Tan Kin Lian's Blog: Outsourcing of work

Tuesday, July 01, 2008

Outsourcing of work

Some government agencies identify their non-core activities and engaged in outsourcing the work. Some examples are cleaning of premises and answering of telephone calls.

Most people are familiar with the tendering approach, as follows:

> specify the standard of work
> award the work to the contractor that gives the lowest cost.

The consequence is that the contractor will find the cheapest source of labour, including foreign workers. Eventually, the standard of service deteriorates. Wages continue to be depressed.

There is another way of approaching this outsourcing of non-core work, as follows:

> specify the contract price, including the wages to be paid to the workers
> award the work to the contractor that is able to give the best standard of service.

If a specified wage is given, the focus is to select the best candidates for the job. This will ensure better standard and quality of service. The contractor's task is to ensure that the human and other resources are organised efficiently to meet the rapid changes in the business environment.

I hope that more attention can be paid to this new method of outsourcing, which is based on quality of service, rather than reducing cost.

7 comments:

HLK said...: To be honest, I am not in the opinion that this approach will work out. People will keep finding cheaper resources and this is unavoidable.; July 01, 2008 9:45 AM
SingaSoft said...: i find this suggestion funny, in particular that we must specify the wages paid by our outsourcing partners...this definitely cannot work to its best intentions.

However, I agree that quality should be maintained, but costs must also be reduced...this is the essence of higher productivities and better innovations.; July 01, 2008 11:30 AM
LivingRoom said...: We should also allow people to quote lower price as they may have ready resources at hand to meet the contract specifications...e.g. technology/machinery, etc. So lower price may not necessary mean lower quality. Lower price will benefit consumers....; July 01, 2008 11:44 AM
whattodo said...: People should sit down and think what is the best way to do outsourcing. There is definitely to bring other factors in the consideration other than price along. As we know most people are lazy, no one will dare to put their head on the chopping board and try out new ways of doing things.; July 01, 2008 2:06 PM
Wealth Journey said...: Unless the Public Service Admin decides to change the approach of evaluating performance, your suggestion of quality first, cost second might not work.

All the ministries have performance benchmark and the main emphasis for budget is the Economic Value Add. Thus, reducing cost is a major component in increasing the EVA.

The other argument might be that increasing quality will reduce unnecessary costs in other areas. However, for the jobs that you are looking at (cleaning and answering phone calls), there is no significant cost-savings derived as we are talking about outsourcing the low-value tasks.

But for higher-value added tasks like IT consulting or Marketing or some of the core functions, the tender will be looked at not from the cost alone but rather from a whole range of evaluation criteria (quality is one of them).; July 01, 2008 8:49 PM
Tan Kin Lian said...: If competition is on price, wages of the lower income workers will continue to be depressed, and will fall below a minimum level. The weak workers have low bargaining power.

In other countries, the low income workers are protected by:

> minimum wage
> trade union bargaining
> social security assistance.

In these countries, they do not have to accept the low wages.

But, in Singapore, they have no choice. It is important for government agency to set a good example for other employers to follow.; July 01, 2008 9:39 PM
SingaSoft said...: I think in business & competition, we cannot be expected to be kind...

It is better to be cruel (but not against law) in business & competition, but be kind by giving back to society via other means like charity/donation.

Bill Gates could probably be one of the examples...

I do agree that we should try to protect the low-income workers...but I don't agree to do it by setting minimum wages. By setting minimum wages we make businesses less flexible and less efficient in allocating resources...

Setting minimum wages is a setback especially to an open & small economy like Singapore...

We must find other ways to protect the low-income workers.; July 01, 2008 9:53 PM