Government outsourcing cost $44 billion this year, about the same level as in 2004. However, spending on non-works outsourced services fell to $12.1 billion, from $13.9 billion in 2004, the Efficiency Unit says.

The 2006 Survey on Government Outsourcing report, published today, is the fourth biennial outsourcing study conducted since 2000. It offers a "snapshot" of the Government's outsourcing activities as at last July.

There were 3,984 government outsourcing contracts involving 1,545 contractors. Non-works contracts accounted for 76.5% and works contracts 23.5%. In terms of service categories, building and property management took up 23%, capital works and construction 20% and information technology 10%.

Contract value

Total contract value was $208 billion, with 65% spent on works and 35% on non-works services. Analysed by service categories, capital works and construction accounted for 61%, environmental hygiene 19%, and building and property management 7%.

Total annual spending was $44 billion, with 73% spent on works and 27% on non-works services. Five departments accounted for 82% of the spending - the Architectural Services (38%), Highways (16%), Housing (15%), Civil Engineering & Development (8%) and Drainage Services Departments (5%).

Annual spending on non-works outsourced services fell to $12.1 billion, from $13.9 billion in 2004. This was partly due to keen competition among tenderers, resulting in lower contract prices.

Three departments accounted for much of the change, amounting to $1.59 billion:

* the Housing Department transferred 96 property-management contracts to the Link REIT, valued at $590 million;

* the Environmental Protection Department has temporarily suspended the operation of a refuse transfer station and completed two projects, whose annual spending amounted to $580 million; and,

* the Architectural Services Department achieved a net saving of $420 million from the bundling of term-maintenance contracts.

Longer, larger contracts

The survey revealed a trend towards longer and larger contracts for non-works outsourced services. The average annual spending for non-works contracts rose 2%, from $3.9 million in 2004 to $4 million this year. The average contract duration for non-works services valued over $1.3 million rose to 3.2 years, from 3.1 years in 2004.

"The survey shows that Government departments and their contractors are generally satisfied with the outcomes of their contracts," Efficiency Unit Assistant Director Steve Barclay said.

"We will study the report carefully to identify where we need to improve the training offered to civil servants, and update outsourcing guides and manuals."

More details of the survey are available here.