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Will Privatisation and Contracting Out Deliver Community Services?

Research Paper 15 1997-98

Jacqueline Ohlin
Social Policy Group
2 June 1998


List of Acronyms

Major Issues Summary


Clarification of Definitions

Roles and Responsibilities and Funding Provisions

Overlap and Duplication

A Coordinating Mechanism for Social Policy Issues?

Towards Contracted Services

Reform of Intergovernment Arrangements in Service Planning and Delivery

A Prognosis for Community Services?

Appendix 1: Chronology of Reports and Inquiries relating to Community Services Development and Delivery

Appendix 2: Commonwealth and State Government Portfolios Encompassing Community Services


List of Acronyms

ACOSS Australian Council of Social Service

ACROD Australia's Council on Disability

AIHW Australian Institute of Health and Welfare

COAG Council of Australian Governments

CSO Community Service Obligation(s)

FAGs Financial Assistance Grants

GDP Gross Domestic Product

HACC Home and Community Care (Program)

LGCSAA Local Government Community Services Association of Australia

OECD Organisation for Economic Cooperation and Development

SACS Social and Community Services (Award)

SPP Specific Purpose Payments

Major Issues Summary

The period 1989-90 to 1995-96 saw the Commonwealth Government increasing recurrent community services expenditure at an average of 18.9 per cent per year, State and Territory Governments averaging a 3.4 per cent increase and local governments increasing expenditure at an annual rate of 20.1 per cent. The planning and delivery of community services in Australia are undergoing major change as a result of new financing arrangements, privatisation and 'contracting out' of services. The change is offering unprecedented opportunity for governments to have a greater say in the way in which services are delivered, and opportunities for community services organisations to further streamline their operations.

At the same time, the sheer quantum and pace of change is signalling stresses in a community services sector traditionally regarded as exemplary in its capacity to innovate and respond to identified need. This paper discusses Australian and overseas studies examining these stresses, in terms of effects on service organisations, service recipients, volunteers and the labour force in general. These studies indicate concern, and suggest the need for thought and analysis about:

  • the actual extent of any 'level playing field'
  • the appropriateness of competition in community service delivery
  • the capacity of service recipients to pay service charges
  • cost-shifting and cost-cutting in service delivery.

The paper comments on the difficulty in arriving at a definition of community services in a 'mixed economy' of service planning and delivery which includes government and non-government, for-profit and not-for-profit agencies, providing everything from children's services to aged care, community development to counselling. It does, however, note some key features of this 'mix' including:

  • the major provision role of the non-government sector
  • the dependency of most (mainly small) non-government organisations on government funding
  • the increasingly important role of private sector providers
  • the increasingly important part (currently one-quarter of all service funds) played by 'user charges' in the funding of services.

Discussion of payments to welfare recipients is specifically excluded from the paper, as these are regarded not as 'services' but individual entitlements.

The paper suggests that difficulties in achieving a definition for community services may stem more from the absence of any mechanism drawing together the key players (both government and non-government) to discuss roles and responsibilities. The importance of achieving common definition relates to the need for comparable data, reporting arrangements and benchmarking processes. The current disparateness of definitions suggests that there may be substantive under-reporting of activity in the sector.

'Overlap' and 'duplication' in service planning and delivery were issues which were largely responsible for driving service reform throughout the 1980s and early 1990s. The paper discusses whether 'overlap' and 'duplication' are evils to be eliminated, or whether, in judicious quantity, they contribute to the plurality of services required by a pluralistic society. It is becoming clear that dealing with 'overlap' and 'duplication' will only be truly effective when all of the key players are involved-and the paper notes that efforts to this end have been intermittent.

When it comes to discussion of the funding of community services, the paper comments on macro-level indications of Australia's capacity for 'social expenditure', compared with other OECD countries. At another scale, it cites Australian and overseas studies cautioning that the promised economic benefits of privatisation and contracting out may not be being reaped, and may even be used as an excuse to effect cost-shifting and cost-reduction, thus casting doubt over service quality for recipients.

A major concern emerging on account of 'confidentiality' provisions, is the reduction of relevant data on which to base social planning policy and the absence of any apparent coordinated and consultative approach to social policy development. Such an approach would enable both government and non-government players, providers and recipients of services to engage in robust debate about issues of unmet need or social well-being which cross the lines of specific services, service recipients or service types. The paper explores a possible model to address this concern and move again toward the generation of co-responsibility for community wellbeing.


From the very origins of community service provision in Australia, services have been planned and delivered through a mix of government and non-government arrangements. Over the years, across different jurisdictions and patterns of need, any description of what is understood as 'community service' has evolved into a 'best fit' for the given situation. In time, this led to some confusion, inefficiency and fear that money was being wasted. Ultimately, it resulted in government intervention to address 'overlap and duplication' in service planning and delivery.

For the purpose of clarification, this paper addresses the range of services broadly regarded as 'community' or 'human' services, but does not include payments to welfare recipients, which are in most cases not a 'service' but an individual entitlement. The paper seeks to clarify some of the various definitions of community services and provide a basis for understanding the many issues which have affected the operations of the community services sector over the past twenty years. These issues include the funding of community services-in particular, levels of expenditure by respective stakeholders and the implications of funding arrangements for service delivery and service quality.

Particular attention is given to the effects of recent policy trends towards the privatisation of service delivery, including the effects on service organisations, recipients of services, on the service sector labour force and effects on volunteers and volunteerism. In no small measure, the responsiveness of the community services sector at its base-that is, its capacity to respond to new and emerging needs-can be seen as one of its crowning features. Direct interventions by service providers to the needs of service recipients have, over the years, seen creative, timely and caring responses to issues such as youth unemployment, child care, HIV AIDS and youth suicide, to name but a few. Many such interventions have grown into government-funded programs of services, but it has been the process of dialogue between all parties, although often imperfect and incomplete, which has allowed for effective partnership in understanding and addressing needs at a community level.

But growth in the identification of community service needs has also been met by major challenges, including stronger pressure by governments for targeting of services to the 'genuinely needy'. Further, western governments, including the Clinton Government in the United States, the Blair Government in Britain and the Howard Government in Australia (but also significant commentators such as Mark Latham, in the Federal Opposition) have urged far greater individual and family responsibility in provision of both welfare and community service needs, through measures designed to reduce dependency on government sources. Community service organisations in both the government and non-government sectors have been urged to greater efficiency within a competitive framework. But there are already indications that the application of blunt economic policy instruments have had a deleterious effect on community service planning and delivery-in the capacity of service providers to respond to identified need, in the capacity of service recipients to have needs met, and in the capacity of all spheres of government to effectively manage service planning and funding. These indicators suggest the need for a national coordinated and consultative social policy overview by governments and the service sector, working in concert. Such an overview could contribute to intersectoral debate and discussion reaching beyond an individual service to tap the developmental and cooperative traditions within the service sector in order for governments and the community, together, to inform desired social futures and the difficult social realities of policy decisions.

Clarification of Definitions

The area of community service planning and provision is variously referred to as 'community services', 'welfare services' 'social services' 'human services' or 'community programs'. Judith Healy, Senior Research Fellow at the London Policy Studies Institute points out(1), 'new labels compete for legitimacy every few years'. The term, however described, is generally understood to refer to direct services rather than to social security payments.

Over time, the need to define community services more specifically has been voiced as a result of expressed confusion over which sphere of government in a federal structure like Australia is responsible for planning and/or provision, over concern about which services actually constitute community services, or through frustration that services provided in a given geographic area are not universal.

The difficulties in defining community services occur through:

  • services being defined differentially under program or Departmental names (which may in turn be affected by changes in Departmental jurisdiction from time to time and may vary from State to State)
  • differing traditions and processes of service introduction (for example: the provision of State Government Recreation Officer subsidies for Local Government in Victoria, and the provision of State Government Social Worker subsidies for Local Government in New South Wales)(2)
  • differential rates of uptake of program funding opportunities (due to differences in local need and/or capacity to plan or deliver services locally), and
  • 'blurring' of roles and responsibilities between the government and non-government sectors(3) in relation to planning, funding and provision of services.

Over time, it has been suggested that a more specific definition of community services may assist in:

  • comparable measurement of service outcomes
  • 'benchmarking' of similar services or service planners/providers
  • clarification of public accountability provisions
  • comparable standards of employment for community services staff across the country, and
  • better understanding of respective roles and responsibilities among service planners and providers.

In this context, the Local Government Community Services Association of Australia (LGCSAA) has defined community services as:

...a system for providing support to sustain and nurture the functioning of individuals, families and groups to maximise their potential for development and to enhance community well-being..(4)

The LGCSAA definition notes that community services are:

...often, but not only directed towards target groups such as families, low income earners, women, unemployed groups, people with disabilities, aged people, people from non English speaking backgrounds, Aboriginal and Islander peoples and victims of violence and abuse.(5)

The LGCSAA notes that community services:

...are often provided in areas such as housing, shelters and refuges, employment and training, family support, public and community transport, child care, income support, finance and emergency assistance, health, education, community centres, community information, legal and consumer advocacy, community safety and counselling/emotional support.(6)

This definition, while lengthy, is useful in that it highlights a systematic approach, and includes general aims or principles as well as specific services and target groups while focusing upon local communities as the locus of planning and delivery.

