The APS seeks outcomes for Australians through complex systems of organisations, rules and relationships. How the APS designs and stewards these systems matters. Research prepared for the Independent Review of the APS suggests the APS of 2030 needs to be more strategic in how it stewards this system towards purpose, value and outcomes.
At a glance
In ANZSOG research commissioned for the APS Review, Janine O’Flynn (University of Melbourne), and Gary Sturgess (University of New South Wales) explore commissioning and contracting. They consider how the APS of 2030 should deploy these tools in pursuing outcomes. Their analysis points to a range of enduring and emerging challenges that demand attention.
What are the differences between commissioning, contracting and outsourcing?
These terms are often used interchangeably. While inter-related, one way of understanding the differences is:
- commissioning is a strategic framework for determining needs and aspirations and then developing ways to achieve these.
- contracting involves a range of tools that join two or more parties together.
- outsourcing is a specific tool used when government moves particular in-house services to external providers.
Why commissioning and contracting matters
Commissioning and contracting matters because of scope and scale.
- Approximately 50-60% of the Australian government’s spending on goods and services for the public is commissioned through external providers including state and territory governments, government business enterprises, and private and not-for-profit organisations.
- In 2017-18, the Australian government spent $90-100 billion on purchasing goods and services from private and not-for-profit. This is around three times the amount spent on direct employment.
Why does government engage with external parties?
Public sector organisations engage with other parties to address short-term capacity problems, access specialist skills, introduce innovations or access capital investment.
Outsourcing can also be driven by:
- political or philosophical views – to reduce the scale and scope of the public sector so government can focus on ‘core business’.
- competition and contestability.
The research found the APS has a deeply embedded procurement mindset, shaped by a long experience of outsourcing. To be more strategic, the APS needs to develop a broader conception of contracting and see it as a range of tools and relationships that can enable the achievement of purpose.
What is the core work of government?
Determining what is ‘core’ assumes it is possible to draw hard boundaries around what government should do. This is more easily said than done. Government activity is increasingly complex and interconnected given government works with many actors to achieve outcomes. In this environment, the core work of government is stewarding these complex systems towards purpose and outcomes.
The scale and scope of the APS’s engagement with other parties demands that system design, stewardship and strategic commissioning becomes the core focus for the APS. This also requires the APS to retain and develop its strategic policy capacity so that it is an “intelligent buyer”.
What does it mean to be more strategic?
Being more strategic starts with fundamental questions of purpose:
- why are we doing this?
- what value are we seeking to produce?
This puts the focus on purpose, needs and aspirations rather than process and tasks. It also addresses the relationship between means and ends and builds in values such as fairness, equity, legitimacy and integrity.
Starting with clarity of purpose means asking:
- Is there a compelling strategic reason why this activity should be kept in-house?
- Are there any external parties that might contribute to this purpose?
- Does the external provider offer (or seem likely to able to provide) net service benefits?
- Do the relationship management costs outweigh other net benefits?
Answering these questions moves away from a procurement mindset towards a more holistic and strategic approach to commissioning.
Challenges confronting the APS
An analysis of Australian National Audit Office reports and other government-commissioned studies revealed the following challenges:
- a failure to understand the service that is to be procured.
- insufficient time allowed for service specification.
- unrealistic expectations about cost and flawed assumptions about potential economies of scale.
- a lack of good process and a failure to follow procurement guidelines in designing and applying evaluation criteria.
- a lack of effective competition in selecting providers
- poor quality contract management.
The APS also faces new challenges:
- the need to think in terms of ecosystems, networks and supply chains.
- expanding how it engages with others by shaping an environment of increased diversity through system stewardship.
- think more relationally rather than transactionally.
Towards strategic commissioning
Strategic commissioning emphasises engagement with communities and clients/users of services. This enables a richer understanding of aspirations and needs so outcomes can be clarified and better decisions made from the outset. Commissioning should be anchored to community needs and aspirations, not decisions made by government for communities
Building this relational capital and trust takes time and effort. This will require particular skills and competencies of public servants, and the development of different organisational capabilities.
Being more strategic also means making decisions about what government will no longer do. This is the process of decommissioning where unneeded, underperforming, failing or obsolete services are discontinued. Creative decommissioning can be used to drive innovation and transformation by closing the old and creating the new.
What does this mean?
The paper proposes the following directions for reform.
- The APS leadership, individually and collectively, should drive a shift in mindset across the public service, taking it from transactional to relational, procurement to contracting, and from transfers, grants and outsourcing to commissioning.
- The APS should operate with principles-based approaches that reflect a broader understanding of contracting and which enable it to design and steward systems in ways that enable the achievement of outcomes, while ensuring that probity and transparency concerns are addressed
- The APS should develop a clear framework for capability with regard to commissioning and contracting, and establish a baseline regarding current capability
- The APS should develop digital platforms that enable effective system design and stewardship and strategic commissioning.
- The APS should establish a small team of specialists at the heart of government as a centre of excellence in contracting (as opposed to just procurement) and system design and stewardship.
- The APS should take the leadership in the establishment of an independent Centre for Public Service Commissioning, in conjunction with state governments and private and not-for-profit providers, to undertake applied research into delivery systems and the conditions necessary for their success.
Want to read more
Getting the work of government done – Janine O’Flynn and Gary L. Sturgess, Australia and New Zealand School of Government, March 2019
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