1.         As at 31 Mar 07, the public sector has market-tested about 23% of its non-strategic functions since the start of the Best Sourcing initiative in 2004. 70% of these market-tested functions were subsequently outsourced to the private sector.  The value of these contracts amounts to $2.1 billion. The remaining 30% of the non-strategic functions continued to be performed by public officers as the market-test affirmed that it was the better value for money approach.

2.         The Best Sourcing Initiative is about the public sector’s continual efforts to remain focused on functions which can and should only be done by the public sector.  It also instills fiscal discipline on functions performed by public sector.

3.         Best Sourcing does not assume that outsourcing is the best outcome for a non-strategic function being market-tested. Rather, agencies decide for themselves whether to continue performing the function or to outsource it, depending on the bidders’ responses to the market-testing.

4.         Thus far, common non-strategic functions that have been market-tested include cleaning services, facilities management, IT as well as other support or operational functions. Some of those that have been outsourced or in-sourced recently after the market-testing are highlighted in the Annex.

5.         While Mr Teo Ming Kian, Permanent Secretary (Finance) is satisfied with the progress made thus far in Best Sourcing, he reminded public agencies to exercise due diligence in Best Sourcing:

“The public sector needs to continue to be prudent stewards of public monies.  Best Sourcing is a good way of achieving the most cost-effective acquisition of public services, by extending the consideration of service providers for services that are traditionally done in-house to external providers.  It is not simply an outsourcing exercise.  To achieve value for money, all factors including non-monetary ones such as the quality of services delivered and the capability of the tenderer to fulfil the contract, are just as important in Best Sourcing. "

Annex

The following are some highlighted projects the public sector has done in FY06:

MINDEF – Strategic Outsourcing of MINDEF Shared Services

MINDEF has strategically outsourced its Shared Services to ST Electronics.  These functions were previously undertaken by D'eXecutive Services (DES), a division in MINDEF that performs human resource services, finance services, and NS administration services. The outsourcing is expected to yield a potential of 3 to 4% cost savings to MINDEF and the SAF over the 10-year contract period. In addition, MINDEF expects greater service excellence, innovation and cost efficiency in the provision of public services for its stakeholders, partners, including internal customers in MINDEF and the SAF.

Contact Person

Name:                         LTC(NS) VINCENT LYE

Designation:              Senior Manager

                                    MINDEF Shared Services Management Office

                                    Defence Management Group Corporate Office

Agency:                      MINDEF

DID:                            6373-3882

Email:                         vincelye@starnet.gov.sg

Public Service Division (PSD) – Outsourcing of Operations of Government Bungalows

With effect from 1 March 2007, the Public Service Division (PSD) outsourced the operations of the aloha resorts in Changi and Loyang to United Premas for a period of three years.  Previously, these government holiday bungalows were run by PSD as a staff benefit for civil servants. With the outsourcing, the Civil Service will ensure that the resorts continue to serve civil servants well and remain affordable to them.

In terms of staff communication, PSD believes in involving affected staff early. Besides convening communications with the aloha resorts staff on the outsourcing plans as early as 2004, PSD also consulted and kept the unions updated on the progress regularly.  PSD also discussed with their staff about the possible implications on their careers and the training opportunities available to them to help them prepare for the changeover. PSD also met with the unions and obtained their views on how best to help the affected staff.

As part of the preparation for the transition, PSD had given each affected staff training grants for them to learn new skills in preparation for their new careers.  As an additional gesture, PSD also bought medical insurance for all affected staff who could not be re-deployed, to cover them for a period of 6 months after the outsourcing had taken place.

In addition to assisting staff with job placements within the Civil Service, PSD also assisted staff to register with job agencies to find employment in the private sector.

Contact Person

Name:                         Andy Ong

Designation:              Asst Manager, Communications & International Relations

Agency:                      Public Service Division, Prime Minister’s Office

DID:                            6332-7175

HP:                              9737-8335

Email:                         andy_ong@psd.gov.sg

Intellectual Property Office of Singapore (IPOS) – In-sourcing of Office Operations Services

IPOS decided to market-test the function so as to achieve cost efficiency and greater value for the organisation. Through the evaluation of the proposals, the cost of providing the services in-house was established to be lower than the cost of engaging a private sector vendor. As the outcome did not result in any private sector vendor being able to deliver the services at the same service level more economically, IPOS decided to retain the function. The market-testing exercise was a learning process for IPOS, as the staff learned to be more adaptable to changes and that best sourcing is not equivalent to “outsourcing”.

Contact Person

Name:                         Angela Sim   

Designation:              Senior Executive, Customer & Corporate Communications Department         

Agency:                      IPOS

DID:                            6331 6565

Email:                         Angela_sim@ipos.gov.sg

Inland Revenue Authority of Singapore (IRAS) – In-sourcing of Processing Center

The scope of IRAS' Processing Center function includes the opening and batching of incoming returns and correspondence, imaging of tax returns and correspondence, and keypunching of return status and financial data declared by taxpayers. Knowing that there are alternative service providers in the private sector, IRAS was motivated to market-test this function to determine if it could achieve greater value for money for this function, in terms of cost efficiency and better service outcomes. To allow for fairer cost comparisons, IRAS conducted an internal streamlining of the function. It is important to determine the cost of individual processes as the service provider may not be able to provide the full suite of services before market-testing the function. There was also the challenge of keeping staff morale high. In evaluating the proposals from the tenderers, IRAS took into account both price and non-price considerations before deciding to retain the function in-house as the total cost of outsourcing was not lower than the in-house cost.

Through this market-testing exercise, IRAS is more mindful of the need to continually review and improve their internal processes to strive for optimum efficiency.

Contact Person

Name:                         Mrs Lee Leng Kiong

Designation:              Director, Corporate Communications Branch      

Agency:                      IRAS

DID:                            6351 2090

Email:                         lengkiong@iras.gov.sg