Commissioning government services – panacea or pitfall for Public Sector Leaders.

Recent state and federal reform agendas have focused heavily on identifying new and innovative ways of delivering services for taxpayers and users of government services – such as healthcare and social services – more efficiently and effectively whilst ensuring accountability remains squarely centered on those responsible for delivering services.

According to a recent Deloitte report titled “What’s over the Horizon”all parts of our economy are looking for ways to reduce their risk and exposures to the ongoing global economic uncertainty that exists. Not surprisingly therefore, strategic commissioning and contestability is fast becoming a central part of the narrative for policymakers, government leaders and academics seeking to achieve a better deal for governments and taxpayers alike.

In November 2016 we saw the launch of the NSW Government’s Commissioning and Contestability Guidelines. The launch coincides with governments around Australia coming under increased pressure to identify new and innovative ways of delivering consumer driven services that are cost effective, integrated and outcomes focused. With very little empirical evidence available in Australia that commissioning or contestability delivers lasting benefits, the question remains as to whether policy makers and public sector leaders fully understand the hazards and financial or social implications of implementing a poorly designed or negotiated commissioning program.

Debunking the commissioning and contestability myth

Commissioning first appeared as a concept in a range of reform processes twenty years ago yet many policymakers and government leaders are still unclear about what it is and how it differs from other government reform processes. Until recently, the Australian context of commissioning centred on the notion of “outsourcing” or contracting core parts of government’s service to deliver responsibilities such as secondary education, healthcare and road maintenance to the private sector at the lowest possible cost. As a consequence, policymakers, government leaders and the private sector have struggled to articulate precisely what best practice commissioning is within the Australian context and how it can deliver benefits to tax payers and users of government services. Arguably, it is this ambiguity combined with a rapidly changing economy and significant cuts to public service budgets that has resulted in so few examples of well designed and implemented commissioning programs. Without this shared understanding, policymakers, governments and the service providers have become wound up in the complexities and debates associated with what “commissioning is” rather than applying clearly articulated expectations on what these programs will deliver to all parties, not least of all the consumer of government services.

Whichever way one views it, commissioning – like any reform endeavour – is most effective when significant investment is made to support policymakers, government leaders and service providers to clearly define and articulate the anticipated benefits and desired outcomes from a win – win rather than win -lose. Accordingly, commissioning appears to be less a science and more of an art.

Gary Sturgess, NSW Premier’s ANZSOG Chair in Public Service Delivery, argues that good commissioning sits between a government’s policymaking and service delivery responsibilities. Furthermore, commissioning occurs when policymakers, governments and service providers clearly understand their respective accountabilities and responsibilities for delivering services. More importantly, however, is the understanding that there are clear and measurable consequences for each party failing to deliver on their agreed outcomes.

Arguably, commissioning is about governments seeking out and engaging individual, entities or organisations that have unique skills and expertise to deliver services better than government can. Once could also say that effective commissioning includes mutual benefit, innovative and cost effective approaches to service delivery and clearly defined measures of value delivered. Government and policymakers therefore need to ask the right questions before considering a commissioning programs.

Like commissioning, the term “contestability” has also become ubiquitous within Australian government and policymaking circles. In many cases, the word has been used as a synonym for “competition” or “competitiveness”, and in some cases as a soft alternative to ‘outsourcing’. Sturgess argues that contestability is about “testing” the market to evaluate whether non-government organisations can deliver services more effectively and efficiently. A concept that has real application and relevance within the Australian public service sector. It offers an alternative way of using competitive tension to drive substantially better value for money without the disruptive effects of widespread market testing. Like commissioning, there are limits to the use of contestability in driving service improvement in government. In the short term, there are issues of capability – on the supply side as well as on the part of government. Ongoing programs of contestability can also be deeply disruptive to those at the receiving end of government services. Furthermore, contestability tends to be used to drive down cost without due regard to service standards and workforce relations; instead of being a process for exploring real value for money, it turns into a race to the bottom.

