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Last updated: 28 May 1996

Outsourcing: Principles, guidelines and good practice

Please note: This document is for reference purposes only and is no longer considered by the APS Commission to be current. It may contain good practice advice and/or advice on the transitional arrangements between the 1922 and 1999 Public Service Acts.

Foreword

This document, Outsourcing: Human Resource Management Principles, Guidelines and Good Practice continues the series of human resource management publications issued by the Public Service and Merit Protection Commission. It is designed to provide agencies with the legal framework within which they must operate and offers guidance on how agencies can best pursue the application of good practice in the area of outsourcing.

These documents, with their focus on principles and good practice rather than on prescriptive and complicated directions, reflect the devolved environment in which the Australian Public Service now operates. They recognise that, while legal requirements must still be satisfied, sufficient scope exists to allow agencies flexibility in meeting those requirements.

I hope that you will find this document of assistance, both in ensuring that the legislative requirements in relation to outsourcing are satisfied, and in helping you to achieve good practice in managing the staffing aspects of outsourcing.

The nature of the public sector employment framework is currently under review, and major amendments to the Industrial Relations Act 1988 are before the Parliament. Agencies will be informed of any changes to the legal and policy framework as they occur.

 

Dr Peter Shergold
Public Service Commissioner
September 1996

Introduction

The Commonwealth Public Sector is striving to achieve efficiencies, improve customer service, be more competitive and implement best practice while simultaneously reducing costs. Outsourcing is one means of achieving these objectives.

Outsourcing, which is also known as contracting out, refers to an arrangement where an agency has an activity or function performed by a private sector provider, or by another public sector or APS organisation. Under such arrangements the original agency retains overall responsibility for the activity. The main purpose of outsourcing is to allow an agency to concentrate on its core activities and to provide better value for money. It may also be pursued as part of an industry development policy.

The previous Government adopted an approach which supported consideration of outsourcing in cases where it would enhance the efficient delivery of government programs.

Outsourcing of APS activities is now taking place at an increasing rate. It has been extensively used by Commonwealth agencies, mainly in the areas of construction, business and property, transport and storage, communications, health education, museums, libraries, cleaning, gardening, training, marketing information and public relations, and in the information technology area.

Agencies should seek advice from central agencies on any pending policy or legislative changes which may affect the future management of outsourcing exercises. Appendix C provides further information on the role of central agencies in outsourcing exercises.

The Industry Commission in its report, Competitive Tendering and Contracting by Public Sector Agencies examined experiences with competitive tendering and contracting (CTC) and sought to identify how, and in what circumstances, CTC can be used to improve the efficiency and effectiveness of government programs. The impact of CTC on employees and their wages and conditions received much attention in the inquiry. It also examined key aspects of managing human resources during the CTC process.

The Auditor-General's Audit Report No. 45 1991-92 on the outsourcing of the Department of Veterans' Affairs National Computer Centre emphasised the need for central policy guidance for dealing with the human resource management (HRM) aspects of outsourcing in the APS.

This document draws on some of these findings and has been developed:

• to help agencies to implement outsourcing decisions efficiently and effectively, allowing for the HRM issues arising from the outsourcing of APS activities to be dealt with in a comprehensive and broadly consistent way; and
• to identify principles and approaches in applying good practice to the management of the human resource aspects of outsourcing in the APS.

Outsourcing is a complex process with a number of major elements. This document addresses only one of those elements: how to manage the human resource aspects of outsourcing an activity, after the decision to outsource has been made. The document makes no judgement on whether or not an activity should be outsourced; this is a matter for the relevant decision makers.

The policies, principles and good practice guidelines that are set out in this document have been developed by the Public Service and Merit Protection Commission (PSMPC) in conjunction with the Departments of Finance and Industrial Relations, and after consultation with other APS agencies, in particular the Departments of Defence and Veterans' Affairs.

The document is divided into three parts:

Part One details the principles and legal requirements to be applied in managing the human resource aspects of outsourcing in the APS. It covers the requirements specified in the Public Service Act 1922 (the PS Act) and other relevant legislation, and details two approaches that have been developed for managing the staffing aspects of outsourcing.

Part Two places HRM issues in the overall context of outsourcing and provides good practice guidance on managing the human resource management aspects of outsourcing. It also provides guidance to agencies on the effective application of the principles and legal requirements outlined in Part One.

Part Three provides further information and case studies, based on examples of outsourcing exercises undertaken by agencies, and provides practical advice on the application of the principles and guidelines set out in this document.

The term 'agency' is used in this document to mean any departments and agencies staffed under the PS Act.

Outsourcing

1.1 Definition of outsourcing

Outsourcing refers to the arrangement where an agency decides to have an activity or function performed by a private sector provider, or by another public sector or APS organisation. Under such an arrangement, the agency retains overall responsibility for the activity. The main purpose of outsourcing is to allow an agency to concentrate on its core activities and to provide better value for money. It may also be pursued as part of an industry development policy.

1.2 In-house bids

In-house bids, although technically falling outside the definition of outsourcing, may be an option that an agency may wish to consider.

An in-house bid is developed by the staff carrying out the activity which is the subject of the outsourcing proposal, in competition with commercial tenderers. The in-house bid is usually developed by a team headed by a senior official who understands the different components of an activity, supported by staff selected for their skill and knowledge of aspects of the activity. The team may also include employees' representatives.

When an in-house bid is successful, the activity remains part of the APS, and positions are filled in accordance with normal APS principles and practices. An implementation directive, which is the internal equivalent of a commercial contract, is issued for the conduct of the activity in accordance with the processes set out in the in-house bid. This would include filling of positions, purchasing of equipment, maintenance of finances, etc.

1.3 Transfers of functions and sales of assets

Transfers of functions (for example, from the APS to a Commonwealth authority or to a State or Territory Government) and sales of assets do not fall within the definition of outsourcing. For information on transfers of functions and sales of assets refer to appendix E.

1.4 Major legislation governing outsourcing

APS staff affected by outsourcing decisions are subject to the relevant provisions of the Public Service Act 1922 (the PS Act), Superannuation Acts, and the Industrial Relations Act 1988. The Redeployment and Retirement provisions of the APS General Employment Conditions Award 1995 (GECA) and the Job Security and Redeployment provisions of the Continuous Improvement in the APS Enterprise Agreement: 1995¯96 (referred to in tandem in this document as'the relevant redeployment and retirement provisions') deal with the management and entitlements of staff who are excess to requirements, including as a result of the outsourcing of an APS activity. (For further details including good practice advice, refer to the PSMPC's publication Management of Excess Staff Situations in the APS).

1.5 Principles underlying the management of the HRM aspects of outsourcing

The principles that underlie the efficient and effective management of the HRM aspects of the outsourcing of an APS activity are as follows:

Ensure fair and equitable treatment of all staff affected by the decision

This principle is central to the success of good people management. The Government recognises the value of staff and will ensure that staff are treated fairly and equitably in any outsourcing situation. To help facilitate this, staff and their representatives will be consulted on issues affecting staff as a result of the outsourcing of Commonwealth functions. An integral part of the implementation process will be the development and utilisation of a communications strategy. Privacy and natural justice will need to be considered as part of this process.

Provide a degree of certainty about the approach to be adopted so as to assist all relevant parties to make appropriate decisions in relation to staffing matters

The provision of information on the likely employment scenario following outsourcing is crucial in maintaining a transparent process, and in fostering a conducive industrial relations climate. In order to achieve this, agency management will need to clearly understand the objectives of the process and to have developed a comprehensive strategy to effectively achieve these objectives.

Seek to maximise a harmonious industrial environment and minimise the potential for industrial disputation prior to, and during, the changeover to the new provider

The minimisation of industrial disputation and the promotion of a harmonious industrial relations environment enables a smoother and faster changeover to the new provider and a reduction in uncertainty for staff affected by the process.

To achieve this agencies will need to identify industrial issues early in the process and develop contingency plans to deal with any industrial and staffing issues that may arise.

Maintain the viability of the function during the outsourcing process

It is imperative that the viability of an activity be maintained prior to, and during, the changeover to the new provider. For the management of the changeover period to be effective, it will require that all parties are fully informed of their role in the process and the desired outcomes. An effective changeover will reduce the disruption to staff, the new provider and the Government.

Ensure that related processes are focused on achieving the best value for money

Achieving value for money requires a balance between risks and benefits, and an assessment of the most efficient and effective way of delivering a service. Agencies should ensure that the implementation of a decision to outsource is based on achieving the maximum return to the Government in the given circumstances.

Ensure that staff are aware of what constitutes ethical standards and behave ethically in relation to the outsourcing of an APS activity

Public servants occupy positions of trust, power and privilege and ethical standards and values are important because of the resulting obligation not to breach that trust and misuse that power or privilege.