The Australian Council of Social Service (ACOSS) comments that the breadth and depth of community services make precise descriptions difficult, but includes in these:

...children's services; various forms of supported accommodation (for older people, people with disabilities including psychiatric disabilities, women escaping domestic violence, younger people, families, men); various forms of support for people to enable them to remain in their own home; other forms of support and training to help people with disadvantages in the labour market to obtain work; child protection and substitute care; youth work; family support including counselling; financial counselling and emergency relief; information and advice; individual and class advocacy.(7)

While in some ways similar to the LGCSAA definition, this ACOSS definition reflects (legitimately, given its organisational focus) more of an emphasis upon welfare services than upon general community and personal development.

The Australian Institute of Health and Welfare (AIHW) has developed a national classification of community services, which includes:

  • personal and social support
  • child care and pre-schools
  • training, vocational rehabilitation and employment
  • financial and material assistance
  • residential care and accommodation support
  • protective services
  • corrective services
  • policy, community service development and support
  • other community services.

The AIHW national classification also addresses:

  • population groups or communities
  • families/households
  • individuals (children and young people, adult age groups, people with particular heath needs, indigenous people, people of immigrant background, people with disabilities, people subject to statutory psychiatric or protective intervention, individuals subject to or at risk or correctional intervention, other special needs groups):
  • organisations
  • labour force groups.(8)

In its report on community services(9), the Australian Bureau of Statistics utilises the national classification of community services developed by the AIHW. While the Commonwealth and State Governments accept the classification, it has not been endorsed by either Australian local government or the non-government sector.

The shortcomings of the AIHW classification are, however, that it fails to acknowledge the breadth of community services currently being provided (particularly in the area of 'other community services'). This may stem from a somewhat restricted view of community development activities as 'vague' or 'soft', but the classification as it stands has limited application for practitioners at the local scale. For example, local practitioners tend to be involved in community development and community-building activities which include community consultation and facilitation, skills development/capacity-building, coordination, research and analysis, negotiation and conflict resolution, processes designed to increase community confidence, develop cooperative relations, enhance community identity, improve outcomes for access and equity and encourage a fairer distribution of resources and equality of opportunity.

If the current classification is applied as the basis for reporting of data (in particular, expenditure on community services) it will result in substantial under-reporting of community service activity. An analogy that can be drawn here is with the area of health. Reporting, for example, on health service activities without including preventative health measures results in only part of the story being presented. Consideration of these issues is perhaps most appropriately a role for the signatories to the National Community Services Information Agreement (the Commonwealth and State Governments, the Australian Bureau of Statistics and the AIHW, but not local government or the non-government sector). The Agreement aims to improve information and data sharing on community services.(10)

The AIHW classification does, however, include other dimensions of service provision not acknowledged in the definitions above, (such as protective or corrective services), which are generally the preserve of State governments.

Regardless of who provides community services, practitioners argue the need for an approach which ensures service delivery is experienced as a system. That is, they suggest receipt of a given service should provide for the whole person, it should be responsive to their needs, it should link with other parts of the service system and through its provision it should not reduce the social well-being of the individual (either by forcing individuals to inappropriate choices, or by unrealistically forcing up service costs).(11) This implies the need for coordination not only of service delivery, but effective social policy coordination, involving relevant stakeholders.

Roles and Responsibilities and Funding Provisions

Australia is widely regarded as having a 'mixed welfare economy'-effectively meaning that all three spheres of government, the non-government sector and the private, for-profit sector are involved in aspects of service delivery. It is a model which, over the years, has never been designed, but rather has evolved to meet circumstances as they have arisen.

Healy(12) provides a 'thumbnail sketch' of 'the Australian mixed welfare economy' as follows:

Family and friends are the main source of help...(the Commonwealth) writes out pension and benefit cheques. State governments administer or deliver many welfare services. Local government looks after the four R's of roads, rates, rubbish and recreation. Voluntary agencies...are well known such as the Red Cross and Salvation Army.

This view is, however, somewhat simplistic (and perhaps tongue-in-cheek). The actual picture for the planning and provision of community services in Australia is both complex and challenging. Australia is unique in that the process of service planning and provision which has evolved over many years is a blend of arrangements involving government and non-government agencies across a range of service types and programs.

For some services, all three spheres of government and non-government agencies may be involved in aspects of planning and/or provision and in providing funding or subsidisation. Some government agencies are involved primarily in the coordination of planning and provision of funding-preferring to devolve responsibility for delivery largely to other organisations. Still other government agencies have remained involved in direct provision across a range of services, alongside non-government agencies or in partnership with them. Non-government agencies (from large church-based organisations such as the Salvation Army, disability organisations such as the Yooralla Society, development organisations e.g. World Vision, through to smaller organisations such as neighbourhood centres, family support services, youth services, meals-on-wheels services, community legal centres) are probably still the major providers of community services on an organisational basis (in 1995-96 providing, as distinct from funding, $5.2 billion or 59 per cent of the total monetary expenditure on 'welfare' services-largely consisting of transfer payments from Commonwealth, State and local governments), followed by the State Governments, local governments and the Commonwealth Government in that order. The AIHW notes, however, that the household sector (i.e. home carers of frail, aged persons or persons with a disability) is by far the dominant sector in the welfare services area, with an estimated service value in 1995-96 of $16.6 billion.(13) The contribution of the household sector is, however, generally only recognised as an 'in-kind' and not as a financial contribution. Financial arrangements within the sector are complex and difficult to measure. As service funding arrangements change however, seeking to simplify them by division into identifiable service 'chunks' may not always be in the best interests of service recipients.

Variations Across the Non-government Sector

In spite of the size of the contribution by the non-government sector over the years to community services, there has been considerable concern expressed on the part of governments and other critics about variability in the service delivery performance of the sector, or with accountability practices. This concern, however, could also be expressed as an ambivalence, because when parts of the sector strive to achieve professional and organisational development, they are often accused of driving up the cost of services (government grants do not, for example, include automatic indexation for the Social and Community (SACS) Award increases, thus payment of staff at Award rates requires that the cost be absorbed by the organisation). Further, many non-government organisations have traditionally been unable to seek funding for staff or volunteer training as part of their government funding agreements-requiring the cost to be absorbed by the organisation or passed on to service users. The Industry Commission Inquiry into Community and Social Welfare(14) sought the development of quality management systems within community service organisations. However, it noted that while these would lead to support for recognised national standards in service delivery, they would inevitably incur costs for individual organisations.

On the matter of accountability, Healy(15) suggests that this aspect of non-government organisations' performance has been strengthened, (i.e. accounting and reporting practices have been improved) and that they can 'no longer escape scrutiny'. The non-government sector is characterised by a few very large organisations (the largest 50 non-government organisations account for less than .05 per cent of all organisations in the sector, yet in terms of income, account for about one-third of the total income of the sector). However most organisations are small, based in local communities or communities of special interest, frequently offering one specific type of service and are heavily dependent upon governments for their funding.(16) The dynamic caused by this dependency in a climate of competition policy is discussed below.

The private, for-profit sector is a relatively new and increasingly important player in the non-government sector, particularly in areas such as child care and aged care provision. At this stage, there is only one category in Commonwealth Government statistics embracing both the private, for-profit sector within the category of non-government organisations, with no separate data area available to distinguish differing levels of involvement of private, for profit and community-based or non-profit organisations.

There are also variations in services concerning different provisions from service type to service type and from community to community. While there is a view that these arrangements have contributed to 'overlap and duplication' (referred to below), these variations have undoubtedly over the years allowed development of flexibility in service responses required across the community. They may, for example, reflect different cultural emphases or different values bases.

While the lines of accountability for government funding of community services are generally clear, the full extent of funding resources available within the area remains unclear and is thus often unrecognised in government reports and statistics. These resources include the considerable funding input to services by non-government organisations (including fundraising and community donations), the cross-subsidisation of work provided 'in-kind' (for example, planning services provided free of charge by local government councils to community organisations, and uncosted planning and coordination tasks undertaken by peak agencies, or one sphere of government for another), and uncosted volunteer services. Funds provided by consumer purchase of services are also increasingly an element in this equation.

Even as the picture for service planning and provision changes under the aegis of competition policy, there continues to be a dizzying array of service arrangements in place.

