Proportion of Public Procurement Projects' Contract Price Targeted at Wage Increases for Outsourced Workers

Parliamentary Question by Mr Zainal Sapari:

To ask the Minister for Finance (a) what is the estimated proportion of public procurement projects that factor in percentage increases in contract price targeted at wage increments for outsourced workers; and (b) what is the percentage and amount of liquidated damages enforced upon service providers by Government agencies in their service contracts for cleaning, security and landscaping.

Parliamentary Reply by Minister for Finance, Mr Heng Swee Keat:

It is not feasible for individual buyers to verify the pay practices of their service providers.  What the Government has done since April 2013 is to award cleaning contracts only to accredited service providers, who are required to pay their workers according to the Progressive Wage Model (PWM).  The PWM takes into account the National Wages Council’s (NWC) recommendations on wage increments.   The Government also supported the adoption of the PWMs for the security and landscape sectors when they were rolled out to these sectors subsequently.

In addition, for new tenders called since 2013, approximately three quarters of government contracts in the cleaning, security and landscaping sectors have explicitly included a reminder to tenderers to factor in NWC’s recommended wage increments into their tender bids.  Many agencies also allowed tenderers to present their bid price in year-by-year break down, which enables them to factor in cost increments, including annual wage adjustments.  We are advising all agencies to adopt such good practices for their cleaning, security and landscaping tenders.

To ensure wider industry adoption of good employment practices such as providing workers with annual wage increments, the Government encourages Tripartite efforts, or efforts by relevant independent bodies, to accredit service providers who adopt such practices. The Government is prepared to accord more favourable consideration for accredited service providers.

As for the enforcement of liquidated damages, based on our survey, about 30% of the cleaning, security and landscaping contracts awarded from 2014 to 2016 (or 91 contracts) have imposed liquidated damages due to failure of service providers to perform according to contractual requirements such as service non-performance. The total amount of liquidated damages collected was approximately $4 million, which was about 0.5% of the total contract value of the 91 contracts.