Chapter 15 - Commissioning, funding and regulatory culture

  1. Commissioning, funding and regulatory culture

This chapter details the proposed operational structure for a rebuilt Commonwealth Employment Services System, including reforms to commissioning, funding, and the regulatory culture that underpins operational management of function, such as, performance management arrangements. These reforms will be necessary to ensure that other changes to the design and delivery of employment services are effective.

The most fundamental change will be the development of a new regulatory culture and a more relational contracting model, focused on partnerships and on building quality services. This will challenge current ‘black box’, ‘arm’s length’, ‘hyper-competitive’, and ‘hard performance management’ paradigms under which the employment services system has historically operated. These reforms must be progressed before a new system can be recommissioned and requires the active and practical engagement of government departments, central agencies, academics, and other key stakeholders.

Within a rebuilt system, commissioning for mainstream case management service partners and specialist service partners should continue to be undertaken centrally by the responsible department. Providers should be required to demonstrate their capacity to deliver the service and their capacity to support clients in a local area, with weight given to local connections and proven knowledge and relationships. These core services should be complemented by specialist services engaged via flexible commissioning approaches, with the reverse auction grants model used for Jobs Victoria given priority.

Noting the compelling evidence that Aboriginal Community Controlled Organisations (ACCOs) are preferred in delivering services to First Nations clients, additional ACCOs should also be commissioned as soon as possible in areas with high numbers of First Nations unemployed people. Separate commissioning arrangements will also be needed for a service for clients in the criminal justice system, as discussed in Chapter 5.

A rebuilt Commonwealth Employment Services System should include smaller regions which better reflect communities of interest and natural labour markets. Determining the number and size of regions should be both a ‘top down’ and ‘bottom up’ process, informed by consultation with State, Territory and local governments and advice from Jobs and Skills Australia (JSA). Regions must also take account of the boundaries of other services systems and administrative jurisdictions such as local governments.

Longer licenses and work orders should be considered. Approaches used in other jurisdictions (such as Belgium’s ‘3-6-9’ model) are instructive. In addition, business transmission clauses should be built into contracts, to minimise confusion for service users and reduce public costs, so that where a key service partner providing Job Coach case management services ceases operating a contract the site and other capital may be able to transfer to a new provider.

As outlined in Chapter 4, government must have a far stronger role in stewarding and providing enabling services for a rebuilt system. Government should begin work as soon as possible to strengthen Australian Public Service (APS) understanding and capacity.

Government should consider directly delivering services in some areas in the short term, possibly through establishing arrangements whereby it partners with a provider to deliver coordination and mapping services, following the model currently being tested in Broome. Direct service delivery by the Commonwealth would not be undertaken on a competitive neutrality basis or to save money, but only in a limited number of places inorder to rebuild an understanding of quality service delivery and efficient pricing in the public sector.

Implementing funding arrangements that balance meaningful employment, building the capacity of clients, and financial viability for service partners is one of the most complex challenges in the design and implementation of an effective public employment service. However, while in reality there is no perfect funding models, existing funding arrangements require reform. Among other concerns, an over reliance on heavy outcome payments for individual placements are a key driver of an excessive ‘work first’ approach which the previous government’s review intended to move away from, but which is still driven by funding and performance incentives, fuelling a transactional, depersonalised approach to service delivery.

The Committee is attracted to a mixed funding model for a rebuilt system, tailored to the needs and circumstances of clients. This should include a mix of upfront service fees; progress payments; some (reduced) outcome payments; and bespoke and other flexible funding arrangements for specialised services. A youth specialist program should include funding for Transition to Work (TtW) at a similar level, probably best complemented by a blended funding model with a mix of performance-based outcome payments but with resourcing to allow a service to support a mixed group of young people with varying intensity.

Executive government would retain decision-making authority regarding system funding. However, the new Employment Services Quality Commission (see Chapter 7) would have a role in transparently advising government on the recommended pricing of ‘bundles’ of services, regularly reviewed and updated to ensure prices remain efficient. Over time this could potentially build towards a more activity-based funding model.

Noting that it will take time to co-design a fit-for-purpose funding model for a rebuilt system, government should also trial alternative funding approaches to determine their impact on the quality of services and on client outcomes.

Performance management arrangements are another key contributor to the ‘work first’ focus of service partners. The rhetoric of ‘matching people to the right job’ rings hollow when measured against a performance framework which forces providers to move clients into any job as quickly as possible.

Pending broader changes to regulatory culture and the implementation of a more relational contracting model, performance management arrangements should be reviewed with the aim of simplifying the metrics used to assess performance and ensuring the framework does not focus heavily on blunt employment outcomes. Some focus on outcomes should be retained but alongside more appropriate measures that reflect the goals of the system and the reality of progress for clients. This review should be conducted as quickly as possible, with a new performance framework in place within one year or so of the tabling of this report.

Market structure


15.1Evidence was received indicating that existing procurement arrangements are expensive and complex, and favour larger and for-profit organisations over smaller scale, local, and community-based organisations which are often well placed to support vulnerable jobseekers.[1]

15.2Workways Australia Ltd (Workways) stated that larger organisations are typically able to dedicate resources to completing tenders—up to and including hiring staff for this purpose. Smaller and not-for-profit organisations often lack this capacity. This impacts on their success in the procurement process and consequently on their market share. Workways also indicated that tender processes do not sufficiently consider the extent to which organisations are embedded in local communities, noting in the most recent procurement round many unsuccessful tenderers had been delivering services in their communities for over 20 years, while many successful tenderers had little to no community presence.[2]

15.3Providers must also be certified against accreditation standards to be able to deliver services, including the Quality Assurance Framework (QAF) and Right Fit For Risk (RFFR). As outlined in Chapter 7, consistent evidence was that these requirements are costly and complex, and act as a significant barrier to many smaller and community-based organisations entering the provider market.[3] Further, and as outlined below, various iterations of employment services—including Workforce Australia—have relied heavily on outcome payments as a funding source for providers. These arrangements often require organisations to have substantial pre-existing capital to be able to deliver services. This has exacerbated the issue of smaller, community-based organisations with strong local networks and relationships, being unable to deliver Commonwealth-funded employment services.[4]

15.4MAX Solutions (MAX) noted that countries such as the UK allow tenderers to make presentations to showcase their organisation, partners, understanding of local issues, and services they offer. By contrast, the tender process in Australia is based on written submissions with a cap on length.[5]

15.5The National Employment Services Association (NESA) indicated that a longer and more considered procurement process would support a diverse pool of providers, including smaller organisations, and allow more time to design service models and explore innovative solutions. NESA highlighted the 2018 procurement for Disability Employment Services (DES), which involved an initial expression of interest to prequalify as a bidder, followed by a formal bid process.[6]

15.6In addition, NESA called for more detailed negotiation in the procurement process to enable an efficient establishment of the market—including to give providers visibility over where other providers intend to establish sites.[7] NESA provided an example of a viable procurement timetable, drawn from tender processes in the UK’s New Deal employment service scheme. This is set out in Table 15.1 below.

Table 15.1Example procurement timeline – UK New Deal




Advertisement and expression of interest


Briefing sessions hosted, and pre-qualification questionnaires issued (PQQs)


PQQS assessed and provisional shortlist drawn up


Invitations to tender (ITT) issued to bidders


Provider surgery events hosted, enabling providers to speak directly to DistrictsBids due in


Bid assessment, financial viability risk assessment (FVRA) and bid assessment


Final post-tender negotiations


Contract award notification


Post-contract support/development


Contract commencement

Source: NESA, Submission 260, p. 24.

15.7NESA noted that the DES procurement process was similar to the approach taken in international jurisdictions, and that:

  • In other countries, the initial expression of interest sometimes involves more detailed proposals and demonstrations of financial capacity to deliver, and contracting authorities may consult with prospective bidders to gather information and provide additional clarity around the tender process.
  • The Organisation for Economic Co-operation and Development (OECD) has stated that tenders are best managed over a longer period—ideally up to a year.[8]
    1. In 2016, the Productivity Commission observed that effective delivery of human services in remote First Nations communities (and for First Nations peoples more generally) may require the use of different commissioning models, noting that (then) current approaches to contestability were not resulting in the provision of quality services. The commission stated:

Redesigning arrangements for commissioning services and providers could encourage providers to improve service quality, use innovative service models, expand access so more people get the support they need, and reduce the costs to government and users who pay for those services. Introducing or expanding contestability for services that are currently not fully contestable could make it possible for a better performing service provider to expand its service offering and for a poorer provider to be replaced with a better performer.[9]

15.9The Productivity Commission made similar observations in a follow-up report released in 2017, and made the following recommendations to enhance commissioning processes for remote First Nations communities and bolster place-based solutions:

  • Increase default contract lengths to ten years—with some exceptions including for program trials—and ensure contracts contain adequate safeguards in case of failure by providers.
  • Publish rolling schedules of upcoming tenders, allow sufficient time for providers to prepare considered responses, and align tender processes for related services.
  • Ensure commissioning processes incorporate skills transfer and capacity building for people and organisations in communities.
  • Take account of the attributes of providers that contribute to achieving outcomes for people in remote communities, including culturally appropriate services.
  • Invest in better systems to underpin service provision by developing outcome measures, conducting community assessments, and establishing evaluation and feedback systems.
  • Adopt more regional approaches to decision-making and engagement with communities, with local staff given more authority over planning, engagement and service implementation.[10]
    1. Some stakeholders highlighted specialised tender approaches for certain services and providers. The Victorian Government uses a reverse tender approach for Jobs Victoria Mentors, wherein tenderers detail their service model, associated costs, and outcomes to be delivered.[11] A 2019 evaluation of Jobs Victoria concluded that reverse tendering:

… helped to achieve a diversity of approaches by providers to the delivery of employment support services, which helped to generate interventions more responsive to local needs both from the perspective of job seekers and of employers.[12]

15.11The Department of Employment and Workplace Relations (DEWR) asserted that the potential cost reductions and flexibilities associated with reverse tendering could result in inconsistent or poor-quality services. DEWR stated that this is a particular risk in a demand-driven service where the flow of new referrals and the size of the caseload can fluctuate due to labour market changes. DEWR also further noted that when providers were permitted to compete on the basis of price in the Job Network tender, many tenders put forward pricing models under which quality services would not be financially viable.[13]

15.12Stakeholders also indicated that procurement processes must evaluate the capacity of bidders to meet employers’ needs, noting that this will require that employers are involved in co-designing tender policies.[14] Associate Professor Jo Ingold (Dr Ingold) and Mr Tony Carr asserted that policies, programs, and commissioning models should be co-designed with employers, with employers and industry associations involved ‘from the start’. Dr Ingold and Mr Carr drew attention to research conducted in the UK and Denmark, stating:

Jobcentres in Denmark [can] engage employers in a sustained way because businesses are considered within the commissioning process … By contrast, in the UK, with its weaker institutional framework, business engagement was much harder to achieve because providers were on the ‘back foot’ … if [employers] do engage in programs, [they] engage on a transactional or ad hoc basis, rather in a repeated or sustained way.[15]

15.13During its European delegation, the Committee heard that Belgium uses a ‘3-6-9’ approach to contracting. This involves a staggered approach to contract review and renewal with around 30 per cent of the market coming up for contract renewal every three years. In effect, this leads to contracts lasting for nine years for each provider. Representatives of Belgium with whom the Committee engaged during the European delegation observed that this supports a more sustainable, open market structure.

