Policy in Action : The Challenge of Service Delivery [1 ed.] 9781742232065, 9781921410727

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John Wanna is the Australian and New Zealand School of Government (ANZSOG) Foundation Professor of the Sir John Bunting Chair of Public Administration based at the Australian National University and is Professor of Public Policy at Griffith University. He has co-authored, edited and contributed to many books and articles on comparative politics, public policy and public sector budgeting and finance. John Butcher has a Masters degree in geography from the University of British Columbia where his research focused on the role of non-government service provision. He has broad practical policy experience with Australian federal and state service delivery and central agencies. Now at the Research School for Social Sciences at the Australian National University, he is currently writing a book exploring the potential for compacts between government and the third sector to encourage greater co-production of public services. Benoît Freyens is a research fellow with the Research School of Social Sciences at the Australian National University. His main area of research investigates the economic consequences of job protection policy and aspects of human resource development theory. A committed interdisciplinary researcher, he has authored or co-authored various articles in labour economics, human services policy, personnel economics, radiocommunications policy, quasi-markets policy, and the economics of inequality and global poverty measurement.

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ANZSOG Program on Government, Politics and Public Management The Australia and New Zealand School of Government (ANZSOG) is a network initiative of ten jurisdictions and 13 universities. Established in 2003, ANZSOG represents a new and exciting prospect for the development of world-class research and teaching in the public and community sectors. ANZSOG has announced an extensive research program that promotes innovative and cutting-edge research in partnership with academia and the public sector (see ). In association with UNSW Press, ANZSOG has undertaken to publish a series of books on contemporary issues in Australian government, politics and public management. Titles in this program will promote high-quality research on topics of interest to a broad readership (academic, professional, students and general readers) and will include teaching texts relevant to the ANZSOG consortia in the areas of government, politics and public management. Series editors are Professor John Wanna and Professor RAW Rhodes, Research School of Social Sciences, Australian National University, Canberra.

Recent titles include: • Terms of Trust: Arguments over Ethics in Australian Government by John Uhr • Yes, Premier: Political Leadership in Australia’s States and Territories edited by John Wanna and Paul Williams • Westminster Legacies: Democracy and Responsible Government in Asia and the Pacific edited by Haig Patapan, John Wanna and Patrick Weller • The Australian Electoral System: Origins, Variation and Consequences by David M Farrell and Ian McAllister • Cabinet Government in Australia, 1901–2006: Practice, Principles, Performance by Patrick Weller • Power without Responsibility: Ministerial Staffers in Australian Governments from Whitlam to Howard by Anne Tiernan • Australian Foreign Policy in the Age of Terror edited by Carl Ungerer • Calculating Political Risk by Catherine Althaus • In Government We Trust: The paradox of the Market State by Warwick Funnell, Robert Jupe and Jane Andrew • Evidence for Policy and DecisionMaking edited by George Argyrous

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Policy in action the challenge of service delivery

John Wanna | John Butcher | BenO ˆi t Freyens

unsw press

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A UNSW Press book Published by University of New South Wales Press Ltd University of New South Wales Sydney NSW 2052 AUSTRALIA www.unswpress.com.au © John Wanna, John Butcher & Benoît Freyens 2010 First published 2010 This book is copyright. Apart from any fair dealing for the purpose of private study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission. Inquiries should be addressed to the publisher. National Library of Australia Cataloguing-in-Publication entry Author: Wanna, John. Title: Policy in action: the challenge of service delivery/John Wanna, John Butcher, Benoît Freyens. ISBN: 978 1 92141 072 7 (pbk.) Subjects: Policy sciences. Public administration. Other Authors/Contributors: Butcher, John, Freyens, Benoît. Dewey Number: 320.6 Design Di Quick Printer Ligare

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Contents

Preface ix Acknowledgments xii Introduction: Policy in action – the challenge   of service delivery and implementation 1 Conventional preoccupations in policy studies The distinctiveness of our approach The structure of the book

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1 The transformation of the service delivery state 16 The rise of the ‘service state’

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The post-war ‘service state’ – creating organisational autarky The service state in transformation Conclusion

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2 The politics of service delivery 51 Understanding ‘politics’

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What do we mean by ‘politics’? Politics and policy

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Ideologies, beliefs and policy

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Politics shapes community demands and expectations The political nature of ‘social problems’ Interests and lobbying

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Actors of influence

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Institutional mechanisms Conclusion

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3 Understanding the economics of service delivery 78 Why the need for economic approaches? The importance of economic analysis

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Choosing the appropriate scale of analysis Conclusion

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4 Choices in delivery 105 Policy intent – desired impact The scope of provision Modes of delivery

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Factors driving choices on the mode of delivery Choosing appropriate policy instruments Managing demand through policy Conclusion

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5 Purchasing services 138 What is principal-agent theory?

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Why use principal-agent theory for service delivery?

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Why was third-party contracting so widely adopted?

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Who is the purchaser? How do purchasers buy?

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From whom do purchasers buy?

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What are purchasers actually buying?

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Boldly going where markets have not gone before Are quasi-markets cost-effective? Conclusion

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6 Who is being served? 168 Who is the recipient?

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To whom should services be provided?

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Customer service approaches to improve service delivery Surrogate measures gauging performance to consumers The ‘bottom-up’ view of policy from end-users

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Responsive government – engagement and collaborative governance Conclusion

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7 Program design and planning 192 Normative requirements versus pragmatic reality Static and dynamic decision-making Competing roles for designers

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Wrestling with needs, causes and problems

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Setting goals, objectives and designing interventions Planning the capacity to deliver Conclusion

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8 Program implementation and management 220 Implementation theory

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Managing other dimensions of implementation

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Implementation through contract management

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Conclusion

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9 Performance management 252 The contemporary performance environment Australian interest in performance management Measuring performance

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The comparative dimension Program evaluation

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The limits of performance management Conclusion

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10 Public sector governance and networked delivery 281 Importance of governance in policy delivery

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Core elements of program governance within government

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Transcending organisational boundaries – moving to networked governance 289 Political risk and accountability Conclusion

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11 The future of policy and service delivery 296 Notes 302 Bibliography 305 Index 315

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Preface

Although there is an extant scholarly literature addressing various aspects of government service delivery, until now it appears that no one has attempted to draw together, in a comprehensive way, the many dimensions of government service delivery in a single text. We have many studies of the political dimensions behind particular policy formulations; we have analyses of community needs and possible policy responses; and we can find occasional policy analyses of the success or failure of particular interventions (usually from an ex post vantage point). To be sure, there are good texts on the market about government and politics, about the history of the welfare state, about policy and public administration, about service planning and design (usually with a particular disciplinary focus), about performance measurement and evaluation, and texts about the economics of particular responses. The student, practitioner or researcher wishing to canvass all of these dimensions would be obliged to range far and wide – bringing diverse material together from many sources. This book, we hope, goes some way towards doing just that. The volume and diversity of the literature addressing various potential aspects of service delivery is such that the task of integrating and making sense of it all was daunting to say the least. Doubtless some readers will wonder why a certain work here or there has not been cited. To this we must respond that we chose to strike a balance between creating a book with a strong narrative thread, that is readable and accessible to a wide audience, and a text (like many in the public policy domain – see for example Wayne Parsons’ Public Policy) that consists of an exhaustive compendium of cited works in which the voice of the author(s) can scarcely be discerned. With this book, readers will be in no doubt about the views expressed and the conclusions drawn, even though they might not agree with all of them. We felt it was important

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to cover the entire fields of knowledge (and competing approaches) relevant to those studying service delivery, but not to do so by providing endless literature reviews of little interest to the eventual reader (they are after all usually dull and sterile). We were also conscious that we had to live within the practicalities of achieving synthesis within a prescribed number of words! The ‘intellectual economies’ necessary to the writing of this book will, we hope, be offset by the value of articulating a holistic account of the service delivery state. It will be evident to the reader that our analysis draws largely upon the Australian policy landscape, but not exclusively. The simple reason for this is that the Australian context is that which is most familiar to us. Australia also has a long history of adoption and adaptation of both administrative culture and policy responses from other jurisdictions. What happens here has either antecedents or parallels elsewhere in the developed world. While the Australian experience with service provision might differ from other jurisdictions in terms of the administrative, institutional or cultural details, in the main, Australian policy-makers and decision-makers are responding to the same exogenous (for example, the global economic downturn) and endogenous (for example, an ageing population) forces confronting other developed nations. It is small wonder, then, that Australian policy prescriptions and service interventions demonstrate greater similarity than difference in comparison with what happens elsewhere. Where differences do occur, it is in respect of factors such as the governing structures (such as whether a nation is a federal or unitary state), political culture and institutional norms, the attitudes and values of the polity, and the dictates of geography (involving the physical reach of government, in addition to the social and economic reach of government). So, while our book will be of particular interest and relevance to an Australian audience, the issues with which it deals have relevance far beyond our borders. It addresses issues that will be familiar to policy-makers in nations such as Canada and the United States with whom Australia shares a federal structure of governance and the challenges of a vast geography; Canada, New Zealand and the United Kingdom, with whom we share strong historical

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bonds and democratic structures; and the rest of the developed world, with whom we share the common challenges of modernity and effective, accountable and sustainable governance. In short, this book is not just an examination of the idiosyncratic peculiarities of the Australian experience with service delivery – indeed, examples from other jurisdictions are included, although it was never our aim to write a book about across-the-board comparative policy responses. Rather, the examples cited in this book ought to be considered as parables included for the purpose of illustrating propositions about particular dimensions of service delivery – propositions that are as true for other nations facing similar policy problems as they are for Australia. In closing, we see policy and service delivery as an active, iterative process constantly evolving and changing. The story of the new ‘service delivery state’ is still being written and acted out. So, the risk of intellectual obsolescence is ever present for those choosing to work in or study a dynamic and sometimes unpredictable field. We are confident, however, that the arguments and propositions included in this book are durable and will continue to have broad relevance for some time to come.

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Acknowledgments

A number of people have assisted with the preparation of this book. At various stages, they helped frame the ideas behind the project, reviewed several chapter drafts and allowed us to test draft chapters in policy analysis lectures. We are particularly indebted to Tracey Arklay, Chris Aulich, Terry Moran, Andrew Podger, David Stanton, Anne Tiernan and postgraduate students of the 2008 Policy Analysis Program conducted at the Centre for Governance and Public Policy at Griffith University. Several public sector organisations have also supported this project through project funding, by sharing their experience and expertise through interviews and workshops, and by reviewing drafts. We are grateful to the Department of Families, Housing, Community Services and Indigenous Affairs; the Department of Education, Employment and Workplace Relations; the Department of Veteran Affairs, and the Department of Finance for their support. We would also like to thank the Australian and New Zealand School of Government (ANZSOG) for funding and support. An Australian Research Council linkage grant LP0562398 ‘Improving Decision Making in Government Service Delivery Using Third Party Providers’ also supports this project and is gratefully acknowledged. We also would like to thank the publisher, UNSW Press, for their encouragements and patience, especially John Elliot and Gabriella Sterio.

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Introduction:  Policy in action –  the challenge of  service delivery   and implementation For Forms of Government let fools contest; whatever is best administered is best. (English poet Alexander Pope, 1688–1744) It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children: those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped. (US politician Hubert H Humphrey, 1977)

If Alexander Pope, a sceptic of government, were writing today, he would surely say ‘whatever is best delivered is best’ – highlighting the importance of the quality of delivery rather than just the capacities of good administration. His intent, though, was to counsel citizens that the structural forms of government should be far less important to them than the ability of government to perform on their behalf. And although he made his comment over three decades ago, the US Democrat Party leader Hubert Humphrey reminds us that one of the main roles for government today is the delivery of services to those less fortunate or those who find themselves in difficult life circumstances. Governments certainly have taken on wide-ranging policy responsibilities

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and, seemingly, will continue to do so into the future. They wish to make a difference to social wellbeing; they also wish their programs to be delivered effectively and with an eye to value for money. In this book we take the ‘delivery project’ of government seriously: how should governments best administer and best deliver services to the public? It is a simple question at first blush, but one with many puzzling aspects and dimensions. In posing this question about how government best delivers, we believe there is no simple answer or single model that fits all circumstances or purposes. Simple models are simple models. We do not place great faith in the ‘off the shelf ’ remedies or ‘plug in’ solutions proselytised by so many consultants and academic gurus. We are not trying to ‘sell’ a particular solution, rather we are studying policy in action as it develops and thinking about the delivery and implementation problems likely to be encountered. Certainly, business models and management strategies can assist our planning and performance but they can also become strait-jackets that limit our imagination and creativity. One model considered appropriate to one set of circumstances may prove disastrous in another. We recognise we live in a complicated and iterative world of shared learning that combines many influences and draws on the cross-pollination of ideas and methods, but also a world in which stuff-ups, bad luck and unintended consequences play a part. In writing this book we are cognisant of the philosophical tensions that exist between the ordered or rational worldview and the disordered or more arbitrary explanations of policy – between systems analysis or rational action accounts of the policy process and contingent or incremental accounts of how policy emerges. Rational approaches, such as that proposed by Simon (Simon 1947; Simon et al. 1950; Simon 1982) or Armitage (Armitage 1980), generally posit a series of stages and processes through which we logically proceed. They highlight the importance of establishing goals and clarifying intentions before setting actual objectives. Policy formulation and design take these objectives and crystallise them into concrete policy forms and instruments. Agencies and actors are then usually charged with implementation and the administration of the purpose-designed programs. Finally, those affected in the community (beneficiaries, the regulated, clients) receive or consume the

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policy, perhaps changing their life circumstances. It is a stage-managed, compartmentalised set of processes that proceeds sequentially, offering guidance and comfort to the uninitiated official. The alternative approach is far more contingent, arbitrary and at times chaotic. Its basic premise is that the design, delivery and administration of public policy are all generally experiential and contingent. Political rationales are infused throughout the entire policy process. Policy learning derives not from abstract theory but from reflexive iterative practices. How we ‘do’ policy is often learnt in the act of doing policy, passed on from practitioner to practitioner. Officials find that the knowledge, skills and judgment they bring to bear on policy topics are largely learned ‘on the job’ and in context. They are not always readily transferable from site to site or policy sector to sector; and much of this experience is not written down. Policy, then, does not proceed from a rational plan or from sterile academic models – although these can often be used retrospectively to describe and justify courses of action or policy procedures. Policy is ‘action’, doing things under constrained circumstances, with imperfect knowledge about the outcomes or effects. In this book we acknowledge such tensions between the main philosophical and analytical approaches as we seek to explain service delivery as ‘policy in action’. We do not sit entirely within one approach but draw on both at various times while often seeking to combine insights from both schools.