High ethical standards contribute to the efficiency and effectiveness of government and the integrity of the outsourcing process.

The National Commission of Audit has recently endorsed a set of principles put forward by the Management Advisory Board and the Management Improvement Advisory Committee which underline the ethical component of public service activity (see appendix A). Several of these principles are directly relevant to the management of outsourcing exercises and the handling of the HRM aspects of outsourcing.

1.6 HRM matters to be considered when outsourcing an activity

The circumstances of each outsourcing proposal may vary considerably given the particular interests and priorities of the agency involved and the particular industrial context.

The following elements have been identified as relevant to the successful outsourcing of an activity:

• the early involvement of an agency's specialists in human resource management and industrial relations, who are cognisant of the objectives and constraints of the outsourcing exercise;
• a clear identification of an appropriate strategy for dealing with the HRM elements - Clean Break or Phased approach;
• a structured approach based on the development of an HRM plan that supports the commercial objectives of the specific outsourcing exercise. (Refer to section 2.4 in Part Two and appendix B for further information on developing HRM plans);
• allocation of sufficient financial and staffing resources to implement the HRM plan;
• development of a communications strategy which provides for early and ongoing information and consultation with staff and their representatives. (For further information refer to subsection 2.4.2 in Part Two of this document);
• the need to ensure that all staff affected by the outsourced activity are treated fairly and equitably. (For further information refer to subsection 2.4.4 in Part Two of this document);
• effective management of any excess staff under the relevant redeployment and retirement provisions. (For further information refer to subsection 2.4.5 in Part Two and section 3.2 in Part Three of this document);
• the need for agencies to appreciate and seek advice on the operation of the current industrial relations framework;
• the need for new providers to comply with the Affirmative Action (Equal Opportunity for Women) Act 1986. (For further information refer to section 3.4 in Part Three of this document);
• the need for agencies to appreciate the application of the Occupational Health and Safety (Commonwealth Employment) Act 1991. (For further information refer to section 3.5 in Part Three of this document);
• recognition that superannuation benefits are not normally available prior to genuine retirement from the workforce. (For further information refer to section 3.1 in Part Three of this document); and
• the need to avoid making voluntary redundancy payments to any staff for whom jobs and terms and conditions of employment have been negotiated with the new provider prior to, or at the time, the activity is outsourced. (For further information refer to Case Study 2 in Part Three of this document).

1.7 Specific approaches for handling HRM aspects of outsourcing

Experience over recent years has highlighted a range of common HRM issues that arise in the context of outsourcing. This has led to the development of two approaches for handling the HRM aspects of outsourcing, namely:

• the Clean Break approach; and
• the Phased approach.

Each approach provides a discrete set of options for dealing with the people management and industrial relations issues in the outsourcing process. As a general rule, the Clean Break approach is the preferred approach. However, in exceptional circumstances, such as where the viability of the function to be outsourced is critically dependent upon the skills and experience of the existing employees, the Phased approach may be appropriate. It is up to the agency concerned to decide which approach to follow. For further guidance on this issue refer to section 2.7 of Part Two of this document.

It should be noted that in relation to the outsourcing of an activity to another APS organisation or to a Commonwealth or State body, as opposed to a private sector provider, there are some limitations on the full application of these approaches (refer to section 1.8 below).

1.7.1 Clean Break approach

The Clean Break approach does not involve any negotiating of jobs by the outsourcing agency with the new provider. The new provider is free to enter negotiations with affected staff regarding employment opportunities with the new provider. This does not preclude the agency entering into discussions with the new provider about the number of staff required to perform the function. All staff associated with the activity to be outsourced are placed in suitable positions elsewhere in the agency or are subject to the relevant redeployment and retirement provisions.

This approach cannot be utilised if the new provider is an organisation staffed under the PS Act and the organisation requires any of the staff previously involved in the activity to be outsourced.

Under this strategy the following steps would usually occur:

• all staff who cannot be placed elsewhere in the outsourcing agency may be declared excess (after completion of steps required under the relevant redeployment and retirement provisions);
• staff may be redeployed or retired, voluntarily or involuntarily, under the relevant redeployment and retirement provisions;
• there is no restriction on the subsequent employment of former APS staff with the new provider (though there are restrictions on subsequent APS employment);
• members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) who are retired as a result of these processes would usually be entitled to PSS or CSS involuntary retirement benefits. However, persons who elect to accept employment with the new provider, are not considered to have been involuntary retired for superannuation purposes. (For further information refer to section 3.1 in Part Three of this booklet).

1.7.2 Phased approach

The Phased approach provides for staff currently performing the activity to be considered for jobs with the new provider prior to the activity being outsourced.

Under this strategy the following steps would usually occur:

• the agency advises all tenderers that the contract may contain a provision for the new provider to fill vacancies initially from the APS staff currently performing the activity;
• the agency (with assistance from central agencies) negotiates with staff and their representatives on the terms and conditions to be offered to staff accepting employment with the new provider. At the same time, the agency has separate discussions with the successful tenderer;
• successful APS applicants who accept a negotiated job with the new provider are identified prior to the activity being outsourced. This ensures that these persons do not receive an offer of voluntary redundancy and a job with the new provider prior to the activity being outsourced;
• APS staff who obtain a position with a private sector provider resign from the APS. Special provisions apply where the new provider is another APS agency or a Commonwealth or State Government body (for further information refer to section 1.8 below);
• where staff choose to accept a job with the new provider and that provider is in the private sector, staff can no longer contribute to the PSS or the CSS. A range of superannuation options is available to those staff which ensures that all PSS or CSS benefits accrued to the date of outsourcing are able to be preserved; and
• APS staff who remain with the agency and who cannot be placed in another suitable position are covered by the relevant redeployment and retirement provisions.

1.8 Variations to the Clean Break and Phased approaches where the new provider is an APS organisation or a Commonwealth or State body

1.8.1 Outsourcing an activity to another APS organisation

When the new provider is an organisation staffed under the PS Act and the new provider requires additional staff to perform the activity:

• these staff should be obtained in the first instance from amongst the appropriately skilled staff of the organisation currently performing the work, and these staff are either:
  -transferred to the new provider under section 50 of the PS Act; or
  -transferred by the Public Service Commissioner, under section 51(3) of the PS Act, in the interests of the efficient administration of the Service;
• any staff moving to the new provider become the responsibility of that organisation; and
• staff not required by the new provider should be managed under the relevant redeployment and retirement provisions.

1.8.2 Outsourcing an activity to a Commonwealth or State body

Movement of staff under the Phased approach from the APS to a non-APS Commonwealth authority as a result of the outsourcing of an activity is effected under section 81C of the PS Act. For further information, refer to appendix E.

Where a non-APS Commonwealth authority successfully tenders for an activity, APS officers who move to employment with the new provider may have certain rights of return to the APS. Further information on these provisions is provided in section 3.3 in Part Three of this document.

In circumstances where a State Government body is the successful tenderer for an outsourced APS activity, there is no provision in the PS Act which enables the compulsory transfer of staff to the State. However, s.87J of the PS Act provides a process for facilitating the voluntary movement of staff in certain circumstances and provides officers with certain rights of return to the APS. For further information, refer to section 3.3 in Part 3 and appendix E.

Human Resource Management (HRM) - An intergral element of outsourcing

Prior to embarking on an outsourcing exercise, it is good practice for an agency to develop a corporate strategy or framework to ensure a co-ordinated approach to the HRM aspects of outsourcing. An example of such a framework is the one developed for the Department of Defence's Commercial Support Program.

Ideally, the corporate framework should outline the policy and guidelines to be adopted by an agency in outsourcing and provide a template for the development of a project plan specific to the outsourcing exercise.

The Management Advisory Board's Contracting for the Provision of Services in Commonwealth Agencies, (December 1992) includes a summary of suggested steps to manage the competitive tendering process. While these steps precede the development of an HRM strategy they are worth restating.

• Consider whether it is appropriate to contract out an activity after taking account of public interest, accountability and control issues.
• Become familiar with the services being offered by outside bodies, including the private sector, other departments and agencies.
• Plan the use of competitive tendering in the agency.
• Consult staff and their representatives and keep affected staff fully informed.
• Identify the best in-house option.
• Establish a competitive tendering strategy to match needs with market capacities.
• Seek expressions of interest from in-house and industry (including other government agencies).
• Seek tenders from in-house and industry, including other government agencies (except for IT requirements where particular government outsourcing policies apply).
• Evaluate tenders and award contract.
• When an in-house bid is selected, the bid becomes the operating budget for the activity.
• When an outside bid is selected, have transition plans developed with staff and their representatives concerning the redeployment of existing staff and the implementation of any redundancy arrangements.
• Monitor the performance of the contract.
• Conduct reviews of the in-house or contract arrangements. Incorporate contract review procedures into the program's and organisation's evaluation cycles.

