The dark side of private-public partnerships

There are two main sources of government control over a society: legislative and regulative. Both are well worn paths of achieving the government’s aims and objectives. Increasingly though, there is a third tier to the control mechanisms of government, the use of contracts.

Contractual governance is nothing new. The management of taxation in the Roman Empire was a contractual one in essence. The Romans would sell off the rights to collect tax to the highest bidder, in effect taking the tax they expected to make from the sub-contractor (for want of a better title) and then allowing these sub-contractors to officially reimburse themselves through the tax they collected from the populace. Roman tax rates were not set by the government but by the subcontractor allowing for the actual tax, and the profit margin set by the subcontractor. It is easy to see what sort of problem these arrangements caused the Roman world.

So contracts have been a feature of government business and policy implementation throughout history.

Most government contracts are fairly benign. Contracts for the provision of goods and resources are a well trodden path: stationery, weapons, land; all are easily recognised as necessary to ensure the proper working of government.

So why the change?

Legislative control is very much an iron bar, the laws created to achieve the government's aims can be both too loose (as with most laws created by Westminster countries) or too controlling (as with most law created by non-Westminster countries). Legislation which is too loosely worded will leave policy implementation wide open to interpretation, potentially changing the very nature of the policy intention. Legislation which is too controlling may result in unintended consequences for implementation not originally envisaged by the government policy makers.

Regulations are much the same but with the added consequence that the control aspect is left to an essentially un-representative body that has little if any accountability to the people, and what accountability it has is generally directed through the government, leaving this political body with the consequences.

Contractual governance is different though. It is the use of non-government service delivery to achieve government policy aims: forgoing the legislative and regulative functions of government.

Just think of a modern road-work. As I take my socially unacceptable smoke break, there is a road-work crew laying down some tar. Once upon a time, the depth of the tar on the road, the number of traffic control operators and time-frames for completing the works were managed through legislation and regulation. Now-a-days, thanks to contracts, these old requirements can be included as part of a contract and enforced through contractual law, doing away with the need for the parliamentary oversight functions embedded in the formation of legislation and the review of regulations (not that these aren’t used).

Government can also make these contracts commercial-in-confidence keeping their inner workings from prying eyes. Road works may not be an exciting example, but the true dark-side exists when you use contracts in the delivery of social services. Contractual control can be very directive. Implementation enforces its rewards and punishments directly on those involved, first the company and through them the public.

Contractual governance can be very useful in ensuring government policy (both good and bad) is implemented through the embedded enforcement of rewards and punishments. Simply put: contracts, being steeped in judicial precedent and common usage, are a well recognised tool to achieve a desired outcome.

The Job Network included many provisions for the docking of the job seeker's dole cheque if they didn’t comply. The legislation didn’t leave much room for compassion; the government contracts with the service providers left even less room (though some organisations such as the Salvation Army did refuse to go through with the act).

Other government contracts, most notably the Howard government’s contracts with the Red Cross include clauses that prevented the organisation from making “unsolicited public comments”, more appropriate language for the gagging of public debate. Imagine any government trying to pass that one through parliament.

This is not where it ends though. Contracts provide a buffer between the government and the public’s experience of the service provision. If there is a problem with this provision, then the government can legitimately claim it’s not their fault. This distance is invaluable in the protection of the government’s public image.

The unemployed who fell foul of the Job Network’s policies didn’t blame the Howard government; they blamed the non-government organisation and the employee who busted them. The government then can play the compassionate one, overturning the non government service decision or ignore the matter altogether. The service provider’s public image is tarnished, not the government.

So the question is: “where will this lead?” It is certainly an impetus for the continued privatisation of government services. The political benefits for government are easy to see: the greater use of privatisation does lead to cost savings, first from the public wage budget (in the community sector this can be as great as 30 per cent if the New South Wales Public sector awards are compared to the NSW Social and Community Services Employees (State) Award); the certainty of costs is another benefit. There are more oblique benefits to government: greater control of policy implementation will be seen as a boon to any Minister or Cabinet weary of the everyday battle with parliament and their department. Add to this a reduced oversight from parliament of their policy-at-work and the governmental benefits of contracting, as opposed to the more visible financial benefits of government contracting, can become a minor consideration.

What it can also lead to is a steady decline of our rights: our right to open government, our right to equality at law and our right to have control of government available to us currently through the traditional functions of the parliament. These declines have already been commented on with the issue of the Howard government including a "no public comment" threat in its contract negotiations with non-government-organisations in 2003, but an awareness of these concerns is the most important outcome we should be aiming for: both the devil and God is in the detail.