Con v e ntiona l p r e occupations in po l ic y stu d i e s When the American policy analyst Harold Lasswell famously declared public policy was about ‘who gets what, when and how’ he was simultaneously a man of his times and incredibly prescient (Lasswell 1936). Not only was he reflecting the emerging 20th century view of public policy founded on materialism and instrumentalist logics, but also indicating that modern government was largely about satisficing the various ‘publics’ or clients within a polity who were

Introduction

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themselves engaged in a participatory culture (Almond & Verba 1965). Moreover, he was also anticipating the main analytical preoccupations to the evolving study of public policy. Today, we might categorise these conventional preoccupations as being concerned with: • the ‘what’ of policy – outcomes approaches evaluating the effects of policy, ‘what’ was experienced and by ‘whom’; • the ‘when’ and ‘why’ of policy – involving the interplay of rationale, political contingency and timing; and • the ‘how’ of policy – involving institutions, processes, instruments and methods. Each of these preoccupations or analytical approaches developed considerably over the second half of the last century as scholars and practitioners became more sophisticated with their explanations of policy and policy processes.

Outcomes approaches Outcomes approaches to policy studies usually focus on the ‘what’ – what is provided, delivered, regulated or funded – and ‘who gets it’ – which groups or individuals. Outcomes analysts are interested in what is done, what is at stake, what is received by citizens and what effects or impacts may be registered. They ask: have desired outcomes been achieved or improved? But there is often an elusiveness about outcome-driven policy, and the link or causality between the ‘outcome’ and the ‘policy’ is in most cases hard to establish. Often the assessment of observed outcomes will comment on how well the ‘what’ was designed and delivered, to what effect, and how well it was received. Quantitative reports and evaluation studies tend to predominate in this approach, aiming to explore which policies work on the ground and why. Generally, these evaluation studies conceive of policy in a priori terms as a ‘given’ product to be implemented – where quantitative or statistical methods are used to assess the efficacy of the policy endeavour. Occasionally some qualitative assessments may be offered. There is interest in ‘what can be shown to work’, but

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far less interest in the nature of the policy, how it was arrived at or who shaped its formulation. Policy remains a ‘given’ simply to be measured.

Institutional approaches Institutional approaches look at policy through the prism of actors, institutions and networks, with their variable rules and values. They ask questions such as ‘when’ and ‘why’ and, in particular, ‘how’ do institutions frame policy. Institutional cultures, professional values, resources and leadership are important attributes of institutional behaviour-shaping policy. Policy is a product (and sometimes a by-product) of the activities of these institutions either acting alone or in interactions with other players. The major concerns of this literature are with the institutions and participants themselves: how they operate, what they do, how well they go about discharging their responsibilities and engaging in interactions with others in the policy arena. Much of the focus in institutional approaches is on the institutions themselves, meaning policy is something of a ‘black box’ that miraculously appears as a result of some institutional intention.

Process approaches Process approaches centre predominantly on the ‘how’ – how is policy made, how are decisions made or unmade, what sequences or cycles are extant, what routines are followed, what information is processed and how it configures policy. Process studies often view ‘the process’ as a controlling feature that runs according to prevailing norms and conventions (for example corporate planning methods or ad hoc incrementalism). They can adopt normative or rationalist models of decision-making, with processes divided into discrete steps with some logical progression nominally assumed (as in rational comprehensive decision-making models). Such accounts are good at explaining stages and procedures but again tend to lack a sophisticated understanding of the contingent and dynamic nature of the policy domains within which they operate. Alternatively, from the contingent side, processes can be seen as

Introduction

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political and to some extent arbitrary. Processes tend to fill a void, providing structure, routine and timelines to an otherwise open-ended space. Administrators like processes because they structure and frame their world – even if they are arbitrary, often inexplicable to outsiders and may not enhance the policy intent. To a large extent, these three analytical approaches dominate the conventional public policy literature. Many key texts locate their discussion of public policy with some acknowledgment of all three vantage points – while others remain confined within one or the other approach. This is not necessarily a bad thing, but it is very limited in the types of insights we can gain from the operations of public policy in all its facets and complexities.

T h e d istincti v e n e ss   o f ou r app r oac h By contrast with the mainstream public policy literature, we adopt a different lens to explore ‘policy in action’. We adopt a policy-centric approach, one that is centred on policy as ongoing challenge, as an iterative activity and meandering narrative, as a set of developing meanings, understandings, learnings and practices. So, our principal focus is on policy itself and how it is delivered and received by end-users. We commence from the notion that policy is a live, unfinished endeavour. It exists and has certain tangible qualities. It comes into being as it is made and is also shaped by how it is made. It may be informed by rational decision-making and structured processes. But it also exists somewhat separately from that process. Policy is socially and politically constructed and has its own relative autonomy as it lives, adapts and changes. It is dynamic and alive and, in part, exists independently from the factors or forces that may have had a hand in conceiving or producing it. Policy is also about argument. There is no objective representation of policy – one that is uniformly agreed and accepted by various participants or end-users. The same policy can mean different things to different players

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each with their own ‘take’ on reality and their own legitimate perspectives. Different players can intend different things with the same policy initiative. And, just as policies can reflect an assortment of different ‘means’, they can also serve different ‘ends’ and be justified by different arguments or social and political narratives. We see policy as inherently connected to implementation – and the lessons learned from implementation are (or should be) important to the ongoing policy challenge. We do not share the view, sometimes articulated by ‘policy wonks’ operating from normative ‘top-down’ notions of public policy, that implementation and ‘making policy work’ is routine or dull work. Such views are disparaging or dismissive about actual service delivery – conceiving it as the menial part of government; administrative, routine and charged with such tasks as removing the garbage or running a local library. Instead, we see the implementation challenge as the critical ‘heavy lifting’ of policy at work (Shergold 2007), where government’s intentions are on show and open to scrutiny by the community. Implementation is the road-test of a government’s ability to govern and make an impact on society. Our text is not intended to be a manual or a ‘cookbook’ for policy implementation. Nor is it merely a collection of implementation ‘stories’ from which we might learn some valuable lessons. Such implementation overviews already exist (for example, Hogwood & Gunn 1984; Hill & Hupe 2002; Ramesh & Howlett 2006; Althaus et al. 2007). They provide practical methodologies to assist in identifying social problems, understanding the dimensions of the problem, calculating what may be politically feasible, framing policy to address problems and needs, designing and rolling out interventions to give effect to policy intent, and establishing the appropriate administrative architecture to support intervention. We will offer insights on each of these issues from a policy-centric lens. Nor is this book intended as a policy evaluation manual. Ex post evaluation is a valuable part of the policy process, but it is only one part, and not necessarily integrated into the policy process more generally. One of the problems of such evaluation studies is that actual evaluations often proceed on the basis of the formal objectives of the policy – which as most people in public

Introduction

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policy know is only one set of objectives a given policy might have. Positivistic assessments of policy outputs can tell us something, but are often misleading in their analyses of what governments are doing and why. This book, by contrast, treats policy as a dynamic, living, interactive experience. It is about policy as intent, desire, meaning, understanding, expression, appropriateness, consequence and feedback. Such meanings or understanding can be imposed, shared, disagreed, misunderstood, contingent. They are rarely simple and straightforward. But they are at the heart of policy in action.

The multi-dimensional character of policy To us, viewing policy trajectories over time, policy simultaneously contains the ingredients of success and failure – of its immediate expression and replacement. Policy as behavioural change often contains opposing or contradictory elements within itself. Hence, policy displays a multi-dimensional quality and even a dialectical quality – a vibrant mixture of potential and changing dichotomies. Policy is an unfolding narrative, a moving trajectory, constantly being made, unmade and remade. It does not just exist as it presently appears but has a past, an evolution, a baggage of previous iterations and conceptions. There are also different conceptualisations of what the policy means and implies. So, policy can be variously: • formal, hard and tough or informal, soft and light – it can be very authoritative and visible or subliminal and almost unnoticeable; • forward-looking and strategic or traditional and reactive; • exhaustive and expansive or narrow and reductionist; • conscious and intended or almost accidental and unintended; • bequeathing independence or creating additional dependencies; • inspired by allocating largesse or heavily rationed; • driven by client demand and uncapped or limited by supply; and • focused on bureaucratic needs and orientations or client centred. Policy is an amalgam of tensions, opposites, conflicting phenomena. It is

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replete with dilemmas, dichotomies, contested meanings and rival interpretations. This can be a frustrating process to observe or in which to take part.

Policy ‘successes’ – the (often)   untold story We do not assume that the world is inherently rational or that policy is conceived in a positive light, in laboratory-style conditions. In many arenas of policy-making we often learn from and act in response to perceived mistakes or shortcomings. Governments generally react (or overreact) to crises, failures and worst case scenarios – when things go wrong, become problematic in implementation and don’t meet expectations. They often then respond with more rules, tighter procedures, revised criteria, or replacement initiatives. They may resort to evaluations and audits to refine the implementation. Or they can reprioritise organisational resources and perhaps even downsize to better focus on their main responsibilities. Often these responses are driven by adverse media attention or opposition criticism. As a consequence, much of the literature on policy analysis focuses on failures, mistakes, fiascos and disasters – drawing out post hoc narratives and trying to draw lessons from failure. By contrast, far less has been written on policy successes and effective policy delivery. One seminal book on implementation failures, Great Planning Disasters by Peter Hall, is a splendid review of all the best made plans that went awry (freeways, airports, opera houses, public housing estates). Hall indicates that in many cases values and objectives were unclear or conflicting; that other factors threw out original intentions (such as environmental or political considerations); that planners did not adequately conceive of the usability dimensions of projects they were charged with; and that social attitudes or behaviour were at odds with government preferences (Hall 1980). Most importantly, ‘things changed’ as the policy activity began and unfolded – governments changed their preferences or requirements, new players entered the frame, unintended consequences appeared to derail the original intentions, theories did not hold up when put to the acid-test of practice.

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But what causes policy mistakes or failures? What makes them occur? Does the problem lie in poor conception – bad ideas, bad policy, bad planning? Or does the problem occur because things tend to go wrong once the policy is underway, that unexpected or unpredictable events occur to throw the policy off course? Or is it that expectations change so that the policy is deemed a failure by ministers, end-users, receptive audiences, or perhaps by other bureaucrats or media observers? Governments can also create policy ‘failures’ when they change their collective mind or announced direction – leaving policy-makers high and dry or exposed to criticism. Examples abound of such shortcomings. From the 1980s many governments adopted policy frameworks promoting the de-institutionalisation of people with disabilities or mental illnesses. The object of the policy was to enable people with high functional needs to be supported in community based settings. Although the policy initially proceeded from humanitarian concerns, human rights and clinical considerations, in many jurisdictions community based service and support arrangements proved inadequate, thereby compromising the wellbeing of persons the policy was intended to benefit. As a consequence, the appropriateness of institutional options for some clients is once again being discussed. Similarly, from the 1990s governments have preferred to devolve selectively some areas of service delivery and administration. They have relied on third-party providers, local deliverers and community organisations. However, questions of local capacity, poor performance and different motives or understandings have resulted in varying degrees of recentralisation and oversight. Thus, delivery decisions are not purely logical or linear. There are detours, twists and turns and occasional reversals in the policy journey – we will explore several examples in this book.