Expenditure on Services

Australia's outlay on social expenditure is low when compared with other OECD countries (note: while 'social protection expenditure' data does include expenditure on both community services and benefits, it is the only reliable basis for international comparisons). On available data (1995), Australia ranks third-lowest of OECD countries with a social protection expenditure of 11.4 per cent of GDP, below Canada (14.7 per cent), United Kingdom (1994 figures only, 15.4 per cent) and the OECD average of 15.7 per cent).(17) However, the calculation of social expenditures is complex, possibly including different factors in different countries, and it does not necessarily take into account the historic differences in the development of welfare states, including the role of the voluntary sector.(18) In terms of total tax revenue, Australia, at 30.9 per cent of Gross Domestic Product (GDP) is slightly below the OECD average of 37.4 per cent.(19) It has been argued that, on the face of it, Australia could possibly afford to outlay more on social expenditure, if so required. Dr Michael Jones, Senior Lecturer, University of Canberra, argues that this is unlikely, however, given the high dependency of the Australian tax system on personal income taxes and taxes on profits, which engenders resistance to higher taxes.(20) The AIHW provides an annual breakdown of expenditure on community (welfare) services. Bearing in mind the limitations of the data provided (due to narrow definitions of services and possible under-estimation of resources for local governments and non-government organisations), these are the best available data on current expenditure.

In 1995-96, total 'welfare' expenditure was estimated at $8.9 billion.(21) Of this amount, 66 per cent was funded by the government sector, the users of services funded 25 per cent and the remaining 10 per cent was funded by non-government organisations.

Government sector outlays in current prices by selected purposes as a percentage of total Government sector outlays

Figure 1: Government sector outlays in current prices by selected purposes (Source: Australian Institute of Health and Welfare)

The Institute estimates that in 1995-96, total government sector outlays on 'welfare services' were $5.8 billion. This represented 3.3 per cent of total government outlays, a rise of 90.4 per cent in welfare services expenditure (in current prices) on the 1989-90 expenditure of $3 billion.

The trend is now toward less government expenditure, rather than more, on community services. ACOSS notes that federal social expenditures are now falling from their peak levels reached at the height of the last recession in 1991, and that trend expenditures for 1997-98 and 1998-99 Budgets indicate ongoing reductions. ACOSS attributes this reduction to declines in unemployment over the past five years (affecting service related to employment/unemployment), and also to broader Budget cuts.(22) Fine(23) notes, however, that the trend was in place much earlier-that the Australian Government was merely responding to 'unprecedented economic pressures' confronting all welfare states, and to their limited capacity (whether Labor or Liberal governments) to meet demands for assistance.

The increases over the period are primarily attributed to:

  • increased demand for welfare services as a result of the 1990 recession
  • changes in Commonwealth policies for childcare (mainly associated with long day care and out-of school hours child care places), and
  • additional services provided under Home and Community Care (HACC) and the Disability Services Program, as well as other services for older people and people with disabilities.(24)

It has been argued that these increases could also be due to sustained unemployment and to the longevity of the population.

In spite of increased outlays directed to welfare spending up until 1995-96, there has, however, been no dramatic increase in the proportion of national product spent on benefits. Jones suggests that 'perceptions of crisis' (in other words, calls for policy responses) are linked rather more to increases of 'social dependency' (in particular, unemployment) than to overall levels of expenditure.(25)

The period 1989-90 to 1995-96 saw the Commonwealth Government increasing recurrent community services expenditure at an average of 18.9 per cent per year, State and Territory Governments averaging a 3.4 per cent increase and local governments increasing expenditure at an annual rate of 20.1 per cent. However, the AIHW estimates that local government expenditure, as a proportion of overall government expenditure, remained relatively low until 1994-95 and 1995-96, (which may also be due to increasing rigour in Local Government management/reporting practices).

Over the same period, capital outlays fluctuated, with initial increases in Commonwealth Government capital expenditure, followed by decline. State Government capital outlays remained static or declined, and local government capital outlays tripled from $13.7 million in 1989-90 to $34.4 million in 1994-95 (a breakdown of 1995-96 figures is not available).(26) The local government increase can be largely attributed to capital expenditure on child care centres. This picture suggests somewhat mixed fortunes for investment in infrastructure, with some particular gains at the local scale, but an overall decline in community sector infrastructure investment. In terms of overall spending, an interesting nexus has been drawn between expenditure on 'welfare services' and expenditure on infrastructure. Jones comments that a high proportion of expenditure by governments on recurrent welfare spending tends to 'crowd out' infrastructure outlays.(27) Certainly there has been an observed general trend of serious decline in public sector capital expenditure over the past eighteen years-implying either a postponement of the inevitable in terms of massive future outlays, or an expectation that the community at large will learn to live with decaying public assets.

The AIHW notes that full details of 'contributions' by the non-government sector to 'welfare services' are probably underestimated, as only government-funded organisations are included in the Institute's count, capital expenditure is excluded, volunteer labour is not costed, and not all the expenditure of for-profit organisations is included.(28) Further to this point, the Australian Local Government Association believes the estimates of expenditure calculated by the AIHW for local government are also dramatically underestimated, because particular services related to community development are excluded from the calculation and because some expenditures which should be included as 'community services' are wrongly classified (in local government's view) to 'housing/community amenities', 'recreation and culture' 'health' or 'education'.(29)

As noted above, in 1995-96, users of community services funded a quarter of total 'welfare' services expenditure. Of total client fees of $2.2 billion, $213 million (10 per cent) was for informal child care services, $265 million (12 per cent) was for government-provided services, and $1.7 billion (78 per cent) was paid to non-government community service organisations. Half of the non-government organisations' fees related to fees charged for formal child care services. Aged care services (predominantly hostels) accounted for 35 per cent, and the remaining 15 per cent related to fees for service provided for people with a disability and other services.(30)

Overlap and Duplication

From time to time, there have been attempts at reducing complexity in community service planning and provision under the banner of reducing unnecessary overlap and duplication (e.g. Special Premiers' Conferences 1990/1991; the Council of Australian Governments (COAG), 1995/96; the National Commission of Audit, 1996.). These attempts have sought to 'streamline' the coordination of roles, or have embraced the need for 'common definition' of services provided. However, such processes have often been based on unclear notions of the gains to be made in 'administrative efficiencies' by taking such actions. The National Commission of Audit did examine the administrative costs of program delivery between the Commonwealth and States, concluding that it was 'difficult or impossible to achieve coordination in policy and funding across the system as a whole'.(31) The finding is of concern in this respect, while cost-savings could be effected by the Commonwealth and States agreeing upon respective roles and responsibilities, it does not necessarily follow that coordination cannot be achieved. The National Commission of Audit findings are based on concerns arising out of bilateral arrangements between the Commonwealth and State Governments. There is no direct recognition of the role which might be played by local government or the non-government sector in the funding contributions they provide to programs or to the administrative efficiencies they might contribute as partners in program planning and funding, and there have been only intermittent attempts at involving all players in discussing respective roles and responsibilities.

A health and community services framework proposed for COAG by the Minister for Health and Family Services, Dr Michael Wooldridge, in June 1996, sought the negotiation and development of bilateral agreements between the Commonwealth and States, canvassing 'the incorporation of tied grants into a few 'broadbanded' specific purpose payments to the States and Territories in agreed areas'.(32) Since that time, there has been little, if any progress on COAG reforms in the area of community services, although reforms have proceeded in several health areas.

Of more general concern is the need to take into account the view that the complexity of administrative and policy arrangements being addressed in service planning and provision requires a considered and attentive social policy overview which can only be maintained where all three spheres of government and the non-government sector are involved. This view is supported by practitioners in community services and community development(33), as it is by practitioners in the delivery of health programs to Aboriginal and Torres Strait Islander peoples.(34) The Commonwealth Joint Committee on Public Accounts reported in 1995 that while one view posited that administrative duplication exists because more than one level of government is undertaking an activity, another view is that negotiation between spheres of government on program objectives could be seen as important consultation.(35)

The non-government sector, too, has a view on the importance of structural relationships to effect coordinated service planning and delivery. ACOSS(36) suggests that in the current context of competition policy, a starting point should be consideration of the responsibilities of respective spheres of government, and that the relationship of 'co-responsibility' which has emerged with the non-government sector in service policy, planning and delivery should be nurtured.

The need for some rationalisation of service administrative functions is not contested. As early as 1986, the Report of the Task Force of the Joint Officers' Committee to the Local Government Ministers' Conference identified 199 Commonwealth and State Government human services funding programs administered by some 58 individual government departments in which local governments were directly involved.(37) However, the same Task Force Report noted that 'a rational basis for allocating responsibilities is difficult'. It suggested that the roles of governments for which responsibilities are exercised concurrently were best 'shared' rather than 'divided' in the human services area, in order to improve coordination and cooperation and to provide opportunities for the improvement of service delivery to those most in need.(38)

While urging continuous improvement in the effectiveness and efficiency of service planning and delivery, some social critics have consistently put the view that such processes need to acknowledge the broader context in which services operate-embracing not only 'privatisation' and 'global competition', but also 'responsiveness, appropriateness, accessibility and cultural relevance' and 'social equity and service quality considerations'.(39) Christine Fletcher, Research Fellow at the former Federalism Research Centre, Australian National University(40), suggests that there are some 'virtues' in overlap and duplication-to the extent that these can lead to more responsive governments, where the propensity for policy failure is reduced and where there is greater willingness to respond to the diverse needs of citizens.