15.14The Brotherhood of St Laurence (BSL), Centre for Policy Development (CPD), and the University of Melbourne (UniMelb) emphasised that more relational forms of commissioning are required to create a collaboration-focused employment system that provides tailored, enabling support to jobseekers and encourages cross-sector partnerships to leverage local community effort and address barriers to employment. According to the submitters, this form of relational contracting (‘collaborative commissioning’) will require entirely new approaches and systems within the public sector and will require government to largely abandon or at significantly reform current instruments of competitive tendering, compliance-driven contract management, and performance payments that are used to steer the market. Relational contracting will also require a different and more flexible funding model which rewards improvement over a longer period, as well as different performance measures which capture providers’ progress in bringing clients with barriers into different versions of labour market attachment.[16]

15.15The BSL, CPD, and UniMelb also observed that, in Denmark, a relational approach to contracting is used by municipalities to harness the expertise of specialist nongovernment providers to support long-term unemployed (LTU) jobseekers with multiple and complex needs. The partnerships involved in this model frequently extend beyond employment services organisations and incorporate the expertise of allied health, social services, and education and training providers who all have a pivotal role to play in enabling a joined-up service response.[17] The Committee also explored the role of relational contracting in Denmark during its European delegation.

Service regions and boundaries

15.16Workforce Australia is currently delivered in 51 employment regions across nonremote Australia (with assistance for jobseekers in remote Australia delivered via the Community Development Program (CDP)).[18] The DES program covers the same geographical area as Workforce Australia but is delivered across 111 employment services areas.[19] The second Job Network contract covered the same geographic area as Workforce Australia and CDP combined, with the program delivered in 137employment service areas.[20]

15.17Some stakeholders indicated that the number and size of the current employment regions are largely artificial, and do not reflect local labour markets. For example, yourtown noted that while Logan and South-East Brisbane are distinct communities, both are covered by the same employment region (Brisbane South-East).[21]

15.18Jobs Australia stated that a competitive tendering process and the move to fewer employment regions—with each covering a larger geographical area—has resulted in fewer and larger providers, with a corresponding reduction in the number of mission-based not-for-profit organisations with deep connections to communities. Jobs Australia asserted that the Commonwealth should increase the number of employment regions from 51 to 110 in the next contract round to help address this issue.[22]

15.19WISE Employment noted that employment regions under Workforce Australia do not align with Australian Bureau of Statistics (ABS) geographic regions, stating that this prevents the development of accurate, detailed pictures of local labour markets and makes it challenging for providers to tailor services to local need. WISE Employment stated that boundaries for employment regions should align with the ABS’ Main Statistical Area Structure.[23]

15.20During its delegation, the Committee heard that other countries are considering alternative approaches to defining service regions. For example, the Netherlands has been contending with framing their boundaries on the basis of economic indicators (such as labour shortages( and social indicators (such as entrenched disadvantage).

15.21NESA indicated that the number and size of regions should be determined through co-design, stating that this should involve consideration of different market structures across various programs (for example, Workforce Australia and DES).[24]

15.22DEWR noted that boundaries for the current 51 employment regions were designed in 2014 to reflect natural labour markets and confirmed the regions consolidated 110non-remote employment service areas used in Job Services Australia. DEWR acknowledged that these boundaries have not been reviewed since 2014 despite significant changes in regional labour markets since that time.[25] DEWR also indicated that there may be merit in re-visiting some of the boundaries between remote areas (serviced under the CDP) and non-remote areas (serviced under Workforce Australia), stating:

[I]individualised servicing is a bit of a concern with people moving between boundaries because it does require a new provider or a new employment consultant to re-establish that connection. It's not ideal. I definitely think there are certain areas of Workforce Australia that are almost islands, with CDP around them. They would be a key part to look at in [Western Australia], [the Northern Territory], Queensland, and New South Wales.[26]

Number and mix of providers

15.23As of December 2022, there were 43 providers with licenses to deliver Workforce Australia Services. Those providers deliver services out of 1,490 sites across Australia, including 663 sites in metropolitan areas and 827 in regional areas. The market share (that is, the proportion of jobseekers each provider is contracted to assist in each employment region)[27] for for-profit entities, multinationals, and small, medium, and large entities is set out in Table 15.1 below.[28] This compares Workforce Australia to the two previous employment services contracts.

Table 15.1Market share of employment services providers

Employment service

For-profit entities


Small entities

Medium entities

Large entities

Job Services Australia (2009 to 2015)






jobactive (2015 to 2022)






Workforce Australia Services (2022 to 2025)






Source: DEWR, Submission 254, p. 26.

15.24Stakeholders indicated that there should be a greater diversity of providers in the employment services system, to ensure services meet the needs of an increasingly heterogenous caseload. NESA stated that diversity is an important precondition to an effective quasi-market system and can—assuming appropriate regulatory and policy settings—promote innovation and improve service quality. NESA also asserted that provider diversity should be maintained, with selection based on the demonstrated capacity to deliver program outcomes. NESA also noted that providers in outsourced employment services in OECD countries come from a variety of organisational backgrounds and from the for-profit and not-for-profit sector.[29]

15.25The Salvation Army Employment Plus (SAEP) observed that the mix of providers makes a great difference to the effectiveness of the program and gives jobseekers greater control over their supports. SAEP recommended criteria for procurement include consideration of provider diversity, stating that this should be accompanied by a comprehensive description of different providers and services for jobseekers to enable informed choice.[30] SAEP views on the diversity of providers in the sector was echoed by other providers.[31]

15.26SAEP asserted that an ideal procurement model for employment services includes the following elements:

  • Tender design and evaluation methodology reviewed independently by a separate agency to the agency administering and regulating outsourced programs.
  • Procurement focused on providers, with validated evidence that they can deliver government objectives—including the providers’ track record in supporting LTU and disadvantaged jobseekers.
  • Procurement which applies favourable weighting to track records of successful performance and continuity of service.[32]
    1. Some stakeholders noted that for-profit entities receive a disproportionate amount of funding under Workforce Australia. For example, ACOSS noted that two-thirds of program funding is allocated to for-profit providers, and expressed concern that those providers have a business model based on cost minimisation and other commercial considerations which does not prioritise support for jobseekers.[33] This concern was echoed by several other stakeholders.[34]
    2. The Community and Public Sector Union (CPSU) observed that the issue of market share for for-profit providers has existed since at least the jobactive contract. The CPSU drew attention to a 2021 report which found that three major providers had received 74 per cent of the $3.3 billion in tenders awarded to jobactive providers since the contract began. The two largest providers—ultimately owned by American-based multinationals—accounted for 56 per cent of all public money spent on employment services contracts since 2015.[35] These concerns were echoed by the BSL in their submission to the Productivity Commission’s inquiry into user choice and contestability in human services:

A diversity of providers is necessary to deliver choice and accountability. However present trends in commissioning threaten diversity by placing undue pressure on smaller and mid-sized community sector organisations to merge in order to compete with larger providers … [T]he creation of new human service markets, together with the preference of government for contracting to fewer, larger agencies, puts smaller organisations, especially those embedded in local communities, at a distinct disadvantage. Yet it is this embeddedness –the strength and duration of their relationships, the richness and reach of their networks— that enables them to comprehend the needs of the community they serve and harness local altruism to find solutions.[36]

15.29The Productivity Commission itself made similar findings, stating that government should focus on the capabilities and attributes of service providers when designing arrangements for human services and selecting delivery organisations.[37]

15.30Several stakeholders called for services to be delivered by not-for-profit entities, noting that these entities do not have the same commercial imperatives as forprofit counterparts, are connected to the communities they serve, and are better able to support disadvantaged jobseekers.[38] For example, Jobs Australia stated:

[F]or-profits, as a matter of law and legal obligation they have with respect to their shareholders, need to maximise the return on these contracts. The directors of those companies are required under corporate law to maximise the profit under those contracts. The not-for-profit submission based organisations don’t have those same pressures; obviously they’ve got to make more than they spend, or they go out of business, but they do not come from that position. They are in their communities to stay.[39]

15.31By contrast, some stakeholders indicated that whether a provider is for-profit or notfor-profit is of little consequences, noting that the drivers of service quality are contract conditions and financial incentives.[40] For example, the Antipoverty Centre stated:

Whether for-profit or not-profit service providers, private organisations do not act in the interests of unemployed people. An ecosystem of supports must have the public sector at its core to provide meaningful assistance.[41]

15.32Stakeholders also noted that while the number of individual providers in Workforce Australia is low, many providers operate across multiple employment regions, and often operate multiple sites within one geographic area. In some cases, this has led to service saturation.

15.33For example, MAX indicated that many locations have multiple providers competing for a relatively small caseload. Larger entities in these locations often have little to no connection to local communities, while smaller entities cannot remain financially viable in this environment and often close within a few years. MAX indicated that the sector is best served by a smaller number but a more diverse range of providers with the capability to deliver the supports that vulnerable jobseekers require.[42]

15.34VERTO observed that increasing the number of providers in regional areas limits the depth of partnerships with employers and industry and leads to poor outcomes for vulnerable jobseekers.[43] Another submitter expressed similar concerns, stating:

Why does my town need a half dozen centres that tell people to go apply for jobs online, when it could have just one with a local jobs board, brochures for TAFE and university courses and apprenticeships and people to talk to about finding appropriate work clothes? A place for people to go as needed, where they come for the carrot, not in fear of the stick.[44]

15.35SAEP indicated that government should consider adopting a similar model to that used in Transition to Work (TtW). SAEP explained that under this model, a single provider is registered for each ‘sub-region’ and services the total caseload for three or four sites. Providers in TtW do not compete for market share within a region, which permits concentration of provider resources and a single point of contact for local employers and community organisations. However, a downside of this model is that jobseekers have no choice over their provider.[45]

15.36The Training Alliance Group (TAG) also supported adopting a model based on the arrangements in TtW, noting that the ideal model would involve providers servicing regions by postcode. According to TAG, this would help to prevent the duplication of services in the same suburb and encourage greater collaboration. TAG also indicated that a new procurement model should be supported by a performance framework that evaluates providers against performance targets for the local region rather than comparing performance between competing providers.[46]

15.37DEWR confirmed that no providers are currently licensed to deliver Workforce Australia Service in part of a region, nor are any contracted to deliver a service spanning multiple regions. All licenses are for the entire employment region for which they are issued.[47]

The role of specialist licenses

15.38Specialist licences were introduced as part of the Workforce Australia contract on the basis of recommendations of the I Want to Work report, which argued that this would allow for greater responsiveness to regional caseload differences. Under Workforce Australia, specialist providers are only referred participants from their target cohort and are expected to have service strategies in place which are specifically tailored to the cohorts with whom they work.[48]

15.39Specialist Workforce Australia Services licenses were issued to organisations that were able to demonstrate capability and appropriate strategies to deliver tailored services to specific cohorts. Target cohorts were First Nations peoples, people from culturally and linguistically diverse (CALD) backgrounds, people from refugee backgrounds, and people with experience of the justice system (ex-offenders).[49] Anoverview of the specialist licenses offered in Workforce Australia is included in Table15.2 below.

Table 15.2Workforce Australia specialist licenses

License type

Number of providers[50]

Number of regions




First Nations












Source: DEWR, Submission 254, p. 27.