2.1 The need for a specific HRM plan

The management of staff affected by a decision to outsource an activity is a critical and integral part of any outsourcing exercise. HRM issues have a major bearing on the successful conduct of an outsourcing exercise.

While some of the HRM issues will have been addressed in the development of the corporate strategy, it is essential to develop a specific HRM plan to ensure that attention does not focus exclusively on the commercial aspects of an outsourcing decision.

The earlier the HRM issues are identified and addressed, the more likely it is that staff and their representatives will have an understanding of the reasons for, the processes involved in, and the opportunities that may arise as a result of the outsourcing exercise. Consequently, staff will be better informed to make decisions about their future, and better able to contribute in a positive sense to the outsourcing processes.

The flow chart places HRM in the context of an outsourcing strategy.

2.2 Human Resource Management - One element in an outsourcing activuty

Corporate framework for outsourcing
Activity to be outsourced is identified
								Phased or clean break approach A decision to adopt one approach should be made as early as possible in the process
Outsourcing project plan
Financial and resource planning includes: outsourcing timeframes project team-roles and responsibilities budget allocations		Tender process includes: tender requirements developed request for tenders tender negotiations		Human resource management plan includes: communication and consultation with staff and their representatives staff support plan management of excess staff		Implementation plan includes: implementation date/ conditions negotiated relevant redeployment and retrenchment processes contract management responsibilities handover arrangements
								Activity outsourced
								Contract management arrangements established
Communications strategy

2.3 Good practice in HRM in outsourcing

The approaches that an agency takes in managing the HRM aspects of outsourcing need to be consistent with the principles and legal requirements set out in Part One of this document. Human resource managers, line managers and others concerned with the implementation of an outsourcing decision should ensure that they are familiar with those requirements.

Experience has shown that there is a range of practices which will assist the successful management of the human resource aspects of outsourcing and, consequently, the successful outsourcing of the function.

These include:

• a structured approach to outsourcing;
• development of an HRM plan;
• sufficient staffing and financial resources;
• communications and consultative strategies;
• fair and equitable treatment of staff; and
• effective management of excess staff.

Past experience demonstrates that the earlier staff and their representatives are consulted in an outsourcing exercising, the smoother the transition is likely to be. It is also important that agencies involve HRM and industrial relations specialists at the earliest possible stage in an outsourcing exercise.

2.4 Developing an HRM plan for outsourcing

It is good practice for an agency to develop a structured approach to the management of the human resource aspects of outsourcing as soon as it contemplates outsourcing of an activity. The development of an HRM plan is the first step to ensuring that a structured approach is undertaken. This will lead to early recognition of the importance and scope of the HRM aspects to be addressed. Failure to address these issues early in the process may result in delays in implementation, industrial disputation and poor staff relations.

The management of the human resource aspects is only one element to be considered in an outsourcing exercise. Consequently, the HRM plan must take into account the interacting elements of the outsourcing exercise and must be sufficiently flexible to adapt to changing circumstances. It is extremely important to ensure that sufficient lead time is allowed to meet target dates.

Agencies should allocate adequate resources dedicated solely to the development, management and implementation of the plan.

Where the likely outcome is that staff may be declared excess, the HRM plan should ensure the date negotiated for handover of the activity to the new provider takes into account the time frames required under the relevant redeployment and retirement provisions.

Below are the key elements which an agency will need to address when developing an HRM plan. (A suggested checklist is provided at appendix B.)

2.4.1 Resource allocations

Sufficient resources should be allocated to implement the HRM plan. This includes sufficient funding to support these activities.

Initially a detailed analysis of the staffing profile within the work areas affected by outsourcing will provide an indication of the scope and nature of the exercise. The allocation of resources to support the HRM plan will be affected by things such as:

• the number of permanent and continuing staff, as opposed to short-term temporaries, and the extent of higher duties;
• the number of workers' compensation cases;
• the marketability of the skills of existing staff.

Resources could include:

• dedicated project team members who are adequately trained in, and conversant with, the HRM processes and issues associated with outsourcing an activity;
• sufficient resources to support the roles and responsibilities of each member of the HRM project team-this can include facilities, travel, training, retraining, consultancy fees, referral fees (e.g. to the APS Labour Market Adjustment Program (APSLMAP) in the PSMPC);
• sufficient resources to implement the communications plan; and
• adequate personnel resources to process the transfer arrangements to the new provider (where applicable) and the redeployment or retrenchment of affected staff (for example, calculation of severance payments and use of ComSuper for the calculation of superannuation benefits and options).

2.4.2 A communications strategy

There is a need to develop a communications strategy to provide early and ongoing consultation with staff involved in an outsourcing activity and their representatives.

The plan should be dynamic, and properly integrated into the HRM plan. It should:

• clearly state the roles and responsibilities for project team members, including central and regional team members, if applicable, and target dates;
• as early as practicable, provide processes for discussions with staff and their representatives and input to the development of HRM strategies (including the formal consultative requirements under the relevant redeployment and retirement provisions);
• contain a timetable for communication to staff and their representatives on a regular basis (for example, through information sessions, bulletin boards, newsletters) to provide details on:
• the outsourcing processes, the proposed time frame and updates on progress of the activity;
• options available to staff (for example, employment with the newprovider, redeployment);
• support available to staff;
• help manage the impact on other areas of the organisation that may be affected by change, by raising the level of awareness and understanding of staff in areas where displaced staff from the outsourcing exercise may be placed.

An honest approach to the provision of information on the likely impact of outsourcing on staff is likely to contribute to smoother implementation.

2.4.3 Staff support strategy

In addition to regular communication and consultation with staff and their representatives, a staff support strategy should be developed to help minimise the personal stress levels of staff affected by an outsourcing decision. Support mechanisms should be designed to be flexible to meet the needs of different work groups in various ways at different stages of the outsourcing exercise and be provided through both group and individual sessions.

Support may include:

• information and briefings from:
  • APSLMAP
  • ComSuper
  • Australian Taxation Office
  • Department of Employment, Education, Training and Youth Affairs
  • Commonwealth Employment Service
  • Department of Social Security
  • Agency HRM and industrial relations specialists
  • Financial counsellors
• information kits to provide staff with details of their individual financial entitlements, details of counselling and support available, an outline of the relevant redeployment and retirement provisions and, in the case of the Phased approach, the conditions to apply on movement to the new provider;
• resources and opportunities allocated to deal with individual staff issues (to address individual problems, preparation of staff training/retraining plans and provision of counselling and outplacement assistance, if required); and
• skills training and retraining activities identified to assist redeployment (such activities may include the development of interview skills, assistance with the preparation of job applications and curricula vitae, etc).

2.4.4 Fairness and equity

Consistent with the principles of equal employment opportunity (EEO), agencies are responsible to ensure that all staff affected by the outsourcing process are treated fairly and equitably.

Agencies should ensure that:

• all staff have access to training and retraining opportunities;
• all staff are given a reasonable opportunity to compete for positions available for redeployment; and
• any staff with special needs are identified and additional support and advice offered to assist them during this period, for example:
  • the provision of information in languages other than English; and
  • the provision of specialist support and counselling services.

Consideration could also be given to reporting on the effects of outsourcing an activity on members of EEO groups.

2.4.5 Effective management of excess staff

Any staff excess to requirements as a result of outsourcing should be managed in accordance with the relevant redeployment and retirement provisions. Relevant unions must be consulted as early as practicable and in accordance with those provisions.

Agencies should be cognisant of the mandatory time frames stipulated in GECA in developing an outsourcing implementation timetable.

To allow staff to make informed decisions on redeployment and retrenchment options, staff should be provided with:

• information on the formal processes;
• information on the support mechanisms available, for example:
  • estimates of entitlements;
  • professional financial counselling;
  • advice on redeployment opportunities and the support available - the APS Labour Market Adjustment Program may be an appropriate organisation to provide this information; and
• access to advice on employment opportunities outside the APS.
  The early development of accurate staffing profiles of the affected work area(s) will help identify where the critical needs are in terms of redeployment or retrenchment. Staff in some employment categories will have better redeployment prospects than others. Several useful mechanisms that may be adopted are:
• personal approaches to other agencies to canvass likely redeployment opportunities;
• staff surveys - to help plan for the allocation of sufficient resources at critical stages of the HRM plan;
• the use of the substitution arrangements under subparagraph 11.4.12(b) of GECA to create suitable redeployment opportunities for excess staff by allowing the retrenchment of other staff in the organisation.

