Contractor Central rescuing NSW from temp worker cost overload

By Harley Dennett

April 27, 2017

New South Wales doubled its temp workers during the O’Farrell-Baird governments — and couldn’t justify value for the extra $600m it cost, according to a new audit report. A lack of due diligence in human resource planning by NSW agency executives has exposed the state government to accusations it is addicted to temp workers.

From when the Coalition took power in NSW in 2011 until last year, contingent workforce costs have more than doubled from $503 million to $1.1 billion. Whether or not the extra temp workers were genuinely filling a skills gap, covering for poor planning, or artificially keeping official staff numbers down, couldn’t be determined — or justified — when auditors looked into three NSW key agencies.

Executives were largely in the dark about the temps working for them and whether they filled a skills gap. What sparse information was possibly to obtain was onerous to do so, and performance management was non-existent. Nearly 60% of temps had contracts running beyond the government’s six-month limit.

Crawford’s findings were consistent with the NSW Public Service Commission’s 2015 ‘State of the Workforce Reform’ report, which found that workforce data and the use of evidence to inform decisions are not well progressed, with few agencies linking workforce data to business data.

However, things have turned around since the 2015 election, report the agencies — Education, Industry and Transport for NSW. While the headline takeaway from Auditor General Margaret Crawford’s report doesn’t look good for the government, all three of the agencies involved say the exploration of the gaps in what they knew about their own contingent workforce turned into a valuable exercise. Agency-wide workforce planning strategies are now in effect, while value-for-money checklists and performance monitoring of contingent workers will be implemented by July this year.

Contractor Central saving state on recruitment costs

Crawford says she expects the government will see better value for money for its contingent workforce when all the state agencies have implemented the new recruitment broker and software system known as Contractor Central.

The Department of Education was the first NSW government agency to implement the system, and the only one to do so prior to the audit. Education’s secretary Mark Scott claimed Contractor Central has improved the oversight, monitoring and cost of contingent labour use. Staff are now able to obtain real-time and accurate reports on key data, such as spend, tenure, headcount, invoice accuracy, and pay rates.

The recruitment broker has the potential to better negotiate and benchmark pay rates, the report claims. The Department of Education reported a net saving of $944,500 from August 2015−May 2016.

Temps needed to meet community expectation of delivery time frames

Transport for NSW secretary Tim Reardon defended the scale of his agency’s contingent labour use, saying the transport cluster is delivering an unprecedented renewal of infrastructure across the state as well as upgrading ICT systems to ensure they are fit for purpose. Its work, perhaps more the other agencies’ use of contractors, required a greater degree of expertise.

Spend on contingent labour by cluster. Source: NSW Procurement, compiled by Audit Office of NSW

TfNSW has brought in a broad number of highly skilled people as part of its internal reorganisation, but a contingent workforce is needed “to supplement internal employees so we can get the job done in the timeframes expected by the NSW Government on behalf of the NSW community,” Reardon says.

“The large scale and temporary nature of many of our mega projects necessitates using a large contingent workforce. When those projects are completed the workforce will be disbanded. The Audit Report notes that the median tenure of around 350 days for the Transport Cluster. This is hardly surprising when many of these projects are multi-year in nature…”

Crawford’s tips for procuring and managing contingent labour

  1. Contingent workforce planning should be part of an agency’s broader workforce planning.
  2. Using information systems to manage and procure contingent labour improves the accuracy, reliability and timeliness of contingent labour data. This information enables agencies to consistently assess contingent labour rates and to identify persistent skills gaps in their workforce.
  3. Routine reporting of contingent labour to agency executives provides oversight of an agency’s use of contingent labour.
  4. Hiring managers should consider all recruitment options, with advice from human resources staff, before engaging contingent labour to ensure that it is the most appropriate solution for a specific need.
  5. Regularly assessing long tenure contingent labour engagements helps to ensure that such engagements are still the most economical and effective labour option.
  6. Planning the engagement of contingent workers, including provisions for knowledge transfer, maximises the potential to obtain value for money from the use of contingent labour.
  7. Assessing and centrally documenting the performance of contingent labour against agreed deliverables helps to ensure services are delivered as planned, including in terms of quality, and timeliness.
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