The role and modus operandi of government As we discuss in chapter 1, the form and extent of any government intervention will depend on prevailing views of the appropriate role of the state. These change according to the imperatives of the era. Government intervention can

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range from minimalist involvement, to high levels of responsibility, to the adoption of facilitative or supportive frameworks. There is no steady state. Other dimensions associated with the appropriate role for governments include questions as to which policy instruments will best achieve their desired goals. As we suggest in chapter 4, governments can address problems through a variety of instruments from direct to indirect provision, market regulation or facilitation, using legislation, taxation, expenditure, enforcement and education. Preferred policy responses today may be very different from those of previous decades and may differ again into the future. The changing norms about intervention strategies are due to the interplay of experience, expectations, values, ideologies and professional judgments. Contrary to Pope’s pithy epigram, forms of government do also matter. The nature of policy and service delivery arrangements will reflect the political and civic structures of the jurisdictions involved. Governments in Australia, Canada and the United States are federal in structure and each exhibits divided responsibilities and blurred accountabilities. Many policy areas involve two or three levels of government, sometimes involving duplicate or parallel agencies and authorities. In Australia’s federation there is little evidence that governments or policy agencies respect each other’s complementarities in task assignment or responsibilities. They will often intervene in the decision-making domain of other jurisdictions, or crowd out delivery specialists with overlapping programs, or consign delivery issues to routine ‘down the line’ operational matters. Hence, discrete polities and ‘semi-sovereign’ jurisdictions can give rise to the problem of ‘too many cooks’ or ‘too many hands’ directing policy, so that implementers do not know clearly what they are meant to be doing – or they find themselves working to potentially contradictory objectives. It is also possible to mount an argument that by design or default federal structures such as Australia’s or Canada’s (or even in quasi-federal arrangements, such as we find with devolved parliaments in the United Kingdom) provide for a degree of jurisdictional overlap precisely to encourage a contest between levels of government as a form of check and balance. In Australia, for example, the debate about whether states should be abolished is a perennial feature

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of mainstream political discourse: advocates of abolition mount arguments based on administrative efficiency and waste reduction while those arguing for retention contend that the needs of the populace are too complex to trust to one level of government alone. By contrast, nations such as New Zealand or the United Kingdom (despite the recent creation of devolved national administrations in Scotland, Northern Ireland and Wales) are centralised unitary states in which local and regional government provides a significant interface between the national government and the community (Rhodes & Wright 1987). In these nations the challenges of service delivery tend to gravitate around the issues of governance and interoperability and devolved operational discretion, rather than duplication of effort and contested responsibilities as in federations.

Policy is dynamic In adopting our dynamic approach to policy studies, we have to accept that ‘policy’ is hard to pin down and apprehend with any certainty. For this reason many other scholars have tended to begin their explanations of policy elsewhere – with formal institutions, with the stages of the policy processes, with assessments of outcomes. By starting with a prime focus on policy, our approach, we would argue, is a more realistic way to analyse policy in action and comprehend policy as social phenomenon. The advantages in our ‘action’ approach are that: • it takes policy as our starting point – adopting a more deliberate focus on what we are, after all, interested in; • it provides a more realistic and dynamic presentation of policy as a living construct not a static ‘end-product’ assessment; • it provides a stimulating set of explanations as an alternative to conventional studies; • it focuses on the ‘delivery project’, exploring how governments can best deliver services; • it brings other factors such as institutions, actors, processes and

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sequences into the lens when they are relevant and important; and • it emphasises ‘policy as doing’, changing things, affecting lives, contested, argued over and evolving.

T h e st r uctu r e o f t h e boo k This book attempts a realistic conceptualisation of policy in action – focusing especially on service delivery and policy implementation. In chapter 1, ‘The transformation of the service delivery state’, we outline the growth of the ‘service state’ with its growing investment in services and attendant interest in the quality of delivery. It traces the evolution of the involvement of governments in providing essential and desired services and broadening their range of responsibilities over time. We suggest that contemporary policy practitioners, analysts and program designers need to understand the historical, political, social and economic antecedents of public policy and service provision. In this chapter we also examine existing and emerging themes guiding the articulation of policy preferences that shape the architecture of service delivery – such as networked governance, collaboration and partnership building, social capital theory, co-production regimes, public value aspirations and capacity building. In chapter 2, ‘The politics of service delivery’, we strive to bring together and understand the essentially political nature of public policy – including the identification of social problems and determination of appropriate responses. The chapter discusses the roles and interests of various policy actors of influence, such as politicians, professionals, bureaucrats, network participants and sectoral organisations. In chapter 3, ‘Understanding the economics of service delivery’, we explore the principal analytical frameworks by which to understand the economic underpinnings of service delivery at different levels of analysis. In this chapter, service delivery is analysed from an economy-wide perspective (macro-economic), then through an industry perspective (meso-economic),

Introduction

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and finally on a firm or unit level analysis (micro-economic). This chapter introduces economic calculations of service utility – using cost-benefit analysis as an example of this approach. In chapter 4, ‘Choices in delivery’, we discuss the scope of provision from universal to selective or targeted programs and the various modes of delivery available to governments ranging from direct services to hybrid forms of delivery to indirect services. Governments can elect to deliver services themselves or use various forms of payment or other inducements to change citizen behaviour. We then explore the menu of policy instruments and strategies available to governments and from which policy analysts or practitioners might choose. Hence, we introduce topics such as legislative policy, resources, regulation, subsidies, grants, rebates, tax expenditures, educative and promotional campaigns. We explore user-charging or co-payment schemes and mutual obligation policy regimes as ways governments have chosen to change incentive structures. We discuss the advantages and weaknesses involved in each instrument. In chapter 5, ‘Purchasing services’, we discuss in greater detail the separation of principal actors from agent providers, the purchaser–provider split, and the establishment of quasi-markets for service provision and the development of contestable delivery markets. We ask who the principals are, and who the providers are. This discussion requires us to disaggregate inputs from outputs and outcomes, to disentangle contract specifications and contract management and to explore the various scenarios that can occur under principal– agent dichotomies. In chapter 6, ‘Who is being served?’, we examine the choices available to service providers when selecting the appropriate client or consumer interface. We ask whether nomenclature associated with the end-user or recipient is important and whether nomenclature changes the behaviour of delivery agencies. Are end-users citizens, clients, customers or consumers, and does it matter? Some agencies insist that appropriate nomenclature is essential to their organisational alignment and in shaping their internal behaviours and cultures. We also consider the roles of service charters, one-stop shops, single entry points, call-centres, electronic kiosks and e-government or internet

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based services. This chapter reviews the impact of such choices on endusers and upon the effectiveness of the services themselves on the community. In chapter 7, ‘Program design and planning’, we address the range of issues associated with the ‘technical efficiency’ of service delivery – how we efficiently meet human wants and needs through programs. Partly, this involves assessing the capacity of policy-makers to design ‘good policy’ that can be effectively implemented. We also examine important issues such as knowledge management, sourcing relevant expertise, tendering and selection processes in procurement and consultation with communities of interest. In chapter 8, ‘Program implementation and management’, we review the practical aspects of delivering services, including resource management, risk management, contract management, relationship management and day-to-day management issues. We look at these management issues first from a generic perspective, then with a particular focus on third-party service delivery. In chapter 9, ‘Performance management’, we examine both the imperatives for performance management and the limits of such regimes. We highlight the inherent tension between an ideal ‘rationalist’ pursuit of performance measurement and the various pragmatic rationales that undermine this quest, or make it elusive. In chapter 10, ‘Public sector governance and networked delivery’, we explore the dimensions of performance governance – examining the components of delivery agency governance and program management, including reporting on performance, providing financial and service delivery assurance, risk management and dilemmas in contract management. Finally, in chapter 11, ‘The future of policy and service delivery’, we conclude by reviewing the future prospects for the ‘service state’, how it is likely to change in the face of new imperatives and how it might adapt to changing environments and community expectations. We come back to notions of ‘wicked problems’ that defy solution and wonder about their future salience. We also comment on how future practitioners might seek to overcome critical gaps in knowledge, legislation, capabilities, skills, operational cultures and evolving practices.

Introduction

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1: The transformation   of the service   delivery state

From an historical perspective it looks as though the highwater mark of state intervention has just passed … As the process of increasing state involvement in services that began in the early nineteenth century is reversed, what will go, and what will stay? Clearly, people will continue to want these services, so the issue is not whether the services will continue to be provided, but rather whether the state will provide them directly or simply ensure that people have access to the services … (McRae 1994: 186, 188)

Governments strive constantly to formulate and adapt practicable policy responses to complex political, social and economic problems. The world today may seem more complex, more instantaneous, and more interconnected than the world of 100 years ago. Yet such differences can be easily exaggerated. Then, as now, governments struggled to keep pace with technological and social change as well as rapidly shifting political and economic dynamics. The major difference is that governments do much more now than they once did. The ambit of government today is extensive. Their purview is potentially unbounded compared to the much more limited roles accorded to government in the late 19th and early 20th centuries. The modern challenge of complexity, and resolving the myriad tensions and contradictions inherent in the formulation of public policy, is as much a question of ‘scope’ as it is of complexity per se. Through the 1970s and 1980s various commentators predicted the demise of the welfare state.1 It was supposedly too bloated, too generous, too

16

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bureaucratic and unsustainable. As it transpired, the eulogies were premature and wide of the mark. It is still generally accepted that governments in developed nations play a major role in social amelioration and are expected (even mandated) by the electorate and society generally to intervene in the social and economic life of the nation using a variety of policy instruments. These include: legislation, regulation, financial transfers and the provision of services (see chapter 4). It is expected that the object of government policy will be to create the conditions necessary to bring about some level of equity in social and economic relationships, resolve social problems and assist with access and availability of services, and provide the basis for economic stability and prosperity. These objectives are not necessarily consistent and usually involve implicit trade-offs. It is also understood that governments have at their disposal significant reserves of technical and operational expertise in the form of a professional and resourced public sector. It is further assumed that the public service will be appropriately qualified, capable of providing informed and impartial policy advice, as well as having the technical capacity to design, implement and efficiently manage the operations of government – including the delivery of public services. The welfare state has proved remarkably durable. Although the key drivers behind the reappraisal of the welfare state (fiscal and demographic pressures) endure – and in spite of spasmodic attempts to opt for smaller government and contain public expenditure, new sources of demand for state intervention continually emerge – in general the overall reach of government intervention has grown rather than diminished. While the preferred suite of policy instruments may have changed, occasioned by reappraisals of the appropriate role of the state, there is evidence of a strong residual preference on the part of the public for direct government provision and well embedded presumptions of entitlement to state provided services (Pusey 2003, Van de Walle et al. 2008).

The transformation of the service delivery state

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Exhibit 1.1 1900

A short history of social security legislation in OECD countries

First state age pension schemes in Australia.

1900–1 Accident compensation insurance law in Spain, Greece, Sweden and Netherlands.



1901

Unemployment insurance in Belgium (public subsidies through trade unions).

1903

First state laws on special pensions for the blind in the US.

1905

Unemployment benefits in France (public subsidies through aid associations).

1908

Non-contributory pensions instituted in Great Britain (Old Age Pensions Act).

1908

First Australian federal laws on means-tested ‘flat-rate’ age and invalid pensions.

1909

Norway introduces a compulsory sickness insurance system.

1909

First federal old age pension bill introduced in the US Congress.

1911

Unemployment fund and health insurance in Great Britain (National Insurance Act).

1911

Italy introduces compulsory maternity insurance for wage-earning women.

1911

First state laws for ‘mothers’ aid’ (aid to dependent children) in the US.

1911

First state contributory pensions system in the US.

1912

First maternity allowance laws in Australia (lump-sum cash payments for births).

1912

US Congress creates the Children’s Bureau (focus on mother and child health).

1913

National Pension Scheme introduced in Sweden.





1914–15 First US state laws providing old age pensions enacted. 1918

First Federal Employment Service in the US to help place job seekers.

1919

International Labor Organization established to deal with ‘Social Security’.

1920

Civil Service Retirement and Disability Fund established for federal US employees.

1920

Smith-Fess Act passed by US Congress (aid to workers injured in industrial accidents).

1921

Sheppard-Towner Act passed by US Congress (maternal/infant welfare and hygiene).

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1923

First state unemployment insurance schemes in Australia.

1923

Old age pension and assistance laws passed in several US states.

1924

First national compulsory insurance law in the Americas (in Chile).

1925

Contributory Pensions Act in Great Britain: old age pension benefits, widows/ orphans insurance.

1926

Japanese National Health Insurance Law of 1922 becomes effective.

1926–7 First state widows pension and children endowment laws in Australia. 1929

State laws for workmen’s compensation are in effect in all but four US states.

Adapted from Australian Department of Social Security, Year Book Australia, 1971 (ABS Catalogue No.1301.0) and Social Security Online .

source

Nevertheless, microeconomic reforms of the past 20–30 years in most OECD countries have not only challenged these preferences and presumptions, they have fundamentally re-engineered and transformed the interface between government, the economy and individuals.

