On 12 February 2015, the Senate referred to the Community Affairs
References Committee ('the committee') an inquiry into the impact on service
quality, efficiency and sustainability of the 2014 community service tendering
processes by DSS. The committee was due to report by 26 March 2015. On 2
March 2015, the Senate granted an extension of 12 May 2015. On 11 May 2015, the
Senate granted a further extension until 13 May 2015.
The terms of reference for this inquiry relate to three main issues:
DSS' engagement with service providers including the clarity of
information provided to these providers throughout the process;
the effect of the tendering timeframe on service collaboration
and on service users; and
the potential and likely impacts of the tendering process on
service users and advocacy services.
In the May 2014 federal budget, the Government announced that it will implement
'improvements to the system of grants funding'. Community service providers
would have to apply for grant funding under the new arrangements. The Portfolio
Budget Statement outlined the reforms as follows:
A key focus for DSS in 2014–15 is implementing a new,
broadbanded discretionary grant programme structure which will strengthen our
capacity to deliver grant programmes, services and support to individuals and
families. The broadbanded structure strategically aligns the work undertaken by
the former agencies now comprised within DSS. It also maximises synergies
across existing discretionary grant programmes to increase the effectiveness
and efficiency of grants management. The smaller, and considerably more
flexible, programme suite will create grant programmes that are more responsive
to the needs of individuals, population cohorts and communities, and deliver
improved value for money.
This new programme structure is part of the DSS approach to
working more collaboratively with civil society organisations, in line with the
Australian Government’s commitments. This approach is based on reducing red tape,
providing greater flexibility and respecting the independence of the sector.
The 2014 federal budget also announced a reduction in grants funding of
$240 million over four years. In the December 2014 Mid-Year Economic
Forecast, the Government announced that a further $30 million was to be cut
from grants to community service providers.
In June and July 2014, the federal Department of Social Services (DSS)
conducted a competitive tendering process for community service organisations
to apply to deliver services. Organisations that wanted to receive funding to
provide services would have to apply to DSS and meet the criteria. These
criteria required the applicant to demonstrate the community need for the
service, how it will achieve value for money, the applicant's experience in
planning and delivering the service and its organisational capacity to do so.
The tendering round offered $646.06 million in funding spread across
26 program areas. DSS received 5558 applications—a funding request
totalling $4.1 billion. In total, 884 organisations were successful (see
The competitive tendering process was a significant challenge for a
sector that had limited time and resources to do so. As this report highlights,
the process also posed significant logistical and stakeholder engagement
challenges for DSS. However, the reasonable expectation of DSS by stakeholders
and the wider community is that the process would:
be fair and transparent, complying with the Department of Finance
and Administration's Commonwealth Grant Guidelines and Rules;
provide sufficient time for providers to understand the reason
for, and the priorities of, the reform;
be planned strategically, with a clear sense of the service gaps
and areas of geographic need, and be based on an assessment of how the
tendering process would enhance the capacity of the sector to meet these needs;
enable providers to engage with DSS and receive timely feedback
to their specific concerns;
provide sufficient time and support to prepare innovative and collaborative
application (as per the government's stated intent);
provide clear feedback to successful applicants on why and for
what they were successful and sufficient time for them to consider and sign a
provide clear and timely information to unsuccessful applicants;
be properly reviewed by an objective third party to consider and
judge whether DSS was able to meet all of these reasonable expectations.
The inquiry to date
This is an interim report. The committee called for submissions by 20
March 2015. It received 97 submissions from a range of peak bodies and
community service providers and held a public hearing in Canberra on 21 April
2015 (see Appendices 1 and 2). The committee thanks all those organisations who
prepared a submission and gave evidence to the committee at the hearing.
The committee wrote to DSS in March 2015 to request various data
relating to program funding and the number of service providers that applied
for and received funding. These questions, and DSS' response, are in Appendix
The committee received a submission from DSS and had the opportunity to
ask questions of Departmental officials at the public hearing in April. On 7
May 2015, the committee received answers to questions taken on notice at the
However, a number of key questions relevant to this inquiry's terms of
reference remain unanswered. The committee therefore intends to recall the
Department after this report has been tabled. These answers, and the
committee's full list of recommendations, will be the subject of a further
The committee also flags its intent to conduct a further public hearing
to examine the impact of the tendering process at a regional level.
