Gov Out


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Gov Out

  1. 1. Government Outsourcing Corruption Prevention Department
  2. 2. Government Outsourcing Corruption Prevention Department Independent Commission Against Corruption May 2001
  3. 3. CONTENTS Pages Introduction 1 Principles 1 Key Control Elements 2 Planning and Implementation 2 Policy and Procedures 3 Segregation of Duties 3 Conflict of Interest 3 Transparency 3 Contracting-Out System 3 Pre-qualification 4 Tender Document 4 Tender Invitation 5 Tender Procedure 5 Tender Evaluation 5 Contract Conditions 6 Contract Administration 7 User Feedback 7 Complaint Channel 7 Disciplinary Measures 7 Payment Procedure 8 Performance Appraisal 8 Management Information System 8 Internal/External Audit 9 Code of Conduct (Service Provider) 9 Further Advice 9 Annex – Summary Control Checklist 10-14
  4. 4. Government Outsourcing Introduction Government departments face the challenge of meeting ever increasing demands for public services with limited resources. In recent years, many of them have looked to outsourcing as one of their key organizational strategies. Government outsourcing is defined in this guide as the contracting out of services/functions which have been carried out by direct staff of government departments, e.g. management services of government properties and testing of vehicle roadworthiness. This guide is intended to supplement the Government Stores and Procurement Regulations and other relevant government instructions/circulars in assisting government departments to properly control the outsourcing process to prevent corruption. Principles Government departments which outsource their services/ functions should bear in mind that they remain accountable to the public to ensure effective and efficient delivery of the outsourced government services by the service providers. Moreover, for successful outsourcing, government departments concerned should aim for :- • a fair, open and accountable contract award and administration system; • effective partnering with the service providers based on specific objectives, rights and obligations; and • high standard of staff integrity of both the government departments and service providers. 1
  5. 5. Key Control Elements The outsourcing process must be founded on an open, equitable and accountable system. For effective prevention of corruption, the government department concerned should incorporate the following elements in its outsourcing process :- • thorough planning and implementation; • clear policies and procedures; • effective segregation of duties; • avoidance of conflict of interest; • system transparency; • open and fair contracting-out system; • effective, specific and enforceable contract conditions; and • effective contract administration. On the other hand, the service provider should be committed to :- • providing quality service; • supervising its staff properly; and • observing ethical practices. Planning and Successful outsourcing hinges on thorough planning and Implementation effective implementation. Management should incorporate, where appropriate, the checks and balance suggested below in the overall outsourcing plan, and ensure their full implementation. 2
  6. 6. Policy and Procedures While the Government Stores and Procurement Regulations provide general guidance on procurement of services, clear departmental policies and instructions should be laid down for outsourcing and administration of service contracts. Segregation of Duties To provide adequate checks and balance, the duties and responsibilities for pre-qualification of service providers, preparation of tender specifications, tender assessment, contract award and administration should be segregated. Conflict of Interest The outsourcing government department should ensure that its staff strictly follow Civil Service Bureau Circular No. 19/92 on the handling of conflict of interest in the appointment and administration of the service provider and should issue to them reminders periodically and on each outsourcing exercise. It is advisable for the government department to supplement the Civil Service Bureau Circular with departmental circulars setting out particular scenarios of conflict of interest for reference by staff. Transparency To promote openness, it is important to provide transparency of policies, procedures and practices. To facilitate monitoring by service users as well as members of the public, details of the services/procedures/practices should be widely publicized, e.g. through the department concerned, information leaflet, media and on the internet. Contracting-Out Necessary safeguards should be in place to ensure that the System procurement is free from corruption and malpractice and that it meets the principles of value for money, transparency, open and fair competition and public accountability. 3
  7. 7. The contracting-out process should follow the Government Stores and Procurement Regulations and relevant instructions/circulars. Pre-qualification To ensure that only service providers of the right calibre are employed, the government department may prefer a pre- qualification exercise to identify these service providers. In such a pre-qualification exercise, the management should ensure that : • there are clear and objective shortlisting criteria and a well-defined marking scheme; • there are sufficient number of shortlisted service providers to ensure competitiveness; and • if the pre-qualification exercise aims to identify the service providers to be included on an approved list, they should be regularly recruited by open invitation. Additions to/ deletions from the list as well as performance appraisal of the service provider should be based on objective and pre- determined criteria. The invitation for pre-qualification and the evaluation process should follow the same principles of the tendering procedures described below. Tender Document Sufficient tender information should be given to potential bidders to enable them to assess their interest and to prepare a conforming bid. To provide a level playing field, the tender specification should be drawn up in an objective and descriptive manner; performance specification rather than brand names should be stipulated. An outline of the tender evaluation criteria and a warning against bribery should be included in the tender document. 4