2.4.6 Contract management arrangements

The agency which outsources an activity retains overall responsibility for ensuring that the activity continues to be performed at the required standard, and in particular that client service needs are adequately met. It is therefore good practice for an agency to include appropriate contract management arrangements in its outsourcing strategy, including the use of experienced staff in the provision of technical advice on the performance of the contract. This will assist in ensuring that the activity is successfully maintained during the handover to the new provider and during the contract period.

2.4.7 Other considerations

In addition to the fundamental elements discussed above, an agency needs to be aware of possible implications of the current industrial relations legislative framework. This is discussed in more detail in Part Three of this document.

2.5 Indicators of good practice in managing the human resource aspects of outsourcing

The following are some useful indicators of good practice which will assist an agency in determining their effectiveness in managing the human resource aspects of an outsourcing exercise:

• defined plans are in place to manage the various aspects of HRM;
• staff and their representatives are consulted and advised in accordance with current requirements;
• staff involved with the implementation of the HRM plan are fully conversant with their responsibilities, the processes to be followed, and the objectives of the outsourcing exercise;
• the process is managed in a timely and cost effective way with minimal industrial disputation;
• staff affected by the outsourcing exercise are consulted and advised in a timely manner and are advised of the possible implications for them - professional advice and support is provided to staff, as required;
• decisions are made in accordance with the HRM principles of effectiveness, equity and accountability and with proper regard to natural justice and privacy considerations;
• the viability of the activity is maintained during the changeover to the new provider;
• legislation and policy requirements are complied with, in particular the relevant redeployment and retirement provisions, and the making of voluntary redundancy payments to any staff for whom jobs and terms and conditions of employment have been negotiated with the new provider has been avoided;
• staff are advised that they have responsibilities regarding official conduct and conflict of interests when tenders are being called; and
• staff do not assist tenderers with their bids.

2.6 The variables that might apply in each outsourcing exercise

The circumstances of each outsourcing proposal will vary considerably in accordance with the interests and priorities of the agency. These variables may include:

• the extent to which the agency has an ongoing interest in the performance standard of the activity. The level of interest may be determined by how critical the activity is to the agency's core business. For example, the performance standard of an agency's computer services may be more critical than for cleaning services;
• whether the skills of existing staff are critical to the continuation of the activity. This may be determined by the specialist nature of the activity, or the length of training or experience required to perform the activity;
• whether specialist skills are required to perform the activity and the availability of those skills in the general labour market; and
• the capacity of the agency to manage the staffing consequences of the adopted approach. An agency's capacity may be affected by:
  • the time frame involved;
  • the number of staff involved in the activity;
  • the cost of each approach, and the organisational costs of supporting them;
  • the availability of sufficient specialist HRM staff to assist on site;
  • whether sufficient resources are available within the agency, or whether assistance may need to be provided through consultancy arrangements;
  • the industrial relations environment;
  • redeployment prospects within the organisation or the APS for the staff involved; and
  • the capacity of the organisation to fund retrenchment and redeployment activities.

2.7 The approach to outsourcing - determining the use of the Clean Break or Phased approach

While it is up to each agency to decide which approach is the more appropriate in the context of a particular outsourcing exercise, the main principle to be followed by the Commonwealth when outsourcing an activity is to minimise transition costs and ongoing liabilities.

As a result, the use of the Clean Break approach will usually be the most appropriate in outsourcing an activity. The Clean Break approach, with its emphasis on not negotiating either jobs or terms and conditions of employment with the new provider, is more likely to deliver a timely and more cost effective outcome for the Commonwealth.

While there may be exceptional circumstances where the use of the Phased approach is desirable (for example where the viability of the function to be outsourced is critically dependant on the skills and experience of the existing employees), the evidence in outsourcing exercises conducted to date suggests that the Phased approach is generally highly resource intensive and costly, both in terms of ongoing commitments for the Commonwealth and the extended time frame involved.

The complexity of the negotiations with tenderers and staff and their representatives on the terms and conditions of staff who accept employment with the new provider should not be underestimated. These negotiations can greatly extend the time frame of the outsourcing exercise, impacting on the organisational costs of outsourcing the function and the overall objective of more effective use of resources. In addition, the highly resource intensive nature of this approach impacts not only on the agency outsourcing the function but also on relevant central agencies in terms of specialist advice on HRM and industrial relations matters.

An agency will need to determine a preferred course of action based on the Clean Break or the Phased approach as early as possible in the process, but it needs to be recognised that the selection of the preferred provider may have an impact on which approach is adopted.

Where an agency identifies a preferred approach before the new provider is known, it may have to modify this approach where the new provider is an organisation staffed under the PS Act or a Commonwealth body (for further information refer to section 1.8 in Part One of this document)

2.7.1 Clean Break approach

The Clean Break approach does not involve any negotiating of jobs and terms and conditions by the outsourcing agency with the new provider. All staff associated with the activity to be outsourced are placed elsewhere in the agency, or are subject to the provisions of the relevant redeployment and retirement provisions.

The advantages and disadvantages of using the Clean Break approach include:

Advantages

1. Administratively simpler
There is no attempt to negotiate jobs and terms and conditions with the new provider. This avoids the heavy demand for resources that can result from having to negotiate these arrangements.

2. Maintains a wider skills market for the new provider
Highly skilled and experienced staff may be those most attracted to a redundancy package. Under the Clean Break approach, skilled staff who take a redundancy package may compete immediately for jobs with the new provider.

3. Reduced implementation time frame
Negotiations on staffing issues are likely to be significantly less protracted than under the Phased approach thus minimising the real costs of transition. This allows wind-down of the activity in the APS, if required, and the rapid re-establishment of the activity with the new provider in line with the essential objective of achieving a better use of resources and the most cost effective delivery of services.

Disadvantages

1. Public perceptions
There may be sensitivities about situations where staff obtain a severance benefit from the outsourcing agency and then, immediately or within a short period, obtain a job with the new provider.

2. Agency liability for redundancy payments
The agency could be liable for high redundancy payment costs if left with a large number of displaced staff who do not have appropriate skills and expertise to obtain redeployment within the APS.

3. Industrial disputation
There may be industrial disputation if the number of excess staff is greater under this approach than it would be under the Phased approach.

4. Continued viability of the activity
If the new provider is unable to retain or recruit staff with sufficient experience and skills, then the continued viability of the activity may be adversely affected.

2.7.2 Phased approach

This approach provides for staff currently performing the activity to be considered for jobs with the new provider prior to the activity being outsourced and prior to invoking the relevant redeployment and retirement provisions.

This approach requires the outsourcing agency to negotiate an agreement with the staff and their representatives regarding the terms and conditions to be offered to staff who accept employment with the new provider. The outsourcing agency will need to negotiate these arrangements separately with the new provider.

An agency should refer to HRM and industrial relations specialists in their organisation for advice on these negotiations.

The advantages and disadvantages of using the Phased approach include:

Advantages

1. Facilitates the agency's interest in ensuring that the activity is continued at an acceptable standard
The employment of appropriately skilled staff who were previously performing the activity will help to ensure that the activity continues to operate efficiently, especially in situations where some of the necessary skills and knowledge may not be available elsewhere.

2. Minimises staff receiving both voluntary redundancy payments and a job with the new provider.
When the filling of jobs has been negotiated between the agency and the new provider prior to the activity being outsourced, the agency can ensure that individuals do not receive a voluntary redundancy payment in addition to a job with the new provider. Case Study 2 in Part Three provides further information on this issue.

Disadvantages

1. Complex and protracted negotiations
This is seen as the main disadvantage to the use of the Phased approach and its impact should not be underestimated. The ability to work within concentrated and reasonably well defined time frames is essential in maintaining the viability of the activity or function while the outsourcing process is finalised. The complexity and potentially protracted nature of negotiations with staff and their representatives and tenderers on the terms and conditions of employment for staff who accept employment with the new provider can greatly extend the time frame of the outsourcing exercise, thus increasing the real costs of transition and compromising the overall objective of achieving better use of resources and the cost effective delivery of services.

There may be additional complexities for organisations who undertake concurrently a large number of outsourcing exercises, in that they may face the risks of industrial action which could bid up conditions or arguments about the flow-on of conditions.

2. Administrative costs
Administrative and resource costs incurred by the outsourcing organisation, and by central agencies, in negotiating with staff and their representatives and in administering any ongoing arrangements may in some cases outweigh the benefits of outsourcing.

3. Agency liability for redundancy payments
The use of the Phased approach will not necessarily obviate the need to make redundancy payments. While it is true that the number of redundancies will generally be less under the Phased approach that under the Clean Break approach, the difference may not be significant.

Other significant Human Resource Management Issues

The following information is provided to supplement issues raised in earlier sections of the document.

3.1 Commonwealth superannuation benefits

Superannuation may be a significant issue for staff considering their redeployment and retrenchment options in the context of outsourcing.

