非工程服務) Source: Outsourcing Survey 2004

9. Non-works Services Outsourced (已外判的非工程服務) Source: Outsourcing Survey 2004

11. Outsourcing Process (外判流程) Business case development(可行性/業務計劃研究) Tendering and selection(招標及選擇承辦商) Contract management (合約管理) Evaluation of outsourcing feasibility Tendering and selection of contractor Managing service delivery

12. Outsourcing Process (外判流程) • Well-performed pre-contract processes key to effective contract management

13. Contract Management Activities(合約管理工作) • Role of in-house staff • Direct service provider  contract manager • Key tasks • Arranging for transition-in and transition-out • Monitoring service delivery • Contract administration • Managing the relationship

14. Some Good Practices (有效的合約管理方法) • Appropriate monitoring mechanism (合適的監管機制) • Risk management approach (風險管理方式) • Relationship management (關係管理) • Ongoing review (不斷檢討)

16. 2001 2002 2004 2005 2006 Service-wide Measures (整體措施) • Applicable to service contracts (excluding construction services contracts) that rely heavily on deployment of non-skilled workers only FC No. 3/2001 Marking scheme to take account of proposed wages and working hours • FC No. 3/2004 Mandatory requirements on tender assessment • Demerit Point System • Conviction records FC No. 4/2006 Tightened mandatory requirements on tender assessment FC No. 5/2004 Mandatory wage level Standard Employment Contract

17. Tightened Mandatory Requirements on Tender Assessment (FC No. 4/2006)(加強標書評審強制性規定(財務通告第4/2006號)) • Sanctions • A tenderer with any criminal conviction under relevant ordinances or 3 demerit points shall not be considered for contract award for 5 years • A contract shall be terminated if the contractor or its permitted sub-contractor(s) has obtained any criminal conviction under relevant ordinances or 3 demerit points arising from the same contract

18. Conviction (定罪記錄) • Relevant ordinances • Employment Ordinance (Cap. 57) • Employees’ Compensation Ordinance (Cap. 282) • Immigration Ordinance (Cap. 115) • Criminal Procedure Ordinance (Cap. 221) • Mandatory Provident Fund Schemes Ordinance (Cap. 485)(for contracts invited on or after 1 May 2006)

19. Conviction (定罪記錄)

20. Demerit Point System (扣分制度) • Introduced since May 2004 • A default notice shall be issued for EACH breach of contractual obligation • Wages • Daily maximum working hours • Signing of Standard Employment Contract • Wage payment by autopay (for contracts invited on or after 1 May 2006) • 1 default notice = 1 demerit point

21. Demerit Point System (扣分制度)

22. Demerit Point System (扣分制度) • Implementation guideline • Investigation officer to ascertain the breach • A senior officer to approve issue of default notice • Appeal mechanism be established

23. Common Departmental Measures(部門普遍採用的措施) • Outsourcing departments • Interviewing workers • Checking payroll records • Posting notice on employment conditions • Deducting payment for wage shortfall • Setting up complaint / enquiry hotlines • Enforcement departments • Stepped up enforcement by LD, ICAC, MPFA, etc

24. Extent of Problem (剝削程況) • 4 major outsourcing departments

25. Extent of Problem (剝削程況) • Convicted summons by Labour Department

26. Extent of Problem (剝削程況) • Demerit point statistics (for post-DPS contracts only) • 23 demerit points awarded (up to 11 Oct 2006) • 2 departments involved • 1 company debarred from tendering in the next 5 years

27. EU’s Observations – Extent of Problem(我們對剝削問題的看法) • Problem seems under control • Current measures seem to work • The media, staff union and public may think differently

28. EU’s Observations – Effectiveness of Measures(我們對保障措施成效的看法) • Existing measures are generally effective except payroll check • Time consuming but not very effective • May spot technical errors / irregularities • Wilful contractors unlikely to submit incriminating records • Cannot detect wage rebate • If payroll checks are to be continued • Adopt a risk management approach to conduct sample checks • Don’t over-do it

29. Some Good Practices (有效的保障措施) • Well-structured contract and robust tender evaluation(良好的合約結構和標書評審) • Attract capable tenderers • Help select honest and reputable contractors • Greatly reduce subsequent monitoring and enforcement effort • Centralise management information (集中管理資訊) • Better understanding of extent of problem • Help formulate appropriate measures • Timely awareness, speedy response, directorate steer

30. Some Good Practices (有效的保障措施) • Risk management (風險管理) • Measures/effort commensurate with the extent of problem • Focus on bad apples • Raising awareness on employment conditions (提高對僱傭條件的了解) • Posting notices on employment conditions in workplace • Briefing contractors and in-house staff

31. Some Good Practices (有效的保障措施) • Responsive complaint system (有效的投訴機制) • Proactive investigation of complaint cases • Build up confidence in department’s complaint handling system • Partnership with enforcement agencies (與執法機構建立夥伴關係) • Early detection of problematic cases • Timely advice on evidence gathering • Enable conviction of unscrupulous contractors

33. What’s Next (下一步) • Training and seminars • Contract management user guide • New edition of outsourcing guide

34. The EU stands to help Contact us Help desk: 2165 7255 E-mail: euwm@eu.gov.hk Website: http://www.eu.gov.hk