Cliff Walsh, Executive Director at the South Australian Centre for Economic Studies(41) similarly comments on the need for responsiveness within intergovernmental arrangements and suggests that overlap is both a recognisable and a desirable feature of Australia's electoral system, which makes citizens 'simultaneously members of, and voters in, several overlapping political jurisdictions [and] gives them multiple access to government, and increases their capacity to get their preferences and problems addressed more readily by "shopping around" among governments'.

Walsh's point is, in fact, reinforced by competition policy, where the exercise of multiple access or consumer choice is regarded as a key tenet. The extent to which multiple access or choice is available across the range of community services in a competitive framework is, however, another matter, addressed in more detail elsewhere in this paper.

There is a common view that citizens do not mind which agency delivers the service just as long as it gets delivered, and to some extent this has been at the heart of intergovernment negotiations on service planning and delivery arrangements. However, there is also evidence of individuals who are more discerning in their choices. In a submission to the House of Representatives Inquiry on Competitive Tendering of Welfare Service Delivery, for example, Australia's Council on Disability (ACROD) Executive Director, Janet Braithwaite, spoke of the distress caused to families of people with intellectual disabilities on learning that the accommodation service provided effectively for several years by their non-government service provider would now be open to tender and may be lost to a commercial organisation.(42)

A Coordinating Mechanism for Social Policy Issues?

The complexity inherent in community service sector expenditure, roles and responsibilities has long provided an imperative for a process of coordination involving all stakeholders. Current efforts, such as the Social Policy Section in the Department of Prime Minister and Cabinet, or the COAG reform processes fall short because they fail to incorporate all stakeholders.

A large part of the successful operation, to date, of the community service sector has been the capacity of service providers to respond directly to the needs of service recipients. This, accompanied by the dialogue which has ensued between the government and non-government sector has enabled the needs of service recipients to be met systematically, from the point of their identification. But, much of that dialogue has been ad hoc, and the old traditions, and government policy practices are changing. Now, global trends in privatisation, which have set the pace for the contracting out of community services, are providing a new urgency for a coordination mechanism to meet the concerns of service recipients, service providers and governments in turn.

There is significant pressure inherent in contracting out to overstate the benefits of public choice and efficiencies, and to understate or fail to consider costs, including social costs (such as unemployment or creation of poverty traps), environmental costs, and depreciation of human and capital assets. ACOSS also refers to the loss of trust, or the 'cooperation and collaboration necessary to achieving positive consumer and community outcomes'.(43) While there is little suggestion that privatisation trends will be reversed, critics are proposing the need to curb the excesses of its operations and provide a positive basis for improving the capacity of the service system.

Possibly the gravest fear relates to the absence of any apparent coordinated and consultative approach to social policy development, whereby both government and non-government players, providers and recipients of services engage in robust debate about issues of unmet need or social well-being which cross the lines of specific services, service recipients or service types.

There is a view that a policy planning process should be developed to ensure services are experienced as a system. Such an approach would need to embrace the following elements:

  • governance (a clear understanding by all of the legislated roles and responsibilities of respective spheres of governments in planning and providing for the needs of people in communities and benchmarks for measuring progress)
  • explicit acknowledgment of the values and objectives inherent in service planning and delivery, (including, for example, specification of social justice objectives in service contracts)
  • commitment to partnership in planning (involving all policy stakeholders)
  • equitable and adequate resource allocation
  • stronger emphasis on quality improvement, and
  • consultation with recipients (as opposed to market research) to inform improvements in service quality and overall quality of life.

In order to ensure coordination across respective departments, portfolios and jurisdictions, such a coordinating and consultative policy mechanism is best established within a central coordinating department-an issue for consideration is an office within the Department of Prime Minister and Cabinet, which could include all stakeholders-respective governments, representatives of for-profit and not-for-profit service providers as well as representatives of service recipients. Such a process would require significant political will, but there are precedents on which to establish such a model.

A proposal of long standing emerged from the Bailey Task Force on Coordination in Welfare and Health in 1978, which concluded that along with government administrative machinery to address issues of overlap and duplication, genuine, participatory processes were required to build trust, undertake joint planning, assess need, propose social policy action and review such action. The Bailey Task Force envisaged a balanced membership of relevant parties, including the Commonwealth Government, States, local government, non-government bodies and some additional nominees.(44) While the Bailey proposal was regarded as proactive, the current concern is that without a whole-of-government, whole-of-community partnership, governments will be removed from the direct experience and information they require to inform even specific service decisions let alone optimum system-wide overviews.

Towards Contracted Services

Global Trends

The contracting out of services is part of a broader process of privatisation which is now truly global. Graeme Hodge, Senior Lecturer at the Royal Melbourne Institute of Technology, notes that one of the key objectives of privatisation, which includes contracting out, is to enable public services to be more effectively and efficiently delivered.(45). The magnitude of movement towards privatisation is impressive. Reports indicate that some 6800 State-owned enterprises world-wide were privatised in the 1980s alone (although a substantial number of these were small entities within the former German Democratic Republic, Eastern Europe or Latin America).

Support for privatisation has been equated with less government intervention, economic gains, greater personal choice and improved accountability. In the area of community services, the move to contracting out of services is characterised on the general grounds of:

  • greater clarity about roles and responsibilities of purchasers (funders) and providers of services
  • increased capacity for governments to prescribe and describe services (including performance criteria)
  • greater transparency in the allocation of funding, and
  • reduction in outlays.

It might be argued that the current Australian Federal Government's general objective of increasing individual and family responsibility for community services is a further characteristic of privatisation, in that greater family and individual contributions to either providing or paying for services can substitute for less government intervention. For example, in a speech by the Prime Minister, Hon John Howard to the Wesley Mission Lifeforce in April 1998, he referred to the need for society to understand 'the impact of a lessened sense of personal and family responsibility which is a characteristic of modern, western society of the 1980s and the 1990s'.(46) At the Australia Unlimited Roundtable Dinner on 5 May 1998, the Prime Minister again referred to this responsibility, in the mutual obligation provisions for young people involved in the Work for the Dole program.(47)

Criticism of privatisation (in particular) of community services centres on concern that the needs of the least articulate and least advantaged groups in the community may not be met by the process and the financial gains enjoyed by some as a result of privatisation may well result in social inequities for others.(48) There is concern that the weak with no choice will be marginalised.

Trends in Australia

The historically strong involvement of the non-government sector in Australia has been important in providing a range of services which reflect the pluralism of the broader community and which are responsive to community needs and adaptable to change. The strength of the sector has also been important in ensuring the affordability of services, made possible primarily through the availability of volunteers to undertake key areas of service provision. But the non-government sector is also particularly dependent on government funding for much of its operations, and in turn, governments are greatly reliant upon the sector to provide a degree of choice in services.(49) From the non-government sector's point of view, in a climate of marketisation, this dependency relationship sparks concern about the autonomy of the sector and the very viability of particular organisations and services. It is argued that fear of failure to 'toe the government line' might lead to loss of service funding is seriously encroaching upon the capacity of organisations to fulfil their own objectives. In Britain, the Labour Government is seeking to rebuild trust with the non-government (voluntary) sector after almost a decade of rigidly structured contractual arrangements. In a statement indicating the need to balance support for voluntary organisations with respect for their independence, the British Government recognises 'the right [of voluntary organisations] to campaign for principles'-which may, of course, be at odds with government positions.(50)

In Australia, government concerns about the sector have centred on the need for improved accountability in relation to government funds, and universal standards of service provision. Under these pressures, non-government organisations have been encouraged both to develop a greater diversification in their funding base and to adopt new performance measures to improve accountability, efficiency and effectiveness.(51) Indeed, the introduction of best practice management techniques remarked upon by the Industry Commission in 1994 has been taken much further by both government and non-government agencies, particularly in the areas of accountability and quality measures for aged care, child care and services for people with disabilities.

The sheer size of the non-government sector, and its vulnerability in terms of dependence on government funding suggest that there are real concerns about the robustness of the service system, and whether a 'mixed economy' can be maintained. Small organisations (over 70 per cent of which are heavily dependant on government funding) are the most vulnerable to pressures under policies promoting the accelerated development of contracting out of government-funded services. While greater personal choice and flexibility for service recipients are the intended outcomes of these policies, there are indications that a 'shake-out' in the sector may lead to less, rather than greater choice, particularly if small providers are forced out of operation through competitive practices. Significant recent developments in contracting out include the implementation of a 'purchaser/provider' model and compulsory competitive tendering for the delivery of many services which are partially or wholly government-funded.