Staff need to be informed that:

• Contributory membership of the Commonwealth's superannuation schemes is not available to persons who are employed in the private sector.
• Superannuation benefits are not normally available prior to genuine retirement from the workforce. Access to superannuation benefits requires a recognised trigger event, such as involuntary retirement (as defined in the scheme rule). Benefit payment merely brings forward a legitimate entitlement that would otherwise have been paid on age retirement from the workforce. There is no increased cost; the issue is one of the timing of access to superannuation benefits. Persons who elect to accept employment with the new provider, or who reject offers of equivalent employment with the new provider, are not considered to have been involuntarily retired for superannuation purposes.
• Increased levels of preservation will apply from 1 July 1997. This means that for Public Sector Superannuation (PSS) or Commonwealth Superannuation Scheme (CSS) members who are retrenched, the amount of immediate cash lump sum superannuation benefits available will be reduced from 1 July 1997. Currently the lump sum option for CSS and PSS members will cease from 1 July 2000, but this absolute cut-off may be reviewed in the light of the Government's wider preservation requirements applying from 1 July 1997. Access to immediate pensions will not be affected.

To assist staff in reaching decisions on redeployment and retrenchment options, agencies should contact ComSuper as early as practicable to enable staff to be fully cognisant of their individual superannuation projected benefits and options.

3.2 Management of excess staff

Staff who become excess as the result of an outsourcing exercise should be managed in accordance with the relevant redeployment and retirement provisions. (Refer to section 1.4 of Part One of this document for details of the Award and the Agreement that apply to excess staff.)

Agencies should be aware that not all staff displaced by the outsourcing of an activity are necessarily covered by the relevant redeployment and retirement provisions. The current provisions do not extend to temporary employees who have been employed for less than one year, Senior Executive Service officers, or to an officer whose probationary appointment to the APS has not been confirmed.

If voluntary retrenchment is being considered for staff who have been displaced by an outsourcing exercise, an offer of voluntary retrenchment may not be available for staff who are on extended leave without pay or unfit for duty. This highlights the importance of developing and analysing the profile of the staff in the affected areas as early as possible.

For assistance and further information agencies should contact the PSMPC's Structural Change Team.

3.3 Part IV mobility rights

Private Sector

The mobility provisions in Part IV of the PS Act do not apply to staff who accept employment with a private sector provider. Staff who take up employment with a private sector provider under the Phased approach must resign from the APS.

Commonwealth and State Authorities

Where a non-APS Commonwealth authority successfully tenders for an activity, APS officers who move to employment with the new provider under the Phased approach may have certain rights of return to the APS, including:

• the right to apply for promotion or transfer to positions advertised in the Commonwealth Gazette and to negotiate transfers to unadvertised vacancies at or below their former APS level;
• the right to appeal against the promotion of an APS officer, if applicable;
• the right to continue contributions to their APS superannuation scheme, or to preserve their benefits in the scheme;
• rights in relations to long service leave entitlements;
• rights to retain recreation leave and sick leave credits; and
• if their employment with the Commonwealth body has been adversely affected, or is to be or has been terminated other than on the ground of invalidity or by reason of resignation, the right to apply for re-appointment to the APS.

These rights of return to the APS may also apply to officers who take up employment in State Government bodies in certain circumstances.

For further information, refer to the PSMPC's publication Mobility provisions under Part IV of the Public Service Act 1922 - Principles, Guidelines and Good Practice. Bodies covered by Part IV are listed on the Commonwealth Managers' Toolbox.

3.4 Affirmative Action (Equal Opportunity for Women) Act 1986

It is Government policy that any organisation which fails to comply with the Affirmative Action (Equal Opportunity for Women) Act 1986 is ineligible for government contracts and specified forms of industry assistance.

The policy is applied to non-complying employers who have been named in Parliament. It is administered by all Commonwealth Government departments and agencies.

To ensure that a preferred new provider is in compliance with the legislation, agencies may obtain a list of non-complying agencies from the Affirmative Action Agency. The list is updated quarterly.

3.5 Occupational Health and Safety (Commonwealth Employment) Act 1991 (OHS(CE) Act)

The OHS(CE) Act defines the classes of people to whom it relates and matters relating to the Commonwealth's duty of care in each case. The classes of people includes contractors, and suppliers of plant and substances to the Commonwealth.

Agencies have an overriding duty of care to take all reasonably practicable steps to comply with the provisions of the Act and should refer to the OHS(CE) Act and Regulations when considering the application of the legislation in each outsourcing exercise.

Comcare Australia is the Commonwealth agency responsible for administering the OHS(CE) Act and agencies should seek advice and further information from Comcare as required.

3.6 Industrial relations legislation

Given that we are in a transitional period in relation to industrial relations legislation, agencies will need to seek advice about the operation of the current industrial relations legislation in relation to the outsourcing process.

The Department of Industrial Relations (DIR) is responsible for administering the industrial relations legislation and agencies should seek advice and further information from DIR as required.

3.7 Role of central agencies

Agencies should ensure that they involve the central agencies (Public Service and Merit Protection Commission and the Departments of Finance and Industrial Relations) as they contemplate outsourcing of an activity. For further information on the role of central agencies, refer to appendix C.

Case Study 1 - The importance of an effective communications strategy

Background

This case study examines the outsourcing of a support service activity from an agency with a large number of regional offices. One hundred and thirty seven staff were involved in the activity, which was located in a country regional centre. There were limited redeployment and private sector employment opportunities in the region and the skills and knowledge of the staff involved were not generally marketable. A number of staff were from non-English speaking backgrounds. In accordance with the relevant redeployment and retirement provisions, staff were offered a choice of redeployment (including retraining, if required) or voluntary retrenchment.

How the process was managed

The Clean Break approach was adopted. Delegations under the relevant redeployment and retirement provisions were held centrally in Canberra; however, the staff were managed locally by the Personnel Section (comprising 1 full-time and 1 part-time officer). The Personnel Section was responsible for the HRM aspects of the outsourcing exercise in addition to their usual duties.

Group information sessions were provided to all staff on the outsourcing methodology and processes under the relevant redeployment and retirement provisions at several stages during the exercise. During these sessions, staff were advised of the lack of employment opportunities in the region. Staff were also provided with extensive financial advice. Briefings by the Department of Social Security and the Commonwealth Employment Service were arranged to discuss employment opportunities and unemployment benefits. Group training sessions on job-seeking skills were conducted by the local TAFE and were offered to all staff. Relevant unions were advised formally of the outsourcing activity and invited to attend these activities.

The majority of staff elected to accept offers of voluntary retrenchment. When the agency sought union agreement to make offers of voluntary retrenchment under the relevant redeployment and retirement provisions, the union notified an industrial dispute. The dispute related to a failure by the agency to look at redeployment opportunities and to provide adequate and timely retraining opportunities.

During the proceedings in the Australian Industrial Relations Commission (AIRC), it became clear that a number of fundamental HRM aspects had been poorly addressed during the outsourcing process.

Insufficient resources

Although an appropriate level of resources had been allocated to manage the outsourcing exercise at the central office level, the same level of resources was not available locally. The local personnel staff were required to carry additional work associated with the outsourcing exercise, and it was not possible to provide adequate individual attention to the staff concerned.

Consequently:

• individual staff preferences and concerns were not adequately explored. It was also unclear whether the large number of staff with non-English speaking backgrounds fully understood the processes and the options available to them;
• redeployment opportunities within the agency but outside the local region were not fully explored; and
• staff/management relations were poor, resulting in industrial action and delays in the implementation.

Lack of a communications strategy

The communications strategy did not include adequate feedback and monitoring mechanisms to address central and regional office roles and responsibilities. This resulted in:

• an incorrect assumption by central office that all staff affected by the outsourcing exercise in the local office were being provided with an appropriate level of assistance and support;
• a failure by the regional office to advise the central office of the inadequacy of the resources allocated to manage HRM aspects of the exercise; and
• staff interest in interstate redeployment opportunities being overlooked. Staff interest in relocation only came to light during the AIRC proceedings.

Further, the lack of an established communication network between regions resulted in the local Personnel Section being unaware of redeployment opportunities outside the immediate region.

Case Study 2 - The importance of a structured approach

Background

This case study examines a situation where an agency decided it would get better value for money by outsourcing an activity. Twenty eight specialist staff were affected. Their skills and knowledge were highly marketable in the private sector.

This was the agency's first outsourcing exercise and no detailed corporate framework had been put in place. Consequently, no detailed project plan or HRM plan was developed.

A new provider was selected and the agency entered into discussions with central agencies and relevant unions concerning the development of an appropriate staffing strategy.

