Service contestability: the four key elements to making it work

By Steven Metzmacher

September 11, 2014

Making government services contestable presents a number of strategic challenges for the public sector. It represents a significant change to the way government currently operates and will have far reaching impacts on each department’s focus, operations, capabilities and culture. The challenges range from understanding what contestability means through to successfully implementing it.

One thing is certain: contestability is here and the public sector will need to proactively embrace it.

The phrase “more for less” encapsulates the aspiration that contestability seeks to facilitate. It entails getting better quality outcomes with fewer resources, resulting in increased productivity. Government will achieve better outcomes through astute “make versus buy” decisions rather than undertake all of the necessary activities itself. The enthusiasm for contestability is not unique to Australia and it will not abate, as the affordability of crucial community services such as health and education are called into question by the economic realities of an ageing population.

There are four key elements needed to succeed …

1. Benefiting from creating competition between providers

Contestability is not just about outsourcing. It does involve better outcomes from creating competition between providers. To make contestability work, however, demands we understand industry dynamics — what drives profitability, what works/what doesn’t, the labour environment, competing market forces, market maturity, how viable is the market, what underpins its fundamentals and what if it fails?

It is not about getting the best deal but rather “enhancing value” for all by maintaining a competitive and accessible market. Outsourcing is one of many commercial delivery models but the task of creating a sustainable market where the citizen ultimately benefits is a much broader challenge.

2. Re-defining the role of government

Departments are increasingly becoming part of networked government — intertwined with industry and other participants to deliver better outcomes for citizens. Achieving “increased productivity” means we all must work more effectively together.

Contestability entails creating a mutually beneficial relationship with delivery partners. In doing so it forces us to answer the question of what our core role is in enabling public services to be delivered. It is about our entire operating model.

Having a clear understanding of a department’s core role (e.g. policy, regulatory, compliance, service delivery), and hence when it partners with others to achieve, is obligatory for contestability to be a success.

3. Becoming a ‘partnering’ organisation

Engaging others to deliver services is as much about the capability of the public sector as it is the capability of the market. It requires a major cultural shift and way of working to one that is highly collaborative and astute to the market. It demands new skills and approaches in partnering, commercial acumen and outcome management.

The “retained” organisation will look vastly different from the previous version. This significant change must be given as much focus as the engagement of the market itself.

4. Discipline in execution — making services contestable is highly complex reform

The public sector traditionally struggles to manage the implementation of complex reform. Contestability is highly complex on all fronts — from a stakeholder perspective, the commercial arrangements, the organisational and cultural change required, the level of risk involved, managing what’s left behind in the “old world” to understanding the level of risk involved without squashing the benefits of the new arrangement. All of these combined requires rigour and discipline to ensure the reform program is successful for all parties.


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