Issues include:

  • whether competition among service providers is appropriate for recurrent community services
  • the extent to which governments take responsibility within a contract culture for particular social objectives of service delivery (for example access and equity for disadvantaged people or localities)
  • how or whether an overview of social policy and planning is achieved in a competition environment
  • whether quality of services (and values underpinning them) can be maintained
  • whether continuous learning processes are possible (or appropriate, in a competitive environment)
  • who should pay for services, the extent of 'user pays' and the capacity of service recipients or the community to pay for services, and
  • whether there are 'lessons' to be learned from overseas experience.

These issues are addressed in the following sections of the paper.

If a premise of greater public choice underpins the moves towards contracting out services, then it needs to be acknowledged that genuine concern is being expressed by service providers and recipients about how that choice is affected by market mechanisms.

Competition Policy

Competition policy was introduced nationally as a result of the Hilmer Inquiry in 1993, and is concerned with enhancing competition across government agencies, firms and individuals 'engaged in the supply of traded goods and services in the Australian economy'.(52)

The particular elements of competition policy which have direct relevance for community services include:

  • community service obligations (CSOs) (i.e. ensuring access and equity to services by geographically-isolated or economically disadvantaged individuals), and their vulnerability to erosion in a policy and funding climate dominated by economics over social and other considerations
  • how 'public interest' and 'public benefit' are determined (a key concern expressed in relation to the reforms proposed by Hilmer is that justification for 'public interest' appears to fall disproportionately upon its proponents):(53)
  • 'contestability' (i.e. establishing the potential for competition, or the availability of competitors), which is of concern to planners and providers of community services where the grounds for entering competition are not comparable for all entrants
  • how 'competitive neutrality' is applied, particularly when government and non-government service providers are entering into competition against each other; and,
  • the effects of cooperative processes and networking between service providers and funding agencies, previously a feature (albeit imperfect) of non-competitive servicing.

Effects of Contracting Out

Some commentators have argued that while competition policy offers potential advantages in clarifying service definition and performance expectations, its application to recurrent community services is inappropriate.(54) Anita Tang, Senior Policy Officer with the NSW Community Services Commission(55) suggests that the 'commodification' of community services promotes a risk of constantly favouring providers rather than consumers of services. This, she says, is because most non-government organisations do not operate on the basis of market incentives (where a drive to profit may work against consumers) and also because demand for services far exceeds supply.

While competition policy potentially offers greater transparency in management processes, there is real concern that service quality will suffer where it is based primarily on price. A review of international evidence offers no conclusive view on whether tendering and contracting out is more cost-effective over other arrangements.(56) While on average, unit costs of services are reduced there are enormous variations reported for saving and losses across service types (from +28 per cent to -49 per cent). There is also little current evidence that cost-savings are passed on to consumers.(57)

The contracting out of community services may affect:

  • the rights of access by recipients
  • service quality
  • cost-shifting from the community services sector
  • cost-cutting within the sector
  • loss of professionalism, employment and organisational memory.

Some analysts suggest, however, that there should be little concern about the contracting of services and that there are few, if any, services which cannot be contracted. Consultant, Gary Sturgess, for example, comments on a long list of services, including utilities, welfare services, prisons, defence, health and education, which can all, potentially, be privatised. He points out that they are, to some extent, already privatised in some Australian States and overseas. He suggests that there are a number of essential governance functions which need to be retained by the state. In general terms these include policy analysis, planning and overview; maintenance of an open society; income distribution; combat roles; judicial appeal and punishment roles; contract management and monitoring; and, regulation.(58) (In so saying, it is acknowledged that the whole area of 'essential governance functions' is the subject of a far broader debate that can possibly be canvassed in this paper). Each of these governance functions may be exposed to extreme stress in the current enthusiasm for more and greater contracting out, particularly as the resources and scope for contract management and policy overview are trimmed. Many of these stresses are in themselves minor and incremental. An illustration of the way in which governance functions are eroded is seen, for example, in changes to the basis of statistical monitoring of social trends.

In New Zealand, where there has been possibly the most dramatic shift to privatisation of government services, there have been difficulties in assessing changes in wealth distribution, because data previously published on employment trends are no longer published on a relevant basis (i.e. taking account of both part-time employment and changes in the levels of cash benefits or subsidised government services).(59) Thus, policy analysis and overview, and in particular whether social inequities are resulting from macro-policy, becomes increasingly difficult to discern. Some Australian researchers are beginning to voice similar concerns about the availability and use of local statistical collections.

A further illustration of erosion in governance is that in the split between purchasers and providers of services, dialogue tends to cease, or at least become stilted. This often occurs under the guise of confidentiality, but offers few opportunities for discussions at a fundamental level about how best to solve complex social policy issues and how best to meet the needs of ordinary people. While there may be some opportunity to build into contracting an information provision requirement (i.e. to assist in planning issues) there seems little doubt that an imposed solution will result in distrust and suspicion, and at a practical level such a measure would carry a non-service cost that few may bear willingly.

Effects on Service Organisations

A key issue for community service organisations is that the indirect costs incurred by them in developing responses to tenders and managing tendered services are not being charged to purchasing organisations or otherwise recognised in contract prices. A British survey suggests that the practice is widespread(60), and has the potential to damage the fabric of the community service sector by stretching already over-stretched resources. While there may be a temptation to mark the practice down to inexperience in contract development, there would appear to be some other factors at play. These include:

  • the very selective nature of service contracts being let (highlighting the vulnerability of service organisations still dependant on government funding for core activities)
  • the increasing dependency of individuals that organisations are asked to serve
  • the extent to which organisations have in the past allowed cross-subsidisation of services, for delivery of services to otherwise unviable localities (e.g. specific disability services in country areas), and
  • the exclusion and shedding of maintenance costs (both of capital stock and of human resources) from tender bids in an attempt to win contracts.

According to the British National Council of Volunteer Organisations, community service organisations are tending to understate the true value of service costs, or seek other ways to cut costs, in desperate bids to win contracts, in some instances vital to their very survival.(61) This research reinforces concerns expressed by ACOSS(62) to the effect that services are suffering as organisations lose their bargaining power relative to government 'purchasers of services'. There is also concern among not-for-profit community organisations that, under the drive for economic reform, they are being forced to adopt an ethos more appropriate to profit-driven enterprises-the fear is that intrinsic values such as social justice, cooperation, advocacy, community participation and networking are threatened.(63) Community sector representatives argue that they are not against good management and accountability, but that as they are neither for-profit nor bureaucracies, a different form of management is required.(64)

There is also a sense that some government purchasers appear neither to understand, nor are prepared, in the current environment, to acknowledge the true costs to service organisations of service provision. Hodge points out that the costs of monitoring and supervising the satisfactory completion of contracts vary from between 3 per cent and 20 per cent of the total contract price, and that cost savings are not being passed on to Government or the community-on the contrary, these are apparently being absorbed into greater numbers of management positions within organisations, or into other organisational rewards.(65) There is also criticism of the ability of Government sector managers to manage service contracts, particularly to determine fair prices or to negotiate the types of services to be included in agreements.(66) This may generate opportunities for service purchasers to deliberately or inadvertently exploit community organisations which are anxious to demonstrate their 'caring at any cost'.

Some community organisations and funding bodies are currently grappling with the process of trying to write organisational values positions into service contracts. In a South Australian study examining the contracting out of community services, the service purchaser has recognised the complexity of structuring service specifications (particularly where the characteristics of a service are an integral part of that service).(67) Players across the sector are seeking to ensure that there is an attempt at holism by contractors in the process, and that there is an effort by the funding body to understand the broader social context in which a service is being delivered, but the whole process is falling far short of the desired position of coordinated social policy discussions.

One practice in contracting out of services is the letting of contracts for specific services as components rather than a whole system of services. While this practice allows for an efficient understanding of the cost of delivering a specific service, it may fail to take into account the interrelated costs and benefits of envisaging the service as part of an integrated whole. The evidence from British studies indicates that the most profitable services are 'cherry-picked' by the private sector or more powerful organisations with capacity to absorb tender development and administration costs.(68) This evidence is supported by emerging trends within Australian community service organisations, where even large organisations operating multiple services are questioning their capacity to provide essential community services under certain conditions. In a submission to the House of Representatives Inquiry into Competitive Tendering of Welfare Services, Bob Woodford (now Executive Director of the Yooralla Society) comments that the explicit focus for the funding and outcome of services and cost drivers under competitive tendering which have recently pushed down prices preclude the ability of providers to 'cross-fertilise' programs to enable the delivery of services, particularly in rural areas.(69) In the South Australian study referred to above, the cost of tendering has led to some smaller service providers either being forced out of service roles or being encouraged into service agreements with larger providers.(70) So, although there is concern about potential loss of cooperation and collaboration between organisations, and even within organisations (this threat was also acknowledged in the South Australian study) as a result of cost-drivers, there is also scope for alternative cooperative arrangements.