How the process was managed

The agency had a high level of interest in the continuing viability of the activity and considered that the skills of existing staff were essential to maintaining the activity. Therefore, the agency was keen to negotiate employment conditions that would be attractive enough for staff to resign and take up employment with the new provider.

The central agencies were concerned to preserve the integrity of the processes relating to staff separations. They wished to avoid an approach that supported in any way the concept of having access to severance benefits and superannuation entitlements under voluntary retrenchment provisions as well as access to jobs with the new provider on negotiated terms and conditions.

Negotiations between the agency, central agencies and the union were time consuming and required significant amounts of skilled staff resources. The outcome of the negotiations resulted in a wide range of options being offered to staff. These were:

• voluntary retrenchment (recognising the staff's rights under the relevant redeployment and retirement provisions as a consequence of losing Commonwealth employment) with no restriction on subsequent employment with the new provider;
• negotiated job with some APS conditions (recognising the agency's concern that the skills of the staff were essential to the continued viability of the activity); and
• redeployment.

The above options were offered to all staff and were intended to run in parallel, and not in isolation from each other. A considerable period of time was spent negotiating jobs, but all staff separating from the Commonwealth elected to take voluntary retrenchment and a large number of these staff subsequently obtained employment with the new provider.

Need for a structured approach

The differing priorities of the stakeholders resulted in a wide range of options being offered to staff. This resulted in:

• significant resources being tied up in negotiating brokered jobs which were subsequently not taken up by staff;
• the implementation time frame being greatly extended; and
• a public perception of staff receiving a voluntary redundancy package and a guaranteed job with the new provider which had been negotiated by the Commonwealth.

While this was acknowledged as a difficult exercise for the agency to manage, the adoption of a single approach may have resulted in a different outcome. Additionally, the agency may have been able to better manage the outsourcing of this activity if it had:

• offered voluntary retrenchment to interested staff after the new provider had been identified and the required staff had been selected; or
• offered voluntary retrenchment earlier in the process so that interested staff were retired well before the activity was outsourced.

Avoidance of negative public perceptions

Under the Clean Break approach, APS staff are able to accept voluntary retrenchment from the APS and then seek and obtain employment with the new provider. The Commonwealth does not oppose former APS staff taking up employment in the private sector in this way.

The concerns that arise out of this case study are that the two approaches were allowed to operate in tandem - the agency spent a great deal of time and effort negotiating jobs and terms of conditions of employment with the new provider on the basis that interested staff would resign and accept the negotiated jobs. In the event, the staff were able to elect for voluntary retrenchment and then obtain jobs with the new provider, when jobs had been negotiated by the Commonwealth, creating the public perception of 'double dipping'.

An agency can maintain the integrity of the Clean Break approach and avoid making voluntary redundancy payments to staff for whom jobs and terms and conditions of employment have been negotiated with the new provider by:

• ensuring potential tenderers do not establish links during the tendering phase with staff currently performing the activity;
• not assisting with the promulgation of material to existing staff on the terms and conditions of employment of potential new suppliers;
• not facilitating processes that could be seen as providing existing staff with a foot in the door in terms of access to jobs with the new provider e.g. APS staff should not assist in the preparation of material comparing APS terms and conditions with those of the new provider; and
• avoiding commitments in the contract that the new provider will fill vacancies initially from the APS staff currently performing the activity.

It is important to ensure that links between the Commonwealth's voluntary retrenchment process and the new provider's recruitment program are not established.

Case Study 3 - Planning - the need to consider all aspects

Background

This case study examines the outsourcing of an agency's catering services located in Canberra. Sixty staff were employed in the activity. No redeployment opportunities were available in the APS in Canberra for the catering staff. This was the first outsourcing activity that the agency had undertaken

How the process was managed

Separate teams were set up to undertake specific tasks, for example, to develop the tender requirements, undertake tender assessment, and develop the contract. The teams were located separately and operated fairly independently of each other.

The responsibility for HRM aspects was allocated to the local Personnel Section, and an additional staff member was provided to co-ordinate the retrenchments that were considered to be a likely outcome of the process.

These staff were not fully conversant with nor were they trained in the processes involved in managing the staffing aspects of an outsourcing decision. They therefore had little understanding of the possible negative effects that an outsourcing decision could have on staff displaced by an outsourcing decision.

Following the announcement of the successful tenderer (a commercial catering company), a contract implementation team was set up and an implementation time frame negotiated with the new supplier. The date negotiated was eight weeks after the announcement of the outsourcing decision, to coincide with a seasonal lull in the organisation's catering commitments.

In order to maximise savings from the new arrangements, the implementation team planned that staff currently performing the activity should be either redeployed or retrenched prior to the handover of the activity to the new provider.

Immediately following the announcement of the tendering decision, personnel officers briefed staff on options available under the relevant redeployment and retirement provisions. Staff were also provided with financial and other counselling in order to assist them in determining their choice of redeployment or redundancy. These briefings were conducted in the two weeks immediately prior to formal offers of voluntary retrenchment being made to staff.

Inadequately trained staff / poor communication

The results of a later survey of staff affected by the outsourcing exercise indicated that staff felt that the information provided to them during the exercise was inadequate and lacking in detail. They indicated that little information was provided on the steps associated with outsourcing the activity, so they had little understanding of what was happening to their jobs, and the time frames associated with each stage of the exercise. As a result, rumour and speculation were widespread. Staff felt that this situation had a negative impact on productivity and morale throughout the outsourcing process.

The survey indicated that the level of knowledge about outsourcing and its effect on individuals was low amongst the staff responsible for managing the process. It was evident that they were on a learning curve and seemed to be 'learning by doing'. Inevitably, this was at the expense of the staff affected by the outsourcing.

Staff also felt that if they had received more information about their options earlier in the process, they would have been less distressed and in a better position to make informed decisions about their future-it was only after the announcement of the decision of the preferred tender that detailed information was available.

Inadequate planning (lack of a structured approach)

Each element of the exercise was managed discretely with no one individual having overall responsibility for the exercise. No strategies existed to facilitate interaction between each element of the outsourcing exercise. Consequently, when the decision was made on the implementation date, no account was taken of the time allowed under the relevant redeployment and retirement provisions for offers of voluntary retrenchment to be made.

In order to maximise the savings resulting from outsourcing the activity, management pressured the Personnel Section to have displaced staff either redeployed or retired by the date of commencement of work by the new provider. With only a few weeks allowed for implementation, staff felt that the speed at which the redeployment and retrenchment processes were conducted was unseemly, with insufficient time for staff to fully consider the opportunities available to them.

Appendix A: Key Public Service Values

A number of key public service values are described in a joint publication by the Management Advisory Board and its Management Improvement Advisory Committee, Ethical Standards and Values in the Australian Public Service (May 1996). These values distinguish the special features of work and employment in the Australian Public Service, and are therefore important to the management of outsourcing exercises and relevant to the handling of the HRM aspects of outsourcing. The values are as follows:

The highest standards of probity, integrity and conduct:

• acting in accordance with the letter and spirit of the law;
• dealing equitably, honestly and responsively with the public; and
• avoiding real or apparent conflicts of interest.

A strong commitment to the community:

• protecting members of the community from arbitrary or discriminatory treatment by public service staff;
• protecting the privacy of members of the community; and
• implementing legislation and government policy without imposing unnecessary burdens on the community.

Responsiveness to governments:

• serving loyally and impartially Ministers and the Government;
• providing frank, honest and comprehensive advice; and
• actively facilitating the implementation of government policies.

A strong commitment to accountability:

• contributing fully to the accountability of the agency to the Government, of the Government to the Parliament and of the Parliament to the people;
• fully supporting the administrative and legal measures established to enhance accountability; and
• recognising that those delegating responsibility for performance do not lose responsibility and may be called to account.

A close focus on results:

• pursuing efficiency and effectiveness at all levels;
• delivering services to the public conscientiously and courteously; and
• making decisions and taking actions in a timely and competent manner.

Continuous improvement through teams and individuals:

• striving for creativity and innovation; and
• making individual and team performance count.

Merit as the basis for achieving excellence in staffing:

• ensuring equality of opportunity; and
• providing fair and reasonable rewards as an incentive to high performance.

Appendix B: Checklist - Human Resource Management plan

Aim:

To define the human resource management objectives, processes and responsibilities for the implementation of an outsourcing decision to enable timely implementation of the relevant procedures and to identify who has responsibility for each of those procedures.

Steps:

Identify key stakeholders, including affected staff, contracting and project managers, central and local management, personnel management and personnel processing areas and relevant unions.

Develop a plan which supports the agency's preferred approach (ie Clean Break or Phased), with the flexibility to change the approach if required and designed to support the commercial objectives and time frames of the outsourcing exercise.

