A shift in the way the Government tenders out work is causing consternation in the recruitment industry.

Recruitment is one of several sectors for which the Government is moving from straight-out tendering to having a panel of preferred providers.

The All of Government procurement programme encourages the wider public sector, including police and schools, to use its selected contractors.

It hopes to shave 30 per cent off recruitment fees.

Agencies are reluctant to speak publicly but there are concerns firms that rely on public sector work may struggle if they miss the cut.

Jonathan Rice, head of Auckland recruitment firm Rice Consulting, said failing to make the panel could have "a disastrous effect" on the profitability of some firms, mostly in Wellington.

"What concerns me here is that these rates will be public knowledge, and I wouldn't be surprised to hear of other big corporates starting to ask for the same figure too."

Rice said the move could also impact on the quality of the talent the public sector was offered.

However Mark Ansell, a category leader for professional services at the Economic Development Ministry, said the process was not just a cost-cutting exercise.

"While we believe it will save money, there are other benefits that we hope will arise from the process."

He said the ministry was "very mindful" of the impact it could have on the industries concerned.

The All of Government programme is part of a broader shift in government thinking.

State Services Minister Jonathan Coleman said yesterday he wanted to see the public sector working closer together and leveraging its size to get better results.

Department heads would be told to consider the "collective interests of government" rather than focusing on single departments or agencies.

Private legal firms have just been through the All of Government process, and Wellington management consultant Ron Pol said many lawyers felt the process had been "an expensive charade".

He said firms which won a contract in a specific area of law felt cheated when they found they were competing with firms which were on other panels.

Shortly afterwards, the ministry put out a clarification saying that a firm which had made one panel could compete for work on any other panel, Pol said.

Rumours persisted that firms which had missed out on selection had "urgently unleashed their formidable lobbying skills".

The Government had negotiated cheaper hourly rates, but Pol said many firms were quietly telling him they would now assiduously record their time.

This would negate the ministry's savings in the end, he said.

- © Fairfax NZ News