To Compete or Not To Compete – Big Questions for the Sector

A new Productivity Commission inquiry into Australia’s provision of human services has major ramifications for the future of the charities and Not for Profit sector, writes David Crosbie CEO of Community Council for Australia.

Could increasing contestability and competition in human services deliver better outcomes for government and the community? Which services? What are the costs and benefits? Are there barriers for new suppliers to enter the human services market?  How could these barriers be removed?

These questions reflect the fundamental issues the Productivity Commission has been tasked by the government to consider as part of the Inquiry Into Introducing Competition and Informed User Choice Into Human Services.

Many questions are listed in the recently released discussion paper by the Productivity Commission, Human Services: Identifying sectors for reform.

This new Productivity Commission inquiry has major ramifications for the future of the charities and Not for Profit sector.  

The inquiry has two stages:

1. The first stage will deliver an initial study report identifying services within the human services sector that are best suited to the introduction of greater competition, contestability and user choice.
2. In the second stage, the commission will undertake a more extensive examination and provide an inquiry report making recommendations on how to introduce greater competition, contestability and user choice to the services that were identified above.

I know from talking with some CCA members as we begin the process of drafting the CCA response, that most people in the sector will adopt the same “not for us” approach in their submissions.  

The human services sector will try to dismiss this PC inquiry by saying their particular area of service provision – be it education, health, employment, child protection, disability, housing, correctional services, etc. – is not suitable for a more competitive market based approach.

The bad news is that this is not what the government is waiting to hear and it is not what they are expecting or wanting the Productivity Commission to report. Governments are expecting to find savings through restructuring human services funding. Increasing competition and contestability is also part of a fundamental commitment to a more market based service provision model.

In the media release announcing the terms of reference for the inquiry, Treasurer Scott Morrison said: “By commissioning this inquiry, the government is meeting a commitment made in its response to the 2015 Harper Competition Policy Review, released on 24 November 2015.”

For those who are not aware of the Harper Review findings, the key recommendation for our sector was that: “Each Australian government should adopt choice and competition principles in the domain of human services.”

Morrison went on to say: “Finding innovative ways to improve the efficiency and cost effectiveness of the human services sector, and to target services to those most in need, will help ensure that high quality service provision is affordable for all Australians and leads to improved outcomes for individuals and the economy.”

What has always been of most concern to CCA is not so much the idea of competition – there are already forms of competition and contestability at play in many of these areas – but how ‘the market’ is defined and how competition is structured.

The human services “market” is more complex than the standard supply and demand market, primarily because the government is the biggest buyer (customer):

A market approach that is driven, informed and funded by government may be described in many ways, but it is not an open or free market. In most cases, it is a distorted market monopoly.

The completely botched tendering of almost $1 billion of community services funding by the Department of Social Services (DSS) under the Abbott government is a classic example of how governments get it wrong when applying market approaches to human service provision.

In the Senate inquiry into the DSS grants process, senior executives from DSS said they were “testing the market” and that this testing was long over-due.

As CCA repeatedly pointed out in submissions and Senate appearances relating to these processes, the most important principle in testing any market is knowing exactly what you are seeking to buy and having measurable criteria for the quality of the product. For me, this is why government “market testing” in human services provision is actually grounded in a whole series of false assumptions.

The grant process DSS setup to allocate hundreds of millions of dollars across thousands of organisations was entirely self-informed and self-serving. DSS determined the scope and nature of the new grant programs, the areas of need, what services could or should be run, what services would or would not work within specific communities and how much funding organisations should be allocated to provide the services DSS wanted provided in that location.  

The process for making these decisions was developed and imposed by DSS, all decisions were made by DSS staff and the review of the program was conducted by DSS staff.

CCA believes it is important to ensure government money is being well applied to achieve the desired policy goals. It is also important to acknowledge that some measure of contestability can be positive – there is not a strong case for simply continuing historical funding models.

There are, however, better ways to achieve efficiency, effectiveness and improved outcomes through reform of human service funding. Promoting co-design, collaboration, broader goals, less micro-management and compliance, greater emphasis on achieving outcomes, more time to develop and sustain programs, building on what works, recognising the value of relationships, drawing on real expertise and grounded knowledge from service providers and users, place based solutions, etc. are just some of the approaches CCA will be putting forward as part of our submission to the Productivity Commission.

We should not ignore the clear indications of what is coming – an increased measure of competition and contestability is going to be applied across many areas of human service delivery.  The question is how?

If we are committed to our programs and services, sitting back and hoping these changes will somehow fade away is not an option. It is our responsibility to advocate for what we believe, what we know works, what we know makes a difference in the communities we serve.

If ever there was a national inquiry that the Not for Profit sector must be very active in, this is it!

NB submissions to the Productivity Commission Inquiry Human Services: Identifying sectors for reform close on 25 July, see here.

CCA members should send their comments and input to leighw@communitycouncil.com.au or davidc@communitycouncil.com.au

About the author:  David Crosbie has been a leader in the Australian NFP sector for more than 20 years. He is CEO of the Community Council for Australia (CCA), an independent member-based organisation promoting the work of the Not for Profit sector. He is also a former member of the Australian Charities and Not-for-profit Advisory Board. He has served on a range of key national bodies including as chair of the National Compact Expert Advisory Group, the NFP Sector Reform Council, and as a member of the Community Response Task Group chaired by former prime minister Julia Gillard.  

David Crosbie will be writing exclusively for Pro Bono Australia News on a fortnightly basis – covering issues of importance to the broader Not for Profit sector.