Competitive tendering in the welfare sector

Competitive tendering is reducing choice in welfare services, especially in rural areas, and increasing administrative costs with the result that services have to be cut. These are the key findings of a recent study undertaken by Anglicare Australia in cooperation with the Australia Institute.

The Study, Competing Interests: Competition policy in the welfare sector, undertaken by Dr Ann Nevile is based on 37 interviews with both welfare agency and Government representatives in five states and the ACT.

In April 1995, Commonwealth, State and Territory governments signed three intergovernmental agreements which form the basis of national competition policy. The policy reflects the view that the best way to achieve increased levels of productivity and innovation (and hence increased standard of living) is through "the discipline imposed by effective competition". However, even when competition does lead to an increase in economic efficiency, competition may also produce undesirable side effects such as increased inequality of income and wealth. This study looked at the impact of competition policy on the welfare sector and in particular the application of the public benefit test.

The importance of this study is highlighted by the fact that approximately 55 per cent of welfare services in Australia are provided by the more than 11,000 community based and church affiliated organisations. Governments which largely fund the welfare services deliver less than 35 per cent of the services. The relationship between governments and the Church and charitable organisations is critical to the effective and efficient delivery of the social safety net in Australia.

The study found that competition policy is changing the structure of the non-government welfare sector because larger, city-based organisations are better equipped to prepare tenders and better placed to pay the costs of competitive tendering. With the result that small local organisations, especially rural ones, with local knowledge and contacts are simply being out bid. This also leads to a reduction in choice for many welfare clients and a removal of access to welfare services altogether for some clients or potential clients. The reduction in choice is a consequence of the decline in number of small agencies and in potential clients being defined out of services as eligibility criteria are tightened.

Competitive tendering is also having a detrimental effect on the quality of welfare services because community based organisations are less willing to share information and innovative approaches because of the need to compete against other agencies for government contracts.

While it is recognised that competitive tendering had improved accountability and transparency in decision making, attitudes need to change at both Federal and State government levels and there also needs to be changes in practice. Not all the impacts of competitive tendering are the result of the policy itself, the way the policy is being implemented and other changes in the policy environment, especially the fact that the policy has been implemented in a period of declining resources for welfare, have also had substantial impacts. Poor implementation strategies, such as inconsistent tender requirements, further increase administrative costs and the impact of such increases is magnified in an environment where overall funding levels are decreasing while demands for services are increasing.

Key changes recommended are greater consistency in tender requirements and procedures across Federal government departments and across Federal and State governments, as well as rationalising reporting requirements and establishing common data collection systems.

To achieve better outcomes for clients, there needs to be greater cooperation between welfare agencies that deliver services and the governments that fund these services. The reduced levels of collaboration and information sharing between government and non-government organisations partly results from and partly leads to inappropriate implementation strategies, thereby undermining any efficiency gains anticipated by the introduction of competition policy. At the moment, competitive tendering is being allowed to become a barrier to improved community / government co-operation and collaboration.

Anglicare Australia plans to use the report to advocate for a protocol for competitive tendering in the welfare sector to be established (defining consultation, encouraging co-operation and collaboration, protecting local level agencies, consistency of procedures, standard conditions re intellectual property administration costs and public comment) as well as urging government to encourage greater consultation and collaboration between community agencies with a view to strengthening networks and local agencies. A series of round table discussions is being planned for capital cities to discuss the report and its findings and to seek support for the development of a protocol.

In some states, such as Queensland, where competitive tendering has not yet been applied to the welfare sector, there is the opportunity to find an alternative mechanism for contractual relationships between Government and community service organisations. In Victoria, where the policy has been applied for several years, the Government is reviewing the application of the policy and looking for new ways to select organisations to deliver services. The federal government is also currently reviewing the application of competition policy in the welfare sector and a Senate Committee has recently released for public comment a draft report on The Socio-economic Consequence of National Competition Policy. Debate about the impact of competition policy is set to grow.