Advisory to a government agency on a programme involving private sector managers and service providers

A government agency appoints private sector managers to market and manage a programme for businesses and appoints private sector service providers to conduct the programme. The appointed managers are required to work with the appointed service providers to deliver the programmes to businesses, who may choose the service provider by considering the recommendations of the manager and the prices quoted by the service providers in their bids for appointment by the government agency. However, appointed managers may have affiliated service providers.

A question raised by the government agency was whether the appointed managers could be allowed to source for their own service providers. CCCS advised that there is no need to allow the appointed managers to source for their own service providers as they may not be as stringent or consistent as the government agency in assessing the quality of its affiliated service provider, and this may lead to service providers using this as a backdoor to offer their services under the programme. CCCS advised that the managers be required to inform the government agency of potential service providers and for the government agency to then assess and appoint such service providers if they are found suitable.

On whether the government agency should allocate a fixed volume of business to each manager and service provider to address concerns that a manager may favour its affiliated service provider, CCCS advised that doing so may artificially distort competition, and recommended instead that the managers be required to inform the relevant businesses of any affiliation between themselves and any service provider so that the businesses can take such affiliations into account when choosing their service provider.

On whether service providers should be allowed to offer businesses under the programme discounts off the prices quoted to the government agency under the programme, CCCS cautioned that such discounts could enable affiliated service providers to gain an unfair competitive advantage over non-affiliated service providers and facilitate anti-competitive behaviour. Hence, CCCS recommended that service providers submit their discounts as part of their bids for appointment by the government agency or approach the government agency to lower their prices so that any price changes can be published and made transparent to the businesses under the programme and other service providers.