15.40DEWR acknowledged that the regions with the highest concentration of jobseekers from identified cohorts are not necessarily the regions where specialist licenses are issued. However, the generalist providers in those regions are expected to have in place servicing strategies to deliver appropriately targeted services to those cohorts. Additional specialist licenses may also be granted if there is an identified need based on the region’s caseload composition, a suitable organisation will be available to deliver the services, and specialist services would be financially viable.[51]

15.41Some stakeholders indicated that specialist services are often crucial to improving social and economic participation for target cohorts.[52] However, stakeholders also noted that despite good intentions, specialist licensing has not resulted in significant increases to service quality or employment outcomes. One key driver of these poor results was that specialist licenses were not granted to organisations with specialist expertise or strong community ties (for example, Aboriginal Community Controlled Organisations (ACCOs) to support First Nations jobseekers), or in areas with high numbers of jobseekers from the cohort the specialist license was designed to support. For example:

  • Only generalist licenses were allocated in Dubbo, notwithstanding high numbers of First Nations jobseekers who would benefit from specialist assistance.[53]
  • Only one of the 16First Nations specialist contracts was awarded to a First Nations-led provider.[54]
  • No CALD specialist licenses were allocated in several employment regions with a high number of jobseekers from CALD backgrounds.[55]
  • Specialist licenses for refugee services have not been allocated in the locations where refugee communities are most highly concentrated and were not issued to settlement service providers.[56]
    1. Sarina Russo Job Access (SRJA) indicated that financial viability can be challenging for specialist providers, as in many regions there are insufficient jobseekers from the target cohorts to enable economies of scale. This is a particular challenge given that jobseekers in those cohorts often have higher, more specific needs and accordingly may require more costly supports.[57]
    2. yourtown stated that government should use existing data to determine the types of providers required in employment regions, asserting that there should only be one generalist provider in each location. Added to this would be a youth specialist, with First Nations and CALD specialist providers also commissioned depending on the demographic makeup of the area.[58]
    3. Another concern was that despite the assumption that specialist providers deliver a bespoke service, differences between the services are often largely cosmetic, with funding, contract provisions, and performance management identical for generalist and specialist licenses.[59] Yilabara Solutions asserted that this creates challenges for specialist First Nations providers, stating:

[O]ur current caseload as of today is made up of 99.8 per cent Aboriginal job seekers... Many [of our clients] may present with complex barriers. Thirty-two per cent of our clients are ex-offenders, more than double the national average. Twenty-one per cent of our clients have disability or mental health issues flagged. Twenty per cent of our clients are homeless. Ten per cent of our clients are homeless and ex-offenders. We work within the same performance quality and funding conditions as non-Indigenous organisations.[60]

15.45Yliabara Solutions stated it is expected to place First Nations jobseekers at the same rate as other providers, notwithstanding that jobseekers on their caseload often have greater barriers to employment, and that culturally appropriate service delivery can often take more time than the delivery of more standardised supports.[61]

15.46As outlined in Chapter 5, service providers delivering assistance to people with experience of the criminal justice system are typically expected to provide a bespoke service based on throughcare and continuity of support. However, specialist exoffender licenses—like other specialist licenses—operate under the same contractual requirements, funding and KPIs as generalist counterparts. This can impact provider performance and viability, noting that specialist providers are often required to deliver a more tailored service to those they support, which may involve greater investment in capacity-building over the longer term and less focus on quickly placing clients in employment.[62]

15.47During its site visits, the Committee met with several providers who held specialist licenses for a region (for all four cohorts). Those providers told the Committee that they had made efforts to meet the needs of target cohorts, including engaging staff with a similar demographic profile to the jobseekers on their caseload; conducting training to build cultural competence; and developing connections to community organisations to which jobseekers could be referred. However, providers emphasised that these efforts were made on their own initiative and were not driven by specific contractual or funding arrangements.

15.48Some providers also noted that clients from the relevant cohort (for example, CALDclients) are frequently not referred to a specialist but are instead referred to a generalist provider in order to balance provider caseloads. DEWR acknowledged that there have been some challenges referring participants who may have been eligible for specialist services to the relevant providers in the earlier stages of Workforce Australia but indicated that those issues have been resolved.[63]

15.49CALD specialist providers with which the Committee engaged noted that funding and performance management arrangements do not take account of the additional time needed to support CALD participants—particularly in cases where it necessary to engage interpreters and work through language and cultural barriers over time. The Committee heard from one provider that the time taken to assist a CALD client is effectively doubled when working with an interpreter. In addition, high administrative requirements within the system—detailed in Chapters 6 and 7—can limit the amount of time staff can spend supporting their clients. This can be a particular challenge for CALD, migrant, and refugee clients who often need additional, tailored support.

15.50Yilabara Solutions also told the Committee that the specialist licensing model is not adapted to circumstances of First Nations communities—in particular because the model does not allow non-First Nations family members of First Nations jobseekers to be referred to a specialist provider. Yilabara Solutions stated:

We see how many mixed families are in our communities. We are turning away mothers. We are turning away cousins. We are turning away uncles. That's because they're non-Aboriginal. We have modelled that we would probably have 300 to 400 clients that are non-Indigenous on our caseload. They are not there.[64]

15.51DEWR stated that allowing specialist providers to service participants outside their target cohort (for examples, allowing First Nations licensees to deliver services to clients who are not a First Nations person) requires policy change with consequent system changes. These changes would require the identification of a funding source for scoping and development.[65]

The role of physical sites

15.52The majority of supports in Workforce Australia Services are delivered via physical sites operated by the service provider, with some delivered in sites belonging to other organisations on an outreach basis.[66]

15.53Stakeholders indicated that employment services could be enhanced via an outreach model focused on meeting jobseekers where they feel comfortable and in locations that are easy to access. For example, IntoWork noted that it operates a ‘completely mobile’ service in some locations, with consultants using company vehicles to meet current or potential participants in their communities. IntoWork also acknowledged that there are some challenges with this approach. For example, where a jobseeker indicates that they wish to be referred to IntoWork and IntoWork’s mobile service is operating in their area, they may still be referred to another provider whose bricks-and-mortar office is closer to the jobseeker’s address.[67]

15.54Youth Projects called for measures to enable youth-focused employment services to undertake outreach to disadvantaged communities. Youth Projects highlighted its Youth Holistic Outreach Program, stating:

Because many disadvantaged, disconnected young people do not come forward seeking help, [Outreach Program] workers embed themselves in the community among young people—at community centres, youth hubs, hangouts, sport/recreation facilities—the places where young people meet, the spaces they inhabit.[68]

15.55Jobs Victoria advocates directly approach people in a variety of settings to ask if they need support or referral to an employment service. Moreover, Jobs Victoria markets its services directly to people captured in its databases—including to connect people to employment opportunities it has identified. This outreach rarely takes place at physical sites.[69]

15.56There can be substantial transaction costs associated with opening and closing sites both during procurement for new contracts and as part of licence renewal processes. Asuria People Services (Asuria)—one of Australia’s largest providers—noted that standing up a Workforce Australia contract required a $10 million investment.[70]

15.57Workskil Australia (Workskil) noted that during each procurement round, providers are obliged to shut down and open multiple sites within a 12-week period, which typically requires wholesale organisational restructuring. Workskil indicated that no industry should be required to meet such unrealistic and demanding timeframes.[71]

15.58Concerns were also raised as to the time it takes DEWR to action service change requests. For example, the Nirrumbuk Aboriginal Corporation (NAC) noted that it would take nine months to hand back a Workforce Australia contract.[72] This aligns with what the Committee heard during site visits. Providers indicated that DEWR would often take significant time to approve changes to service arrangements, leading to providers being forced to send staff to locations with no clients.

15.59The Joint Charter – Workforce Australia sets out the manner in which the department and providers would work collaboratively.[73] However, as NESA observed there is no operational framework to enable resolution of issues to ensure mutual accountability. NESA also highlighted that given the power imbalance between providers and DEWR as the sole purchaser of services, the Joint Charter is—at least in isolation—an ineffective measure. NESA recommended an Operational Framework including clear mechanisms to drive collaboration between DEWR and providers.[74] This issue was also identified during site visits, with some providers calling for service standards requiring DEWR to action core deliverables and tasks.[75]

Funding arrangements

15.60As outlined in Chapter 1, the funding model for Workforce Australia Services includes four key funding types: an upfront payment when participants commence in services; outcome payments, which are payable when a jobseeker remains in work (or rather off income support) for a set period; progress payments which reward demonstrable improvements to a participant’s employment prospects; and supplementary fees for securing work for LTU jobseekers.

15.61Separate payment arrangements apply to TtW and to complementary programs.

Outcome payments and upfront payments

15.62A key theme in evidence was that the fee structures in Workforce Australia has too strong a focus on outcome payments, to the point that it will be difficult for a provider to remain financially viable if jobseekers on the caseload do not achieve employment outcomes within a reasonable timeframe. This is a key driver of the ‘work first’ approach that has historically underpinned employment services—and is not conducive to providers investing in and building the social and economic capacity of jobseekers.[76] For example, Generation Australia stated:

[T]he current … funding structure encourages [providers] to place people quickly into the first available job. This structure does not incentivise [providers] to consider the long-term prospects of the industry they are placing the job seeker in, the job seekers’ skills and interests, the employers’ needs and relevant education pathways available to reskill [or] upskill.[77]

15.63The Refugee Council of Australia (RCOA) noted that the refugee community has long asserted that current funding arrangements push new arrivals into jobs which do not enable meaningful career outcomes or economic participation. Moreover, under current arrangements providers are not incentivised to support jobseekers pursuing recognition of overseas qualifications or local work experience.[78]

15.64Yilabara Solutions indicated that current funding arrangements do not enable investment in capacity-building for First Nations peoples, stating:

Under jobactive, 70 per cent of revenue for individual job seekers was directed to employment outcomes … [this] constrain[ed] the ability of employment service providers to deliver longer term interventions designed to address the substantial barriers that the long and very long-term unemployed face. This approach has been magnified under Workforce Australia with over 82 per cent of payments for job seekers being directed to employment outcomes and only 18 per cent being directed to engagement and development.[79]

15.65The Committee also heard that funding structures under previous iterations of the employment services were more conducive to investing in the capacity of jobseekers. For example, MAX observed that under the Job Network and Job Services Australia, there was greater balance between outcome and service payments that encouraged investment of time and resources in jobseekers.[80]

15.66Several stakeholders supported moving funding arrangements away from outcomes and towards higher upfront payments, to enable providers to deliver tailored services while remaining financially viable.[81] The Committee heard that such a model could be based on funding arrangements for other employment service programs, such as TtW or DES.[82] For example, Jobs Australia called for:

  • a reduction in the emphasis on outcome-based payments and the reintroduction of quarterly service fees to encourage greater investment in building the capacity of jobseekers with complex barriers;
  • a greater focus on progress payments; and
  • the introduction of a service payment for ongoing support, such as has been part of the DES program for many years.[83]
    1. Yilabara Solutions argued that a new funding model would be needed to underpin a new dual-stream approach to supporting jobseekers (involving work preparation and support services). Providers would receive base funding in the form of a grant representing 60 per cent of all possible funding for a jobseeker, with the remaining 40per cent of funding contingent on the support a provider delivers.[84] VERTO similarly stated that longer, performance-based contracts linked to block funding arrangements would provide a more stable operating environment for providers.[85]
    2. SYC Ltd (SYC) indicated that higher upfront fees would reduce reliance on the Employment Fund (EF) and accordingly reduce the administrative burden associated with claiming. According to SYC, this would allow providers to invest additional time in delivery of frontline services.[86]
    3. Among the stakeholders who supported retaining outcome-based payments, several indicated that payments should be made available for 52-week outcomes (rather than the current maximum of 26 weeks), to enable providers to deliver longer-term support and enable more sustainable employment.[87] For example, SAEP stated:

[T]he Committee [should] consider 52-week outcome fees within the funding structure. Sustainable and secure work is a key objective for job seekers and for those who have worked through activities to build their capacity for long-term work … 26 weeks is not sufficient time to demonstrate whether the employment is sustainable and secure.[88]

15.70Professor Jeff Borland observed that there are challenges with both payment-by-outputs (payments based on employment outcomes) and payment-by-inputs (more upfront payments) models, noting that:

  • Payment by output can be effective to motivate performance when relevant output measures are aligned with the objectives the government is seeking to achieve, and if it is possible to vary payments according to the effort a provider is required to expend to achieve the same outcome for different service users.
  • In employment services, payment output has been challenging. This is because outputs are often misaligned with the objective of moving participants into high quality jobs, and because classifying jobseekers into categories does not fully reflect the heterogeneity of the caseload.
  • Payment by input can be desirable if output from a service is difficult to measure. However, this model creates no direct incentive to achieve the objectives for a service market and may create incentives for over-servicing of users.[89]
    1. The Committee received mixed evidence on progress payments. For example, SAEPargued that progress fees should represent between 35 and 50 per cent of all fees payable to providers, and that fees should be adjusted according to jobseekers’ barriers to reflect the necessary investment of time and resources.[90]
    2. By contrast, CoAct suggested that progress payments be removed and replaced with more substantial ongoing funding. CoAct noted that existing progress payments are undermined by administrative complexity and inflexible compliance arrangements. Moreover, current arrangements for progress payments can leave providers with little alternative but to nominate a specific set of activities for a jobseeker that will be tied to a payment, thereby increasing prescription in the system.[91]

Blended and pathway-based funding models

15.73Some stakeholders expressed support for a blended funding approach, combining outcome-based funding with payments based on the number of jobseekers served and the types of services delivered.[92] One stakeholder observed:

To address the limitations of outcome-based funding models, alternative arrangements could include a mix of outcome-based, fee-for-service, and block grant funding. This would allow providers to address the diverse needs of jobseekers, including those with more significant barriers to employment.[93]

15.74CPD asserted that the funding model should not be one-size-fits-all but should include a mix of fit-for-purpose funding mechanisms, including arrangements to support a jobseeker’s journey towards employment and to enable participation in a range of activities to boost social and economic participation. Moreover, funding arrangements should incentivise collaboration between providers, engagement with employers and the community, and the sharing of lessons and examples of good practice.[94]

15.75Stakeholders also indicated that a new payment model should better recognise the pathways to employment which jobseekers may take, as well as the various services included within the employment services system. For example, ACOSS called for a new payment model with a mix of payment arrangements:

  • The ‘core’ employment service should have hybrid funding that combines establishment, service and outcome payments and access to an investment fund in respect of each individual assisted. Within funding stream, service payments would be increased to support an adequate number of suitably qualified frontline workers; progress payments would be abolished, and higher outcome fees would be paid in respect of people assessed with greater labour market disadvantage.
  • Providers would have access to places in national paid work experience and training programs. These would offer fixed rates of funding per program place and local employment and skills networks would provide regular advice on the number and type of places required in each region.
  • Professional career counselling services would be paid as fixed, per-person fees.
  • Local partnership services for people with complex needs would be funded on a grants model, with funding provided to a lead agency or consortium to oversee partnerships among services. Modest outcome payments would also apply.
  • A local employment and skills network (similar to the current Local Jobs Program) would be funded on through grants, with an auspicor agency funded to develop the network and then to sustain it by employing facilitators, conducting regular meetings, and sharing information.[95]
    1. Dr Ingold and Mr Carr indicated that there would be value in adjusting the funding model for employment services to better recognise ‘soft’ outcomes such as increases in confidence and development of key employability skills. Funding could also recognise the ‘distance travelled’ towards an employment or education outcome, supported by measures of increased optimism, purpose, and self-confidence, or improvements in learning behaviour and attitudes.[96]
    2. According to Dr Ingold and Mr Carr, incentivising soft outcomes and rewarding distance travelled could involve splitting payments between clients and providers. DrIngold and Mr Carr drew attention to several models in other jurisdictions which have focused on these measures, with varying levels of success:
  • In the early 2000s in the UK, the StepUP program experimented with progression payments for employers and clients. Many participants moved closer to the labour market particularly as a result of increased objective employability.
  • The UK Talent Match programme for young people not in employment, education, or training experimented with the measurement of hard and soft outcomes. The program led to improved wellbeing for young people.
  • In Ireland, the My Journey Distance Travelled Tool measures soft skills relevant to employment, education and training and personal development. This can assist providers in initiating conversations, assessing needs and planning steps in conjunction with the service user. However, it is not a way to determine funding levels or benchmark performance.
  • Estonia has a pathways model based on a workability approach combined with employer services. The intention is to work with clients so that they identify barriers and work to overcome them, ideally actively owning their employability plans. The model has demonstrated some success in reintegrating clients furthest away from the labour market.[97]
    1. The BSL, CPD, and UniMelb stated that a range of approaches to pricing and funding should be considered to enable service delivery that is more responsive to the needs of people and communities, especially to people facing disadvantage or who have greater barriers to employment. These include:
  • Contracting and pricing arrangements that incentivise a range of progressive and final outcomes and allow providers flexibility to respond to jobseeker challenges and capability.
  • Sustained funding for elements of the delivery model that are outside standard service delivery but make a difference to outcomes, such as coordination and capability-building of service providers, development of shared approaches and tools, strategic employer liaison, comprehensive and intensive case management, and service innovation.
  • Accurate costing of the supports required to respond to complex cases—in terms of duration, sequencing, intensity—so that providers are incentivised to invest in personalised supports.[98]
    1. The BSL, CPD, and UniMelb also highlighted activity-based funding —used in public hospitals—as an example of an alternative funding approach that is suited to effective, responsive service delivery. They explained that this funding model, in the health system context, is:

… a national mechanism for funding, pricing, and performance measurement [which] uses a Nationally Efficient Price and a National Weighted Activity Unit … Funding allocation is based on forecast activity levels in specific categories … [such as] Acute or Emergency Services, with each hospital receiving the ‘nationally efficient price’ per unit. A standard unit equates to the resources required for a typical admission and stay at a hospital for a recognised procedure or treatment. Adjustments are made for paediatric patients, First Nations, remoteness, and complexity.[99]

15.80The BSL, CPD, and UniMelb further explained that activity-based funding requires defining, defining, classifying, costing, and funding activities in a consistent model, with pricing controlled by an independent authority. In the context of employment services, this would involve independent national authority fixing an efficient price for agreed bundles of services, updated regularly with regional and cohort variation as appropriate. Services could be priced as a bundle, would recognise complex needs, and could span multiple services and objectives, with bundles of services provided by individual providers or by a consortium. A consortium approach would also create the incentives and conditions for collaborative responses.[100]

Funding local initiatives

15.81The existing funding model may need to be adjusted to support local initiatives and wrap-around services to ensure that they are integrated into the national system, and to enable greater collaboration at the local level. For example, the RCOA noted that collaboration may be achieved via pooled place-based funding or by increasing the proportion of funding allocated to service fees—with a corresponding reduction in outcome-based payments.[101]

15.82Stakeholders also told the Committee that place-based initiatives can be challenging to implement due to lack of investment and to funding arrangements which can stifle innovation. There was support for flexible funding and contracting arrangements to enable providers to partner with local organisations and design place-based solutions.[102]

15.83The Enterprise and Training Company (ETC) suggested establishing community foundations in each employment region with the purpose of maintaining and administering funding for long-term local projects. These would be allocated regular government funding from the Australian Government, supplemented by community investment from services providers and from philanthropic funding. Funding from providers would involve the provider investing system-generated profits above a certain margin in the community-based foundation. An advisory board for each foundation would advise on local priorities, assess proposed programs for funding, and appropriately allocate funds.[103]

15.84The BSL, CPD and UniMelb similarly proposed the creation of a Regional Advisory Group, connected to regional hubs, to identify and offer advice on place-based, personcentred initiatives in response to local needs and opportunities; ensure that there are partnerships and capacity building across the local services ecosystem; and strengthen connections to local industries and employers.[104]

15.85Bamara raised concerns with the use of grants to fund community-based initiatives. Specifically, they noted that grants are temporary and once funding ceases, so does the project. This leads to a sudden loss of assistance to participants, and often a loss of valuable accumulated knowledge and experience.[105]

Performance management

15.86As outlined in Chapter 1, the performance of providers in Workforce Australia Services is assessed during Annual License Reviews, which determine whether the provider has performed sufficiently well to warrant a license extension. Providers are assessed against the Provider Performance Framework (PPF), which focused on whether the provider has achieved employment outcomes for jobseekers; whether the provider has supported jobseekers to make progress to employment; the quality of services delivered to participants and employees, and whether the provider has complied with their contractual requirements.[106]

15.87Providers in TtW are assessed against a similar performance framework, with some minor differences in how the framework is structured.[107]

15.88Several stakeholders indicated that performance management arrangements for employment services continue to drive a ‘work first’ approach.[108] The Angus Knight Group (AKG) noted that a provider can only achieve ‘High’ performance if they achieve a ‘High’ rating for the Sustained Employment module and may achieve an overall rating of ‘High’ if they otherwise achieve ‘Moderate’ ratings against the other criteria. The AKG indicated that this may encourage providers to focus on placing jobseekers into work as quickly as possible rather than building their capacity.[109]

15.89Dr Micheal McGann similarly noted that the ‘work first’ approach to service delivery is driven by incentives in the funding and performance management framework, stating:

[Providers are] just responding to incentive structures in their environment around the risk that has been shifted onto them—the fact that they have to achieve outcomes in the immediate future or their contract is potentially not going to be renewed in the next period or they're going to be subject to business reallocation. So there are a whole series of mechanisms established in the design, in the technical instruments of the market model, that aggravate this emphasis on work first as the approach. It's an approach that doesn't work with the very long-term unemployed. We know that from the comparative international research.[110]

15.90SYC asserted that the PPF should be adjusted to focus more on building human capital, arguing that progress—rather than employment outcomes—must be rewarded.[111]

15.91SRJA asserted that three of the modules in the PPF—that is, Quality of Services to Participants, Quality of Services to Employers, and Provider Compliance—appear to duplicate elements of QAF accreditation.[112]

15.92Asuria indicated that 12-month license reviews are too frequent to be effective within a system which supports building human capital. Asuria called for 24- to 36-month reviews, asserting that it takes time to develop relationships with employers and other human services, and to develop a pathway to employment for jobseekers who are further from the labour market.[113]

15.93NESA argued that existing performance management arrangements, including the focus on work outcomes and frequent license reviews, are not conducive to building the capacity of jobseekers. NESA also observed that performance management arrangements do not give providers sufficient information to enable continuous improvement. As an example, NESA noted that assessment information may note that a proportion of records must be brought up to standard but will not provide unit data as to why the records were assessed as unacceptable.[114]

15.94NESA called for the performance framework to be subject to an independent, expert review, to assess whether it is appropriate in the context of a program which aims to build human capacity. In addition, NESA recommended that licensing arrangements be amended to better align with a human capability model.[115]

15.95Dr Ingold and Mr Carr indicated that performance management has historically focused on perceptions of candidates’ level of work readiness, stating that this is ‘a very supply-sided’. Dr Ingold and Mr Carr argued that what is needed are genuine measures of employer satisfaction, and suggested the following measures:

  • A composite measure of employer engagement based on latent class analysis and involving measures of participation in programs and HR-related services.
  • Measurement of employer participation, retention, and repeat business, based on measures used in the US. They indicated that a less ‘blunt’ approach might be preferred in the Australian context, noting high levels of churn in the employment services system.[116]
    1. Dr Ann Nevile suggested a range of measures which might be considered in evaluating levels of employer engagement. For example:
  • The number of provider staff responsible for employer engagement.
  • Whether a provider has an employer engagement strategy, and whether the strategy contains:
  • measurable and time-bound targets;
  • the sequence of steps the organisation will take to realise these targets; and
  • quarterly review processes to identify emerging constraints, additional actions, and any other necessary adjustments.
  • Evidence of repeat business, including:
  • numbers of employers returning to the provider after initial engagement; and
  • evidence of new business generated as a result of the organisation’s employer engagement strategy.
  • Employer satisfaction surveys, including:
  • the extent to which the provider understands the employer’s requirements.
  • the suitability of applicants referred to the employer by the provider; and
  • the level of administrative burden associated with engaging with the provider.[117]

Committee comment

15.97In Chapters 4 to 14 of this report, the Committee made recommendations to improve design and delivery of employment services in Australia with a rebuilt Commonwealth Employment Services System and a framework for the delivery of services focused on pathways to social and economic participation. To be effective, these reforms will need to be supported by fundamentally different, fit-for-purpose commissioning, funding, and performance management arrangements.