Keep in mind any special considerations due to the particular circumstances of the outsourcing exercise. Such issues could include:

• the location of the activity;
• the classification and skills profiles of the staff;
• employment status (i.e. permanent, continuing, fixed-term or short-term);
• the industrial relations environment;
• the number of staff involved and the consequent impact on resources;
• the timing of decisions;
• the likelihood of an excess staff situation;
• the early provision of information to staff.

A staffing profile will assist in the identification of the critical areas which need support or specialist staff.

Resources:

• Has the strategy for managing the HRM elements been clearly identified?
• Has a staff survey been undertaken to identify critical areas where specialist support may be required?
• What funding has been or should be set aside for managing the HRM Plan?
• What is the time frame and target dates and are they consistent with the project plan?
• Have central agencies been advised?

For support of activity:

• How many specialist support staff, and who are they?
• What are the responsibilities and reporting lines of each team member?
• How much training is required for support staff to upgrade skills and obtain sufficient knowledge to manage the HRM aspects of the outsourcing processes?
• What facilities are required (e.g. dedicated office, office equipment, travel facilities, etc)?

Staff support:

• What is the time frame and target dates?
• Have the critical areas of need been identified?
• How much funding is required?
• Who is responsible for collection of staffing profile information?
• What assistance is going to be given to staff (group and individual)?
• Is external assistance needed (e.g. APSLMAP, DEETYA, TAFE, CES etc)?
• Are external consultants required for specialist assistance?
• Who is responsible for arranging assistance?
• Who is to arrange for calculation of severance payments, if required?
• Who is to liaise with ComSuper for retirement benefit information?
• Who is to manage the other payroll aspects, e.g. group certificates?

Consultation and communications:

• What is the time frame and target dates?
• Is the time frame sufficient to meet the requirements of the relevant redeployment and retirement provisions?
• Who is responsible for developing a communications plan for dissemination of information to staff and their representatives?
• What is the mechanism for interaction with other project teams (e.g. tender and implementation team) ?
• How is information to be presented (e.g. information sessions, information kits, newsletters, bulletin boards, electronic mail, etc)
• How much involvement will the executive have (e.g. visits to sites, internal memos, etc)?
• How will individual assistance be delivered?

Consultation/liaison with staff and their representatives:

• What is the time frame and target dates?
• Which unions are involved?
• Who are the nominated contacts (including workplace delegates, organisers and officials)?
• Who is responsible for communication and consultation with staff and their representatives?
• What information needs to be conveyed formally?
• How will staff representatives wish to be involved in the process (e.g. involvement in information sessions, redeployment and retrenchment processes, Phased approach negotiations)?
• Who is to liaise on relevant redeployment and retirement provisions?

Fairness and equity:

• How are staff with special needs to be identified?
• What additional support is to be provided (e.g. translators, interpreters, literacy skills training)?
• Has appropriate funding been allocated to provide this support?

Management of excess staff:

• What is the time frame and target dates?
• Is the time frame sufficient to meet requirements of the relevant redeployment and retirement provisions?
• Who is to advise staff on options/rights/entitlements available and how?
• How are staff preferences to be identified?
• Who is to identify redeployment prospects?
• Who is to advise on vacancies - local, internal to the agency, across the APS?
• How are substitution (in accordance with subparagraph 11.4.12(b) of GECA) arrangements to be managed, if at all?
• Who is to decide when staff should be declared excess; who is to negotiate processes with staff representatives?
• How is necessary training/retraining to be identified?
• Has funding for training/retraining been allocated?
• Who is to provide each element of training/retraining?
• Who should obtain severance/superannuation figures?
• Is external assistance needed (e.g. specialist counsellors)?
• Who is going to prepare a timetable of assistance (including processing of severance payments) to coincide with the implementation time frame and the relevant redeployment and retirement provisions?
• Who is to refer excess staff to APSLMAP?
• Has funding been allocated for referrals to APSLMAP?
• In the event that 15 or more staff are retrenched, who will notify the CES?

Appendix C: Role Of Central Agencies

Public Service and Merit Protection Commission (PSMPC)

The PSMPC has responsibility for major elements of human resource management policy in the APS. The PSMPC takes a broad view of its human resource management responsibilities in setting an appropriate strategic framework for the APS.

As a general approach, the PSMPC sees its role in strategic management along the following lines:

• setting an appropriate framework (in the form of a policy statement, guidelines or broad instructions), usually after consultation;
• communicating and promoting the framework;
• monitoring and obtaining feedback on the implementation of the framework;
• identifying and communicating good practice, where this is appropriate and productive;
• undertaking evaluation or promoting evaluation methodologies; and
• revising policy where necessary and re-commencing the above cycle.

In relation to outsourcing of APS activities, the PSMPC, together with the Departments of Finance and Industrial Relations, assists agencies with outsourcing-related HRM and industrial issues.

The PSMPC has policy responsibilities for transfers of functions and for mobility arrangements between the APS and other Commonwealth authorities under Part IV of the PS Act, and provides policy advice on the management of excess staff and the operation of the relevant redeployment and retirement provisions. Redeployment assistance is also provided through the PSMPC's Australian Public Service Labour Market Adjustment Program.

APS Labour Market Adjustment Program (APSLMAP)

Under the Continuous Improvement in the APS Enterprise Agreement: 1995-96, staff who have been declared excess and wish to be redeployed must be referred to APSLMAP. Surplus (potentially excess) staff who have not been formally declared excess may also be referred to APSLMAP.

APSLMAP provides a wide range of services including a Surplus and Excess Officers' Orientation Program, various job search services and access to Skills Development and Change Management programs.

Fees are charged for the referral of surplus and excess staff and for consultancy services provided to agencies.

Department of Finance (DoF)

DoF is responsible for providing advice on the Commonwealth's role as employer insofar as this impacts on outlays and improved management in the public sector. It is involved in both policy development and co-ordination, and in the development and maintenance of Service-wide systems with particular reference to classification and structures, remuneration and terms and conditions of employment. Its work includes:

• setting appropriate frameworks for encouraging efficient and effective resource management by departments and agencies;
• addressing the supplementation requirements of agencies for employment costs;
• providing policy advice on and central agency co-ordination of superannuation arrangements for Commonwealth sector civilian employees and parliamentarians;
• Senior Executive Service (SES) funding and control arrangements for budget-dependent agencies;
• providing policy advice on, and facilitation of agency implementation of, workplace bargaining for staff in Australian Government employment;
• central agency regulation of and/or co-ordination of Service-wide systems for position classification (including for the SES);
• managing the payment of APS salaries via the PAY system; and
• providing APS workforce statistics from various central databases.

In relation to outsourcing, DoF has responsibility for the superannuation aspects, including advice on the various superannuation options available to APS staff affected by outsourcing. DoF is also responsible for the overall separation policy framework (in conjunction with the other central agencies), any supplementation/funds transfer issues that arise in relation to outsourcing and any implications for SES requirements.

Office of Government Information Technology (OGIT)

OGIT has policy responsibility in regard to Information Technology (IT) and telecommunications outsourcing. This includes the development and promulgation of guidelines for IT and telecommunications outsourcing, the promotion of best practice (in consultation with the Government Information Services Policy Board) and the collection of data on IT and telecommunications outsourcing. DoF has a role in providing advice on the 'value for money' issues associated with market testing/outsourcing initiatives of agencies in order to assist agencies to obtain best value for money IT service provision. This advice is provided through the IT Acquisition Council process and through supply officers or directly to agencies.

DoF retains an active interest in and input to policy development in this area, particularly the 'value for money' issues, through close liaison with OGIT and through its representation on the Government Information Services Policy Board, which is chaired by the head of OGIT.

Department of Industrial Relations (DIR)

DIR has responsibility for providing sound policy advice to Government on industrial relations arrangements. DIR is specifically charged with improving the productivity, efficiency and flexibility of industrial relations outcomes for federal Government employees.

In improving the nature of industrial relations in the APS, DIR's activities include:

• encouraging and facilitating the implementation of agency bargaining through strategic advice, training, information and consultancy services;
• establishing fair and reasonable remuneration for APS staff by providing core pay and classification structures and appropriate career paths, and effective and equitable essential standards of employment conditions; and
• assisting APS agencies in pay and essential conditions administration through the production of authoritative pay and conditions information and advice.

In relation to outsourcing, DIR has responsibility for the following:

• providing detailed guidance and advice to the relevant APS agency regarding remuneration and conditions issues ensuring that staff are treated fairly and equitably;
• assisting the APS agency in negotiations with unions and in the prevention and resolution of any industrial problems associated with the outsourcing process;
• in conjunction with the APS agency involved, negotiating with other employer and union parties, as appropriate; and
• ensuring that undesirable precedents involving pay and conditions matters are avoided.

