Qld govt contracting plan shocks industry

Qld govt contracting plan shocks industry

Summary: Queensland's ICT industry is up in arms about a state government proposal to handle the recruitment of all IT contractors through one master vendor to drive down contracting costs.


Queensland's ICT industry is up in arms about a state government proposal to handle the recruitment of all IT contractors through one master vendor to drive down contracting costs.

I really think there'll be some blood on the walls on this one.


The details on the proposal currently being put to industry have not yet been made completely clear, but the government has aired the idea in a presentation this week that current supplier panel arrangements be replaced by a master vendor that would draw on a database of contractors.

According to the government's presentation, the panels currently draw from the same pool of candidates and result in higher costs for suppliers, which is an increase in costs and an inconsistent experience when dealing with the government. The government pointed to figures that put upper-range wages for IT contractors at $338,430, a tick more than the Prime Minister at $330,000.

Despite those figures, the plan has the industry up in arms, especially as it flies in the face of the consultation the government has done in the market on the issue. The presentation saw some unhappy faces. "Both sides wouldn't look at each other. It was getting pretty vehement," one source said. "I really think there'll be some blood on the walls on this one."

Some think the proposal will reduce the quality of contractors brought in, others believe it will mean a migration of skilled workers out of the state. Many are waiting until the government clarifies issues before they speak for or against the proposal.

A report that the industry lobbying group, the IT Working Group, and the Queensland Government Procurement Office commissioned from Queensland-based analyst firm Longhaus to look into the government's engagement with the IT contracting industry did not recommend the model being proposed.

That type of model could be positive as it would form an industry standard, according to Longhaus' report, which has entered the public domain, yet the database could end up being just another place for contractors to list their services with specialist panels springing up as soon as skills couldn't be found in the database.

Longhaus found the rates charged by many companies were necessary to cover costs. "Industry perceptions surrounding excessive margin costs charged to government (as a percentage of daily rate charges), as a potential source of savings is unfounded. Contrarily, the 20 to 40 per cent charged by labour-hire or recruitment management companies, and the 50 to 100 per cent for consulting companies would appear to represent reasonable business practice and be commensurate with the cost of operation, value and risk mitigation provided by both sub-sectors within the ICT labour industry servicing the Queensland Government," the report said.

The problem, according to Longhaus, lay in the way the Queensland Government was engaging with the industry. Often the government would bring in a worker to do a job, who would then bring in more contractors in a snowballing effect that ends in the government bearing higher costs than it had planned.

Instead of the government bearing the risk for such projects, Longhaus believed it should forge deals with firms for a specific job, so that if the requirements for that job expand, it is the industry that bears the risk if more manpower was required than expected.

The government could also automate the renewal of the tenures for long-term contractors who are treated like public servants and employed by the government for years, but are contractors and are paid as such. Another recommendation was to have a standard engagement model instead of a variety of sanctioned panels, non-standard contracts and direct agency acquisition.

Topics: Data Management, Big Data, Government, Government AU, Outsourcing

Suzanne Tindal

About Suzanne Tindal

Suzanne Tindal cut her teeth at ZDNet.com.au as the site's telecommunications reporter, a role that saw her break some of the biggest stories associated with the National Broadband Network process. She then turned her attention to all matters in government and corporate ICT circles. Now she's taking on the whole gamut as news editor for the site.

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  • Idea.

    How about this crazy idea.

    Actually pay more than 70K a year for skilled IT staff and you wont need 70% of you workforce on contract.
  • They just don't get it

    The Qld State Government have blown so much money on high priced consultants in failed projects like Corptech, they now want to blame the entire contracting market to cover their own mismanagement. Once again the Qld Government is big on spin, and small on delivering results.
  • on the other side of the coin

    of course no contractor has ever milked a contract either.....seen that more than once as well

    of course no recruitment agency has ever ripped off one of it own contractors...seeing that a lot atm as rates 'reduce' for contractor but not the agency margin...

    doesn't excuse bad management by government but there are games played on both sides of this issue
  • Can't manage, don't manage

    "Often the government would bring in a worker to do a job, who would then bring in more contractors in a snowballing effect that ends in the government bearing higher costs than it had planned."

    In other words, the government are hopeless project managers. It's left to the contractors to try and bring in more competent people to fix broken projects while the government PM's dither about in the corners.
  • Flavour of the day

    Maybe the contracting industry should pay an ex-pollo lobbyist 300k to push our case forward!

    Or better still just do it the Nuttal way - bribe the minister.
  • Back to the future

    Principles ignored
    - Widely consult and then ignore the advice.
    - implement when the market turns up and skills again become scarce (out of synch)
    - drive scarce skills out of Qld
    - institutionalise a monopoly
    - treat IT like a commodity
    - compare IT with the construction industry
    - pass the parcel
  • How about a range then?