  8. 8. Tender Invitation Opportunities for tendering should be open to all eligible tenderers. In the case of a restricted tender, all shortlisted service providers should be given a fair chance to bid. Single tender should only be used in exceptional circumstances and must be fully justified and approved by an appropriate authority, e.g. Government Central Tender Board. Adequate publicity should be given and sufficient time should be allowed for potential tenderers to prepare and submit tenders. Tender Procedure Tenders should be submitted in duplicate and lodged in a secure tender box. The tender box should have double locks with the keys held separately by staff members of an appropriate level. If e-tendering is adopted, the relevant Government Supplies Department procedures should be strictly followed. Tender Evaluation To avoid allegations of preferential treatment to a particular tenderer, tenders should be assessed based on pre-determined criteria. Personal prejudice will be reduced if an evaluation is subject to a well-defined marking scheme. If only pre- qualified service providers are invited to tender, the lowest conforming bid should be recommended for acceptance; any deviation must be justified and approved by an appropriate authority independent of the assessment team, e.g. a committee or Government Central Tender Board. To ensure objective assessment and to afford greater protection against bias or manipulation in open tendering, the two-envelope tender assessment system should be adopted. The envelopes containing the "quotation" should only be opened after the technical proposals have been properly assessed. 5
  9. 9. Contract Conditions For effective contract administration and prevention of abuse, the contract should clearly specify the rights and obligations of both the outsourcing government department and the service provider as follows : Government Department • service requirements; • schedule of rates for the services (if applicable); • handling of contract variations; • rules and details of deducting or withholding payment for unsatisfactory services; • termination of contract for persistently poor performance or serious contract breaches; • conditions for contract extension (if any); • warning clauses against the acceptance or offer of advantages; and • authorized access to information by Director of Audit for audit purpose. Service Provider • reporting requirements; • handling of confidential information; • declaration of potential conflict of interest; • the adoption of a code of business and staff conduct; and • management structure and administration system. 6
  10. 10. Contract An effective and comprehensive system of site inspections Administration comprising both regular inspections and surprise checks by the government department concerned should be established. Supervisors of the staff concerned should also conduct frequent surprise checks to guard against possible collusion between their staff and the service provider. To put in place an accountable system, proforma inspection records should be maintained, irregularities should be reported, and instructions should be issued to the service provider for timely remedial action. Where feasible, electronic devices may be employed to continuously monitor the performance of the service provider, e.g. CCTV monitoring of security service. User Feedback For effective external monitoring, feedback from users should be obtained regularly or at the time of the service delivery (if feasible) by the government department concerned, e.g. via completion of questionnaires upon receipt of service or periodically (i.e. opinion survey) to be returned to the government department direct. The feedback should be used to facilitate supervision and performance appraisal of the service provider. Complaint Channel To further facilitate external monitoring by users and members of the public, there should be effective complaint channels, e.g. hotline or provision of complaint forms addressed to the government department direct, which should be adequately publicized. Procedures should also be laid down for handling complaints received. Disciplinary Measures There should be a well defined and effective disciplinary system to ensure that appropriate action is taken against a service provider whose performance is unsatisfactory, e.g. a 7
  11. 11. de-merit point and payment deduction system, which should be made known to the service provider and strictly administered. Payment Procedure To avoid fraudulent claims through corrupt dealings, the service provider should be required to provide billing details on a timely basis, which are subject to audit as follows : • upon receipt of the invoice, the service provided should be verified against the relevant records; • payment deductions during the period should be verified and applied; • where feasible, the user should be asked to confirm the payment details; and • invoices should be submitted to an independent section (e.g. the accounting or finance office) for double-checking before payment. Performance Appraisal A formal performance appraisal system, taking into account results of supervisory checks, user feedback and complaints, should be set up to enable the performance of the service provider to be evaluated in a fair, objective and systematic manner. Supervisory staff should compile assessment reports with the aid of a standard proforma periodically, say, quarterly, and at the end of the contract, which should be examined and endorsed by a more senior staff member to ensure fairness. Management To facilitate the senior management's monitoring of both the Information System performance and supervision of the service provider, a management information system should be set up, keeping key information and statistics on the administration of the contract, such as details of surprise inspections and 8