15.98Commissioning arrangements for rebuilt system must encourage a diversity of providers with the capacity to support an increasingly heterogenous caseload. Current commissioning arrangements have created unreasonable barriers to entry for smaller and community-based organisations, compounded by complex and burdensome accreditation and assurance arrangements (including IT). This has led to a situation where many services are delivered by large providers with little community presence, compounded by perverse levels of provider turnover and staff turnover. If a person steps back and takes stock of the system in its entirety it really is bizarre the place that Australia has ended up in.

15.99As outlined in Chapter 5, the core service model for a rebuilt Commonwealth Employment Services System is proposed to include:

  • A stronger public sector core,including a national digital-hybrid service for those closest to the labour market; Employment Services Australia (ESA) and its regional hubs providing enabling and stewardship functions; and some case management capacity for people furthest from the labour market who have not succeeded in or are not ready for provider services, in thin markets or where warranted to rebuild sector capability and experience.
  • Contracted service partners providing generalist and specialist case management services in a far less competitive, more collaborative model with smaller regions and stronger local connections, differentiated by an individual’s needs and proximity to the labour market and complemented by a similar model specialist youth service. Most jobseekers would likely be supported via this network of partners.
  • A richer ecosystem of labour market participation options via social enterprises, complementary local or cohort programs and supports—funded via regional and national reverse auction grants according to outcomes and subject to rigorous evaluation.
  • Active labour market and complementary programs—funded and available nationally—including an employer support service, wage and training subsidies, and other programs.
    1. The Committee has not had the data, analytical resources, or capacity to make fully detailed findings and recommendations regarding the optimal commissioning and funding model. However, the series of findings and recommendations presented in this chapter should be the basis for further work by DEWR and central agencies to design a future system.
    2. The most fundamental change required however will be the development of a new regulatory culture and a more relational contracting model, focused on partnerships and building quality services. This will challenge the existing ‘blackbox’, ‘arm’s length’, ‘hyper-competitive’, and ‘hard performance management’ paradigms under which the employment services system has historically operated to one of achieving common goals. In essence, this is a mindset and cultural shift from contracting services out, to contracting service partners in.
    3. With regard to the system’s regulatory culture, the Committee agrees with expert academic evidence that compliance-driven regulatory models which remain prevalent in quasi-markets and service systems like Workforce Australia have proven to be unhelpfully costly and defensive. By contrast, models such as those found in occupational health systems involve an inspectorate which is empowered to help firms improve and is encouraged to identify and share lessons and examples of good practice to enable continuous improvement. Generally, such models will subject certain core issues to harder or more prescriptive regulation and leave most other operational issues in the ‘learn to improve’ category where inspectors work with managers to improve quality and get better outcomes. This model promotes transparency and specifically allows agreement to adapt rules and operating expectations to improve performance.
    4. The Committee’s recommendations concerning a continuous learning and improvement function and a new Employment Services Quality Commission will go some way to rebuilding a system focused on collaboration and service improvement rather than on competition. However, building such a system will also require DEWR to shift the commissioning, procurement, and performance management culture. This will require changes to language, policies, and practices in relation to regulation, as well as adjustments to the and ownership and understanding of key policy and program matters by relevant departments, central agencies, and engagement with the Australian National Audit Office (ANAO). It will also require a shift from rigid, ‘closed box’ tenders to a more collaborative honest, transparent, and efficient procurement approach.
    5. There is significant theory and practice that can be drawn on regarding relational contracting—some of which was touched on in evidence. The core feature of this approach involves greater effort to leverage shared norms and long-term relationships to improve performance. A rebuilt system must still maintain integrity but build better relationships with providers, rather than relying on rigid beauty parades to get a contract (which often reward organisations who can write the perfect tender document rather than those who are best placed to deliver services), imposing tough performance management requirements, and ultimately subjecting service partners to a Darwinian model of survival of the fittest.
    6. There is a lot of research about these issues in the private sector. Long term suppliers often work without a contract. For example, McDonalds uses Coca Cola as its exclusive supplier but has no contract. The two companies simply agree to plan together and meet agreed expectations. While it would not be appropriate for the Australia Public Service (APS) to run without contracts, the Committee encourages the public sector to explore long term supply arrangements and more open bookpartnering. This could involve a two-part agreement. First, the common objectives and agreed manner of working together (potentially including co-governance, ‘open book’ accounting, and shared interests) could be determined. Secondly, the service offer and prices could be agreed. Ultimately, procurement and contracting should involve no more black boxesand no more secret sauces.
    7. The Committee acknowledges that such a shift in procurement and contracting is a significant change and that public sector norms of integrity, probity, and accountability, and fair treatment of all parties must be preserved. A ‘relational contracting’ model should not be understood as suggesting a drift into informality given the need for fair competition and the prevention of corruption.
    8. Building a new regulatory culture and relational contracting model is a critical and separate piece of reform work that needs to be done before a system can be recommissioned or it will fail. This work must involve government departments, central agencies, academics and potentially with insights from the ANAO.

Recommendation 65

15.108The Committee recommends that the Australian Government develop over the next nine to 12 months a new model for regulatory culture and relational contracting for a rebuilt Commonwealth Employment Services System and articulate this before new approaches to commissioning are trialled or determined. This should occur as a collaboration between departments, centralagencies and expert academics supported by insights from the Australian National Audit Office and practices in other jurisdictions and the private sector.

15.109In a rebuilt system, procurement for mainstream case management service partners (generalist and specialist) and specialist youth service partners should continue to be undertaken centrally by the DEWR (procurement risk cannot be shifted to the regional level) but with key changes. Providers should be required to demonstrate their capacity to deliver the service and their capacity to support jobseekers in their local area. Weight should be given to existing local connections and proven knowledge and relationships rather than abstract claims of future performance and cleverly written tenders of equal word length. This would entail greater focus on local connections and on the organisation’s ability to deliver services which are tailored to the needs, circumstances, and backgrounds of jobseekers in the region. Measures should also be implemented to simplify tender processes to provide equity of access for smaller organisations.

15.110As outlined in earlier chapters, the Committee has concluded that the level and nature of competition in the system is excessive and counterproductive, resulting in high levels of service saturation, fragmentation, and duplication. In some areas, be they regional towns or disadvantaged suburban centres, it seems there is a provider operating on every block. This is despite those providers in reality delivering largely the same service with little innovation or variation in offering or performance. Coupled with the myriad of Disability Employment Services (DES) providers it is a patently ridiculous situation. Five ice cream shops all selling the same vanilla ice-cream, lined up side by side, while the government studiously manages market share so everyone gets a lick.

15.111The problems arising from excessive competition have plagued every iteration of the quasi-market system for decades. The promised benefits of choice and contestability have never been realised, despite this issue being raised in every major previous review. Successive governments of all persuasions have only ever made tweaks to the system and experimented with band-aid and sticky-tape responses. While payment incentives, facilitators, and regional coordination mechanisms can result in minor improvements to the system, they simply cannot overcome the fundamental problem of excessive competition and fail to respond to the significant current and historic problems associated with regulation, commissioning, funding, and performance management.

15.112The Committee considers it past time that fundamental issues in the system are addressed, and therefore agrees with the many submitters that the number of generalist case management providers and youth specialist providers should be generally limited to one per place, in line with the ‘default’ commissioning approach currently used for TtW. This may (and usually would be expected to) involve having more than one provider per region.

15.113The core mainstream case management and youth service in each place would be complemented by specialist case management services as appropriate, subject to factors such as caseload demographics and community needs. The Committee shares the concerns of stakeholders that—despite being well intentioned the implementation of specialist licensing has not been effective. Rather than specialist licenses, specialist service partners with cohort expertise and strong community ties such as ACCOs should be engaged to deliver bespoke supports.

15.114Generally, it would be expected that there would be a specialist service partners available in each region where there are reasonably sized First Nations, CALD, or ex-offender cohorts. Over time, if DES is integrated in some way, then specialist disability service partners would be needed. Rather than keeping every licence or service contract within a region, a single organisation could be commissioned to work across multiple areas or regions in a flexible way. For example, a CALD specialist could operate across a number of regions with smaller CALD caseloads, using a mix of physical sites and outreach ‘fly-in, fly-out’ servicing. CALD specialist providers would be the default partner to work with the humanitarian settlement program and there may be value in positively weighting bids by humanitarian settlement providers to also provide CALD employment services. Of course, where a specialist provider is not justified or possible, providers should possess a sufficient level of cultural competency and skill to respond to different cohorts within the mainstream service.

15.115Noting concerns about the impact of contestability on service provision for First Nations clients and in remote communities, the Committee also reiterates that specialist service partners should be engaged via flexible commissioning approaches which recognise the increased cost of service delivery for clients with multiple and intersectional barriers, and the importance of ensuring that there is always a ‘provider of last resort’ in the case of market failure.

15.116The Committee also accepts the strong evidence set out in this and other chapters, as well as the impression gained through numerous site visits, that ACCOs are to be preferred as the service delivery organisation for First Nations jobseekers. Enabling First Nations jobseekers to be supported by First Nations-led organisations is consistent with government’s efforts under the Closing the Gap reform process and aligns with previously settled understandings of First Nations peoples’ right to self-determination and the view that policies and programs which impact First Nations peoples should be culturally appropriate and community led. ACCOs should be recommissioned as soon as possible in areas with a high number of First Nations jobseekers.

15.117With regard to the number and size of employment regions in Workforce Australia the Committee concludes that they are currently simply too large. This view has been tested extensively with stakeholders and there is broad agreement that the large size of the regions has been driven by a flawed theory of competition and ease of Commonwealth procurement rather than reflecting coherent or more natural regional labour markets. The system has assumed that it is necessary to ensure high levels of competition and choice in every place, which means large regions so caseloads are large enough to maximise service efficiency and ensure providers’ viability.

15.118A future system should be rebuilt based on smaller regions that better reflect communities of interest and labour markets, with the tender process adapted to the service typology proposed in this report. This should support smaller and community-driven organisations that bring social capital and local expertise back into the system over time. The size of the existing regions has also encouraged the proliferation of larger service providers with little to no local presence, at the expense of smaller organisations with deep connections to their communities.

15.119Determining the number and size of employment regions should be both a ‘top down’ and ‘bottom up’ process, informed by consultation with State, Territory, and local governments and by advice from Jobs and Skills Australia (JSA) on local labour markets. It should also take into account of the boundaries imposed under other services such as DES and the CDP. The more that boundaries can be aligned across service systems (especially with DES) the better.

15.120Separate arrangements will be needed for a service for jobseekers in the criminal justice system as discussed in Chapter 5. This will require engagement with States and Territories, including on a specific commissioning process for that service once redesigned.

15.121As part of a fundamentally different regulatory and market culture and a more relational approach to contracting, longer licenses for providers should be considered. The Committee was attracted to Belgium’s ‘3-6-9’ approach of nine-year contracts with three-year renewals, subject to satisfactory performance, and 3-yearly tender rounds so that no more than one third of the market is up for tender at any one point in time. This is consistent with a model that focuses on improving providers’ performance and encouraging providers to build strong community connections.

15.122The Committee also considers that in a less competitive model, business transmission clauses should be utilised in contracts. These are commonly used in State, Territory, and local government service contracts. When a contractor responsible for public amenities and services such as parks and gardens, garbage or public transport leaves an area or a market then offices, equipment, and facilities (and possibly staff or options on staff) transfer to the area’s new provider. The current approach in employment services is peculiar as ultimately the taxpayer pays for fit-outs, new IT, staff terminations, and staff recruitment (among other matters). Citizens and employers get confused when services regularly disappear and reappear up the road in different shops with different logos.