Stakeholders have strong concerns that the tender process has created gaps in
the delivery of services, particularly at a regional level.
In December 2013, the formation of DSS under Machinery of Government
changes amalgamated 18 discretionary grant programmes from five former
departments. In the May 2014 federal budget, the government announced that
these programmes will be streamlined into the following seven programmes:
Families and Community Services Programme;
Housing and Homelessness Programme;
Disability, Mental Health and Carers Programme;
Home Support Programme;
Residential and Flexible Aged Care Programme;
Workforce and Quality Programme; and
Ageing and Service Improvement Programme.
As an interim measure, the government announced that it would provide six-month
extensions 'for the majority of existing grants' from 1 July 2014. There would
be 12-month extensions for grants transitioning into longer-term initiatives
such as the National Disability Insurance Scheme.
DSS stated in May 2014 that 1,446 providers were given six-month extensions,
1,452 received 12-month extensions and 380 were offered five-year extensions.
In January 2015, the Minister for Social Services, the Hon. Scott
Morrison MP, announced that the Government will provide bridging funding
to ensure continuity of front line community services. The Minister said:
Providers of ongoing frontline services under the grants
programme will have their funding extended to 30 June 2015 while new services
are properly established and clients are appropriately referred. For emergency
relief service providers we expect a more rapid transition process and will
extend current funding arrangements for these services to 31 March 2015.
The rationale for the reforms
DSS says in its submission that the streamlined arrangements represent
the Department's 'commitment to administer grants in a more strategic and
The Government's intent is to streamline the grants system and promote value
for money through innovation and competition. As DSS told the committee:
...the needs and nature of people and communities have changed
over time, as has the availability and the range of services. Some services
have been funded by the department for long periods of time without being
tested to see if different providers could deliver better or more innovative
services to meet the changing needs of their community and clients.
Without an open process new organisations would never get the
opportunity to receive government funding for the services or projects that
they can and do deliver and have the potential to deliver.
The 2014 budgetary decision to reduce grants funding by $240 million
over four years was a significant constraint. As DSS put it:
This reduction added a significant constraint on the Department’s
ability to maintain previous funding levels for services into the future, in
line with stakeholder expectations, as the existing grants neared their expiry
on 30 June 2014.
This reduction in funding presented a significant budgetary
constraint for the Department to manage while implementing the new grant
arrangements. While the Department always takes available resources and
community priorities into consideration when conducting funding rounds, this
reduction required a particularly strong consideration of high priority areas
of need along with alignment to Government and Departmental policy priorities. Funding
levels were determined to ensure critical services were available to support Australia’s
most vulnerable people. With the Department’s grant funding reduced, the
Department could not maintain previous funding arrangements.
The Department explained the need to reduce duplication in programs:
The programmes from the former agencies had many instances of
duplication across services. This created inefficient policy development for
the Department and confusion in the sector, who found it difficult to identify
the differences between some programmes that were similar in policy focus. For
example, there were instances of duplication in the former children and
parenting programmes between state and territory government policy responsibilities
and other Commonwealth agency policy responsibilities, particularly as child care
and early childhood education are funded by other Commonwealth programmes or agencies.
There was also a high degree of locational overlap with other like services
funded by former agencies.
DSS also highlighted the need for the sector to face greater
The Department's grant programmes also needed to better
foster innovation in the community services sector ('the sector'). Some areas
of the sector had not been subject to a competitive selections process for a
considerable period of time. This has resulted in many new and different
community service providers being excluded from funding opportunities. This has
resulted in the composition of funded services remaining fundamentally the same
for an extended period of time, despite new communities of need having arisen.
For example, Emergency Relief services had not been subject to an open
selection process since the 1970s and programme reform would allow the
opportunity for new providers to apply for funding.
DSS described the reforms as 'part of the most significant changes that
have occurred to grant funding in our department for many years'.
It added that 'the primary focus of DSS grant funding is and remains to fund
services which improve outcomes for people'.
The interim report
This inquiry has to date received considerable evidence that raises
serious questions about the entire tendering process. The committee has
concerns that the government's express goals of innovative service delivery and
improved outcomes for service users have actually been hindered as a result of
the way that the tendering process was designed and executed. This report
canvasses many of these concerns. Given the complexity of the issues associated
with the tendering process, and that its impact is still to be determined, the
committee will deliver its full recommendations at a later time.
This report focuses on the tender timeframes, engagement and communication
with the sector.
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