How NFPs Can Make Inroads into Better Consumer Outcomes - PC Report

Competition within the social housing sector and initiatives around government-commissioned welfare funding are two areas the not-for-profit sector can make innovative inroads into better consumer outcomes, according to a new Productivity Commission report.

The latest Productivity Commission report lists six priorities where well-defined reform in the area of competition, contestability or user choice could improve service provision for users, and benefit the community as a whole.

The priorities are: social housing, public hospitals, end of life care services, public dental services, services in remote Indigenous communities and government‑commissioned family and community services.

Set up in June 2016, the Productivity Commission inquiry followed the Harper Competition Policy Review recommendation that the human services sector be assessed to see where there would be opportunity to apply competition principles.

According to the Terms of Reference for the inquiry: “Australia’s human services sector is facing significant challenges, including increasing demand for services due to the ageing population, the effect of technology and cost increases associated with new and more complex service provision demands.”

However Productivity Commissioner Dr Stephen King told Pro Bono Australia News that whenever there was user choice there must be alternative options for individual users, but that “competition was just a tool and not an objective”.

“The objectives are the benefits and outcomes for the users,” King said.

“Social housing already has some not-for-profit organisations engaged through community housing provision. We would see more engagement for not-for-profit organisations going forward.

“We see differences in performance in community housing and the public housing sector and  those parts of social housing [that are] managed by the not-for-profit sector appear to be performing better.

“We see issues relating to waiting lists, we see issues with regards to a ‘mismatch’ between social housing stock that’s available and the needs of the individuals… the needs of families that need social housing has changed over time so in a sense we have built a housing stock for working families and now have a lot of individuals who require social housing so we have seen that mismatch.”

King said one of the things the Productivity Commission would be asking in the upcoming phase two of its investigation is to what degree does Australia need to consider broader housing reform and the role of not-for-profit organisations in that.

“If not-for-profit organisations become more involved there’s the issue of whether they can become more involved in management, can they become more involved in innovative ways that bring new stock into play and in terms of social housing, can NFPs work with other parties out there in the private sector, whether they are co-operatives or for profits, to be able to increase the availability of the housing stock.”

He agreed that the concept of not-for-profit mutuals and cooperatives could be part of the reform.

“In a sense harking back to the history of mutuals… for a long time not-for-profit mutuals have been involved in housing and we think there will be an increased role for them moving forward in Australia,” he said.

“At the moment we have identified the areas and we think there is a lot of scope for new thinking in the social housing area. What we are asking next is bring that thinking to us and show us how new innovations can be made.”

He said in the area of government-commissioned community and welfare funding there was already explicit contestability and competition through the tendering process.

“What we are focusing on is the commissioning process.The feedback is on the problems of the current commissioning process.

“One party put it to us in this way: the current commissioning process has meant that the not-for-profit sector has become very good at writing tenders and the government departments have become very good at evaluating tenders. That’s a nice way of putting it because the user doesn’t appear anywhere there.

“The recipients in human services are almost locked out of that loop. And so what we want to do in this second stage is to focus in on how can we improve the commissioning process… how can we make it work better for the sector and make sure that the sector is getting the certainty that it needs to be be able to invest .

“We have seen situations [of] 12 month and two year contracts where quite frankly in non-government sectors, parties just wouldn’t accept those short-term contracts where they can’t invest.”

He said the examples they saw were “extraordinary”.

“How can they operate like that? One NFP had been working in the [welfare] area for 20 years and had only ever had 12-month contracts.”

King said the commission heard evidence of the way that services were broken up in the tendering process.

“Wouldn’t it make more sense to tender out for the whole of the service instead of breaking it into little bits that seem uncoordinated and often one service provider gets one bit?

“The sector quite correctly talks about coordination and collaboration between not for profits which we suspect is just putting back together the services that have been split apart during the commissioning process.

“One of the things coming into this area we have found is that government commissioning of human services really is a lot to be desired and what we are going to be focusing on in the second stage is not fundamental reform of the services themselves but just getting reforms and recommendations out there to improve the nuts and bolts of the commissioning process.

“[We want] both parties, government and the not-for-profit sector, involved so that they can get the incentive right and make the investments that need to be made, so that they can innovate on the services, so that they can have output based services rather than services that are based on inputs. So that they can focus on the users.”

King said the Productivity Commission would be releasing an issues paper in the next week inviting not-for-profits to be part of the ongoing discussion.

“Now we are going out again and asking the questions again saying come to us with your evidence based suggestions and reforms so we can evaluate them.”