T h e r is e o f t h e ‘ s e r v ic e stat e ’ In the developed world governments exist, apart from their executive and legislative functions, to provide a range of services to the public. The modern state, however, would be almost unrecognisable to those living in the 1800s or even the early 1900s. ‘Government as service provider’ is a relatively recent phenomenon and has its true beginnings in the last century. Prior to the First World War (1914–18) the classical liberal or minimalist state was the accepted norm – at least in the European, American and Australasian world. The state existed, primarily, to legislate, regulate markets (including labour markets), provide essential infrastructure, facilitate trade, maintain public order (social control), provide for territorial security, conduct foreign relations, collect taxes and maintain armies. Public education was in its infancy, and public health

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Exhibit 1.2

Portfolio departments 1903–2001 (including Post- Master General but excluding parliamentary departments and non-departmental agencies)

30

25

20

15

10

5

0

1903

1916

1923

1929

1932

1946

1951

1966

1972

1975

1983

1996

2001

systems or social welfare entitlements did not exist in the way we now take for granted, being for the most part the province of churches, charitable organisations or philanthropic societies or occasionally by local governments. Modern government is itself a relatively recent development. Universal suffrage, parliamentary representation, the emergence of political parties and social movements are all largely products of the latter half of the 19th and early 20th centuries, impelled by the dramatic social, economic and demographic changes wrought by the industrial revolution and, later, by the obligations left by the world wars. Such changes included the shift from agricultural to industrial production, the displacement of a rural workforce, urbanisation and the rise of waged labour resulting in the creation of a new working class, which, together with a new aspirational middle class, challenged the old dictums of class, aristocratic privilege and the logic of hereditary rule. This new polity created new pressures and new expectations. Universal suffrage placed new needs on the political agenda (for example for aged pensions) and gradually built a new public sector to address them – the industrial state.2 The industrial state was increasingly brought into the service of

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a voting public – not a monarch (although privileged groups in society continued, and indeed continue, to influence disproportionately the conduct of public policy). Governments would, henceforth, govern in the interests of industry, commerce and national prosperity and would, progressively – and fitfully – yield to demands for the creation of a ‘fairer’ society through such measures as broader political enfranchisement, universal public education, the socialisation of health care and the regulation of economic and social exchanges.

T h e post- wa r ‘ s e r v ic e stat e ’ – c r e ating o r ganisationa l auta r k y At the beginning of the 20th century, the ‘service state’ was still in relative infancy. However, following the First World War, nations rose to meet the challenge of reintegrating demobilised servicemen into their societies and economies. Thus, we see in the period after the Great War the introduction by national governments of programs of resettlement assistance, pensions and payments (Clague et al. 1984). The Great Depression that gripped much of the developed world from 1927 until the beginnings of the Second World War (1939–45) further challenged governments to respond both to the collapse of their national and regional economies and to the impacts on communities of widespread unemployment and poverty. The evolution of a ‘service providing state’, however, really gained pace after the Second World War, underpinned by Keynesian notions of demand management, state intervention, and consumer-led prosperity impelled by the ‘baby boom’. During the Second World War, the war effort required governments to rethink comprehensively their role and scope. Industries had to be restarted and retooled, the workforce mobilised, the armed forces supplied and fed and the families of servicemen and women supported. To achieve this, the size and reach of the state was dramatically enlarged. Moreover, the bureaucratic apparatus of the wartime state was continued into the post-war period

The transformation of the service delivery state

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and governments never returned to their pre-war levels (Peacock & Wiseman 1961). The advent of the ‘service providing state’ followed hard on the heels of the wartime command economy. Returned servicemen and women (who were used to following orders) had to be reassimilated into the community and the economy, and many were given lifetime government jobs – the socalled veterans’ brigades. Government agencies also gradually recruited the new technocrats – the economists, trained book-keepers and administrators, engineers, surveyors, statisticians and lawyers – many of whom helped preside over the expansionary era of government provision guided by the logic of Keynesian economics. The post-war period also saw the rise of the ‘autarkic state’ – where governments did things by themselves, for themselves. They did not necessarily trust or choose to use the private sector, because they wanted consistency, reliability and standardisation. The autarkic state was self-providing, selfsufficient, self-delivering; it was also hierarchic, command-driven, standardised and administratively-focused. It was the era of in-house provision of all kinds of services (for example printing and publishing, car fleets and transportation, catering, personnel management, even building works). Bureaucrats ran employment agencies, railways and ships, hospitals, energy utilities, civil works, urban management bodies, trade and economic protection commissions. In Australia, this is evidenced by the dramatic proliferation of federal government departments and agencies in the immediate post-war years (indicated by the growth in portfolios as shown in Exhibit 1.2 above – the slight decline in portfolios after the mid-1980s is due to consolidation into mega-departments). The sustained economic prosperity that became the hallmark of the West not only helped fill the coffers of government but brought with it new expectations and new demands, amplified, as they were, by the seismic demographic changes wrought by the baby boom. Thus, the ‘service providing state’ was born, underpinned by a belief in the potential for governments to ‘govern the economy’ (Hall 1986; Bell 1997) while engineering the capacities of a skilled technocracy to guide the direction of the post-war boom.

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Exhibit 1.3

Social expenditure and employment between 1980 and 2005–06

Social expenditure as % of total general government expenditure 1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

Australia

31.4

31.7

37.2

44.4

49.5

48.6

50.0

50.9

50.2

49.2

Canada

32.7

35.3

36.5

39.4

39.9

40.7

41.4

42.0

41.7

56.8

Denmark

46.2

41.7

45.0

48.8

47.8

47.8

48.7

50.2

50.4

51.0

France

45.4

50.2

50.7

52.5

54.0

54.1

54.3

54.4

54.7

54.4

Germany

22.7

23.2

22.3

48.4

58.0

55.3

56.1

56.3

56.6

57.2

Japan

30.4

33.6

35.6

39.2

42.5

45.1

46.0

47.5

48.7

64.7

14.6

16.0

20.8

21.7

21.4

18.2

22.6

23.8

44.9

44.3

46.6

42.2

44.8

43.5

44.3

44.9

45.7

46.2

40.7

45.6

49.5

49.4

49.2

47.9

47.0

46.4

Sweden

42.7

45.8

49.8

49.4

51.3

52.0

52.0

53.2

53.7

53.2

United Kingdom

35.9

42.6

40.3

45.8

47.9

48.8

47.6

47.7

48.2

64.2

United States

39.0

35.6

36.3

41.4

42.4

43.1

44.2

44.2

44.0

43.6

Korea Netherlands New Zealand

OECD Social E xpenditure Database (SOCX), OECD, accessed March 2009 at .

source

Employment in social services as % of total employment 40% 

35% 

30% 

25% 

20% 

15% 

10% 

80

19

82

19

84

19

86

19

88

90

19

19

92

19

94

19

96

19

98

19

00

20

02

04

20

20

Australia

Canada

denmar k

franc e

Germany

japan

korea

Nl

NZ

Sweden

Uk

US

06

20

OECD annual labour force statistics, OECD Stat database, OECD, accessed March 2009 at .

source

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However, for all that the nascent service providing state was brimming with optimism and confidence about the capacity of governments to realise the promise of modernity, the agents of service delivery could also be monolithic, authoritarian, paternalistic, inflexible and slow. Governments ‘knew best’ and determined themselves what would be provided, how and to whom.3 In part, this was a reflection of the industrial age of mass-production. The service providing state of the 1950s and early 1960s also preceded the rise of the human rights or consumer rights movements – not to mention the contemporary manifestations of political activism and protest voices. Standardisation, rule-bound provision and homogeneity were guiding principles – the notion that citizens or consumers could exercise choice or command flexibility did not begin to feature in the public policy landscape until the mid-1980s.

The 1980s–90s – challenging the service state It is important, when considering contemporary issues in service delivery, to bear this history in mind. After all, in the developed world the service providing state is only about 60 years old (and much less than that in the newly independent nations in South-East Asia, South America, southern Africa, or central Europe). We would suggest that the history of the service providing state can be viewed in two distinct parts. The first phase runs for a 30 to 40 year period of welfarist growth and consolidation from the late 1940s until the late 1970s. It was an ideologically ‘statist’ and state-centric period when the modus operandi of service provision was to facilitate social and economic redistribution through the extension of universal access to education, housing, income security and health care. In the United Kingdom, Sir William Beveridge was commissioned to prepare a report to provide guidance on how to rebuild Britain after the war. The so called ‘Beveridge Report’ (Beveridge 1942) provided the road map for the establishment of the welfare state in Britain. Beveridge conceived of a coherent and efficient national social security system including a national health system and a national insurance scheme. The welfare state was conceived as a safety net, supplying services

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to workers who were between jobs, or providing basic life chances to the less fortunate. Provisions such as unemployment benefits were considered shortterm relief for family breadwinners who would soon find new jobs. The second phase, from the late 1970s until the present, was characterised by economic and social changes (the end of the ‘long boom’) leading to a significant rethinking of the precise role and contribution of government. This phase resulted in a retreat from earlier principles such as universalism or providing amelioration to the ‘deserving poor’ to instead focus on notions of public insurance, contributory investments, co-payments and access regimes. New policy orientations including deregulation, privatisation and outsourcing were trialled to achieve stipulated policy objectives.4 This second phase of the ‘service providing state’ emerged at different times in different parts of the world and sometimes took on localised forms that reflected the prevailing political culture. The ‘old politics of welfarism’ were supplemented with the ‘new politics’ of social movements stressing postmaterialism, individual identity, self-reliance, multiculturalism and cultural differences, sexuality and gender issues. Old statist paradigms of intervention and direct provision underwent considerable strain and revision. Some changes stemmed from contrasting ideological influences, stressing the virtues of individualism, neo-liberalism, neo-conservatism, economic rationalism and public choice theories. These various ideological doctrines (which were not always ‘read’ and understood by policy-makers) questioned the legitimacy and viability of automatic statist ‘solutions’ or delivery modes. In the United Kingdom, the Conservative government of Prime Minister Margaret Thatcher (1979–90) saw ‘Thatcherism’ emerge as the local ‘brand’ of neo-conservative doctrine. This was closely followed in the United States by ‘Reaganism’ under the presidency of Ronald Reagan (1981–89). Reagan famously said in his inaugural address that ‘government is not the solution to our problems; government is the problem’. Both leaders (and their advisers) were strongly influenced by monetarist and ‘supply-side’ economic theorists and both embodied fundamental beliefs in the sustaining and self-regulating powers of markets unfettered by state or bureaucratic control (Glennerster 1989; Mishra 1990; Gould 1993).

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Through the 1980s these doctrines were ‘transferred’ as policy ideas to other nations but also transformed in the process, and elements were adapted to suit local circumstances in other jurisdictions. In Canada, these ideas were enthusiastically embraced by conservative provincial governments keen to restrain growing social expenditure (Allen & Rosenbluth 1986). In some polities, these doctrines also crossed party political divides. In New Zealand, the Lange Labour government (1984–1989) infused its radical reform program with ideas whose provenance had more do with public choice theory and Thatcherism than with the pervasive regulation and welfare statism of the conservative Muldoon government which had preceded it. The wideranging free-market reforms of the New Zealand Labour government came to be referred to colloquially as ‘Rogernomics’, after Lange’s Finance Minister and chief architect of the reform program Roger Douglas (Coddington 1993; Saunders 1995). In Australia, the Hawke and Keating Labor governments (1983–1996) also exhibited reformist zeal and pursued a variety of managerial reforms aimed at redrawing the service provision landscape. These included the tightening of eligibility criteria and incentives for self-provision with respect to retirement income as well as rationalising and consolidating social welfare programs – principally through the renegotiation of financial agreements with state and territory governments (Stewart 1994; Clark 1995; Saunders 1995; Jones 1996; Singleton 2000). In Australia the term ‘economic rationalism’ came quickly into vogue and denoted a major shift towards a focus on competition, contestability, accountability, transparency and performance (Pusey 1991). Later, the Howard coalition government (1996–2007) drove these reforms a good deal further and embraced the extensive outsourcing of service delivery and the use of the taxation system to send pricing signals to consumers in order to encourage self-provision and/or greater reliance on the private sector in areas such as education, health care and child care (Singleton 2000; Aulich & Wettenhall 2005). It is important to stress at this stage that, contrary to common public perceptions, these new orientations have not reduced the delivery of social services in these economies. Indeed, expenditure on social services (which are

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mostly provided by governments) has tended to grow in most OECD countries over the 1980–2007 period, as has the share of employment in social services benchmarked against aggregate employment (see Exibit 1.3 above).

