Govt to slash $69m from recruitment agency spending

Photo / Thinkstock

The government is eyeing savings of at least $69 million a year from what it spends on recruitment agencies by cracking down on the number of firms its uses.

The Ministry of Economic Development has put out a tender document, seeking suppliers of external recruitment services in the latest all-of-government procurement push. It seeks to slash at least 30 per cent from its annual $230 million spend on recruitment agencies.

By cutting back on the number of recruitment agencies used by government departments, the MED expects to get better value for money by using a centralised account to reduce costs across the public sector and cut back on duplication.

Pickings have been slim for recruitment agencies over the past four years as companies tightened their belts and unemployment rose as high as 7 per cent in the first quarter of 2011. That's seen the local arms of agencies report success successive losses since the global financial crisis in 2008 on dwindling revenues.

Hudson Global Resources (NZ) hasn't been profitable since 2007 when it reported earnings of $3.5 million on revenue of $103 million, and its 2010 statements showed a loss of $3.3 million on sales of just $50.5 million in the 12 months ended Dec. 31.

Similarly, Rubicor Group, whose stable of brands includes Powerhouse People and Wheeler Campbell, last made a profit of $2.2 million in the 12 months ended June 30, 2008, on revenue of $39.3 million, and has since reported three deficits on lower sales.

MED's Centre of Expertise "is seeking to engage with reputable providers that will recognise the collective annual expenditure of over 210 eligible agencies when treated as a single desirable customer, and provider a competitive bid to reflect that status," the document said.

The government has been on a drive to cut costs in the public sector and has already achieved savings through cross-agency procurement process for its external legal advice, international and domestic air travel, and office equipment and passenger vehicles.

If the tender is successful in achieving its targeted $69 million savings, that would be the biggest cut so far, with annual cost reductions of some $23 million for the office equipment and passenger vehicle procurement, $18 million from the legal advice, and $10 million from air travel.

The successful recruitment firms will win three-year contracts with two rights of renewal for one year each.

The services up for grabs include placement of permanent, temporary and contract staff in Wellington, Auckland and Christchurch. Additional services include psychometric assessments technology solutions, interview support and assessment centre facilitation.

The tender doesn't include recruitment services outside the major centres, specialist job, or executive searches.

The MED estimates the size of the procurement to be 2,551 permanent staff placements, 10,844 temporary staff with some 2.83 million hours of assignment, 1,403 non-IT contractors for about 22,000 weeks and 925 IT contract staff for some 14,100 weeks.

The contract will also win the mandate to hire processing staff for next year's census, after the February earthquake prompted the government to delay the five-yearly survey just two weeks before it was scheduled to take place.

The MED's request for proposals closes at the end of business on May 14, and successful bids will be told in June and July of this year.