Delivering outcomes is challenging

Performance management is a significant challenge for those charged with delivering services through commissioning frameworks. With rare exceptions, these challenges exist mostly in the management of public services and utilities. These areas typically have poorly defined and agreed performance benchmarking in place to determine the value and benefit of services being delivered. In many cases, there are no agreed performance standards, hence making it difficult to know whether providers are delivering value for money. Typically, front-line service providers are not resourced to deliver the wide range of outcomes they are required to deliver, making it impossible to hold management accountable for any failure to deliver. In too many cases, accountability is linked to process rather than performance or outcomes.

Putting aside these observations, commissioning and contestability are typically considered effective ways of driving technical efficiency in the way public services are delivered whilst allowing consumers of these services to focus on needs assessment. Commissioning can act as a counterweight to professional dominance in some service areas whilst also encouraging service providers to become more responsive to service users by clarifying the cost of services and developing clearer lines of accountability.

Managing the delivery of public services through commissioning or contestability is significantly different to directly managing services. Choice and competition increase the number of decision makers in public services and reduce direct control by government. Some policymakers and public service leaders may struggle to adapt to these differences.

Government is slowly developing the strategies, capabilities and systems needed to reshape policy and how services are delivered. The increased number of decision makers has left policymakers, regulators, and providers struggling to work out who was responsible for solving the challenges associated with delivering services in this way. This may be one reason why these problems have persisted.

What should leaders focus on?

There are several considerations policymakers and government leaders need to consider as part of a commissioning endeavour.

Government accountability: Government agencies that deliver public services through commissioning frameworks need to provide parliament and the public with accountability maps. These should give a clear account of which organisations (and individuals) are responsible for which aspects of system management.

Consider alternative incentive models: Commercial skills amongst policymakers can be constrained by government focusing too much on securing a good price on individual contracts rather than developing a diverse market of suppliers that can effectively meet the needs of users in the long term. Government leaders and policymakers need to consider adopting commissioning frameworks that are underpinned by ‘payment for outcomes’ models combined with better knowledge of financial markets and the factors that encourage investment in companies and deliver results based on performance outcome.

Exploit the benefits of user choice: Government agencies do not always need to provide active support. Some government agencies lack a coherent strategy for ensuring service users can make informed choices that incentivise ‘good’ provider performance. In addition, information is not provided in the best format for those who use several related services. Government leaders and service providers alike need to ensure that consumers of services can make informed choices concerning the services provided.

Maintain continuity of service: Policymakers and government agencies need to ensure they have clear contingency plans in place for coping with the failure of a provider to deliver services. Government policy and regulations also need to discourage service providers from taking excessive financial and operational risks in delivering services.

Leverage collaborative commissioning: From the user’s perspective, public services are often fragmented, and therefore, provide sub-optimal value for money. As a result, government agencies can end up paying over the odds for services or end up not paying providers for the value they create. Policymakers and government agencies should identify areas where there are potential benefits from coordinating commissioning across multiple agencies or departments and should assign responsibility (and budgets) for taking forward a more co-ordinated approach supported by senior ministers.

Establish an open and constructive dialogue: Efforts should be made to enable commissioners, regulators and service providers to engage in open discussions about the challenges of implementing choice and competition effectively. Regulators should advise on how such interactions should be managed to avoid the appearance or risk, of collusion, while still enabling the maximum knowledge exchange possible.

Final thoughts

Ultimately, choice and competition only deliver effective public services when the organisations charged with designing and overseeing competitive systems are performing well. Providers of public services engaged through strategic commissioning engagements frequently discussed problems that covered far broader topics than contracting services or enabling user choices, such as public sector culture and incentives, relationships between officials and politicians and policy and decision-making processes. Time will tell whether the NSW Government’s love affair with commissioning can deliver the anticipated financial and social benefits to taxpayers and users alike. Time will tell.