15.123The Committee acknowledges the evidence that there is nowadays little difference in performance outcomes for for-profit and not-for-profit providers. Poor and positive service quality and a heavy focus on outcomes are displayed broadly across both for-profit and not-for-profit entities. Moreover, academic work over many years has shown increasing convergence across provider types, driven by funding and performance management arrangements. There is nevertheless a clear need to allow local not-for-profits back into the sector, and evidence suggests that encouraging a diversity of providers—including for the generalist case management service—is desirable when all providers operate in a shared model of performance and ethical service delivery. This should be enabled by the changes to tender processes outlined above.

15.124The ‘reverse tender’ approach used by Jobs Victoria allows organisations greater freedom to bid based on the services they will deliver and outcomes to be achieved, rather than requiring those organisations to conform to prescriptive service deliver models designed by government. The Committee proposes that a ‘reverse auction grants’ approach be used as outlined earlier at a regional level, and with a national fund to support local and social enterprises, programs, services, and projects which can plug into the Commonwealth system but without the scale or formality of larger case management services.

15.125Funding should be allocated through these pools based on the quality of the supports and outcomes proposed to avoid the kind of ‘race to the bottom’ on price which has negatively impacted procurement in other human services. This will require careful design of the process so the impact costs are clear, keeping the lens of paying what it takes for the hardest cohorts and using that flexibility for greatest outcomes, so as not to incentivise bidders to only target the easiest, cheapest to help people.

15.126Reverse auction grants for these sorts of local services allows an efficient price to be established more regularly for outcomes and supports, which will vary significantly by location, cohort and with labour market cycles. It would not be necessary to allocate all funds in every round either like a traditional grants round. A regional fund could be seen as a tool for the region to draw on including partnering and leveraging State, Territory, local or philanthropic contributions especially in disadvantaged areas.

Recommendation 66

15.127The Committee recommends that the commissioning model for a rebuilt Commonwealth Employment Services System includes the following elements:

  • A review of employment regional boundaries leading to a substantial increase the number of regions to better reflect natural labour markets and communities of interest, aligned as much as possible with Disability Employment Services and the Community Development Program. This should include mechanisms for periodic review.
  • Service partners engaged as follows:
  • for the generalist case management service, one partner per location, acknowledging that this may mean more than one partner per region;
  • for the youth specialist service, one partner per location, acknowledging that this may mean more than one partner per region; and
  • specialists commissioned to support target cohorts with priority on people from culturally and linguistically diverse backgrounds, people with disability, ex-offenders, and First Nations peoples, some of which may operate across more than one region utilising flexible servicing models.
  • Procurement for generalist and youth case management services and specialist service partners continue to be undertaken centrally but adjusted to include:
  • a simplified tender process, to reduce barriers to entry for smaller and community-based organisations;
  • a requirement for providers to demonstrate capacity to deliver targeted services to participants in their employment region; and
  • priority for service partners which are able to demonstrate strong local and community connections and a proven track record in place.
  • Consider longer license terms for all providers, using Belgium’s approach which involves nine-year contracts with three-year renewals, with staggered re-tendering so that only one third of the provider market is subject to review at any one time.

Recommendation 67

15.128The Committee recommends that the Australian Government include efficient business transmission mechanisms into contracts for employment services. These should provide for:

  • increased use of government assets in the delivery of assistance; and
  • the transfer of facilities, assets, and equipment (and potentially staff options) when a provider is replaced in a location.

Recommendation 68

15.129The Committee recommends that as a priority, even before a new commissioning model is fully developed and implemented, the Australian Government prioritise the recommissioning of First Nations specialist services in areas with high populations of First Nations jobseekers and jobseekers from culturally and linguistically diverse backgrounds. Priority should be given to commissioning Aboriginal Community Controlled Organisations.

15.130In its interim report on ParentsNext, the Committee recommended that the Australian Government seriously consider having a public sector agency deliver services in some employment regions. The Committee emphasised that this would not be done on a competitive neutrality basis or to save money. Rather, the proposal was made on the basis of an identified need to re-develop direct experience of service delivery to inform policy development, evaluation, and public stewardship—in short, to begin to rebuild a public core to the employment services sector.

15.131The additional evidence the Committee has considered since tabling its interim report has only strengthened its view that government must have a far stronger role in the employment services sector, including in the direct delivery of services to clients. After more than two decades of a of outsourced employment services, the Australian public sector now has little corporate memory or experience of the complexities of service delivery. The Committee was particularly shocked to discover early in the inquiry that DEWR—the department with primary responsibility for policy and program design and implementation—does not have a clear view on what constitutes a ‘good’ service delivery model.

15.132Elsewhere in this report (particularly Chapters 4 and 7) of this report, the Committee has outlined a series of measures to substantially increase the role of government in the employment services sector—both in the delivery of services and as an active steward. Key recommendations include the creation of two entities—ESA and an Employment Services Quality Commission. ESA would be responsible for core enabling functions within a rebuilt Commonwealth Employment Services System and would act as a provider of last resort for certain cohorts and in thin markets. Among the functions of the Quality Commission would be advising government on pricing for high quality services, commissioning, and payment models, and facilitating research, evaluation, and continuous learning and improvement.

15.133The Committee is optimistic that the proposed measures should—if implemented—be effective in boosting the capability of the public sector and ensuring that, over the long term, the employment services sector has a robust public core. It is critical that government begin this capacity-building work as soon as possible to ensure that it has a strong understanding of and the capacity to deliver high-quality services by the time the rebuilt employment services system reaches maturity.

15.134The Commonwealth should consider taking over the delivery of services in certain areas in the relatively short term. This may include directly delivering services in the Australian Capital Territory on a trial basis after current contracts with providers expire and while broader reforms to the employment services system are progressed.

15.135It is emphasised that service delivery by the Commonwealth would not be undertaken on a competitive neutrality basis, nor to save money—especially noting concerns about current under-investment in employment services outlined in Chapter2. Rather, public provision of services is intended to rebuild an understanding of quality service delivery and efficient pricing to inform policy and program design and development, and to help embed a culture of continuous learning and improvement.

15.136Taking over delivery of employment services in a small number of places such as the Capital region may, at least in the early stages, require government partnering with an existing provider.

15.137In addition, the Committee welcomes new arrangements in Broome whereby the Commonwealth is partnering with a First Nations provider. As outlined in Chapter 4, these arrangements will involve APS personnel engaging and advocating locally to improve coordination across the employment and human services ecosystem, helping to establish more streamlined pathways for clients to address barriers to employment, and supporting the new First Nations provider to build capacity.

15.138The role of the Commonwealth in Broome resembles and may be instructive for (but is by no means identical to) the role that the Committee envisages for the ESA Regional Hubs (see Chapter 4)—particularly their role in mapping and coordination supports within local service systems. As such, the Committee considers that the Australian Government should establish additional arrangements, focused on locations (for example, partnering with one or more providers in regional or remote areas) and cohorts (for example, supporting one or more organisations that deliver services to people from CALD backgrounds or to First Nations peoples).

15.139In the Committee’s view, such arrangements would be instrumental in rebuilding the Commonwealth’s understanding of and capacity for service delivery, and particularly how service delivery must adapt to the needs of different places and cohorts. These arrangements should also inform the policy settings and program design for the proposed regional hubs and associated services.

Recommendation 69

15.140The Committee recommends that the Australian Government implement trial arrangements to rebuild public sector understanding of and capacity to deliver high-quality services while broader reforms to the employment services system are progressed. These should include:

  • consideration of the Commonwealth taking over the direct delivery of employment services in a small number of places, suggested to include the Australian Capital Territory; and
  • implementing arrangements whereby the Commonwealth partners with a service provider in target regions and for target cohorts, including to provide coordination and mapping supports and some direct delivery of services.
    1. Implementing efficient funding arrangements that balance meaningful employment, building the capacity of jobseekers, and financial viability for providers is one of the most complex challenges in the design and implementation of a truly effective public employment service. This is not merely a challenge for Australia. The Committee’s engagement with other OECD countries indicated that most if not all countries with employment service systems are grappling with this challenge.
    2. All elements of funding need to be reconsidered in a rebuilt system, including the quantum of overall funding, the proportion of funding spent on the operating core of the system, the proportion spent on active and complementary labour market programs, and the methods of allocation including the extent of reliance on outcome payments for individual job placements. As outlined in paragraph 2.94 of Chapter2 of this report, there are significant inherent costs in operating a quasi-market which need to be explicitly examined, quantified, and monitored and reported on an ongoing basis.
    3. With regard and the overall quantum of funding provided for outsourced providers the Committee has not been able to identify any rational basis for the funding levels in recent contracting rounds. Like its predecessor, Workforce Australia appears to have been driven by random funding envelopes based on history and disconnected from a coherent view as to what a quality service model is, the workforce which is needed and the costs required to achieve optimal outcomes. That funding for employment services is not driven by evidence of what constitutes a quality service and how much that service costs is frankly bizarre and perplexing to the Committee. Such an approach would not be tolerated in other human service sectors such as health, education, childcare and aged care and should not be allowed to continue in employment services. Accordingly, the Committee has made recommendations in Chapter 4 to establish an Employment Services Quality Commission and to significantly enhance the role of government in active stewardship.
    4. The Committee endorses the analysis above and in Chapter 2 that shows a strong correlation between well-targeted expenditure on employment services and labour market participation for participants and encourages the government to favourably consider well targeted and designed funding boosts to address long-term unemployment as an investment.
    5. With regard to the commissioning of service providers, the narrow focus on employment outcomes and the heavy reliance on outcome payments appeared reasonably effective at helping the easier to place jobseekers in previous contracts. However, these job ready clients are now expected to be supported in digital or hybrid services. Moreover, the current and historic funding model has clearly not been effective to help the most disadvantaged (who are the bulk of the caseload with outsourced providers now) or to drive down long-term unemployment (which has remained stubbornly high despite a very strong labour market).
    6. Fixing prices in advance for multiple years with a heavy reliance on outcome payments also means that at every point in a contracting cycle the government is almost certainly either overpaying or underpaying for an outcome and hoping that this will simply ‘balance out’. The advice and experience of other jurisdictions indicates that a fixed pricing model leads to providers exploiting the system for profit when economic conditions are good (as a provider is able to spend less to achieve an outcome). By contrast, when economic conditions are soft, a fixed pricing model means that providers may not be able to secure the necessary funding to deliver a high-quality service to achieve outcomes for clients. The OECD advised the Committee that the extent of reliance on outcome payments for contracted service partners is a policy choice and that other jurisdictions utilise different mixes of funding instruments.
    7. The Committee considers that in a rebuilt employment services system based on the principles in this report (including embedding a more relational contracting model) alternative approaches to funding and setting prices will be required. Over reliance on individual outcome payments is a blunt instrument that fuels work first and inappropriate behaviours and locks out smaller, local, and not-for-profit partners who cannot meet the significant upfront costs associated with services delivery. It is impossible to expect major changes in the system without tackling the funding model, as it is funding that is the most significant driver of provider behaviour—regardless of other policy objectives or administrative settings.
    8. The Committee is attracted to a more blended funding model which would give contracted service partners greater upfront funding through service fees (recognising essential inputs of time and effort) as well as recognise milestones (recognising outputs suchas completion of relevant training or activities). This is consistent with a more tailored service that focuses on building human capital and capacity for employment with disadvantaged people rather than moving every person into any job as rapidly as possible (noting that a ‘work first’ approach will be appropriate for and the preference of some jobseekers). Broadly the funding elements proposed by the BSL, CPD and the University of Melbourne should be considered as part of a shift to relational contracting and a higher quality system. These include:
  • Funding for an overall package of KPIs—including job outcomes—co-designed between providers and government;
  • A funding model that incentivises delivery of bridging and demand-side activities and stronger connections with employers and community;
  • Funding largely de-coupled from work outcomes, enabling providers to focus on a range of outcome measures that facilitate long-term economic security and wellbeing;
  • Ensuring capacity for workforce capability building, coordination and collaboration between local services and supports and shared learning; and
  • Lower compliance burden, meaning providers can focus on supporting people rather than chasing payments and engage in conversations about service quality.
    1. Ultimately the policy department with primary responsibility for employment services (currently DEWR) and executive government would retain decision-making regarding system funding. However, the new Employment Services Quality Commission (recommended in Chapter 7) would have a role in transparently advising government on the recommended pricing of ‘bundles’ of services, regularly reviewed and updated to ensure prices remain efficient.
    2. Outcome payments for successful job placements should continue to play a part in the funding model to help focus efforts. However, the proportion of funding claimable for narrow jobseeker outcomes should be substantially reduced. At present, it is difficult to see why outcome-based funding should exceed 50 per cent of provider payments under a blended funding model. However, the Committee acknowledges that the exact quantum of funding will need to be determined through a process of co-design and experimentation. Consideration could also be given to linking some payments to the overall performance of a service partner, rather than linking payments to individual job outcomes. Over time, it may also be possible to move towards a more transparent Activity-Based Funding Model with some parallels to the health system. However, the Committee is not convinced at this time that this proposal would be feasible given the paucity of data, the enormous heterogeneity of the caseload and the dynamic nature of labour markets.
    3. In principle, it seems sensible that outcome-based payments continue to vary to some degree with a person’s level of disadvantage and distance from the labour market. Minor adjustments to outcome-based payments could also be made depending on the quality of the job obtained—although the Committee acknowledges that this may be too complex in practice. Similarly, while the Committee is attracted to the idea of making some allowance for a longer-term outcomes payment–say 52weeks–as some other programs and jurisdictions do, there is a legitimate concern that this may lead to unwanted engagement with a jobseeker once they start in a new role and should only be considered if it can be automated via access to Single Touch Payroll (STP).
    4. Better funding models should also allow more room for experimentation and could, for example, trial rewarding progress toward employment and increased social and economic participation with modest payments against key milestones achieved by the client in line with their Participation and Jobs Plan. Noting that jobseekers may achieve multiple milestones within a short period of time, there would also be value in increasing the frequency at which progress payments can be claimed (currently every 24 months), and setting different payment amounts for different milestones. This would need to be subject to careful co-design to avoid perverse incentives or unnecessary complexity.
    5. For the other services that the Committee has recommended form part of the system, such as wrap-around and place-based services, the Committee is attracted to a mix of funding approaches, including funding pools and grants. For example, there may be merit in sharing outcome funding with other services such as social enterprise, especially if the service has an active role in building a jobseeker’s skills and capacity and connecting them with employment. Funding for social enterprise must also be designed with the sector. Fee-for-service arrangements are also proposed in relation to the new careers service outlined in Chapter 11.
    6. Ultimately, for people supported by case managers in contracted service partner, the Committee is attracted to a mixed funding approach. The model would include funding tailored to the needs and circumstances of the jobseeker, as follows:
  • Upfront service fees, with the amount varying depending on the needs of the jobseeker and the cost of delivering the assistance.
  • Progress payments for the achievement of both vocational and non-vocational milestones along a pathway to employment.
  • Some outcome-based payments, with the ratio of outcome-based to upfront payments reduced relative to the current model.
  • Bespoke grant and other flexible funding arrangements for specialised services such as paid work experience and engagement with social enterprises and complementary community-based programs.
  • Subsequent prohibition on service partners accessing the EF for their own purposes as core services should be provided by the core system.
    1. Additional loading should be considered for target cohorts, for example migrant and refugee jobseekers where an interpreter is needed and jobseekers with disability.
    2. Noting that it will take time to co-design a fit-for-purpose funding model for reformed employment services, the Committee encourages government to trial and evaluate alternative funding approaches to determine their impact on the quality of services and on jobseeker outcomes. This is consistent with an approach of experimentation and learning that should permeate the culture of a rebuilt system. Evaluations should inform a final model for a reformed system.
    3. The Committee has not had the analytical resources or data to form definitive views on the blended funding models that should the subject of experimentation while the final funding model for a rebuilt Commonwealth Employment Services System is developed. Accordingly, the Committee leaves this matter to co-design.
    4. The Committee acknowledges that rebuilding a different funding model with less reliance on outcome payments is a significant shift in philosophy. To succeed, it needs to be accompanied by other changes including a more relational, ‘open book’ contracting model to address risks of profiteering, investment in complementary programs to give case managers better tools, clear advice on service pricing, and robust monitoring.
    5. While new funding arrangements are co-designed and implemented, there would also be merit in an interim measure to put in place of a second service fee of around $1,200, payable once a jobseeker has been on the caseload for 12 months. This would be balanced by a corresponding reduction in the outcome fees payable for placements so as not to increase overall cost to the budget.
    6. The Committee acknowledges the support for the existing funding structure for TtW and does not propose any changes to funding arrangements for that program—at least beyond those which may be required (and identified through co-design) to implement a new youth specialist service as recommended in Chapter 5. Most likely a redesigned specialist youth employment service would utilise a blended funding model with a mix of performance-based outcome payments but with resourcing to allow a service to support a mixed group of young people.
    7. The Committee also encourages government to review and engage with the sector in relation to possible changes to funding arrangements for S-EA, informed by other enhancements to that program discussed below.

Recommendation 70

15.162The Committee recommends that funding arrangements for a rebuilt Commonwealth Employment Services System be the subject of co-design based on a more relational contracting model and include the following key elements:

  • Additional upfront funding based on a block- or activity-based funding model.
  • Payments for employment outcomes, with the proportion of payments claimable against outcomes substantially reduced relative to the current system.
  • Payments for other appropriate outcomes that help a person progress towards employment.
  • Bespoke grant and other flexible funding arrangements for specialised services such as work experience and engagement with social enterprises.
  • Additional loading to enable higher intensity supports for jobseekers in target cohorts, including migrant and refugee jobseekers and jobseekers with disability.
  • The Employment Services Quality Commission be responsible for:
  • advising government on funding models and recommended pricing for quality services;
  • preferred approaches to funding service partners; and
  • monitoring and reporting periodically on the system’s overall operating costs (including transactional and other costs relating to a quasi-market) so there is greater transparency for government and the public.
  • The system should allow for experimentation with different potential funding models to evaluate and learn what works most effectively and efficiently.

Recommendation 71

15.163The Committee recommends that while alternative funding arrangements are developed a second service fee be considered if a person has not secured employment for 12 months balanced by a corresponding reduction in the outcome fees so as not to increase the overall cost to the Budget.

15.164Current performance management arrangements are another key contributor to the ‘work first’ focus of providers. Providers are not assessed on whether they have helped disadvantaged jobseekers find meaningful work or build their capacity for social participation, as measures of jobseeker progress are very narrowly confined to employment-related indicators. This compounds the problem that current funding arrangements are also overly focused on achieving short- to medium- term employment outcomes which simply does not work with LTU people. The rhetoric of ‘matching people to the right job’ which is often used by government in relation to the employment service system rings hollow when considered against a performance framework which forces providers to move jobseekers into any job as quickly as possible. Indeed, many providers told the Committee that long-term investment in capacity-building is penalised rather than rewarded.

15.165Current performance management arrangements are overly complex and diffuse and may distract providers from the core mission of supporting jobseekers and employers. It seems unclear why contract compliance is a measure of performance, rather than this being assessed on an ongoing basis as part of the day-to-day administration of the system.

15.166Pending broader changes to the regulatory culture and a more relational contracting model, it would be beneficial to review performance management arrangements with a view to simplifying the metrics used to assess performance and ensuring the framework does not focus too heavily on blunt, time-based employment outcomes. Some focus on employment outcomes should certainly be retained but alongside more appropriate measures that reflect the broader goals of the system and the reality of what real progress often is with highly disadvantaged people.

15.167Other matters that could be assessed may include:

  • capacity-building outside of progress to employment, for example improvements to confidence or self-esteem and levels of social participation; and
  • the quality of the job a participant has obtained (supported by guidance on job quality as outlined in Chapter 11), and the extent to which a jobseeker’s financial security has improved.
    1. Also, as previously detailed in Chapter 8, there is benefit in instilling within the sector support and recognition for innovation. Testing possible approaches to reward and incentivise innovation within the performance framework also warrants consideration.
    2. For service partners expected to maintain strong relationships with employers, a revised performance management should have a stronger focus on this aspect of their work. KPIs should consider a broader range of indicators including direct feedback (for example, employer satisfaction surveys), data on matters such as new or repeat engagement, and whether a partner has implemented measures to support better engagement with employers such as an employment engagement strategy.
    3. The Committee is not convinced it is necessary to lessen the frequency of license reviews at present (for example, by conducting reviews each 24 to 36 months instead of every 12 months). Issues appear to relate to the culture of the system, the matters assessed and the consequences (for example, early termination of licenses or loss of market share) rather than how frequently reviews occur. The frequency of license reviews can be examined as part of the system reform.
    4. Reviews should be conducted as efficiently as possible, with a new performance management framework in place within one year from the tabling of this report. While a new framework is being developed there may be merit in pausing and deferring automatic reviews unless serious issues are identified through other monitoring. There is some risk that some instances of poor performance may not be assessed, however, a relatively short pause is probably better than continuing to assess providers under a flawed model. Poor performance can still be identified via standard contract management processes.
    5. A different regulatory culture and relational contracting model would drive a different approach to performance management. Licenses would be far less likely to be simply terminated for poor performance in the short-term, with a greater focus on improving performance and building sustainable relationships with communities.

Recommendation 72

15.173The Committee recommends that the Australian Government review existing performance management arrangements for providers, and co-design and implement a new framework as a high priority. This should include:

  • simplifying performance management and assessment arrangements;
  • reducing the focus on blunt, time-based employment outcomes;
  • consideration of additional measures such as job quality, human capacity-building, and employer support;
  • an approach to performance management that focuses on working with providers to improve performance rather than imposing sanctions; and
  • removing measures relating to contract compliance.

While the review is conducted and the new framework designed, the Australian Government may elect to pause formally assessing providers against the existing performance framework.


[1]See, for example, The Salvation Army Employment Plus (SAEP), Submission 199, pages 19-20; Brotherhood of St Laurence (BSL), Submission 249, p.29; Professor Mark Considine, private capacity, Committee Hansard, 14 March 2023, p. 14.

[2]Workways Australia Ltd (Workways), Submission 239.1, p. 3.

[3]See, for example, The Business Centre, Submission 102, p. 14; SSI, Submission 193, p. 17; Workskil Australia (Workskil), Submission 196, p. 31; Ms Felicite Black, CEO, Women’s Heath and Family Services (WHFS), Committee Hansard, 1February2023, p. 8.

[4]See, for example, CoAct, Submission 1511, p. 8; Nirrumbuk Aboriginal Corporation (NAC), Submission 180, pages [4, 6]; Workways, Submission 239.1, p. 3. See also Organisation for Economic Co-operation and Development (OECD) (2022), Paying for results: Contracting out employment services through outcome-based payment schemes in OECD countries, Social, Employment and Migration Working Papers No. 267, p.14,, viewed 20 November 2023; The Policy Lab (2018), Improving outcomes for disadvantaged jobseekers – The next generation of employment services: response to discussion paper, p. 4, submissions/university-melbourne, viewed 20November2023.

[5]MAX Solutions (MAX), Submission 146, p. 12.

[6]National Employment Services Association (NESA), Submission 260, p. 23.

[7]NESA, Submission 260, p. 24.

[8]NESA, Submission 260, pages 23–24. See also OECD (2022), Paying for results: Contracting out employment services through outcome-based payment schemes in OECD countries, p. 21.

[9]Productivity Commission (2016), Introducing Competition and Informed User Choice into Human Services: Identifying Sectors for Reform, Preliminary Findings Report, p. 140,, viewed 20 November 2023.

