How the Victorian government plans to wean the public service off labour hire and consultants

By Stephen Easton

Monday July 15, 2019

The Victorian government has told public service leaders to stop relying so much on consultants and labour-hire firms and given them until October 1 to comply with new rules.

All proposals to use consultants now need secretary-level approval, and requests to use labour hire for periods up to a maximum of 12 months must be approved by, at minimum, the relevant deputy secretary or equivalent. These responsibilities are non-delegable and began applying from the start of a transitional period on July 14.

The new policy follows a 2018 review that found spending on both categories of external human resources has been growing significantly and consistently in recent years. It spells out exactly when it is acceptable for government agencies to use contractors, consultants and labour hire firms.

Greater investment in long-term public service capability and “secure employment” are key aims of the policy, according to the Andrews government, which has released two sets of guidelines for public servants explaining how it all works.

“At the heart of this goal is a cultural and strategic emphasis on secure employment, building capability, and sharing resources, learnings, and expertise across the VPS,” explain the documents circulated by the Department of Premier and Cabinet.

A set of principles for each category of procurement are to become a mandatory part of public service decision-making. To limit the number of procurement proposals that senior executives have to knock back, DPC has made the new rules abundantly clear with written explanations, decision-making flow charts and example scenarios.

Professional services

Consultants must no longer perform “key or enduring public service functions” in the VPS without the department secretary or the “equivalent public service body or entity head” giving the go-ahead.

“Key or enduring public service functions are often referred to as ‘core business’. This includes repeatable skills and capabilities, and the delivery of products and services that are essential to the running of the public service and the delivery of Government work.”

The new rule book notes that core business differs from agency to agency but suggests a few clear examples: policy, strategy, and business case development; policy and program evaluation; engagement and facilitation; and organisational development.

Victorian public service leaders will be able to approve deals with consultants where they provide “skills or expertise that are not efficient to recruit or maintain within the VPS” or to perform roles where a level of independence is needed, “to instil confidence in the objectiveness, impartiality, and integrity of Government work, services, or decision-making processes.”

This could include complete independence from government or “segmented independence” where the job must be done at arm’s length from a certain administrative unit, agency or department but a suitably qualified and independent public servant cannot be found.

Agency leaders will also be able to approve contracts with consultants that “provide the latest technical advances, emerging key skills or expertise” and build public service capability. The guidelines explain (emphasis in original):

“The VPS must continue to adapt to and adopt new ways of working. To do this, the Government will continue to need external support to provide innovative solutions to problems, and transition to new technologies.

“The transfer of skills and knowledge to build VPS expertise must be a central and essential component of engagements that rely on this condition. Where applicable, the engagement must not be approved without evidence of a contractual component and clear project strategy for transferring relevant skills and knowledge across to the organisation from the professional services provider through the engagement.”

Labour hire

Labour hire staff can still be used to provide “technical or specialist skills [that] are demonstrably unavailable in the VPS” and to cover temporary vacancies while a recruitment process is completed, or when a permanent employee is away for six months or less.

Labour hire workers must also be paid the same as “the designated or equivalent VPS grade of the position being filled” in future.

And if they are to be work in the VPS for more than a year, two additional conditions apply. First the approval must come from the secretary or agency head to certify the contract fulfils “critical business needs” rather than the relevant deputy secretary or equivalent. Secondly, there must have been a failed attempt to fill these jobs by recruiting fixed-term or ongoing public servants.


Exceptions and definitions

There are a few exceptions to the new rules. They do not apply to “professional services to undertake, service or advise on built environment and infrastructure work, such as construction, infrastructure, engineering or architecture” and a list of bodies outside the public service are exempt, such as parliamentary departments, councils, the ombudsman’s office, the audit office, the police and various commissions, as well as courts and tribunals.

The rules for professional services apply to “the formal engagement by Government of an individual or organisation to provide skills, expertise, knowledge or advice in the performance of work or services” regardless of whether the experts are classified as “consultants” or “contractors” for financial reporting purposes. Labour hire is easier to define: staff that work inside the public service but are employed by a private-sector firm.

For further clarity, or perhaps to make it harder for public servants to get around the new policy, the rules apply to all service categories covered by the state purchase contracts for staffing services, professional advisory services, legal services, marketing services or e-services — whether they are procured from a preferred-supplier panel or not.

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