Commissioning NSW hopes to straighten out the tangled web of government insourcing

By Stephen Easton

Tuesday October 22, 2019

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Public servants engaging the machinery of government to handle service delivery should follow clear processes just as they do when outsourcing services, according to the New South Wales government’s experts on commissioning and contestability.

Conflicting interests can arise when teams of public servants play both roles — commissioning and delivering services — leading to unhelpful “tension” and a complex “noodle soup” of responsibilities, according to Commissioning NSW, a Treasury unit established in 2016 to help guide outsourcing-vs-insourcing decisions.

It is a “provocative” suggestion that agencies should make service-delivery arrangements through internal and external providers in much the same way, says the Treasury team, before listing several benefits of a more consistent approach in the first substantial post on a new blog for the community of commissioning professionals in the NSW public sector.

By “more consistent” they are suggesting internal service agreements be arranged according to clear rules and processes more like those which apply to contracts with external service providers.

“Where government partners with external providers there is usually clear structural separation between commissioner and provider roles, and contracts usually define the specific responsibilities and risk allocation between each side,” the anonymous post observes.

“This is sometimes also true where government is both a commissioner and provider: NSW Health commissions services from Local Health Districts via service agreements, and Training Services NSW commissions services from TAFE NSW via Smart and Skilled contracts.”

“However, in other cases, accountabilities are often not as transparent, and sometimes the same division, team, or even person may play both commissioner and provider roles. The entanglement of roles resembles a noodle soup – all mixed up and difficult to separate.” [Emphasis in original]

For example, they say teams of caseworkers provide services to children in foster care and “manage relationships with non-government providers” at the same time. “This entanglement can cause tension between [their] accountabilities” related to the two different roles in commissioning services and providing them, according to the blog.

“Most obviously, there is a matter of prioritisation: spending more time on one role can come at the detriment of the other. More subtly, there can be a tension between the provider’s interests in the outcomes of their particular service, and the commissioner’s interests in the functioning of the entire service system.”

Commissioning NSW sees four main benefits from a more consistent approach to commissioning internally and externally. Firstly, it says clients could have similar expectations of the services regardless of who provides them.

Secondly it imagines this would support a more “level playing field” between internal and external service providers. This goes to the heart of the whole concept of contestability, in which decisions to outsource or not to outsource are theoretically made on a rational, case-by-case basis.

Other expected benefits include “clearer accountabilities and risk allocation between commissioner and internal providers [to provide] the basis for more rigorous and realistic performance conversations” and “increased autonomy for internal providers” within an overarching “system vision” that is clearly defined by the public servants responsible for commissioning the service.

The article notes that in some cases it is neither feasible nor desirable for internal service arrangements to have “the sort of strong structural separation seen in external partnerships” but the key message is there is room for improvement, because good outcomes from commissioning depend on both parties clearly understanding the relationship and their respective roles.

“Many NSW government agencies are exploring different approaches to commissioning internal providers, including in collaboration with Commissioning NSW,” it adds.

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