[10]Productivity Commission (2017), Introducing Competition and Informed User Choice into Human Services: Reforms to Human Services, Inquiry Report No. 85, p. 265, completed/human-services/reforms/report, viewed 20 November 2023.

[11]Government of Victoria, Submission 278, p. 8. See also Ms Laura Trengove, Executive Director, Employment, Government of Victoria: Department of Jobs, Skills, Industry and Regions (DJSIR), Committee Hansard, 20 September 2023, pages 13–14.

[12]Government of Victoria, Submission 278, p. 8. See also South Australian Centre for Economic Studies (2019), Review and Evaluation: Jobs Victoria Employment Network (JVEN), Final Report, p. iv,, viewed 20 November 2023.

[13]Department of Employment and Workplace Relations (DEWR), Submission 254, p.29. See also Social Enterprises Australia (SEA), Submission 305, pages [7-8].

[14]See, for example, Dr David O’Halloran, Submission 108, [p. 8]; The BUSY Group Ltd (BUSY), Submission227, p. 4.

[15]Associate Professor Jo Ingold (Dr Ingold) and Mr Tony Carr, Submission 216, pages 2–3.

[16]BSL, Centre for Policy Development (CPD), and UniMelb, Submission 256, pages17, 23, 29.

[17]BSL, CPD, and UniMelb, Submission 256, p. 21.

[18]DEWR, Submission 254.1, pages [1, 6-14].

[19]See Ms Robyn Shannon, Acting Deputy Secretary—Disability and Carers, Department of Social Services (DSS), Committee Hansard, 26May2023, p.2.

[20]See Department of Employment, Workplace Relations and Small Business (2001), Job Network Evaluation: StageTwo, p.69,, viewed 20November 2023.

[21]Mr Brendan Bourke, Head of Client Services, yourtown, Committee Hansard, 6June2023, p.17.

[22]Jobs Australia, Submission 185, p.10.

[23]WISE Employment, Submission 169, pages23-24.

[24]NESA, Submission 260, p. 25.

[25]See, for example, DEWR, Submission 254, p. 22.

[26]Ms Edwina Spanos, Acting First Assistant Secretary—Workforce Australia for Providers, DEWR, Committee Hansard, 17May2023, p.17.

[27]While a provider, for example, in one employment region may be allocated a market share of 25percent in that region, there is a tolerance of 30percent above and below that market share in which they can operate. This means that provider with a market share of 25 per cent can be assisting between 17.5percent to 32.5percent of jobseekers.

[28]Information is based on AusTender contract data at the beginning of each employment services contract. The size of an entity is determined in accordance with Australian Taxation Office (ATO) definitions: small (annual turnover between $2 million and $10 million); medium (annual turnover between $10 million and $100 million; large (annual turnover between $100 million and $250 million). See ATO, Entity size classification,, viewed 20 November 2023.

[29]NESA, Submission 260, pages 24–25. See also OECD (2022), Paying for results: Contracting out employment services through outcome-based payment schemes in OECD countries, p. 21.

[30]SAEP, Submission 199, pages 17–18. Measures to enable informed choice for jobseekers are discussed in Chapter 9 in the context of assessment and onboarding.

[31]See, for example, Asuria, Submission 246, p. 24; MatchWorks, Submission 263, p. 11.

[32]SAEP, Submission 199, p. 17.

[33]ACOSS, Submission 203, p.4.

[34]See, for example, Name Withheld, Submission 92, p.14; CVGT Employment (CVGT), Submission 106, p. 7; Name Withheld, Submission 230, p. [1]; Anglicare Australia, Submission 215, p. 4.

[35]Community and Public Sector Union (CPSU), Submission 255, p. [7]. See also C Foote and S Tran (2021), jobactive: The private investment firms profiting from Australia’s unemployed, p. 5,, viewed 20 November 2023.

[36]BSL (2017), Reforms to human services: response to the Productivity Commission, p. 10,, viewed 17 November 2023.

[37]Productivity Commission (2017), Introducing Competition and Informed User Choice into Human Services: Reforms to Human Services, p. 2.

[38]See, for example, SSI, Submission 193, p. 8; Australian Services Union (ASU), Submission 205, p. [3]; BUSY, Submission 227, p. 4.

[39]Mr Bryan McCormick, Senior Advisor–Government and Policy, Jobs Australia, Committee Hansard, 14March 2023, p. 43.

[40]See, for example, MAX, Submission 146, p. 11; Associate Professor Siobhan O’Sullivan, private capacity, Committee Hansard, 14March2023, p.4.

[41]Antipoverty Centre, Submission 276, p. [7].

[42]MAX, Submission 146, p. 7.

[43]VERTO, Submission 202, [p. 14].

[44]Name Withheld, Submission 115, [p. 1].

[45]SAEP, Submission 199, p. 17.

[46]Training Alliance Group (TAG), Submission 195, p. [2].

[47]DEWR, Submission 254.8, p. [5].

[48]DEWR, Submission 254, p. 26. See also Employment Servies Expert Advisory Panel (2018), I Want to Work: Employment Services 2020 p. 71., viewed 20 November 2023.

[49]DEWR, Submission 254, p. 26.

[50]Providers may hold multiple license types, and accordingly may be counted multiple times in the table.

[51]DEWR, Submission 254, p. 27.

[52]See, for example, SAEP, Submission 199, p. 19; Settlement Council of Australia (SCoA), Submission 211, p.8.

[53]Joblink Plus, Submission 157, p. 7.

[54]Minderoo Foundation Trust - Generation One, Submission 222, p. 4.

[55]See, for example, MTC Australia (MTC), Submission 164, p. 9; Multicultural Australia, Submission 182, p. 15; SSI, Submission 193, p. 8.

[56]See, for example, HOST International (HOST), Submission 188, pages 2, 5. Refugee Council of Australia (RCOA), Submission 226, p. 10; Ms Sandra Elhelw Wright, CEO, ScoA, Committee Hansard, 17 May 2023, p. 27.

[57]Mr Mark Berlese, Chief Operating Officer, Sarina Russo Job Access (SRJA), Committee Hansard, 6June2023, p. 16

[58]yourtown, Submission 198, p. 9.

[59]See, for example, Workskil, Submission 196, p. 9; Minderoo Foundation Trust - Generation One, Submission 222, p. 3; DEWR, Submission 254, p. 26.

[60]Mr Matthew Clarke, CEO, Yilabara Solutions, Committee Hansard, 26 May 2023, p. 38.

[61]Mr Clarke, Yilabara Solutions, Committee Hansard, 26 May 2023, p. 38.

[62]Workskil, Submission 196, p. 9.

[63]Ms Melissa Ryan, First Assistant Secretary—Workforce Australia for Individuals, DEWR, Committee Hansard, 20September2023, p. 51.

[64]Mr Clarke, Yilabara Solutions, Committee Hansard, 26May2023, p.48.

[65]DEWR, Submission 254.8, p. [4].

[66]DEWR, Submission 254, p. 61.

[67]Mrs Nicole Mattsson, National Services Design and Integration Leader, IntoWork, Committee Hansard, 14March 2023, p. 61.

[68]Youth Projects, Submission 141, pages 9–10.

[69]Ms Trengove, Jobs Victoria, Committee Hansard, 14 March 2023, p. 53.

[70]Mr Con Kittos, Asuria, Committee Hansard, 26May2023, p.26.

[71]Workskil, Submission 196, p. 8.

[72]Mr Joseph Grande, CEO, NAC, Committee Hansard, 26May2023, p. 40.

[73]DEWR, Submission 254, p. 120.

[74]NESA, Submission 260, pages 57-58

[75]House of Representatives Select Committee on Workforce Australia Employment Services, Your Future Planning: Interim Report on ParentsNext, p. 121.

[76]See, for example, Professor Leila Green, Dr Kylie Stevenson, Dr Kelly Jaunzems, Ms Claire Hanlon and Mr Arthur Hanlon (Professor Green et al), Submission 120, pages [3–4];National Foundation for Australian Women (NFAW), Submission 135, p. [7]; MAX, Submission 146, pages 7-8; CoAct, Submission 151, p. 7; SAEP, Submission 199, p. 12; Yilabara Solutions, Submission 231, p. 5; Dr Michael McGann, private capacity, Committee Hansard, 14 March 2023, p. 19. Evidence also indicated that the focus on ‘work first’ is driven by performance management arrangements. This is discussed below.

[77]Generation Australia, Submission 154, p. 3.

[78]RCOA, Submission 226, p. 8.

[79]Yilabara Solutions, Submission 231, p. 5.

[80]MAX, Submission 146, p. 11. See also DEWR, Submission 254, p.36.

[81]See, for example, National Youth Commission Australia (NYCA), Submission 166, p. [6]; Asuria, Submission 246, pages 23-24; MatchWorks, Submission 263, p.15.

[82]See, for example, CoAct, Submission 151, p. 7; Joblink Plus, Submission 157, p. 8.

[83]Mr Bryan McCormack, Senior Advisor—Government and Policy, Jobs Australia, Committee Hansard, 20September 2023, p. 16

[84]Yilabara Solution, Submission 231, p. 19.

[85]VERTO, Submission 202, p. [23].

[86]SYC Ltd (SYC), Submission 189, p. 11.

[87]See, for example, Workskil, Submission 196, p. 22; atWork Australia (atWork), Submission 210, p. 8.

[88]SAEP, Submission 199, p. 13.

[89]Professor Jeff Borland, Submission 171, p. 11.

[90]SAEP, Submission 199, p. 18.

[91]CoAct, Submission 151, p. 7.

[92]See, for example, CVGT, Submission 106, p. 9; WISE Employment, Submission 169, p. 9.

[93]Name Withheld, Submission 264, p. [10].

[94]Ms Annabel Brown, Deputy CEO, CPD, Committee Hansard, 20 September 2023, p. 2.

[95]ACOSS, Submission 203, pages 36–37. See also BSL, CPD and UniMelb, Submission 256, p. 31.

[96]Dr Ingold and Mr Carr, Submission 216.1, pages 1–2.

[97]Dr Ingold and Mr Carr, Submission 216.1, pages 2–3.

[98]BSL, CPD, and UniMelb, Submission 256, pages 30–31.

[99]BSL, CPD and UniMelb, Submission 256, p. 31.

[100]BSL, CPD and UniMelb, Submission 256, pages. 31–32.

[101]RCOA, Submission 226, p. 9

[102]See, for example, Enterprise and Training Company (ETC), Submission 133, p. 3; SYC, Submission 189, p.8; BUSY, Submission 227, p. 2.

[103]ETC, Submission 133, pages 3–4.

[104]BSL, CPD and UniMelb, Submission 256.1, p. 8. See also Ms Brown, CPD, Committee Hansard, 20September 2023, p. 10.

[105]Bamara, Submission 214, p. 7.

[106]DEWR, Submission 254, pages 122–123.

[107]DEWR, Workforce Australia Guidelines – Part B Transition to Work, pages156-160. The performance framework for TtW measures both the quality of services for participants and the quality of services for employers. However, both measures are evaluated using a single module (‘Quality of Service’).

[108]See, for example, NFAW, Submission 135, p. [10]; MAX, Submission 146, p. 7; CoAct, Submission 151, p. 3; SAEP, Submission 199, p. 12; MatchWorks, Submission 263, p. 13.

[109]The Angus Knight Group (AKG), Submission 208, p. [8].

[110]Dr McGann, Committee Hansard, 14 March 2023, p. 3.

[111]SYC, Submission 189, p. 13.

[112]SRJA, Submission 145, p. 19.

[113]Asuria, Submission 246, p. 34.

[114]NESA, Submission 260, pages27, 56.

[115]NESA, Submission 260, p.9.

[116]Dr Ingold and Mr Carr, Submission 216, p. 8.

[117]Dr Ann Nevile, Submission 136, p.13. See also CVGT, Submission 106, p. 24