Appendix D: Referral Points For Further Information

Provided below are the names and addresses of organisations which agencies may need to contact for further advice and information in relation to:

Excess Staff, Outsourcing Policy
Australian Public Service Commission
16 Furzer Street
PHILLIP ACT 2606

Telephone: (02) 6202 3500

Redeployment of Staff
Australian Public Service Commission
16 Furzer Street
PHILLIP ACT 2606

Telephone: (02) 6202 3500

Part IV Mobility
Australian Public Service Commission
16 Furzer Street
PHILLIP ACT 2606

Industrial Issues (Industrial Relations Framework, Pay and Conditions)
Department of Industrial Relations
Agencies should contact their agency liaison manager in DIR in the first instance.

Workers' Compensation, Occupational Health and Safety
Comcare
CFM Centre
Cnr Moore and Rudd Sts
CANBERRA CITY ACT 2601

Telephone: (02) 6275 0000

Comcare also has offices in each State and Territory.

Financial Planning and Superannuation Policy
Department of Finance
Newlands Street
PARKES ACT 2600

Telephone: (02) 6263 2222

Superannuation
ComSuper
Commonwealth Superannuation Administration
Unit 1 Cameron Offices
BELCONNEN ACT 2617

Telephone: (02) 6252 7911

Information Technology and Telecommunications Outsourcing
Office of Government Information Technology
East Wing
Old Parliament House
King George Terrace
PARKES ACT 2600

Telephone: (02) 6263 4888

Social Welfare Support Systems and Policy
Department of Social Security
National Administration
Athllon Drive
TUGGERANONG ACT 2900

Telephone: (02) 6244 7788

Job opportunities and notification of retrenchments in excess of 15 employees
Commonwealth Employment Service - Please contact your local/regional CES office.

Training and re-training
Department of Employment, Education, Training and Youth Affairs
10 Mort Street
CANBERRA CITY ACT 2601

Telephone: (02) 6240 8111

State Office contacts:
Adelaide:(08) 8203 6200
Brisbane:(07) 3223 1000
Darwin:(089) 82 9211
Hobart:(03) 6235 7111
Melbourne:(03) 9666 7166
Perth:(09) 429 3888
Sydney:(02) 9379 8000

Taxation matters
Australian Taxation Office
National Office
2 Constitution Avenue
CANBERRA CITY ACT 2601

Telephone: (02) 6216 111

EEO status of potential contractors
Affirmative Action Agency
1 Market Street
SYDNEY NSW 2000

Telephone: (02) 9334 9800 / Outside Sydney: 1800 249 928

Appendix E: Transfers Of Functions And Sales Of Assets

Transfers of functions (for example from the APS to a Commonwealth authority or to a State or Territory Government) and sales of assets are not included in the definition of outsourcing. However, it is important to bear in mind that:

• similar staffing issues and principles to those outlined in this document, such as the proper use of the relevant redeployment and retirement provisions, will also be relevant; and
• any terms and conditions negotiated in the context of an outsourcing decision may set precedents for negotiations in relation to transfers of functions and asset sales.

While transfers of functions are seen as separate to the outsourcing of an activity, in circumstances where the Phased approach is adopted and certain staff move from the APS to another Commonwealth authority, the transfer of the staff concerned is effected under the transfers of functions provisions (s. 81C) of the PS Act.

The following gives a brief description of each of the mechanisms used:

Transfers of functions to a Commonwealth body

The Government may decide that a function currently undertaken by the APS could be more effectively performed by a non-APS Commonwealth body or a Government Business Enterprise (GBE). These transfers may be administered under s.81C of the PS Act or through specific legislation. Affected staff follow the function on negotiated terms and conditions.

Transfers of functions to a State or Territory

The Government may decide that a function currently undertaken by the APS should be transferred to the responsibility of a State or Territory. Such transfers of functions may be effected under s.87J of the PS Act or through specific legislation. Under s.87J, certain affected staff are able to follow the function on agreed terms and conditions.

For further information on transfers of functions, contact the Structural Change Team, PSMPC.

Sales of assets

The Government may decide to sell a function as a going concern, or dispose of the assets. Staff may be offered employment by the buyer, be redeployed in the APS or become excess.

For further information on sales of assets, contact the Office of Assets Sales, Department of Finance.

Appendix F: References And Further Reading

Relevant Legislation

Public Service Act 1922

Industrial Relations Act 1988

Superannuation Act 1976

Superannuation Act 1990

Affirmative Action (Equal Opportunity for Women) Act 1986

Long Service Leave (Commonwealth Employees) Act 1976

Occupational Health and Safety (Commonwealth Employment) Act 1991

Privacy Act 1988

Awards/Agreements

APS General Employment Conditions Award 1995 (the redeployment and retirement provisions are contained in clauses 11 and 12).

Continuous Improvement in the APS Enterprise Agreement:1995-96 (the Job Security and Redeployment provisions are contained in Attachment B-Schedule 2).

Suggested Reading

Contracting for the Provision of Services in Commonwealth Agencies, a joint publication by the Management Advisory Board and its Management Improvement Advisory Committee, No. 8, December 1992.

Commonwealth Procurement Guidelines, Department of Administrative Services Nos. 4, 7, 13 1989-90.

Building a Better Public Service, a joint publication by the Management Advisory Board and its Management Improvement Advisory Committee, No. 12, June 1993.

Competitive Tendering and Contracting by Public Sector Agencies, Industry Commission Report No. 48, 24 January 1996.

Commercial Support Program, fourth edition, Department of Defence, June 1994.

Ethical Standards and Values in the Australian Public Service, a joint publication by the Management Advisory Board and its Management Improvement Advisory Committee, No. 19, May 1996.

Outsourcing:The Management of Redundancy Arrangements, Department of Veterans' Affairs, Auditor-General's Audit Report, No. 45, 1991-92.

Further reading

All About Contracting Out, Office for Public Sector Management, Department of the Premier and Cabinet, Government of South Australia.

A Framework for Human Resource Management in the Australian Public Service, second edition, Public Service Commission, 1995.

A Report on Contracting for Services in the Department of Defence, Department of Defence and Attorney-General's Department, June 1994..

A Review of the Commercial Support Program and its Performance, Ernst & Young Consulting.

Future CSP Directions and Process Improvement, Ernst & Young Consulting, September 1993.

Contracting and Market Testing Policy: Common sense for better value government, NSW Government.

Contracting Out by Public Sector Agencies: Submission to Industry Commission Inquiry, Public Service Commission, March 1995.

Cooperation Not Confrontation, Australian Defence Industries Case Study pamphlet, Department of Industrial Relations (Government Authorities Advisory Branch).

Human Resource Management - When Outsourcing: Sale of Repatriation Hospitals, Hollywood, Perth and Greenslopes, Brisbane, speech presented by Mr Keith Lyon, Deputy President, Repatriation Commission at the Australian Information Industry Association and UNISYS presentation, 'Outsourcing & Issues in Human Resource Management', Hyatt Hotel, Canberra, 19 July 1995.

HR Program Support for the Competitive Business Strategy, Victorian State Government, June 1995.

Industry Commission Issues Paper: Contracting Out by Public Sector Agencies, Submission by the Repatriation Commission and by the Department of Veterans' Affairs, April 1995.

Information Package for Excess Officers and Potentially Excess Officers, Public Service Commission (APS Labour Market Adjustment Branch).

Lopert, P (1991) Competitive Tendering and Contracting Out: The CSG Experience, Office of Public Management, NSW Premier's Department.

Management of Excess Staff Situations in the APS, Public Service and Merit Protection Commission, (to be published in late 1996).

Mobility provisions under Part IV of the Public Service Act 1922, Principles, Guidelines and Good Practice, Public Service and Merit Protection Commission (to be published in late 1996).

Outsourcing of the National Computer Centre: The Redeployment of Excess Staff, report by the Department of Veterans' Affairs and the Public Service Commission.

Outsourcing and Contract Management Guidelines, Victorian Department of Treasury and Finance, December 1995.

Paddon, M (1991) The Real Costs of Contracting Out: Re-Assessing the Australian Debate from UK Experience, Discussion Paper No. 22, December.

Report on Staff Related Outcomes of RGH Hollywood Sale Process, Employee Relations and Development Branch, Department of Veterans' Affairs, April 1994.

Report on Staffing Issues Arising from the Sale of RGH Greenslopes, Employee Relations and Development Branch, Department of Veterans' Affairs, May 1995.

Submission to Industry Commission Inquiry: Contracting Out by Public Sector Agencies, Department of Employment, Education and Training.

Tan, K, Tarapore, A and Strangman, D (1995) Competitive Tendering and Contracting: An Annotated Select Bibliography, Occasional Paper No. 1, Department of Administrative Services, July.

The Government's Guide to Market Testing, Office of Public Service and Science, London, 1993.

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