The late 1990s to the present – contestability, competition and choice From its beginnings the Australian welfare state took a different form to that of Britain or even Australia’s near neighbour, New Zealand. Australia’s postwar ‘residualist’ welfare state developed slowly. It was based more on a tradition of targeting and means-testing than universality; the achievement of full employment as opposed to ‘palliative’ measures; and the payment of benefits and subsidies as opposed to ‘in kind’ services (Jones 1996). Hence, the adoption of economic rationalism by the Hawke, Keating and Howard governments represented not so much a wholesale retreat from welfare statism as an incremental extension and re-engineering of the selective targeting and means-testing of programs. As one public official said recently, whatever intended policy proposal is under discussion, the next question is always: ‘how are we going to means-test it?’ – which means at what level of income or assetbase will the proposal cut out. The reform efforts of Australian governments have centred on reengineering the administrative and operational apparatus of service provision. Where services had previously been provided directly by public sector agencies, there was a much greater emphasis on purchasing services from private not-for-profit and for-profit providers. Where governments once funded not-for-profit organisations to offer a parallel network of complementary human services, such funding would be increasingly ‘tied’ in order to maximise alignment with government priorities. Where Australia once boasted the ‘widest range of government enterprises outside the Soviet Union’ (Clark 1995), outsourcing, asset sales and privatisation would become a virtual policy fetish (Pusey 2003; Aitkin 2005). Contestability – involving the removal of entry barriers in public service markets – was embraced in the early 1990s by Australian federal and state/

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territory governments as an antidote to the purported inefficiency and high cost of monopoly provision. The expectation was that even the threat of competition would encourage public sector providers to act more competitively. In some cases, governments experimented with the separation of purchaser and provider functions; for example, separating policy functions from service provision functions. The most notable example of this in Australia was the creation of Centrelink, established expressly to deliver a range of services to clients on behalf of various departmental ‘purchasers’ (Halligan & Wills 2008). Governments even applied contestability principles to the provision of policy advice: no longer did government agencies enjoy a monopoly on policy as governments increasingly canvassed policy input from consultants, ‘think tanks’ and experts (although governments had often in the past deferred to other sources of advice over science policy, health policy, and at times economic policy). In the early 1990s, senior public sector managers in federal and state government central and line agencies enthusiastically embraced the ideas of public sector governance enunciated in David Osborne and Ted Gaebler’s widely-read book Reinventing Government (Osborne & Gaebler 1992). Subtitled How the entrepreneurial sector is transforming the public service, Osborne and Gaebler’s book, written largely for a US readership, articulated a vision of an ‘American Perestroika’, the central concepts of which became virtual mantras for public sector managers in Australia where ‘competition’ and ‘choice’ became dominant policy themes. Chapter titles such as ‘Steering rather than rowing’; ‘Empowering rather than serving’; ‘Injecting competition into service delivery’, and ‘Funding outcomes, not inputs’ transferred directly into the common parlance of policy-makers and infused policy and service design. It was a digestible ‘how-to’ book, explaining how to reinvent government to make it more business-like. Competition policy aimed to diversify formerly monopolistic markets and thereby deliver improved service quality at lower cost to clients and taxpayers. Competition policy provided the intellectual rationale for the privatisation of government business enterprises and public utilities: the markettesting and outsourcing of the corporate support functions of government

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agencies (such as internal auditing, information technology, human resource management and communications); the use of third parties to deliver mandated programs and services under contract to government purchasers; and the use of the tax system to leverage ‘choice’ by offering a variety of incentives to preferentially access services from private providers. The use of competition instruments did not negate or deny the ‘service state’ – it merely offered alternative ways of providing services. These approaches were not always successful, in that they inadvertently conferred disproportionate market power on private sector service providers in relatively ‘immature’ markets. This has been a recurring criticism of the privatisation of formerly government owned utilities in many Western nations. In particular, critics point to the sometimes mixed policy goals underpinning privatisations: competition on the one hand and generating windfall revenues on the other (with the latter often taking precedence in the conduct of the sale). The experience in the United Kingdom followed a similar trajectory and, for that matter, anticipated developments in Australia. Rhodes (1994: 139) described a process of ‘hollowing out’ the state through the 1980s and 1990s, a process that included: • privatisation and limiting the scope and forms of public intervention; • the transfer of functions from government departments to alternative service delivery systems (such as agencies); and • limiting the discretion of public servants through the application of new public management with its emphasis on managerial accountability, together with clearer political control evidenced by a sharper distinction between politics and administration. Rhodes signalled what he described as ‘potentially dramatic changes underway in British government’ characterised by smaller government, the transfer of functions and capability to quasi- or non-governmental agencies, the application of rigid management and political disciplines, the proliferation of service delivery systems and the erosion of central capability (Rhodes 1994: 151). Skelcher (2000: 12), reflecting on Rhodes’ account of the transformations in governance of the 1980s and 1990s, remarked that the ‘hollowed-out’ state had transformed

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into the ‘congested’ state characterised by ‘an environment in which high levels of organisational fragmentation combined with plural modes of governance require the application of significant resources to negotiate the development and delivery of public programmes’. According to Skelcher, this has important implications for supervision, governance and accountability owing to the sometimes opaque nature of the collaborative and partnership structures necessary to manage a more complex policy and service delivery environment (Skelcher 2000: 16–17). These are issues we will return to in chapter 10.

T h e s e r v ic e stat e in t r ans f o r mation The service state has undergone a series of transformations, both in how it has adjusted to the context in which it operates and in the questions it asks about the policy instruments and the delivery chains in use. The following observations, made some 30 years ago, are still pertinent (Axinn & Levin 1975): Decisions need to be made about the nature of social welfare programs. Should help be offered in cash, in ‘kind’, – that is, as goods – or in services? Money, food, or advice? Rent supplements or public housing? Should cash transfers be tied to work incentive programs? Are money payments to be joined to counselling services? Is help in one’s own home – family care in one’s own community – preferable to institutional or asylum care? Simultaneously, benefit levels and, equally important, terms of entitlement must also relate closely to the purposes for which the programs have been devised. The extent to which potential beneficiaries are viewed as claimants, recipients, or clients suggests not only the intent of the program but also the extent to which eligibility factors will be deterrent or invitational. (Axinn and Levin 1975: 1–2)

These words are still relevant to the contemporary policy discourse. Few of the questions posed have been conclusively settled despite clear policy preferences that have held sway in various jurisdictions over the last three decades.

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The old adage of ‘the more things change, the more they stay the same’, or more colloquially ‘what goes around comes around’, is often typical of the main currents of public sector thinking. Ideas, concepts and approaches are continually framed and reframed. Their proponents are lionised or disparaged in equal measure. Periodically, new concepts emerge that excite the imaginations of policy-makers, policy professionals, academics and service providers. Some are heralded as ‘revolutionary’ reframings of the status quo, others are presented as sensible, incremental refinements of existing practice. Some are tried and discarded as ‘the next big thing’ emerges to take their place. Others lead to genuine, positive – sometimes even transformative – change. Hence, the service state today is a contested and almost unbounded concept. If previously the industrial state had a defined public sector and relatively clear sphere of public delivery, the same is not true today. It is a hybrid mixture of part public, part private activities, delivery chains that do not remain in neat boxes or organisational settings, loose combinations of actors and providers who are each necessary to see something delivered. In any policy area, the services provided may zig-zag between the public and non-public sectors many times over. While these changes have occurred in practice, they are often not fully appreciated by politicians and policy-makers inside government. Nor is there often an adequate appreciation of the difficulties involved in trying to manage, steer, or co-ordinate across these different domains. The nature and operational cultures of delivery systems (whether they are clear and coherent or vague and a little chaotic) will influence the mindset of political leaders and policy-makers, the content and evolution of policy, the attitudes and behaviour of providers and their clients and, importantly, the quality of service provision. We examine next the challenges for the transformational ‘service providing state’ as it grapples with the new realities of delivery. We discuss these challenges under the following headings: • the challenges of networked governance and ‘differentiated polities’; • the increased reliance on collaboration and partnership arrangements; • the quest to incorporate co-production logics and mutual obligations;

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• the lure of ‘public value’ approaches and policy entrepreneurialism; and finally, • the problem of building capacity within government and developing ‘social capital’ and resilience in the community to enable the transformations in the service state to be effective.

Service provision and networked governance Service provision now takes place through myriad actors and arrangements that we have come to regard as delivery networks. These systems are also termed ‘differentiated polities’ involving mutually dependent, semi-autonomous and self-organising players from different sectors who participate to some degree in producing outcomes. Governments have chosen, or been impelled by circumstances, to use these delivery networks due to a number of factors. Governments are not nimble and flexible on the ground whereas networks allow greater diversity and flexibility. Non-government actors are often already actively engaged in a given policy area; they have developed ‘handson’ connections and working relationships. And although network actors can, in theory, be excluded from or bypassed in government initiatives, in practice they cannot and any attempt to do so is likely to prove counterproductive. In short, governments have come to realise that they have to work through networks not against them. But reflecting their ‘old style’ mindsets, governments then usually seek to ‘manage’ these networks or marshal their activities toward the ends desired by government itself – seeking to control network providers. They do not spot the contradiction in their motivations. The notion that networks can be ‘managed’ is a view fondly held by many senior government executives and program managers. It posits that differentiated networks can be directed and managed to harness their potential to achieve progress towards some government-desired end. Working through networks moves beyond the traditional hierarchical, top-down bureaucratic structures that have long characterised public sector service delivery and seeks to build co-operative relations and overcome barriers to horizontal and

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vertical co-ordination. This approach has also been called ‘managing out’ and ‘managing across’ (Corbett 1992). Yet networks are damned stubborn things. In practice they are often ‘unsteerable’ and ungovernable. They are characterised by constantly changing dynamics and interactions, changing personnel and volunteers. Co-ordination is often at best patchy and contingent. And attempts to manage networks usually prove a frustrating experience to administrators. Governments can be equally frustrating to non-government actors in networks. From their perspective governments seek to ‘use’ them, change their priorities or motivations, shift the goalposts, and constantly change their demands or requirements. There is also a high accountability overburden when network actors become involved with government programs or funding initiatives. Working through networks involves sharing power, compromising on objectives, and letting go (Huxham & Vangen 2008). Governments are not good at doing this and our accountability regimes discourage experimentation. Many public servants are comfortable working from their desk or office but not skilled, equipped or prepared to ‘manage out’ with all the associated unpredictability that it would entail. Often government agencies will hire consultants to manage networks because they can’t or won’t attempt the responsibilities themselves. In New Zealand, for example, Schick (1996) observed that a greater reliance on networks has tended to make policy departments even more prone to silo-like insularity and siege mentalities than previously. Accordingly, networked governance is a highly nuanced concept, involving many voices, forms of trust, fostered relationships, and mutual interdependencies. It is a high-wire act involving many players who have to be encouraged and motivated not ruled or commanded. Commitment has to be engendered and earned not expected or required. And the differentiated nature of these polities means that parts of the network may be commercial and profit-oriented whereas others may be entirely voluntary and community based. Even when networked delivery systems involve largely government and commercial entities, the problems of governing these arrangements still apply. We can consider networks across two main dimensions. First, networks

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can be developed across government or between governments. Public agencies within one jurisdiction or between levels of government (national, state or regional and local) can build networks of delivery based on shared responsibilities, co-ordinated involvement, and resource exchanges. Often these governmental networks are founded on interdependencies and fragmented capacities to address particular aspects of problems. Their administrative expression might take the form of financial or resourcing agreements or contracts. They might be co-ordinated to some degree by formal executive government bodies such as ministerial committees or intergovernmental bodies such as the Council of Australian Governments or Premiers’ Conferences in Canada. Since the early 1990s, Australian governments have also promoted the ideal of ‘whole of government’ or ‘connected government’ approaches to policy formulation and service delivery. Interestingly, in the Australian context when most governments (federal or state) use this terminology they usually refer to horizontal co-ordination between agencies within the same level of jurisdiction (MAC 2004). By contrast, the UK Labour government promoted the concept of ‘joined up government’ which focused more explicitly on achieving complementarities, co-ordination and co-operation between levels of government (to achieve better vertical co-ordination). The ostensible value of ‘whole of government’ approaches lie in enhancing the economic, technical and social efficiency of policy formulation and service delivery by: • reducing the duplication of effort; • avoiding service gaps and operational incompatibility; • avoiding policy contradictions and associated externalities; • leveraging knowledge, expertise and information; • fostering the clustering or bundling of services to assist recipients; • gaining social and political legitimacy; and • achieving a coherent and intelligible interface between governments and clients. However, whole of government approaches can be risky, time-consuming and tend to cut across the conventional lines of political and administrative

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accountability. To date, tangible outputs of whole of government approaches include ‘one-stop shops’ in which allied services are co-located in a single facility or even centralised government call-centres that direct inquiries to appropriate agencies depending on the callers’ circumstances. Regional plans are another example where multiple agencies contribute toward agreed local priorities. Emergency housing schemes similarly involve multiple agencies coming together to provide for approvals, land, funding, construction, maintenance and letting arrangements. Second, networks arise and are developed between government actors and non-government actors (such as business, trade unions, peak organisations, faith and charity bodies, or voluntary associations). These looser networks are generally fragile, and heavily contingent on the differentiated players perceiving some gain to themselves or their constituencies from being involved to some degree. The crucial question for governments, and to a degree for the other actors, is the extent to which such networks can be ‘governed’ or are selfgoverning, or even beyond governing. Actors cannot be ordered to perform, and governments may not have developed the requisite skills or relationships to work these networks appropriately. Moreover, other players do not necessarily think of themselves (or want to be seen) as extensions of the government. If players consider the burdens of involvement are too great or greater than the anticipated benefits they are prone to leave or exit (sometimes being replaced by other bodies where substitutes are available or present themselves, and at other times not). Governance issues are more about maintaining allegiances, conducting diplomatic relations between the various organisations and keeping open the lines of communication.