    "The government pointed to figures that put upper-range wages for IT contractors at $338,430"

    What does that really mean? There's one senior exec earning that much? What about showing us the range of all the figures for all of the contractors (not consultants, but contractors)? That doesn't make for such good ammunition though does it?

    One of the reasons contractors exist is that short term they are cheaper than permies.

    If you want long term IT support employ permies as they're cheaper. If your budget forcast doesn't allow for employing people, change it; don't go whinging about the money you're forcing yourself to spend and try to dictate T&C's to your only fall back for workers.
  • How about a range then

    Generally Govt has no idea of the full cost of staff, their systems are chaotic as are their reports. Once all overheads are factored in there is no way the PM costs $330k. The comparison is laughable and is in fact dishonest. To take one or two exceptions and then use that as the basis for argument is ludicrous. The same applies to their point that contracting organisations are making up to 45% profits. Utterly clueless when it comes to commercial interpretation or management - Goethe once stated - "there is nothing more terrible than ignorance in action" - how apt.
  • Electricity too?

    Let's go back to having one electricity supplier for the state too. Obviously they now think competition doesn't work.
  • Yes

    Great idea and they could call themself (((Telstralectric))), rofl.
  • really, no idea??

    So when I was working on the SSS project & the contractors whinge about getting $800 to $900 / day of the $1300 to $1500 charged to the Govt, I'm expected to believe that it costs these companies over $500 / day to manage their contracting staff. Goodness me, who'd want to run a consulting company.
    Give us a break. If you have a real gripe about the proposal, that fine. But please don't bleat about it just because the cash cow suddenly looks like running low on milk.
  • $338k!

    I'm a QLD Government Contractor - please point me in the direction of these $338k contracts!!! Certainly nothing like this where I've been working...
  • Agree

    That kind of markup is excessive and it does lead to contractors and employers complaining.

    The point is that's a consulting company you're talking about there, not individual contractors. Consulting companies DO charge a huge overhead, but they also provide a comfort factor to govt departments that they are dealing with one entity to deliver project resources. They are paying for that comfort/risk factor.

    Individual contractors from contracting agencies have a far lower %age for the agency - typically 15-30% - that's often negotiable.

    Dealing with a single agency will wipe competition for contractors rates out. The agency are likely to keep their cut at a high rate and force the contractors to accept lower rates. There's enough bad IT people floating around to accept those rates and provide a second rate service, giving contractors a bad name.

    Any contractor worth their while, wouldn't accept that, so the govt ends up with cr*ppy contractors, who basically do it because they couldn't get a permanent role.

    As a tax payer and a professional with a passion for seeing things done properly, that bothers me.

    If you're happy to see your tax dollars lining the pockets of pollie driven quango's go and stick your head in the sand. Other's prefer to bleat when the wolves are around.
  • 338K!

    Me too! I'm obviously contracting to the wrong place..over 3 times what i'd ever get!
  • Indemity insurance

    remove the need for contractors to carry $5m professonal indemnity insurance. Allow independents and small contractor groups to bid for work. Currently its loaded for large American ex accounting firms to bid to get on panels. Panels exist so purchasing officers don't have to deal with independents and small australian companies. Remember permanents are the remains left after the outsourcing debarcles.
  • Electricity too?

    The comparison is ludicrous. The Qld Government doesn't have hundreds of parasitic one man band electricity suppliers as it does with ICT recruitment companies.
  • licence to print money

    These agencies provide little added value for the added cost. I resented every cent I was forced to pay (essentially a tax) to them because of the panel requirements.
    Forget the external panel completely! Create an internal one using the experienced HR staff already in the public system, and fund them from the SAVINGS in unecessary overheads.
    Let private industry pay for these private HR specialists.
  • How can this possibly align with State Procurement Policy?

    Here are three of the 6 "benefits of procurement" the State Procurement Policy seeks to deliver:
    * building Queensland’s regions by ensuring competitive local businesses receive a fair go
    * making government supply opportunities more transparent, and easier for business to access
    * growing a diverse and innovative economy

    It's hard to see how the proposed single panel arrangement will benefit anyone except the big multinationals. Who's pulling the strings? The Chief Procurement Office needs to take a good lat at its own objectives.
  • This is all payback

    The industry protested the Gov's commitment to ICT before the last election, and all this did was to piss off the Minister.

    Now he is giving them payback.

    This is typical Qld Politics, maybe the industry should have hired a few ex cabinet ministers to lobby on its behalf.
  • licence to print money

    Agree wholeheartedly - I work for a large financial institution, and since they've allowed us to hire directly by having a payroll agency charge us $20 p.day per contractor to process the payroll I've saved my business unit $100s of thousands in the last 12 months. The panel agencies never added any value and I'm please to not have to put up with them any more.