As a general principle, work that could reasonably be conducted by public sector employees should not be given to external contractors.
VPS departments determine the mix of employment arrangements to best meet their business needs. Engaging contractors and consultants, in addition to ongoing employees, can give departments the flexibility to meet immediate critical skill gaps.
Deciding when to engage contractors
Can the work be reasonably done by a public sector employees?
Yes – Then the work should be conducted by public sector employees
No – Consider the benefits and disadvantages of engaging a contractor
→Highly specialised infrequent work
→Work that requires independence
Loss of capability, increased dependency
- Core capabilities such as policy development and evaluation should be performed by public sector employees given the environment of the employing organisation.
- Engaging contractors to fulfil these functions reduces the opportunity for public sector employees to develop these capabilities.
- An over-reliance on contractors performing capabilities that are central to the nature of work in government is likely to increase the employing organisation’s dependency on the contractor to perform the same function going forward.
- If employees are interested in the task/project and have the skills and knowledge to perform them, but are not considered, they could disengage from the work and organisation.
Hidden service costs
- Service price may not always be more cost-effective than keeping the service in-house as the billed amount could be higher than that of assigning employees for the project and/or includes hidden costs associated with the contracting arrangement.
- If contractors are not able to increase value, i.e. effectiveness, efficiency, quality, equity, etc., the Government would likely incur a much higher cost for the same service than if it were performed by public sector employees.
- Engaging a contractor requires additional resources be diverted to managing the contractor. These costs include, but are not limited to:
- Defining the service;
- Choosing the provider;
Managing the relationship and contract (which if not properly defined can result in contract extensions and greater than expected costs).
- Contractors may lack the operational context or history that public sector employees have, which is knowledge that might not be easy or appropriate to transfer to the contractor. This should be considered a risk to the contractor’s performance.
- Contractors may experience operational hurdles that inhibit them from adequately performing their function, or inadvertently increase the cost of the work to be performed.
Recommendations before engaging contractors
Recommendations for consideration are explained below
- Employ governance systems that increase effectiveness and achieve project success. These include but are not limited to clear designation of roles, responsibilities, delegations and authority, as well as a single point of accountability.
- Clear definition of requirements to avoid cost overruns.
Key performance indicators
- List clear key performance indicators that are linked to project/task outcomes to lessen chances of project overruns and to ensure a better quality of work from start to finish.
- Set up good systems for rules and guidelines for additional expenditure. Hidden expenditure such as travel and accommodation could, if left unchecked/unregulated, make up a significant portion of the final costs; therefore a good system with rules and guidelines for additional expenditure can help control overall project costs.
- Assign employees to work alongside contractors and consultants to ensure that in advance of contract-end:
- new knowledge and skills are transferred to the in-house team
- there is handover of lessons learned.
- Create a knowledge transfer process and commit to its execution to ensure that the public sector is both a recipient and a contributor to skills and innovation exchange.
What you need to know when engaging contractors
We offer a guidance document for managers engaging contractors and consultants to perform public sector functions. It explains different employment arrangements, and why it’s important for the code of conduct to apply to anyone working in government.