Collaboration and partnership arrangements Increasingly, governments have shown a proclivity to use collaborative frameworks to provide services or address community needs and aspirations. Collaboration implies the linking of specialised skills or attributes which may be used on a one-off basis or in an ongoing collaborative relationship

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(which over time may feed into networked delivery). Governments will collaborate with other governments, with different levels of government, with non-government organisations (NGOs) and on occasions with private businesses. Collaboration implies a ‘buy-in’ from the other participant(s) either generated by shared or parallel interests or by the prospect of mutual gain or commercial advantage (business partnerships). It usually implies a closer or more symbiotic relationship than that of a principal–agent purchasing arrangement or that of a tenderer under contract whose relations are defined by a fixed contract and specified deliverables. Collaboration exercises confer a sense of ‘ownership’ concerning the aims and means of the services being provided, and perhaps even shared objectives and interests. They tend to take the form of relational agreements setting out broad and shared understandings about expectations, respective roles and responsibilities, codes of conduct, intentions and strategies for resolving conflicts or disputes. Such approaches to policy formulation and service delivery often involve a strategic dimension – that is, both sides are prepared to work with the other to achieve a greater sum gain in the longer term and perhaps even realign the nature of the organisational capabilities depending on the success of the collaboration. Generally collaborative relations are formed to enhance implementation (working together). Sometimes new policy initiatives or directions have embedded within them incentives or requirements to deliver services in collaboration with other agencies. This is usually premised on the assumption that collaborative arrangements offer an enhanced potential to harness and make the best use of diverse capacities and capabilities. Governments may design policy to be implemented by agents, stakeholders or contractual actors. But the precise arrangements can vary enormously – from tightly argued legal contracts, to grants for worthy purposes, or even vague understandings of collaborative efforts to achieve some outcome. There are many benefits stemming from collaborative delivery systems (access, flexibility, customisation, service focus) but also other implications that need to be considered. Delivery chains can be too cumbersome, lose focus or neglect the original objectives of

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the policy proposal. They can also complicate accountabilities and create the problem of too ‘many hands’ becoming involved. Collaborative approaches can also be used to enhance deliberation when there is no obvious or settled approach to the resolution of a particular social problem or complex of problems. The object of collaboration might be, for example, to bring relevant government agencies together with consumer, business and community representatives in a deliberative forum to identify issues and probe possible solutions and strategies to address localised problems such as homelessness, youth unemployment, binge drinking (among others). Collaboration of the deliberative kind may, in turn, lead to collaboration with respect to the implementation of policy and the delivery of services; perhaps through the formation of steering committees or community services boards providing executive oversight for collaborative arrangements. There can be some scepticism surrounding the motivation of government in taking a collaborative approach. Governments may talk about collaboration when often they simply mean the dissemination of information about matters that have already been decided. It is not a mutual arrangement, but one in which governments cloak themselves in collaborative discourses while merely providing instructions and information regarding the rationale, content, implementation and timeframe for the policy. Governments sometimes pursue policy initiatives through ‘partnerships’. The term ‘partnership’ is one that can be used euphemistically and without much precision. In its strict sense, partnership implies a relationship in which there is a formal assignment of the respective roles of the parties, the identification of inputs and outputs, and the clear articulation of criteria for performance and remedies for non-performance. Partnership usually means two or more partners commit to an undertaking that neither operating alone could manage or perform to that level. Partnerships are of three kinds – commercial partnerships, relational partnerships and community partnerships. Commercial partnerships are a legal agreement to require the provision of goods or services along business (for profit) lines. Private sector operators or consultants usually insist on the form of a ‘classical contract’ to codify their relationship and to specify

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deliverables they will be legally obliged to deliver. Relational partnerships are agreements or understandings that two or more parties commit to because they have an interest in some outcome or higher aim. This may take the form of a ‘memorandum of understanding’ (MOU) such as might be used in a partnership involving two government agencies or an agency and a charity. The key difference between relational partnerships (or MOU agreements) and a formal contract is that signatories to the former do not generally have access to legal remedies whereas contracts are actionable under law. Instead, they depend on the goodwill and shared commitment of the various parties – in essence, on a measure of moral force – to make them work. Relational agreements should document the nature and scope of the collaboration and the respective roles of the parties. Community partnerships are even looser arrangements of actors linked to some local community benefit or desired behaviour. They can be exhortations to a community to ‘clean up’ the streets, to establish ‘neighbourhood watch’ initiatives, to conserve water or repair damage after floods or fires. In Australia ‘shared responsibility agreements’ between the federal government and Indigenous communities incorporate provisions for voluntary ‘mutual obligation’ in which communities undertake to effect behavioural changes (such as improved school attendance) in exchange for discretionary benefits from government.5 Public–private partnerships (PPPs) have been used extensively to construct and operate public infrastructure such as tollways (see Exhibit 1.4 opposite). In theory such partnerships are characterised by a high degree of reciprocity: they are not simply about the procurement of services from third parties. For example, governments may be required by the terms of the partnership to enact special legislation and regulation to confer particular authorities on a private sector provider (such as to enforce compliance with particular service regimes), to guarantee income streams or market share, to guarantee usage rates, to offer indemnities against legal action, or undertake coercive functions such as the levying of fines. On the other side, private sector partners are expected to deliver projects on time, on budget and according to specifications. It must be said that not all PPPs exhibit these characteristics. As with many things in the public policy discourse, terms

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like ‘public–private partnership’ slip into the lexicon of policy rhetoric and can be co-opted or misapplied (see Wettenhall 2003). We cannot do full justice to the subject here and interested readers should turn to the extensive literature on public–private partnerships and the potential risks and benefits of such instruments for the delivery of public policy (Hodge & Greve 2005). Exhibit 1.4

Private investment in public infrastructure

In Australia, investment by governments in public infrastructure has to be viewed in the context of just over 200 years of nation-building. Government investment in basic infrastructure supported economic growth and was instrumental in the development of the Australian economy. Generally, government investment in physical infrastructure was used to correct market failures (that is, non-provision from private suppliers) or to provide services normally considered to be natural monopolies. In the Australian context, these have included utilities (water, electricity), communications (telecommunications, postal facilities, television and radio), transport (roads, railways and airlines) and social and cultural facilities (hospitals, schools, housing, sporting and entertainment venues). Much of the investment by Australian federal, state and local governments in public infrastructure occurred in a social, economic and political climate far different from that we observe today. As the Australian economy ‘matures’, the imperatives for strategic public investment are increasingly being redefined. There is increased scope – and support – for greater diversity in approaches to funding public infrastructure. There are also greater social demands on the ‘public purse’ and a consequent need to preserve a greater measure of flexibility and discretion with regard to public outlays. In addition, there is perceived to be a greater capacity for private sector investors to invest in, and earn a return on, public infrastructure. The encouragement of private sector investment in public infrastructure by governments gives rise to additional challenges and demands for public accountability and transparency. The parameters of risk are far different than is the case with traditional approaches to funding public infrastructure and the potential liabilities accruing to governments may be significant. A central issue is the fine balance between protecting the public interest and offering a commercially viable investment opportunity for private sector partners. It cannot be assumed (although it is sometimes expressed as such) that the public interest is best protected by ensuring the realisation of private sector interests.

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In providing services to the public, governments constantly worry about formal partnerships or raise issues about the wisdom of engaging in partnerships with other actors. They worry about being compromised, whether they are getting the best price or value from the market, whether cross-subsidisation is taking place, whether other potential providers are excluded from the arrangements, whether guarantees are likely to be abused, and whether one or both parties are distorting their businesses by maximising their interests in the partnership.

Incorporating co-production logics Governments sometimes actively encourage citizens or clients to provide ‘in kind’ contributions to the delivery of public services. In other words, clients and citizens are asked to ‘co-produce’ services, mainly through voluntary contributions of time and effort. Co-production involves citizens or groups doing something to assist the production of a service, improve its quality or expedite delivery. It could involve something as simple as purchasing prepaid tickets for public transport, to entire communities taking a shared responsibility for a desired result. The concept has been of interest to policy practitioners and public sector administrators since the early 1980s (Sharp 1980; Whitaker 1980; Brudney et al. 2005), largely because it aligns incentives to improve implementation. Co-production is now an important element in the design and delivery of many programs and services. People willingly co-produce for a variety of reasons – including altruism, following rules or guidelines, perceived self-interest (personal and career development), personal values and interests, or intrinsic rewards (the ‘feel good factor’). On the flip side, government service providers encourage coproduction for a variety of reasons – most of which are context dependent – including encouraging behaviour change, capacity building, winning acceptance of policy objectives, or simply to supplement public resources (Alford 1998). Examples of co-production include: • Landcare and Parkcare groups in which government agencies provide technical and material support to volunteer networks undertaking

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environmental conservation work on public and private lands; • parents voluntarily contributing time to school activities such as operating tuckshops, supervising sporting activities and outings, fundraising or school reading; • tenants’ committees in public or community housing estates undertaking activities aimed at encouraging positive behaviours and discouraging destructive or antisocial behaviours; • medical practitioners who bill governments for patients in bulk (bulk-billing) are reducing the administrative costs to the government as payee; • water and energy conservation programs in which members of the public voluntarily conserve in excess of targets or mandatory restrictions; or • Neighbourhood Watch programs in which households work with local law enforcement agencies to reduce crime. Co-production depends on trust, reciprocity and the alignment of broadly shared values. It is essential that programs and services relying on co-production as part of their delivery strategy invest in building and maintaining relationships with co-producers. Relationship management might include the provision of training, recognition and reward schemes, or ensuring the provision of necessary technical and material support. Failure to build these features into the service design may result in high turnover of co-producers, disaffection, drift or lack of confidence in broader policy aims.

The lure of public value approaches and policy entrepreneurialism ‘Public value’ is a construct popularised by the Harvard academic Mark Moore in the mid-1990s, especially through his 1995 book Creating Public Value: Strategic Management in Government. Moore asserts that public sector managers should aim to create public value, in part by identifying ways to accommodate the ‘varied and changing tastes of the political marketplace’ (Moore

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1994). He urges them to become advocates, champions and entrepreneurs motivated by a desire to discover new ways to increase public value on behalf of the community. In essence he encourages them to become involved in ‘the politics’ of public provision, championing things in the community’s name, and showing both politicians and the community that public managers are usefully contributing to public value (Moore 1995). Moore’s concept of public value is intended to encourage public sector managers to: scan their authorising environments for potential changes in the collective, political aspirations that guide their operations; search their substantive task environments for emergent problems to which their organisations might contribute some part of the solution; and review the operations of their own and other organisations in search of new programs or technologies that their organisations could use to improve performance in existing (or conceivably new) missions. (Moore 1995: 72)

Moore contends that public sector managers operate within a ‘strategic triangle’ and an ‘authorising environment’. The strategic triangle asks them to think about whether their augmentations are substantively valuable to the organisation’s mission, whether they are legitimate and politically sustainable, and operationally and administratively feasible. The ‘authorising environment’ sanctions their activities and consists of the ‘overseers’ such as political leaders, political executives and members of the legislature. Officials need to exercise political management in order to ‘fashion legitimacy and support for themselves, their policies, or their organisational strategies’ (Moore 1995: 113). Moore accepts that political management requires managers to ‘engage actors beyond the scope of their direct authority’, and must therefore rely on persuasion to gain their support and co-operation. According to Moore, public sector managers should be neither clerks nor martyrs: instead they should be explorers commissioned by society to conscientiously search for public value and be ‘willing to openly state their views about what is valuable, and to subject those views both to political commentary and to operational tests of effectiveness’ (Moore 1995: 299).

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Managers seeking to build public value will be expected to exercise political management across a variety of contexts, including: • over routine accountability – sustaining the flow of authority and money for public enterprises by reporting activities and accomplishments through defined channels of accountability; • authorising change and innovation – seeking authority for changes in an organisation’s operations, administrative arrangements or mission; • achieving interagency co-ordination – leveraging the co-operation of agencies and people outside the manager’s direct control, but upon whom the organisation is dependent for the production of results for which they are accountable; • mobilising decentralised co-production – engaging, mobilising and persuading disparate agencies and private decision-makers in order to leverage their co-operation in pursuit of the organisation’s mission. So, in public value approaches, the responsibility for strategy passes to the officials who need to advocate a ‘strategic view of operational management’, which embraces traditional notions of accountability for the use of authority and money as well as public value elements such as fairness, adaptability and flexibility. Public managers must ‘make their organisations more valuable’ by: • increasing the quantity or quality of public activities per resource expended; • reducing the costs (in terms of money and authority) used to achieve current levels of production; • making public organisations better able to identify and respond to citizens’ aspirations; • enhancing the fairness with which public sector organisations operate; and • increasing their continuing capacity to respond and innovate. However, Moore warns that ‘if managers have substantively valuable ideas but are unable to attract political support or administer them feasibly, then those ideas must fail as strategic conceptions’ (Moore 1995: 71–2).