  12. 12. documentation audits, irregularities committed by the service provider, actions taken, payment deductions and ratings of performance appraisal. Internal/ To ensure that the system in place is in order, to further External Audit improve its cost effectiveness and control, and to act as a deterrent against irregularities and abuses by staff or the service provider, independent internal audit of the outsourcing process should be performed periodically. Where feasible, external audit should also be arranged to further enhance the independence of the system review and bring in new dimensions for improvement and prevention of abuse. Code of Conduct Staff of the service provider are performing a public duty in (Service Provider) the delivery/discharge of the outsourced government service/ function. They should observe the stringent ethical requirements of a government servant. Service providers should, therefore, be required to compile a staff code of conduct governing, inter alia, acceptance of advantages, declaration and avoidance of conflict of interest, etc. for compliance by their staff. Further Advice This module is one of a series of Best Practice Modules prepared by the ICAC Corruption Prevention Department. The measures outlined above are not exhaustive and should be tailored to meet the specific needs of individual government departments. Government departments requiring further advice from the Corruption Prevention Department in their outsourcing processes, particularly in assisting service providers to draw up their business or staff code of conduct, should call Tel. No. 2526 6363. 9
  13. 13. Annex Summary Control Checklist The following checklist outlines the major areas for control. If a "No" answer applies to any of the questions, a control weakness requiring special attention and proper justification may exist. Planning and Implementation Yes No Are the outsourcing activities well planned? Are effective checks and balance built into the system? Are sufficient resources committed to effective implementation of the plan? Policy and Procedures Are clear departmental policies and instructions laid down for the outsourcing activities and administration of the service provider? Segregation of Duties Are the duties and responsibilities for prequalification of service providers, preparation of tender specification, tender assessment, contract award and administration effectively segregated? Conflict of Interest Are staff and persons concerned reminded to declare conflict of interest periodically and on each outsourcing exercise? Transparency Are the outsourcing policies, procedures and practices effectively publicized? 10
  14. 14. Yes No Are service users and members of the public informed of details of the services provided and the complaint channel for unsatisfactory services, e.g. via information leaflets, the media and/or the internet? Prequalification Are there clear and objective criteria and a well-defined marking scheme for shortlisting service providers? Are there sufficient number of shortlisted service providers to ensure effective competition? Are there objective criteria for maintaining the approved list of service providers? Tender Document Are the service requirements clear and specific enough for effective tender comparison and subsequent contract administration? Are the tender specification objective, fair and reasonable? Are the tender evaluation criteria and a warning against bribery included in the tender document? Tender Invitation Are all shortlisted service providers given a fair chance to bid? Is single tender properly justified and approved by an independent authority? 11
  15. 15. Yes No Are adequate information and time given to potential tenderers to bid? Tender Procedure Are tenders submitted in duplicate and lodged in a secure tender box? Is the tender box fitted with double lock, with keys separately kept by authorized staff? Are Government Supplies Department procedures followed for e-tendering? Tender Evaluation Are tenders assessed against pre-determined criteria? Is the two-envelope tender assessment system adopted? Contract Conditions Are the service requirements clearly and effectively specified? Are the rights and obligations of both contracting parties clearly specified? Are the rules and details of deducting or withholding payment for unsatisfactory services included? Is a probity clause included? Is the service provider bound to adopt a code of business and staff conduct? 12
  16. 16. Contract Administration Yes No Is there an effective and accountable system of site inspections by government staff concerned? User Feedback Is there an effective external monitoring system for the outsourced services? Is feedback from users obtained regularly and/or at the time of the service delivery? Complaint Channel Are there established and well publicized complaint channels? Disciplinary Measures Is there a well defined and effective system to discipline under-performing service providers? Payment Procedures Are invoices submitted by service providers verified? Are payments made by an independent section after double-checking the invoices? Performance Appraisal Is there an accountable performance appraisal system? Does it take into account results of supervisory checks, user feedback and complaints? Is it made known to the service provider? 13
  17. 17. Management Information System Yes No Is there a management information system to facilitate monitoring of supervision and performance of the service provider? Internal Audit Is independent internal audit of the outsourcing process performed periodically? Corruption Prevention Department Independent Commission Against Corruption May 2001 14
  18. 18. J1676