COS 2013 – Restructuring the childcare sector


Committee of Supply Cuts by YJJ on Ministry of Social and Family Development
Restructuring the childcare sector
Madam, I declare my interest as a supplier of services to education institutions.
I have previously stated my concerns over the way the childcare industry is organised. The government has stated that Anchor Operators (or AOPs) must be non-profit, non-religious and non-racial based. I do not think these criteria are necessary as long as operators accept students of any race and religion and follow strict rules which I will elaborate. MSF can dictate outcomes. It can define fees and expected quality of services instead of being concerned if operators are race or religion based or are private entities. With appropriate rules, MOE and MOT have found it acceptable to work with such entities for schools and public transport respectively . The AOP scheme has caused serious imbalance in the industry by loading a few selected operators with huge operating advantages over others.
I repeat the proposal I made last year for MSF to revamp the AOP scheme and to make childcare as a public good, with open contest by all operators.
Firstly, available sites can be clustered as a package for open bidding. Each tender can be for around 10 centres, with rental cost tied to what non-profit operators currently pay. Bidders should prove their ability to operate centres well, such as having good track record and being SPARK-accredited. Operators can propose the style of programmes and fees to be charged, but fees should be within an acceptable guideline around existing price charged by current AOPs.
Once an operator is awarded, it cannot change fees without approval by MSF. To achieve investment payback, operating period can be for a period of say 10 years, with interim review every 3-4 years. This is to ensure operators will continue to innovate and provide quality services. After the operating period, the sites are re-opened for bidding again by all.
The key advantage of this over the existing AOP scheme is that it allows newer operators who have proven themselves in the market to join in continuously when sites are available. This provides greater diversity of choices. Competition spurs innovation. The current scheme kills competition and freezes AOP players to the few based on the time of selection. It limits choices for consumers requiring affordable fees. Ten centres per tender will allow sufficient economies of scale, and a good operator can win several clusters of sites over time.
To speed up more new sites, I repeat my earlier suggestion that the government can negotiate as main tenant with large landlords of malls and industrial sites with spaces suitable for childcare. It can then open these sites for bidding under this new scheme. It can also turn disused schools and old community centres into mega childcare sites with different operators under one roof.
The government is spending $3 billion in this sector. I believe this same amount can be used to achieve better outcomes in accessibility, quality and affordability and with greater diversity of choices if we organize childcare as a public good and allow regular open and fair competition by all.
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