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Moore describes his approach to public value as ‘a normative theory of public management’. His book presents a series of organisational ‘stories’ that illustrate how public sector managers can act to create added ‘value’ for the public in the delivery of public services. Public value is not a ‘methodology’ and is not sufficiently rigorous for use as a decision-making tool (like cost-benefit analysis). Some have argued, nevertheless, that it is a useful intellectual construct and provides a framework that supports a deliberative approach to public policy formulation (Bozeman 2002). It has also been taken up by many community-oriented public organisations anxious to make a difference – especially in the UK, Australia and New Zealand (Stoker 2006). But the public value approach is not without its critics. They consider that the approach relegates ‘politics’ to an afterthought, asking public officials to take on political roles usually the province of ministers, urging officials to be entrepreneurial as if they were operating in the private sector, and thrusting them into the role of self-appointed ‘platonic guardians’ of the public interest (Rhodes & Wanna 2007). Critics also contend public value innovations are more appropriate to low risk settings (such as market testing or customer satisfaction) rather than the high risk areas associated with high politics (Rhodes & Wanna 2009; see also O’Flynn & Wanna 2008).

The problem of capacity building and social capital Capacity building generally refers to the development of necessary qualities, skills or competencies in an entity to enable it to function effectively and optimally. It can also refer to the capacity to handle risk and/or the development of resilience and robustness to withstand shocks or crises. These have become major areas of concern to both governments and the community sector as the transformations in the service state have taken place (MAC 2003). Any deficiencies in social and organisational capacities will impede the ability to deliver services through these means. Hence, active capacity building has emerged as part of the suite of strategies employed by governments

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to transform communities, industries and organisations, and thereby enable them to respond adaptively to social and environmental problems. The term capacity building is usually associated with investments and skills development in human capital, organisational capital, community capital, and forms of ‘social capital’. The World Customs Organisation defines capacity building as ‘activities which strengthen the knowledge, abilities, skills and behaviour of individuals and improve institutional structures and processes such that the organisation can efficiently meet its mission and goals in a sustainable way’ (World Customs Organisation 2007). Australian governments facilitate capacity building in a variety of scenarios: • in households through the provision of support with skills-formation with respect to such things as parenting, anger management, financial management or interpersonal communication; • in not-for-profit organisations (NFPOs) by facilitating access to enhanced operational practices including corporate governance, financial and human resource management, knowledge management and information technology; • in industries through changes to the regulatory and institutional environment as well as by facilitating improved flows of information and providing access to enhanced business, economic and policy prognostics; and • in communities by improving the availability, quality and accessibility of basic social and physical infrastructure as well as through mechanisms for social inclusion, local empowerment and social resilience. The concept of capacity can be contrasted with that of capability. The former refers to the latent potential of a social unit (for example an organisation, industry or community) to perform or behave in certain ways. Capability is an expression of the likelihood that that capacity will be fully realised. For example, government agencies might be said to be ‘capacity rich’ in that they have the financial, technical and intellectual means to respond adaptively and

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constructively to emerging needs. They may, however, be ‘capability poor’ in that bureaucratic rigidity, legislative proscription, political control or organisational culture might blunt the ability of the organisation to make optimal use of its capacity. Conversely, many smaller non-government organisations may be ‘capability rich’ in the sense that they are willing to be adaptive, flexible and creative and enjoy the support of their boards and constituencies, and yet are ‘capacity poor’ in that their core business systems prevent them from performing optimally. Capacity building, therefore, must take account of capability (see Exhibit 1.5 below). A related concept to capacity is social capital. Social capital is an organic concept of enrichment created when individuals voluntarily and cooperatively participate in and contribute to networks of trust and reciprocity, Exhibit 1.5

Building capability and capacity CAPACITY POOR/CAPABILITY RICH

NGO/ NFPO

Facilitative, enabling

Ideologically Political aligned

Public sector

Gate-keeping, Ideologically Apolitical controlling unaligned

Epistemic community

Constituency/ values-based

Visible

Generalist/ pluralist

Public good/ meta-values

Opaque

CAPABILITY POOR/CAPACITY RICH

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guided by broadly shared values and aims. The term ‘social capital’ and its companion ‘civil society’ have, in recent years, featured strongly in political, social and policy discourse in many Western societies (Norton 1997). Although this discourse has largely occurred in academic circles, social capital has crossed over into the realm of political rhetoric and is frequently invoked by policy-makers as an important underpinning of social policy. It is a concept that has been embraced by conservatives and social reformers alike. Indeed, even before the term ‘social capital’ gained wide currency, policymakers recognised the potential for positive spill-overs arising from policies that encourage voluntary collective behaviour and a positive disposition to mutual assistance initiatives. In this context, governments can facilitate and leverage social capital in the pursuit of public policy goals. Governments can

CAPACITY POOR/CAPABILITY RICH Test thinking Low control, ‘Shallow’ publicly permissive hierarchy

Risk-taking

Flexible, responsive

Entrepreneurial Knowledge broker

Test thinking High control, ‘Deep’ internally restrictive hierarchy

Risk-averse

Inflexible, reactive

Conservative

Knowledgehoarder

CAPABILITY POOR/CAPACITY RICH

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also inhibit or stifle the formation of social capital – often unintentionally and in spite of stated policy objectives. Scholarly research into the dimensions of social capital is relatively new and draws from the wellspring of authors such as Bourdieu, Coleman and Putnam (Bourdieu 1986; Coleman 1988; Coleman 1990; Putnam et al. 1993; Putnam 2000). Many of these writers have attempted to measure social capital and assess its impact in relation to other attributes. While it remains a contested concept, a number of recurring themes are salient: • social capital as enrichment depends on the health of social networks and/or social norms (that is, shared understandings, informal rules and conventions that facilitate predictable or beneficial behaviour and provide a basis for the expression of reciprocity in social relationships); • trust is an important element of social capital, or at least an indicator of the level of social capital in the community, and refers to the level of confidence people have that individuals, groups or institutions are trustworthy or reliable; • social capital can be considered as a resource that – although it cannot be owned in a formal sense and may be unequally distributed – can be drawn upon to achieve positive social outcomes by, for example, reducing transaction costs, facilitating the dissemination of information, promoting co-operative or socially-minded behaviour, and producing individual benefits that have positive social spill-overs; • social capital can arise at all levels of society: within families, nonfamilial networks, communities and nations; and • social capital is not vested in community facilities or government infrastructure (such as parks, halls, libraries, hospitals, schools, roads or public utilities), nor is it synonymous with concepts such as ‘social concerns’ or ‘non-financial benefits’ (Productivity Commission 2003). Social capital may have both welfare-increasing and welfare-reducing effects. Adverse effects are grouped into effects on outsiders and effects on insiders.

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The former might be manifest where strong within-group ties have the effect of excluding or exploiting non-members, while the latter might take the form of parochialism, social inertia, high levels of social control leading to restrictions on personal freedom and disincentives for individual advancement (Productivity Commission 2003). If governments desire to facilitate or harness social capital, it is important to give explicit consideration to the social capital enhancing versus the social capital depleting elements of the policy framework and service design. For example, Australian governments have in recent times made much of the role of the third sector as a vehicle for the formation of social capital. Indeed, public policy settings such as the purchase of services from private not-for-profit providers have been premised – at least in part – on the grounds that the social capital associated with such providers adds value to the services provided. However, the ways in which services are contracted out to non-government, not-for-profit service providers may act to deplete their social capital. The practice of specifying contractual services and outcomes within a contestable purchaser–provider framework diminishes the capacity of not-forprofit organisations to build social capital and incorporate social capital enhancing approaches into their service provision (Lyons 2001). Contestability regimes tend to favour larger private and more bureaucratic firms (the employing organisations that are relatively ‘social capital poor’) over smaller not-for-profit associations – the non-employing ‘social capital rich’ networks (Lyons 2000). Reliance on paid employees effectively substitutes financial capital resources for social capital resources. A reduced reliance on social capital leads, in turn, to organisations producing less of it (Lyons 2000).

Conc l usion The story of the ‘service state’ is still being written. Although it may seem as if the contemporary architecture of government service provision has been with us for many decades, the history of service provision by the state has

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been relatively short and tumultuous, punctuated by major episodic paradigm shifts. It has been a history in which catastrophic global events such as wars and depressions, ideological movements, changing values and expectations and eras of prosperity have all played a part. The rise of the autarkic state occurred relatively late in the piece and survived but a few decades in the postwar period before it was gradually dismantled. As the state has accepted more and more responsibilities it has had to change and experiment with the range of services provided and the ways they are provided. Indeed, the service state is continually adapting, evolving and changing: accommodating emerging expectations, responding to fresh challenges and new ideas – including policies ‘borrowed’ and adapted from other jurisdictions seen to be doing things differently. Policy adaptation seldom proceeds purely from considerations of cost or efficiency. It is incumbent upon policy-makers, policy professionals and those charged with the delivery of services to be as mindful of historical antecedents – lest they replicate past errors – as they are of emerging paradigms and their likely consequences.

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2: The politics of   service delivery

Politics, n. Strife of interests masquerading as a contest of principles. (Ambrose Bierce, 1842–1914?) Man is by nature a political animal. (Aristotle, 384 BC–322 BC)

U n d e r stan d ing ‘ po l itics ’ Politics infuses everything we do, the way we think and the ways in which we behave. It involves power and position, people and personality. It involves structures and behaviours, persistence and deference, conformity or deviance, knowledge or even ignorance. In short, we can’t keep politics out of human activities.

W h at d o w e m e an b y ‘ po l itics ’ ? Politics is both an art and a craft (being political, doing politics, being involved in politics, political inspiration, making political calculations). It can also be a decisional system, a process through which we make legitimate decisions or a rationale to explain outcomes. It can be a set of institutional relations (parliaments or cabinets) or patterns of behaviours – expressed through

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institutional rules, bureaucratic norms, organisational cultures, interest groups, social movements or powerful actors. It also extends to include philosophies and moralities, explanations and assumptions, political and social theories (such as liberty, freedoms, legal and human rights, the rule of law or notions of a ‘good’ society). There are multiple ways and contexts in which politics exists and is expressed. It exists across many levels – globally though international relations and treaties, in a nation state, in organisations, in private firms, in families (the personal is also political). As Aristotle argued, people are by nature political animals. We act out of politics and use politics to determine things. We use politics in society to resolve problems and decide what we will provide collectively to the community. Politics is a way of collective decision-making – a way of making decisions in the interests of the wider community – but mediated through electoral politics and representational party organisations. We use politics to decide whether to impose restraints on the community for the greater benefit (for example rules, fees, taxes, licences). We often call this the ‘tax-benefit trade off ’ – principally involving deciding how much of our private resources we might wish to forego to provide other services or services collectively for the community, and how much of our voluntary resources we might wish to devote to useful purposes. Politics can also be used to prevent actions or decisions being taken, to create or further disputes, and to establish winners and losers. These latter dimensions are often associated with the negative or pejorative meanings of ‘politics’ – its ‘just politics’. Collective decision-making (in both its positive and negative dimensions) is a fundamental part of policy-making and policy implementation. Often in official documentation (and in some academic literature) there is a danger that this crucial aspect of the policy process is intentionally ‘depoliticised’ – policy decisions are often presented as being neutral and objective, or couched in rational-sounding language that hides the politics or pretends only the chosen option is possible or available. However, the policy process is loaded with politics across all its many and iterative stages – through conflicts over competing values, actor preferences, power and influence, winners and

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losers, various blame games, subsidisation or cost-shifting. This is the main focus of this chapter: we ask how politics affects and plays out in the various aspects of service delivery; how ideology and societal values influence policy; how politics identifies and responds to community needs; and how it translates these issues into policies and proposals for service. How does politics then shape what is delivered? How does politics influence who gets what, when they get it, and how it is delivered? These questions open up the various ways we can observe and understand politics operating within the policy process.