In the South Australian study, under arrangements which promoted cooperation and collaboration between or within services, there was scope for meeting the needs of service recipients with a high degree of dependency. Commonly, for example, service organisations report that an individual may be referred, or present in search of a particular service, but on assessment, it may be determined that the immediate need is for multiple services (an older person or person with a disability requiring transport to medical appointments may also be found to be in need of meals-on-wheels home help or carer services on a temporary or longer term basis). Under contracting out, arrangements provide a 'loading' for such individuals, and the capacity for organisations to meet the needs of those individuals is yet to be tested.

The role of governments is also complicated by the extent to which public and private roles are mixed up and even internalised within the government sector itself. In areas where governments are both the funder (or purchaser of services) and the service provider, competition policy dictates that functions be separated to assist transparency and stop collusion between bidders. However, there are concerns about the tensions which may develop within an organisation charged with both the responsibility of protecting the well-being of the community at large and the well-being of consumers. Anecdotal information based on the Victorian local government experience suggests that there has been significant loss of trust within such organisations. There are suggestions that this loss of trust may be based on the 'breathtakingly broad' confidentiality clause that all organisations involved in service contracting are required to sign.(71) In these circumstances, where an organisation is both purchaser and provider, commentators have questioned whether the erection of paper walls is sufficient to separate functions and keep integrity. While there may be inherent danger of corruption in such an arrangement, there are suggestions of other, more damaging, unintended consequences. Hodge(72) suggests that the major risk of corruption relates less to the business side of the equation and more to the loss of democratic process, whereby reduced accountability to the community is justified on the grounds of 'commercial-in-confidence' information.

Effects on Service Recipients

Of particular concern, as service delivery arrangements change, are the consequences for the least advantaged people in our society. From Britain there is evidence indicating that poorer people are likely to 'give up' or reduce the hours of needed service under 'user pays' approaches. Although research, both in Britain and Australia, indicates a long history of charging for some community services, the combination of breadth and size of charges is beginning to elicit broader and significant social changes, including capacity to pay, employment (conditions and unemployment) and gender equity. These are discussed in more detail, below. Historically, some community services incurred charges either for symbolic reasons (to convey the view that recipients were not paupers), to reduce costs to taxpayers, to extend existing resources, or to target services in order to reduce service abuse.(73).

In Australia, it is clear that the emphasis of seeking a 'contribution' from service recipients has accelerated under competition policy. In essence, the argument runs that consumer expectations may be higher for paid rather than for free services, so levying a fee leads to a raising of standards.(74) However, there is often no nexus between identified need and the capacity to pay, or an inverse relationship is present (i.e. 'user pays'). Further, critics are suggesting that because competition policy is not reflecting the true costs of service provision, service standards are actually diminishing and will continue to do so over time. In the British study, researcher, Sally Baldwin(75) notes concern among service recipients about the arbitrary nature of charges levied and fears about capacity to pay, particularly if the scale of fees changed. There is also concern about the diminution of the rights of service recipients. In her study, Baldwin comments on the reluctance of recipients to ask for a review of charges, or to 'shop around', fearing loss of the service altogether. She also comments on the extent to which recipients of 'user-pays' services felt the requirement to cut back on other essentials in order to maintain their access to a given service ('essentials' included food and telephone calls).(76) A similar situation, described in a recent Australian report by the Brotherhood of St Laurence and Community Child Care, indicates that increased child care costs have put significant pressures on both essentials in family budgets and on their economic decisions.(77)

A further argument suggests that paying for services confers a sense of ownership or control than if the service is free(78), but whether there is any greater degree of satisfaction as a result is a moot point. In an article in The Age, Kenneth Davidson(79)discusses the dilemma for recipients of services, now contracted, but formerly provided by local government in Victoria. In a particular situation, residents' complaints fell into a loop between contractors (only engaged to do particular tasks) and councils (no rate money to do more than engage contractors for the bare minimum). The 'ownership through payment' argument also begs the question of the status of services previously provided, through taxation, as 'common goods'. In some ways, the question represents a debate not yet conducted in Australia. Baptist Minister, Tim Costello comments that the 'older notion of common good [declaring] that we all benefit by cross-subsidising the more marginal in our community' was understood, and that the disappearance of cross-subsidisation and with it the growth of 'customer' status under competition policy suggests that now people may not now appeal to their rights as citizens, but must, rather, pay their way.(80)

Another potential problem area for recipients of services relates to their legal redress when community services are contracted to another party. The vulnerability of service recipients is accentuated among those who are highly dependent on services, who have limited capacity to advocate on their own behalf, or who have few other support mechanisms. Commenting on an Administrative Review Council Issues Paper in 1997, Deputy Director of the Council, Sue Bromley, points out that there are limited options under private law for service recipients who seek to take action against a service provider. In the first instance, there usually needs to be a written contract between the service recipient and contractor(81) (which is more likely to be the case in the delivery of utilities than in the delivery of community services). In the second instance, service recipients may be unable or unwilling to take legal action because of concern about costs, or for the reasons cited above. Bromley notes that among complaints about contracted services to the Commonwealth Ombudsman were issues of 'buck-passing', stand-offs between clients and contractors, inadequate or ambiguous contractual arrangements and the absence of accessible and effective dispute resolution processes.(82) Bromley further suggests the need for a suite of additional remedies to enable redress to service recipients.

For many service providers, 'customer service charters' are increasingly becoming a feature of the service, either as a direct legislative requirement (as in the case of Victorian local governments), or as a voluntary 'marketing' feature. In general, such charters outline the services recipients may expect, and minimum response times for dealing with requests for assistance. In some instances, service recipients may seek legal redress if their expectations are not met according to the stated objectives of the charter.

Labour Force Effects

Where costs are being driven down under competition policy, the effects within the community services sector upon the predominantly female labour force is also having another potentially damaging social effect-that of driving down further the earning capacity of an already low-waged sector. As has already been indicated by studies in Australia and in Britain, community service organisations are increasingly opting for part-time, casual and less qualified staff, thus keeping costs to a minimum in order to win contracts and stay in business. Australian research shows that contracting out does lead to fewer staff being employed by service organisations.(83) On the face of it, this may indicate greater efficiency, but it also has the effect of reducing employment opportunities within the sector. In the area of child care, in particular, there is concern that the significant numbers of children being shifted from long day care to family day care, is having the effect of forcing out more qualified long day care staff in favour of cheaper family day care employment.(84)

There have been concerns of long standing about low levels of appropriate training among non-government organisations, and although overall training and skills development remains low, under reforms across the sector in recent years, there has been increasing professionalisation of the work force, and with that, commitment to quality training. There is concern, however, that rather than a commitment to increased training and skills development in the current environment, price-conscious service contracting is leading increasingly to the exclusion of training costs and hence to the de-skilling of service providers. In a sense, this de-skilling is a depreciation of human infrastructure akin to the running down of investment in capital infrastructure, which is ultimately likely to result in a loss in service quality.

Effect on Volunteers/Volunteerism

The impact upon volunteers under contracting out is difficult to determine because there are profound pressures upon volunteerism at the very same time as the nature of service delivery is changing. As Healy points out, concerns that volunteerism is waning appear unfounded-she cites an Australian Bureau of Statistics survey which reports that one in five adults undertake community work.(85) However, the majority of 'social care' voluntary work falls disproportionately upon women (with men reportedly involved in sport and service club meetings). Studies have shown that there are increasing pressures on women's time as they juggle competing responsibilities. While volunteering may continue, the cost to individual women of these pressures has yet to be assessed. Related research indicates that women who are isolated through domestic responsibilities are particularly susceptible to non-monetary rewards such as recognition and status.(86) This evidence would seem to suggest the need for sensitivity on the part of organisations recruiting volunteers to ensure they are not exploiting the good nature of women.

There are other potential occasions for the exploitation of vulnerable volunteers, for example in current government programs such as 'Work for the Dole'. There is a need for vigilance to ensure that such programs provide for the development of volunteers as well as for the service and the community, and that volunteers are not merely regarded by service organisations as a cheap source of labour.

There is clear evidence that volunteers are vital to the operation of many not-for-profit community service organisations (for example in the Industry Commission Report into Charitable Organisations in Australia). Volunteers enable such organisations to deliver community services on a cheaper basis than government-delivered services. While the industrial relations issue of work substitution has been overlooked to date in favour of this expedient, it may be set to change as more and more 'for-profit' service providers enter the market and demand a fair basis for competition.

