30 November 2012

City of Sydney Council PSA ‘win’ equals a loss for most recruiters


Another pointless waste of time concluded last week with the announcement of the 39 recruitment agencies that were ‘successful' in winning a place on the City of Sydney Council Temporary Staff Recruitment Panel.

Industry news service, ShortList, reported that the Council's process opened in February this year with submissions closing on 13 March 2012. It's taken eight months to sift through all the proposals to come down to the lucky 39 who were selected in one or more of the twelve categories of staff nominated by the Council.

The Council's total spend on temporary staff in the previous financial year was $7.5 million. Using 15% as a (speculative) average margin, we have a total of $1.3 million per annum in gross profit that's available, factoring in a moderate growth in spending for the 39 agencies. As an average weekly gross profit that equates, in round figures, to about $650 per agency.

As with most of these mega-winner tenders, there's bound to be a disproportionate amount of the business going to a minority of the panel. For the sake of the argument, let's use the Pareto Principle and speculate that 20% of the panel gain 80% of the business.

In other words, 8 agencies generate an average annual gross profit from the City of Sydney Council work of around $130,000 and the remaining 31 agencies have to make do with $8,400 each for their year's work.

This financial return has to compensate for:

a) Reading, preparing and checking the tender submission

b) Reading and legal advice on the agreement

c) Visiting the various hiring managers to understand job requirements and undertaking OH&S assessments

d) Sourcing, assessing and briefing temporary staff then managing their performance during their assignment

e) Managing WorkCover claims

f) Chasing payment, managing cash flows and financing overdraft facilities

Looking at all of the above, you would really want to be one of those agencies in the top twenty per cent otherwise it's yet another instance of an enormous amount of time and money being invested in a PSA/tender process that fails to deliver a profitable return for a vast majority of participating  recruitment agencies.

I appreciate that there are numerous compliance issues that a Council, as a large employer of a diverse range of skills, needs to cover but surely there is a more time and cost effective way to do this?

Lottery ticket anyone?

2 comments:

  1. Totally agree Ross. Also, the end result is that City of Sydney and panels of this nature receive poor service levels, as after no returns recruiters turn their attention to easier and more profitable clients. I can't think of any global organisation that needs 39 recruitment providers, let alone City of Sydney Council. Can you imagine the hours their procurement team have spent managing the tender process? Not a great return for shareholders (the rate payers of Sydney)!

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  2. Craig, ratepayers are not by any stretch of the imagination shareholders. All local councils in Australia are private corporations, and the profits do not go to "ratepayers". Being a private business, a councils primary concern is not ratepayers, but maximising profit, as with any business entity or body corporate. If this was not the case you would be experiencing a very different society. There are still very good reasons that council rates are not lawful and everyone should be deeply questioning these taxes.

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