Breaking with tradition

With the huge sums of expenditure involved in sourcing and hiring temps and contractors in the public sector it is not surprising that there has been an array of procurement solutions cropping up in recent years. Big changes in recruitment procurement practice began to surface in government agenda in 2003 with the introduction of the National Procurement Strategy. To further endorse this approach a second directive, The Gershon report called for local authorities to radically review the delivery of services to the public, with the aim of maximising efficiency to streamline and automate procurement processes.

Approved agencies
Traditionally, hiring staff fell upon line managers in public sector organisations, usually on an ad-hoc and largely unregulated basis from whichever agency the team or individual may have favoured. This approach could lack consistency and sometimes resulted in excessive spending, purchase decisions based on relationships rather than results and a lack of transparency in reporting.To address these concerns, Preferred Supplier Lists (PSL’s) involved the HR department compiling a shortlist of approved agencies from which the line manager could choose from. To generate a final ‘approved list’, a tender process would be conducted that invited a range of companies to bid for the business. Although dictated by European law that local authorities spending in excess of £150k should undertake a tender process and advertise the business opportunity, presently organisations such as housing associations are not obliged to do this.

Types of recruitment tools
In recent years newer procurement methods have evolved to tackle the inefficiencies in traditional recruitment and it is through Vendor Managed Services (VMS) and framework agreements that this has been addressed. VMS solutions are run by independent organisations or recruitment agencies that have set up more stringent methods, usually with the aid of IT to improve the process and potentially make cost savings.So what are the various options and how do they compare? Vendor Managed Services is the umbrella term generally given to an organisation that manages the recruitment supply process. This can vary drastically depending on the type of contract and can range from master vendor agreements whereby one recruitment agency is appointed and given preference over other agencies to submit CVs. If the master vendor cannot fulfil the requirements in a given period of time, they will contact their “2nd tier” suppliers i.e. other selected agency. The master vendor would be the interface between you and the other suppliers.The selection process sets out clear metrics which the suppliers have to fulfil that are usually based on speed of response, low costs and geographical coverage. The overriding benefits are that you can outsource the work involved rather than manage it in-house gaining speed of response and lower costs. It also aims to control maverick spend and provide more accountability.A caveat should, however, be applied to VMS as you can sacrifice direct contact with the other agencies and communication can sometimes break down which could result in a lack of understanding from the 2nd tier agencies supplying staff. Another worry is the quality of the candidates supplied. With margins sometimes squeezed, agencies can actually loose money when supplying staff and do not have as much incentive to submit the best people.Other types of agreement include neutral vendor whereby a similar process is implemented as outlined above, however, instead of having one main agency managing the process and enjoying priority over other suppliers, all agencies are equal.Matrix is a leading staffing vendor management specialist serving the public sector in London. Adam Herron, Director of Matrix, comments: “With VMS you can achieve properly managed preferred supplier lists, comprehensive management information, invoice consolidation and the ability to better manage risk. These benefits follow direct cash savings and efficiency gains of up to 12 per cent and perhaps most astoundingly: the ability to reduce agency worker headcount by up to a third if organisationally viable.” The trend for local authorities to opt for VMS solutions seems to indicate there are big benefits for these solutions.

Framework agreements
Framework agreements are another method of procuring recruitment and are run by independent organisations who manage the tendering process to select a recommended shortlist of suppliers. Often the agreements are compliant with European law and aim to tackle all the key drivers as above such as cost efficiencies and streamlining recruitment practice. The Recruitment and Employment Confederation (REC) has called for a review of public sector framework agreements. Tom Hadley, director of external relations at the REC, said that such agreements were part of a regrettable trend driven by procurement professionals, which focused on saving money rather than on quality. “Framework agreements may provide cost savings, but are they delivering value for money?” he said. The reason for this is that they can exclude smaller recruiters who do not have total national coverage that could be perfectly compatible but lack the size of the larger agencies. However, framework agreements do offer all the benefits of VMS including speed of response and transparency.

Whether you are planning the VMS route or sticking with a PSL, whichever recruitment suppliers you shortlist, you are unlikely to reap the promised cost and service benefits unless you set up rigid structures and processes to manage suppliers at an early stage. If your aim is to reduce costs, then you should set metrics to deliver cost savings. If, on the other hand, you are seeking service quality benefits, commercial terms should be linked to some objective measure of quality improvement. You should look at the volumes of recruitment you are expecting to help decide which method to select, larger volumes and higher expenditure are more likely to warrant a VMS or framework agreement. However, you can still keep it in-house and use a PSL. If you are considering this option then it is imperative you ensure you have the resource and commitment to oversee and run this. The key to in-house recruitment is to look at the benefits of E-Procurement and ensure your suppliers’ agreements are set-up to meet these metrics. Consider the variables below that set newer procurement methods apart:Service Level Agreements should include:

  • Faster response times
  • Fully screened and vetted candidates including visa and CRB checks
  • Reduced costs
  • Equal Opportunity monitoring.

Compare and analyse
Technology can be used to create greater transparency and report critical information such as; the number of CVs or interviews for each role and ratios which demonstrate how effectively agencies are filling roles. Aside from this the financial information can provide cost comparisons and can be used for top-line analysis. You should look at the consolidation of invoicing, bank transaction fees and other process efficiencies.Tom Hadley, Director of External Affairs, from the REC says “Both public and private sector employers are looking at the way in which they procure recruitment services. Master vendor and vendor neutral arrangements are an option although there are a number of issues that must be addressed when looking at the implications of such systems. In part, it is crucial to ensure that any such managed services approach is sustainable and does not mitigate against the quality of provision.”At Morgan Hunt when working as a consultancy supplying staff direct to the client, our aim is to work to stringent quality measures. We advise the client to ensure the staff they are being supplied are referenced and CVs submitted are accurate. We provide conversion ratios on the number of CVs that are interviewed and then placed. When working with master vendors our relationships with them are of prime importance and good communication ensures we fully understand the end-client’s requirements. As a government organisation you should ensure you demand stringent measures to protect against bad service. Also, you should conduct regular audits to ensure suppliers are actually reaching the targets you have set.

Morgan Hunt is a leading a public sector recruitment company and works as a supplier for Vendor Managed Services (VMS), various Framework Agreements and PSL’s. As associate director Michelle Weir manages all of the contract business.Tel: 020 7419 8900

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