Reform of Intergovernment Arrangements in Service Planning and Delivery

Vertical Fiscal Imbalance

While 'duplication and overlap' was an early catch-cry for reform in service planning and provision, a more compelling motivation for reform may be the degree of 'vertical fiscal imbalance' regarded as inherent in intergovernment relationships. In effect, although the Commonwealth raises most of the revenue for expenditure on services, the Constitution limits the types of activities or services on which the Commonwealth can spend these resources. By long-standing agreement with the States, the Commonwealth passes over a certain percentage of the revenue it raises to the States as Financial Assistance Grants (FAGs). Some of these funds are passed to the States and through the States to local government as Specific Purpose Payments (SPPs) for areas such as hospitals, housing, community services, roads. These SPPs are in effect an extension of FAGs, but by their process of granting, they allow the Commonwealth a policy role.

The degree of vertical fiscal imbalance has long been a source of conflict in Commonwealth-State interactions. Much of the activity of the Special Premiers' Conferences in the early 1990s was directed towards redressing this imbalance, followed by more recent COAG activities.

Policy Approaches under Respective Governments

There is also a need to discuss the degree to which political philosophy is likely to affect intergovernmental relations, social policy and funding. Healy(87) traces the 'hallmarks of the Commonwealth government in the Whitlam Labor years (1972-75) [as] increased central intervention, competitive federalism between the Commonwealth and the States, the pursuit of national goals and more use of tied grants'. This intervention was largely justified on the basis of perceived gaps in services which State Governments were failing to provide. Healy notes that the Fraser Liberal Government (1975-83), by comparison, pursued:

...coordinated federalism with the States (separate functions), devolved welfare responsibilities, reined back public sector spending, and reinstated more revenue sharing. The Hawke Labor government (1983-91) increased funds for social programs, sought cooperative federalism, and consolidated welfare programs into cost-sharing arrangements with the States. The Keating Labor government (1991-96) was more centralist, especially on micro-economic reform, but engaged in joint reviews of intergovernmental areas.

In Healy's view, the Howard Coalition Government is characterised by 'more State rights, less central policy control, increased privatisation, the Commonwealth to purchase but not deliver services, and a reduction in social expenditure.' Healy notes that through all these shifts, however, 'the Commonwealth has steadily increased its power over social policy'.(88)

The current strategy of the Commonwealth Government is to reduce, over time, its role in direct service delivery and service management in the provision of health and family services.(89) The Department of Health and Family Services will primarily 'purchase' health and family services, but will maintain a role in strategic policy advice and setting national service standards and targets. The trend towards privatisation of service delivery has emerged as a response to the economic pressures confronting all welfare states(90) but also through a desire to reduce the cost of services. Service targeting is now the norm, widely regarded as a way of redressing concerns about actual and perceived rising levels of demand for service assistance, but also about discouraging dependence on the State and to reinforce individual and family responsibility.

The Howard Government has also introduced a Business and Community Partnerships initiative, supported by a Round Table meeting of community leaders which has been asked to assist in the development of the initiative, including:

  • education, supporting a cultural shift toward philanthropic effort and civic engagement
  • recognition, based on a system of Prime Minister's Awards
  • taxation issues related to philanthropy
  • information gathering and dissemination, and
  • facilitating best practice partnerships, including pilot programs and mentoring schemes.

Working Groups addressing each of these components are due to report to the responsible Minister at the end of May 1998. Hence, currently little is known about the detail of the initiative. It is, however, indicative of the Prime Minister's concern about the need for a 'new balance' between government, business and the community, following 'the 1970s [perceived as] the era of big spending by government on social programs' and the 1980s, 'characterised by the non-caring 'me generation'.(91)

The initiative appears to be similar to a British undertaking promoting more effective business partnerships with the voluntary and community sectors. 'Taskforce 2002', a British institution established by the National Council of Voluntary Organisations reportedly notes that: involvement in the community typically goes through three stages, from philanthropy, to more systematic involvement, to the point where it becomes an investment strategy, and community activity becomes an integrated part of what the business does. Likewise, voluntary organisations may start doubting the value of partnership with business before discovering they are able to give help as well as receive it.(92)

The British experience points to the need for more effective local brokerage services to improve connections between businesses and voluntary/community groups. The proposed compact between the British Government and the voluntary sector is also seen by the Chair of 'Taskforce 2002' as an important opportunity by which the Government can provide support.

Both in Britain and Australia, the success of such partnerships will be measured by the extent to which socially 'unpalatable' parts of the community sector, working with some of the least advantaged people, will receive partnership support alongside so-called 'nice' charities.

A Prognosis for Community Services?

Over recent years, in spite of the government preoccupation with issues of overlap and duplication of community services, and with general reforms which have driven the need for improved accountability, the issue having the greatest impact upon the service delivery system is privatisation and the contracting out of services. A great deal of faith is being invested in a market-driven approach to community service provision being implemented by all spheres of government, although in some places, it must be acknowledged, the approach is incremental rather than accelerated.

But what happens if the market breaks down? What might our society look like? In the money market, companies and shareholders sustain losses and the 'fit' survive. In the sector which provides for the least advantaged in society, a system breakdown will almost certainly see a gradual fraying of the somewhat patched community 'safety net'. The most vulnerable or at risk people in society will bear the brunt of market failure-we can expect to see greater incidences of acts of desperation by service recipients as people in their community support networks become stressed by increased caseloads and responsibilities, or because less-qualified or part-time staff are unable to pick up on 'cues' indicating their cries for help. We may also expect to see increased evidence of poverty traps, because there is a lack of any effective social policy overview. We may expect to see more anger and frustration, because there are fewer opportunities for people to have their say about how a service ought to be developing and catering for their needs. We may expect to see less trust and social cohesion, because there are fewer deposits being made by ordinary people and by governments in the bank of social capital.

While there is no opportunity to reverse the clock on privatisation, service organisations, providers and recipients are all calling for governments to apply specific checks and balances to ensure that the needs of service recipients are met holistically and that service recipients are not worse-off as a result of privatisation and contracting out. The need for an inclusive coordinating social policy mechanism, in which the Commonwealth Government would take the lead role, has often been suggested. Indeed, ACOSS argues that such a mechanism is urgently required.(93) Such a mechanism may help to ensure that confidentiality provisions do not become a barrier to social policy development. It should include government and non-government sector players, providers and recipients of services. It would need to ensure release of sufficient resources so that all stakeholders are able to participate. Although by its very nature there may never be a perfect model of community service planning and delivery, the imperative has never been greater to overcome fragmentation in service mix, scope, availability and affordability and set desired community objectives. Governments, alone, cannot achieve these tasks. Overseas experience has illustrated that to tackle issues in a piecemeal fashion, from service to service or individual to individual, has the potential of denying society's development.


Appendix 1: Chronology of Reports and Inquiries relating to Community Services Development and Delivery





Royal Commission into Australian Government Administration


Inquiry into Poverty (Henderson Report)


Task Force on Coordination in Welfare and Health (Bailey Report)


Through a glass darkly: evaluation in Australian health and welfare services, Senate Standing Committee on Social Welfare (Baume Report)


Self Inquiry, Intergovernment Relations


Community Development, Human Services and Local Government, Report of Joint Officers Group to Local Government Ministers' Conference


Better Services for Local Communities, report on the Rationalisation of Intergovernment Administrative Functions


Home but not alone, Standing Committee on Community Affairs Inquiry into the Home and Community Care Program


Industry Commission Inquiry into Community Social Welfare Organisations, Draft Report/Final report


Getting Real, Final Report of the Review of the Commonwealth/State Disability Agreement


Economic Planning Advisory Council report on the future of child care provision in Australia


House of Representatives Standing Committee on Family and Community Affairs, Competitive Tendering of Welfare Service Delivery


Performance measures for Local Government, Industry Commission report


Senate Inquiry into affordability of child care (current)

Appendix 2: Commonwealth and State Government Portfolios Encompassing Community Services

Community services programs and activities are planned and/or delivered through the following Departmental portfolios:


Health and Family Services

Employment, Education, Training and Youth Affairs

Communication and the Arts


Immigration and Multicultural Affairs

South Australia:

Department of Human Services (encompassing previous Departments of Family and Community Services, Housing and Urban Development and South Australian Health Commission)

Western Australia:

Department of Family and Children's Services (encompassing Office of Seniors' Interests, Women's Policy Development Office, WA Drug Strategy Office)

Aboriginal Affairs Department


Office of Multicultural Interests

Ministry of Education

Disability Services Commission

Health Department of Western Australia


Department of Premier and Cabinet

Department of Natural Resources and Environment

Department of Human Services

Northern Territory:

Chief Minister's Department

Department of Housing and Local Government

Department of Sport and Recreation

Australian Capital Territory:

Chief Minister's Department

Department of Urban Services

Department of Health and Community Care

Department of Justice and Community Safety

Department of Education and Community Services


Department of Community and Health Services

Department of Education and the Arts

Department of Environment and Land Management

Department of Tourism, Sport and Recreation


Department of Family, Youth and Community Care

Department of Environment and Heritage

Department of Housing, Planning and Local Government

Office of Arts and Cultural Development

Department of Sport and Tourism

New South Wales:

Ministry for the Arts

Department of Community Services

Ethnic Affairs Commission of New South Wales

Department of Housing

Department of Sport and Recreation.



