In case you didn’t know already, the opportunity to make contractor margin on Government contractors in their second year of work has now been deemed practically impossible. I was actually hoping for a fun and frivolous blog this morning, however, given I’ve had to cover every aspect of the “All of Government Talent Acquisition Services” contract from its (mis)conception to present, I am duty-bound to continue. Like an inherited gypsy curse, my lot is to write about a panel I have zero interest in being on. Anyway, here we go…
To start at the beginning, and to simplify many wordy documents, the situation is as follows: The initial tender asked respondents (recruitment agencies) to give two contract margin rates. One for year one, and one for year two. Given some very ambiguous/deceitful wording, recruitment agencies dropped their pants appropriately. Given how long Contractors can hide in government, two year plus contracts are fairly common. Margins were set appropriately low based on 1) the volume of work (which never came), and 2) the fact that many contracts run for more than a year.
Next up, NZTA paid some consulting firm (with our money) to interrogate the AoG TAS contract. What they found, to the delight of all those who don’t understand recruitment, is shared with The Ministry of Business and Innovation (MBIE).
MBIE then send a communique to all Government agencies highlighting a big loophole in the contract which would save the tax payer millions (more on this “saving” later). The memo states the following:
“When a participating agency has entered into a TSO for a term of 12 months, and the agency has a continued requirement to engage the contractor beyond the initial 12-month period, there are two options available under the TAS contract:
1 The participating agency may seek to extend the engagement with the provider. The provider fees will reduce to the second-year rate
2 The participating agency may consider transitioning the contractor to a direct-contractor arrangement…. The agency will need to engage a provider to perform all payroll services”
So in layman’s terms, if the original Talent Service Order (TSO) was 12 months, a Government agency no longer has to pay your margin. Instead, they can go to any payroll provider on the contract (i.e. the cheapest), and run this contractor directly. Given this, no Government department, no matter how dumb, would go with option 1.
Next, some recruitment firms, brave enough to stick their head above the parapet, said “Hold up. How is this fair? Why ask us for a second year rate? Why use contradictory wording to suggest we’d still get margin?“. The RCSA, proving themselves of value and worth currently, then engaged with a barrister called Dr David Cooper KC to establish if sensible recruiters who don’t want to go bust have a leg to stand on.
The response from the KC may be in your bosses inbox, but if you haven’t read it, it’s not good. Essentially, there are some key phrases which would suggest that many recruiters’ understanding of the contract is incorrect. Unlike good contracts, it is clear that the contract itself is open to very different interpretations. However, the addition of the phrase “the Participating Agency may engage a former Contractor as a Direct Contractor and no conversion fee shall apply” has destroyed any argument that we can make margin on year two.
The final chapter to this (for now) is that a number of Recruitment Agencies will probably try and take MBIE to court over this. However, this requires solidarity and a fair bit of hostility between MBIE and the Recruitment Agencies. Do you have the balls and money for that comrade?
So some thoughts to consider;
- Going forward, no sane-minded government agency will ever offer a “TAS” longer than 12 months. Therefore, agencies having a year 2 rate is a total irrelevance. There is no “year 2”.
- Although this is a kick in the balls for recruitment firms imbedded in that government contracting space, there is opportunity. Unfortunately, this opportunity is within payroll services, and this would only “benefit” about 3 big firms who can make money out of payrolling. Should Accordant want to be opportunistic, they could canvas government to pick up all these payroll gigs. Would this make them popular with other recruitment firms? Is this the direction any of us want this industry to head? Is this a moral approach? Don’t ask me – I once tried to kill and eat a swan.
- Is this best for New Zealand? If I had a quality IT contractor in a Government department, in month 11 of their contract, I would work until fingers bled just to place them elsewhere. On principal alone, I’d rather place them on no margin elsewhere than have MBIE steal my livelihood. How is this good for New Zealand?
- On the above, I’ve heard talk of agencies collaborating to create a shared talent pool for Contractors about to “serve” 12 months in government. Imagine that. An opt-in service for contractors placed by one recruitment firm, who then introduce them to all of their competitors. Why hold on to a candidate who no longer makes us money? Better to let someone else place them, and you’ll receive a few contractors in return. Sounds brutal right? Welcome to recruitment baby.
- MBIE, which has both “business” and “employment” in its name clearly does not understand either. This constant attempt to spend less at any cost is turning Wellington into a boarded up, post-apocalyptic wasteland. Government departments won’t be more efficient with worse staff. And to get good staff, you need good recruitment. The AoGTAS contract does not make for good recruitment.
Anyway, this blog is far too long, so I’m going for a lie down.
^SW
