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Private sector involvement in government business under fire

FIVE years after the Court Government contracted out a range of facilities management functions to the private sector, savings remain at the “lower end” of initial forecasts, according to a report tabled by Auditor General Des Pearson.

The contracting out of non-core business support services or facilities management include the management of buildings and property maintenance (including break down repairs), property services including security, cleaning, hospitality and engineering services.

Until 1996, approximately 58 per cent of government buildings and facilities were built, repaired and maintained by the Building Manage-ment Authority (BMA) as a service to other agencies throughout the State.

Traditionally, government trading entities entered into their own agreements for asset maintenance while the departments relied on the BMA and its in-house day labour force.

In 1996 the move to the user-pays policy devolved budgetary control to agencies.

The in-house BMA was disbanded and a panel of facilities managers was contracted to the Department of Contract Management Services (CAMS)

In March this year, CAMS implemented a new facilities management arrangement titled “Western Property” which, when fully implemented in May next year, will give agencies the flexibility to purchase individual services, such as cleaning, from a range of preferred private suppliers.

About $66 million was spent on facilities management under CAMS contracts in 1999-2000.

CAMS was abolished on July 1 and its building management function was transferred to the Department of Housing and Works.

Mr Pearson’s report also expressed concern that some agencies were not keeping adequate records to determine if the changes in 1996 had saved taxpayers money.

Facilities management contracts run by CAMS realised an overall saving of 6 per cent ($2.7 million) on metropolitan breakdown repairs over a three-year period.

“There is an expectation for greater savings under the recently-announced Western Property arrangement, where agencies will be able to select their own facilities managers or to contract service provi-ders direct,” the report says. “However, to ensure success, it is incumbent on agency managers when contemplating moving to or from a facilities management arrangement to undertake comprehensive financial and risk analyses and to ensure that their financial management systems enable them to monitor and scrutinise facilities management expenditure.

“Additionally, the potential for improving contractor performance by including incentives and penalties in future contracts should be fully considered.”

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