  1. Judith Healy, Welfare Options: delivering social services, Allen & Unwin, St Leonards, 1998, p. 2.
  2. Local Government Community Services Association of Australia (LGCSAA), Combining rigour and whole community development with community services and community development practice 1998, p. 1.
  3. Elaine Wilson Martin, 'Human Service Organisations Revisited: Still a Useful Concept in the 1990's?', Australian Journal of Social Issues, February 1997, p. 2.
  4. LGCSAA, op. cit., 1998, p. 2.
  5. ibid.
  6. ibid., p. 3.
  7. Australian Council of Social Service, Budget Priorities Submission 1997-98: For a Future that Works, Paper No. 83, January 1997, p. 135.
  8. Australian Institute of Health and Welfare (AIHW), National Classifications of Community Services, 1997, pp. 9-65, 71-109.
  9. Australian Bureau of Statistics, Community Services, Catalogue 8696.0, 1998, p. 40.
  10. Australian Institute of Health and Welfare, Australia's Welfare, 1997, p. 5.
  11. Jenny Merkus, personal communication, 1998.
  12. Judith Healy, op. cit, p. 51.
  13. AIHW, op. cit., 1997, p. 11.
  14. Industry Commission, Charitable Organisations in Australia, Draft Report, 1994, pp. 332-341.
  15. Judith Healy, op. cit., 1998, p. 60.
  16. Industry Commission, op. cit., 1994, p. xxii.
  17. OECD, Historical Statistics 1960-95, Paris, France, 1997, p. 71.
  18. Michael Jones, The Australian Welfare State, 1996, pp. 36, 37.
  19. OECD, Revenue Statistics 1965-1996, Paris, France, 1997, p. 74.
  20. Michael Jones, op. cit., 1996, p. 45.
  21. AIHW, op. cit., p. 10.
  22. ACOSS, Federal Budget Briefing Kit, 1997, p. 22.
  23. Michael Fine, SPRC Newsletter, 1995, p. 2.
  24. AIHW, op. cit., 1997, p. 8.
  25. Michael Jones, op. cit., 1996, p. 46.
  26. AIHW, op. cit., 1997, p. 5.
  27. Michael Jones, op. cit., 1996, p. 46.
  28. AIHW, op. cit., 1997, pp. 18, 19.
  29. John Pritchard, personal communication, March 1998.
  30. AIHW, op. cit., 1997, p. 16.
  31. National Commission of Audit, Report to the Commonwealth Government, June 1996, AGPS, Canberra, p. 44.
  32. Hon Dr Michael Wooldridge, Minister for Health and Family Services, Press release, 1 May 1996.
  33. LGCSAA, op. cit., p. 1.
  34. Anderson & W. Sanders, Aboriginal health and institutional reform within Australian federalism, Discussion Paper No. 117, Centre for Aboriginal Economic Policy Research, ANU, 1996, p. 17.
  35. Joint Committee on Public Accounts, The Administration of Specific Purpose Payments, Report 342, November 1995, p. 30.
  36. ACOSS, op. cit., pp. 15, 16.
  37. Australian Local Government Association, Better Services for Local Communities: report on the rationalisation of intergovernment administrative functions, November 1990, p. 13.
  38. Task Force of Joint Officers Committee, Local Government Ministers Conference, Community Development, Human Services and Local Government: report, 1986, p. 84.
  39. Jenny Wills, 'Community alliances and the new governance', Australian Journal of Public Administration, 54(3), 1995, p. 376.
  40. Christine Fletcher, 'Responsive government: duplication and overlap in the Australian federal system', Federalism Research Centre Discussion Paper, No. 3, August 1991, p. 3.
  41. Cliff Walsh, 'Refocussing Commonwealth-State financial relations: tax powers, microeconomic reform and intergovernmental relations', Business Council Bulletin, 126, January 1996, p. 31.
  42. Janet Braithwaite, ACROD, Submission to House of Representatives Inquiry into Competitive tendering of welfare service delivery, October 1997, p. 223.
  43. ACOSS, op. cit., 1997, p. 31.
  44. Task Force on Coordination in Welfare and Health, Consultative Arrangements and the Coordination of Social Policy Development: second report, AGPS, Canberra, 1978, pars 156-159.
  45. Graeme Hodge, Contracting out Government Services: a review of the international evidence, Montech, Melbourne, 1996, p. 3.
  46. Hon John Howard, Transcript of Address at the Wesley Mission Lifeforce Suicide Prevention Commemorative Service, Opera House, Sydney, 30 April 1998.
  47. Hon John Howard, Address to the 'Australia Unlimited' Roundtable Dinner, Grand Hyatt Hotel, Melbourne, 5 May 1998.
  48. Graeme Hodge, op. cit., 1996, p. 4.
  49. Industry Commission, Charitable Organisations in Australia: an inquiry into community social welfare organisations, October 1994, p. xxviii.
  50. Alun Michael, Building the future together, Labour's policies for partnership between government and the voluntary sector, London, Labour Party, March 1997, p. 1.
  51. Industry Commission, op. cit., p. 332.
  52. John Kain, National Competition Policy: Overview and Assessment, Research Paper No. 1, Parliamentary Research Service, 1994, p. i.
  53. ibid., p. 32.
  54. ACOSS, Keeping sight of the goal: the limits of contracts and competition in community services, Paper No. 92, September 1997, pp. 7, 21.
  55. Anita Tang, 'The changing role of government in community services: issues of access and equity to administrative review', Australian Journal of Public Administration, 56(2) June 1997, p. 98.
  56. Hodge, op. cit., assessed 129 current studies, with international coverage, of 'contracting effectiveness' in privatised service provision, and selected 28 of these studies for detailed analysis. Criteria for inclusion were that studies had to report sufficient statistical information of a high standard, with specific statistical controls - drawing a quantitative relationship between 'contracting' to either the public or private sector and 'performance'. 'Contracted services' included waste management services, transport services, training services, hospital domestic and cleaning services, information technology services, property tax assessment services and unspecified local government services.
  57. ibid., 1996, pp. 26-29.
  58. Gary Sturgess, 'Virtual government: what will remain inside the public sector?', Australian Journal of Public Administration, 55(3) September 1996, pp. 69, 70.
  59. Michael Jones, Reforming New Zealand Welfare: International Perspectives, Centre for Independent Studies, St Leonards, 1997, p. 97.
  60. Audrey Thompson, Community Care, 1997, p. 19.
  61. ibid, p. 18.
  62. ACOSS, op. cit., p. 16.
  63. Faye Williams, 'Impact of Hilmer reforms on Health and Community Services' in What Price Competition Policy?, Public Sector Research Centre Seminar Paper No. 17, University of New South Wales, Sydney, 1995, p. 99.
  64. ibid.
  65. Graeme Hodge, op. cit., 1996, p. 28.
  66. Steering Committee for the Review of Commonwealth/State Service Provision, Reforms in Government Service Provision, Industry Commission, Melbourne, 1997, p. 22.
  67. ibid., p. 9.
  68. Audrey Thompson, op. cit., p. 19.
  69. Robert Woodford, Submission to House of Representatives Inquiry into Competitive tendering of welfare delivery, October 1997, p. 231.
  70. SCRCSSP, op. cit., p. 20.
  71. ACOSS, op. cit., 1997, p. 51.
  72. Graeme Hodge, op. cit., p. 30.
  73. Sally Baldwin, 'Charging for community care', Social Policy Review, No. 9, 1997, p. 91.
  74. Judith Healy, op. cit., p. 49.
  75. Sally Baldwin, op. cit., p. 99.
  76. ibid., p. 100.
  77. The Age, 8 April 1998
  78. Judith Healy, op. cit., p. 99.
  79. Ken Davidson, 'Straightjacket on local councils tightened further', The Age, 23 March 1998.
  80. Tim Costello, 'Can we afford to care?' in Governing Local Communities - the future begins, Centre for Public Policy, 1997, p. 87.
  81. Sue Bromley, 'The Contracting Out of Government Services', Admin Review, No. 48, May, 1997, p. 39.
  82. ibid., p. 40.
  83. Graeme Hodge, op. cit., p. 29.
  84. Jenny Merkus, op. cit.
  85. Judith Healy, op. cit., p. 95.
  86. ibid., p. 100.
  87. ibid., p. 52.
  88. ibid.
  89. Commonwealth Department of Health and Family Services, Annual Report 1996-97, AGPS, Canberra, p. 3.
  90. Michael Fine, op. cit., p. 2.
  91. Louise Dodson, 'Business to the Rescue', The Australian Financial Review, 19 May 1998.
  92. David Grayson, 'Take your partners for the future', New Statesman, 24 April 1998.
  93. Australian Council of Social Service, Budget 98: Time for a 20/20 vision, Federal Budget Priorities Statement, 1998-99, p. 163.