TL;DR – Not the first time.
With the recent collapsed PIE structure incident still fresh in my mind and another viral post by netizen Clarence Chua calling the Government out on their online procurement system GeBIZ, one can’t help but think about the prevalent and detrimental practice of “cheap-sourcing”.
But what exactly is cheap-sourcing?
Clarence’s Facebook post aptly terms it a “race to the bottom” where service providers who have lost out on previous bids, cut prices moving forward to be able to win future bids and prompting other service providers to do the same to beat the competition. To ensure decent profits, service providers cut corners through suppressing quality and worse of all, possibly under-paying workers.
A comment on Clarence’s post echoed this succinctly:
Furthermore, this is not the first time that someone has called on the Government to review this practice.
MP Zainal Sapari has called out the government more than once to practise best-sourcing so that low-wage outsourced workers like those in the cleaning, security and landscape industries are not shortchanged.
In 2016, Zainal wrote a few blogposts on this issue where he called for the Government to review their outsourcing guidelines.
Zainal first said this where he criticised management guru Peter Drucker,
“Do what you do best and outsource the rest!” was the advice given by the legendary business and management guru, Peter Drucker, who started the phenomena of ‘outsourcing’ in the late 1990s, where companies buy services (or goods) by contract from a service provider (or supplier).
Outsourcing makes good business sense because companies can focus on their core business and save costs by buying from the cheapest source (also called ‘cheap sourcing’). Over time, the outsourcing craze gained momentum and even government agencies and statutory boards started buying essential services such as cleaning and security. Many proclaimed they were able to save on costs compared to providing it themselves. (But do you know the cost savings were due to low wages paid to the workers?)
He pointed out that many contracts of service providers have loopholes that work to the employers’ advantage or are “one-sided” contracts which are the most detrimental to workers.
In order to save manpower costs and maximise profits, service providers might pay low basic salaries, not give over-time pay or omit medical benefits etc. With such low margins, there is also little or less incentive to embark on productivity efforts that would be beneficial in the long run.
With so many trickle-down effects, he moots that a mindset change is in order and that the Government should take the lead in changing this trend of “cheap-sourcing”.
In my last blog post, I shared my thoughts on how irresponsible outsourcing by organisations or companies could depress or lead to stagnating wages. Cheap sourcing could cut the margins of service providers and hence, give them very little room to provide better employment benefits other than those required under the Employment Act.
So, cheap-sourcing can lead to many outsourced or fixed term contract workers being shortchanged. They might receive low basic salaries with no yearly increment, overtime pay will be low too since it’s based on basic pay. They are likely to be denied of 13th month bonus, and some may even be denied of medical benefits outside the scope of the Employment Act.
But if not cheap-sourcing? Then what?
During an On The Record interview with 938LIVE’s Bharati Jagdish, Zainal Sapari reiterated that outsourcing should be done responsibly and in the form of “best-sourcing” rather than “cheap-sourcing”.
This means that contracts should be evaluated on other aspects as well such as quality, value-for-money, productivity aspects, being worker-centric etc. To better encourage productivity, longer service contract periods will also see service providers being able to better recoup their investments in productivity initiatives.
Better employment terms would also see happier and more motivated workers which could up quality.
Perhaps all these have got to do with the fact that Zainal grew up in a low-income family himself. His own father once worked as a cleaner earning $600 a month, and his mother worked as a hospital attendant in the past too.
He’d shared these in the On The Record interview,
“It is my pet peeve to see people taking advantage of a vulnerable group of workers. I always imagine if it is my mother or my father who is being abused, how would I feel?
It was much later, when I was grown up that my father shared that sometimes he had to borrow money from his siblings, especially when school started at the beginning of the year.
Growing up as a teenager, I seldom got to see my father. He would go to work at around 5am when I was still sleeping. By the time I came home, he was not there and when he came home from work, it was already 11pm, and I would be asleep.
Sometimes I feel very aggrieved if I see people taking advantage of the vulnerable group, and I think that partly explain my deep sense of conviction, my drive to really do my best to make a difference to the lives of low-wage workers.
In that same interview, Zainal spoke of how it took him years of lobbying and years of talking to different stakeholders just to create awareness of the issue. You see, sometimes nothing will move unless there is enough awareness and this just won’t happen overnight.
Did you know what DPM Tharman eventually said to Zainal?
“Zainal, why doesn’t the Union decide on a salary for the cleaners and we think of a way for the Government to pay according to what NTUC would recommend?”
And, the Progressive Wage Model (PWM) happened.
He’s not stopping here. Zainal Sapari just published another blog post today championing for the rights of term contract workers, a problem aggravated by cheap-sourcing.
A mindset change towards “value-based” decision making is certainly the way forward whether for Government or private contracts. And having the Government take the lead will signal a change and propel it further. As individuals, the onus also lies on us to be aware of the vicious downward spiral of cheap-sourcing and move towards better procurement practices.
This is one of those things where it takes a village.