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Opening Address by Mr Hawazi Daipi, Senior Parliamentary Secretary for Education and Manpower at the "STF Seminar on Best Sourcing Practices", 11 April 2012, 2pm, NTUC Auditorium, One Marina Boulevard

Employment practices
Mr Zainal Sapari, Director, Unit for Contract and Casual Workers, National Trades Union Congress

Mr Tan Kwang Cheak, Assistant Executive Director, Singapore National Employers' Federation

Distinguished Guests

Ladies and Gentlemen,

Introduction

  1. Welcome to this tripartite seminar on best sourcing. I am heartened by your participation and interest in learning more about best sourcing.

    Best sourcing for an Inclusive Singapore
  2. Building an inclusive Singapore is one of the central themes in this year's Budget Statement. In line with this, the Government has announced various measures to step up adoption of best sourcing. We are making a determined push to tackle the problems caused by cheap sourcing, which can lead to poor service quality, depressed wages and poor employment standards.
  3. Among the measures is the commitment that the Government, as a major buyer of outsourced services, will take the lead in best sourcing. The Government will best source from only accredited cleaning companies and well-graded security agencies.
  4. At the same time, MOM will work with NEA and MHA to tighten the Clean Mark accreditation scheme for cleaning companies, and the grading framework for security companies. In particular, we will make sure that accredited companies provide the employment standards, productivity and quality service befitting of them.
  5. NEA has also announced plans to licence all cleaning companies within two years. This will further raise standards in the industry across the board.
  6. While these steps by the Government are important, private sector buyers have a key role to play too, as they comprise the lion's share of demand. For best sourcing to take root deeply and widely, and to improve the employment terms and conditions of outsourced workers, a concerted effort by a broad-base of service buyers is paramount. Service providers must also play their part.
  7. Building a truly inclusive Singapore through best sourcing rests with all firms, and it starts with how each and every one of us here treats our suppliers and the employees of our suppliers.

    Best Sourcing Brings About a Virtuous Cycle
  8. It is in the interest of all parties to support best sourcing. This is because best sourcing is not just best for the worker, but also best for buyers and best for service providers. Let me explain.
  9. When service buyers treat quality as one of the key factors when choosing between service providers, instead of awarding bids simply based on price, they win better overall value for themselves. By focusing on the level of service to be delivered instead of headcounts, service providers will be empowered and motivated to develop more productive ways to deliver quality service, such as more advanced security solutions, better cleaning methods, or more efficient manpower deployment.
  10. Enlightened companies focus on quality because they understand that, in the end, it actually reduces total costs. First, when service providers are more productive, they can pass on cost savings to the buyer. Second, when service providers can make more productive use of their workers, they can pay more and give them better benefits, raising morale and performance, while reducing absenteeism and slip-ups. As a result, buyers expend fewer resources micro-managing non-performance, and avoid any negative effects which service non-delivery has on their primary business.
  11. Service providers too benefit from best sourcing. A key challenge today is that we cannot find enough security officers or cleaners. Some companies have told me that they are unable to bid for contracts because they cannot find enough workers.
  12. We know that we cannot further increase our reliance on foreign workers. We need to make cleaning and security jobs more attractive to Singaporeans.
  13. By offering greater scope for productivity and job enlargement, best sourcing can enable service providers to offer better jobs and thereby attract the workers they need. I therefore hope that service providers will resist the temptation to respond to cheap sourcing by putting in exceedingly low bids which they can only fulfil by cutting wages and benefits should they win the bid.
  14. I am also a town council chairman. I am glad that my town council has collectively decided that we will not buy from the cheapest bidder. We have found that it has worked well with the company continuing to provide services for residents. Best sourcing is a good principle to go by, and I encourage all of you to see how best sourcing serves you best.
  15. With benefits to all parties – buyers, service providers, and workers – I hope companies will also include best sourcing in any corporate social responsibility (CSR) plan they develop. Many companies aim to be a good corporate citizen by supporting charities, sports, the arts, or other worthy causes. But, as they say, charity begins at home. Any CSR plan should consider the well being of the company's workers, both those directly employed and outsourced. Best sourcing should be an integral part of any CSR initiative.

    More Support for the Implementation of Best Sourcing
  16. There is no better time than now for service buyers to embark on best sourcing, as more resources are available to support you in its implementation.
  17. First, after consultation with tripartite partners and industry stakeholders, the revised Tripartite Advisory on Best Sourcing Practices was launched in January this year. It provides greater clarity on the best practices that service buyers can adopt in best sourcing.
  18. Second, an accompanying step-by-step guidebook for service buyers was also launched to provide service buyers with detailed pointers at every step of the way; from drafting the service requirements, evaluating the tender bids, to the selection and management of the service provider.
  19. If you are not sure how to phrase your tender specifications or contract, the guidebook gives you sample text. If you do not know how to develop a price-quality matrix, the guidebook provides a template to get you started. The guidebook helps identify pitfalls. For example, some service buyers may not be aware that the quantum of liquidated damages (LD) must be based on a genuine pre-estimate of the loss that it serves to compensate. An unreasonably excessive amount of liquidated damages (LD) that is clearly aimed at punishing the party in breach will be treated by a court of law as a penalty clause which the courts will typically not enforce. In other words, imposition of an LD that is greater than the loss suffered is likely to be rendered invalid if challenged in a court of law.
  20. A copy of the step-by-step guidebook for service buyers has been provided to all participants today. Please refer to it for more useful pointers.
  21. Third, some service buyers who find it difficult to assess which service provider is better often fall back on price as the differentiating factor as a result. With the Government now accrediting cleaning providers and grading security agencies, buyers can easily identify service providers with higher professional standards.
  22. Fourth, NTUC provides funding under the Best sourcing Initiative (BSI) to help kickstart best sourcing efforts. If your company wants to implement best sourcing but finds the initial updating of standard operating procedures, tender specifications and service contract resource-intensive, the BSI serves to defray these initial costs to help get you started.
  23. As Chairman of the Tripartite Committee for Low-Wage Workers and Inclusive Growth, I am pleased to learn that NTUC has doubled the maximum grant that a service buyer can receive under BSI from $75,000 to $150,000. NTUC's Unit for Contract and Casual Workers (UCCW) will be providing details on their revamped BSI funding scheme in their presentation this afternoon. I encourage you to tap on this funding and approach UCCW for assistance.
  24. With such a web of support in place, I call on all buyers to step up and play your part to best source. SNEF has launched a service buyer pledge, whereby service buyers pledge to adopt the Tripartite Advisory on Best Sourcing Practices. Over 30 companies have signed the pledge to date. This is an easy first step which I encourage buyers to take. SNEF has made it even easier for you to sign the pledge by providing a copy of the pledge form in your conference handouts today. Take advantage of this opportunity to support best sourcing.

    Conclusion
  25. This afternoon, you will hear more about the benefits of best sourcing, the resources to help companies adopt best sourcing, and the actual experience from two buyers, one from the leisure industry, and another in the healthcare sector. For those of you new to best sourcing, I hope the sharing and resources provided at this seminar will spark your company to embrace best sourcing as the best way forward.
  26. I wish you all a fruitful seminar.