Duration of Government Contracts for Clean, Green and Safe Sectors

Mr Zainal Sapari asked the Minister for Finance (a) what is the average length of Government agencies' contracts for procurement services in the three traditionally outsourced clean, green and safe sectors; (b) what has been the shortest and longest contracts that have been given out by the Government; and (c) how does the Government determine the appropriate length for each of the contracts.

Contract periods vary depending on factors such as the needs of the buyer agency, the scale or complexity of the contract and industry acceptance.

Among the three sectors, the shortest contract in the past three years was a transitional cleaning contract. It was for a period of six months and is an exception as the agency was to be relocated after that. The longest contract awarded was for seven years, as the Government agency had assessed that a longer contract was needed to enable the service provider to recoup the high capital investments needed for the contract.

While longer contracts allow service providers more time to get familiar with the contractual requirements, and justify investments in equipment or technology, contracts that are too long can introduce business risks for service providers and can be unattractive to them. So a balance needs to be struck. The vast majority of contracts in the cleaning, security and landscaping sectors have a base period of between two to five years, with an average duration of about 2.7 years. In addition, many contracts also come with options to extend for a pre-determined duration if the service provider has done well, and the needs of the agency have not changed. For instance, a cleaning contract can have a base period of three years, with an option to extend for another two years.