P o l itics an d po l ic y Every stage of the policy process is political (the design phase, the action phase and the review phase). The identification of a ‘problem’ is political, as is the formulation of policy and any budgetary and allocative decisions taken. Who is involved – whether included or excluded – is a political issue. How policies are implemented is political, as are the ways such policies are evaluated and ultimately who is held accountable. We cannot envisage a policy process in the public sector that is not interlaced with politics. The AIDS case below (see Exhibit 2.1) illustrates this point. In public policy how a problem is decided – by whom, and by what process – is a political issue. What are deemed appropriate ‘strategies’ or ‘solutions’, and how much might be spent on them, will depend on the interplay of politics, not on science, objective reasoning or abstract rationality. The form and substance of public policy is the result of the mobilisation and mediation of interests across society. While political interests may play a major role in determining who gets what, when and how, governments have a broader set of social responsibilities to redistribute resources to meet social priorities and provide some degree of equity (access to essential services, income support, safety-net provisions, head-start programs). Governments have a degree of autonomy over and above

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Exhibit 2.1

The politics of HIV-AIDS policy responses

The international outbreak of HIV-AIDS that flared from the 1980s provides an illustrative example of how politics shapes the definition of the problem, the actions of the actors involved and the range of public policy responses. In some countries, HIV-AIDS was defined as a major public health issue and treated as a health ‘epidemic’. It was quickly ‘medicalised’ and the policy response involved sophisticated health and drugs programs. Hospitals, doctors and health workers mainly delivered the programs. In other countries, HIV-AIDS was considered a sexual and lifestyle problem and dealt with through educational ‘safe sex’ campaigns especially among the gay community, drug users and sex worker industry. In some jurisdictions it was felt that the mainstream public service should not be involved in delivering services (condoms, sex education, prevention strategies) and so it fell to others to implement policies (gay organisations, voluntary associations or church groups). In other countries AIDS was ignored or even denied, with political leaders claiming it was not a serious problem. In these latter cases little was done to activate prevention or treatment strategies, with the result that reported cases of AIDS usually soared. It clearly matters who defines the problem and how they define it, who designs the relevant policies and how they are to be delivered, and who is given responsibility for the implementation of mitigation or assistance programs. There is no objective or neutral scientific definition of the problem that is universally agreed by the various sections of the global or local community. Politics determined the policy responses to HIV-AIDS.

the interplay of sectional interests in society. By definition, this will mean that policy is inherently political because governments are attempting to change circumstances that would otherwise prevail. Policy has a political purpose: it is aimed to effect outcomes in politically sanctioned directions. Most policy in democratic societies is shaped and mediated by representative politics – the choice of leaders we elect and how they get there. In turn, representative politics is organised through political parties and particular electoral systems – and both of these have significant effects on policy choices. Electoral systems determine not only who forms government but also what latitude for action is available to governments. Democracies with single member electorates (constituencies) usually produce two-party adversarial systems based on majoritarian governments (with the winning party enjoying

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majority rule – often with an inflated majority of seats over the actual level of voting support for the party). These governments are often afforded considerable latitude to implement their platforms because they generally do not have to rely on other political parties to govern. By contrast, nations relying on proportional representation systems tend to have coalition governments, multi-party arrangements and formal policy ‘compacts’ between political competitors. These nations are usually governed by a higher degree of consensus, with political leaders having to broker policy ideas and engineer cross-party support. To varying degrees political parties exhibit ideological predispositions in their conceptualisation of social problems and the framing of preferred solutions. It is not uncommon to see differences in the choice of policy as well as in the preferences for the way such choices may be delivered (different policy instruments or direct delivery versus outsourced delivery – see chapter 4). For example, centre-left parties may prefer interventionist policy formulations that exhibit a greater propensity for direct delivery or assistance than would be the case for centre-right parties that favour more market-based approaches or regulation. Parties also serve as gate-keepers to the policy process – allowing differential and discretionary access to various interest groups and lobbyists. The political marketplace for ideas is a complex and contested space. But politics is far more pervasive than representative politics. Political influences come from myriad proximate factors and situations. Ideas and preferences emanate from different domains (political, administrative, interest group, community sector) and feed into the policy process. Politics can be about mobilising opinion, influencing positions, crafting and selling messages and reaching workable, practical compromises over proposed solutions. And because politics is often about conflicts and alternatives, these influences often generate counter influences (as with opposing pressure groups). Players will often react to other stimuli, causing them to re-evaluate their own choices or approaches. Rarely are such influences neatly contained or circumscribed. Political influences in one situation can have effects in others. While most democracies have established a traditionally ‘apolitical’ public service (in that it does not enter and exit with governments of different party

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complexions), these officials are (supposedly) cognisant of the political dynamics impacting on their roles and responsibilities. In today’s parlance, they are meant to be ‘responsive’ to ministers and to the political preferences of the government. Formally, officials are meant to be obedient to ministers, although this assumes ministers are decisive and know what they want. Officials are expected to display a professional responsiveness based on expertise and frank advice, but are not expected to act in ways that are, or are perceived to be, politically partisan. Nevertheless, officials are of limited use to governments if they blunder around the policy minefield wearing political blinkers. Politics is not solely about decisive capacity or administrative capability, but is also about building relationships within and between institutions and organisations, with communities of interest and even between individuals. Hence, public officials can be required to engage with the community or with interest groups directly. This may involve facilitating communication, building consensus, resolving differences and solving problems – even making peace between warring parties. Practical skills in analysing and actively managing these relationships are an indispensable part of the policy professional’s toolkit. The policy process also has to contend with rival pressures for stability, order and inertia, against pressures for change or forces of uncertainty and turbulence. Some of these pressures may be the result of political preferences, but others could be forced on policy-makers by external factors such as global crises or international concerns. Some policy regimes may give the appearance of stability, while underneath this façade they are characterised by discontinuities and ruptures. Every policy environment faces varying levels of turbulence as circumstances change, new technological possibilities emerge, different ideas drive policy and the various stakeholders (politicians, bureaucrats, interest groups and users) seek to influence the political and decisionmaking marketplace. As a concrete example, owing to significant advances in information and communication technology, governments are now much better placed to monitor the performance of departments or third-party providers, which will impact on what future initiatives they can conceivably advance.

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I d e o logi e s , b e l i e f s an d po l ic y Fundamental ideas that shape policy can emanate from values systems that exist in relatively discrete and cohesive traditions or ideologies. People often bring these ideas to bear irrespective of the issue or circumstance. Traditional ideologies often concerned the essential nature of human society and individuals, and the relationships between them. The traditional ideological divide posited a left versus right cleavage, with social democracy, socialism or Marxism on the collective left and conservatism and liberalism to the right. These ‘meta-narrative’ ideologies drove much of the politics of the 19th and 20th centuries through to the Cold War (1946–1989) and were represented in most of the political regimes extant in the developed and developing worlds. Other more ‘modern’ ideologies have recently emerged to challenge the dominance of these older ideologies – generally related to specific issues or clientele. Hence, feminism, environmentalism, social movements and gay rights campaigns have arisen to assert new values and priorities. Some older ideologies have also been revamped or reborn, as with neo-liberalism or neoconservatism, as critiques of existing policy settings or to provide rival agendas and policy options. Often these right-of-centre ideologies emanate from think tanks of the right (for example the Institute of Public Affairs in Australia, the Fraser Institute in Canada, or the Adam Smith Institute in the UK), but are often counterbalanced by left-of-centre counterparts (such as the Australia Institute, the Canadian Centre for Policy Alternatives, or the Institute for Public Policy Research in the UK). Although there is talk of the ‘end of ideology’ and the ‘end of history’, the role of ideology can still play a significant part in government approaches to policy – in framing policy priorities and determining the policy instruments chosen. However, we may simply live in a less doctrinaire age. Older ideologies of ‘left’ and ‘right’ perhaps have less potency or practical meaning today than they did some decades ago. In policy terms (and between our major parties), we seem to have entered into an era of social and economic pragmatism in which political precepts are less doctrinaire and tied to old-fashioned

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ideologies (Hill & Hupe 2006). This is not to say that contemporary policy responses are necessarily more reliable, objective or appropriate. Ideology – if interpreted broadly as a ‘belief system’ – still affects and shapes the framing of policy and the choice of policy instruments. Depending on the political and social dynamics of the times, policy formulation can be subject to ideological ‘capture’ as particular belief systems gain ascendancy in a given polity. Other values-driven beliefs, sometimes parading as ‘evidence-based’ policy, have taken root in the policy process. Such values can be woven into the construction of policy responses and into the beliefs and prejudices of actors or audiences. In recent times we have seen disputes between secular versus religious mindsets. On the secular side, ‘economic rationalism’ can be construed as a belief system whose normative values have significantly shaped public policy formulation and implementation. On the religious side, we have seen the emergence over the past 20 years of faith-based groups seeking to bring religious beliefs and values to the assessment of social problems and preferred policy responses (Maddox 2005). Faith-based political activism occupies both the right and left of the political spectrum, ranging from the Moral Majority (founded in the US in the late 1970s to promote conservative Christian values) to the Liberation Theology Movement (which arose in Latin America in the late 1950s with the aim of bringing social justice to the poor). Although in the West, faith-based movements and political parties (examples of the latter being the Family First Party in Australia or the Christian Heritage Party of Canada) are predominantly Christian in orientation, other faiths are represented (the Islamic Party in the UK). While this is a relatively recent phenomenon in Australia, it might be regarded as the norm in, for example, much of the United States where activist, and predominantly conservative, Christian and Jewish lobbies exert enormous influence on both domestic and foreign policy. Two broad but antagonistic conceptualisations of how a social order operates and is maintained remain strong, particularly (but not exclusively) in the Anglo-American world and are worth contrasting – the notion that humans co-exist in a ‘marketplace of individuals’ and the notion that humans create ‘society as a communitarian entity’. During Bill Clinton’s 1992 presidential

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campaign in the United States, the catch phrase ‘it’s the economy, stupid’ acquired strong popular currency. Sixteen years onwards, a caller on Australian talkback radio offered the following response to a question about the affordability of public facilities: ‘we live in a society, not an economy’ (Langmore 2007). Both sentiments find ample expression in existing policy options and instruments. Notions that humans coexist in a ‘marketplace of individuals’ almost denies that society exists (and former British Prime Minister Margaret Thatcher once famously argued that ‘[t]here is no such thing as society: there are individual men and women, and there are families’). It suggests people live in a marketplace of atomistic individual interests, where individuals look to themselves to maximise their own satisfaction. People have specific talents and capacities that they then ply competitively to gain benefits. Exchange relations and competitive struggles typify social relations, with victors coming out on top. The competition for ideas and innovation in the marketplace suggests dynamism, creativity and entrepreneurialism. So, the marketplace of individuals rests on contractual or exchange relations based on trade-offs, comparative advantage, specialisation, economies of scale, returns on investment and profit. Not everyone in the marketplace or society (if such a thing exists in this conception) will be equally able or in a position to participate to their fullest potential – therefore some amelioration or redistributive intervention strategies will be necessary. Policies may favour ‘free market’ solutions, although some controls may need to be exercised to enable markets to work efficiently for the general good. Groups may also coalesce to increase their economic power; they might be tolerated to a degree but dissuaded if too rapacious. By contrast, the notion of ‘communitarian society’ is based on imaginings of ‘community’ as a familial congregation. This view sees community as an organic collective entity in which learning and socialisation takes place and is both vibrant and mutually supportive. The communitarian ideal places great weight on collective endeavour, social capital, and posits a greater role for social activism and social movements. The ‘whole’ is considered to be more than the sum of the ‘parts’. Communitarianism does not assume that

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individuals know their own interests best, but rather that collective forms of decision-making and mutual assistance promote the standing and wellbeing of the whole community. The traditional welfare state is predicated on social convictions emphasising collective action to assist those less able to defend or maximise their own personal interests. Individuals may be able to exercise some personal freedoms but the collective interest prevails.

P o l itics s h ap e s communit y d e man d s an d e x p e ctations Within the context of prevailing belief systems, society expresses certain wants or demands and has expectations of government. The ‘demands’ and ‘expectations’ of the community are never given nor objectively derived – they are politically constructed. They are couched in changing values and cultures, and in political language. They also are expressed in a political time and space, and are subject to ongoing change. For instance, historical campaigns to promote income support programs such as the old age pension were made on the grounds of charity and social responsibility – meeting the needs of the ‘deserving poor’, a notion that traces its origins to the Elizabethan Poor Law of 1601 and differentiates between those who are of good moral character and the ‘undeserving poor’ whose misfortunes are the consequence of moral failing. Today income support systems are based on broader humanitarian and economic considerations such as alleviating poverty and disadvantage, ensuring social order and cohesion, or maintaining labour force capacity. The calculation of pensions today takes into account purchasing power, comparative living standards and the notion that the recipients have already made valuable contributions to society, and even ‘paid for’ their retirement through their paid or social work and by tax contributions. Social provision, in its various forms, implicitly recognises a ‘hierarchy’ of human needs. The best known articulation of the concept of a hierarchy of needs was that developed by renowned American psychologist Harold

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Maslow (Maslow 1943). Constituting a pyramid, the so-called ‘primitive needs’ – such as food, water, safety and shelter – formed the base of the hierarchy and ascended through the needs for love, belonging and esteem to selfactualisation at the apex. People require these more ‘sophisticated’ needs to operate meaningfully as an individual and social contributor. At the society level, policy choices addressing basic needs tended to focus on the provision of basic infrastructure, utilities, public order and physical security. It is regarded as axiomatic that modern societies ought to ensure these basic needs are met (witness the fall-out from the Italian garbage pile-up in Naples in 2008). Education and health are frequently defined as essential needs for a modern nation and for individuals to fully participate in society. More complex needs and expectations (such as art and culture) can be seen as higher order constructions, which society ought to support to some degree. In addition, policy trajectories in dealing with social problems can also demonstrate a historical progression from basic to more complex responses over time. Societies will re-articulate or reconstruct their demands and expectations in the face of social, cultural, technological and economic change. Schools are a good example of this phenomenon. A century ago schools were based on a ‘one-size-fits-all’ model with a ‘one teacher knows all’ approach. There might be just one school room, and a single class of varying ages to be taught with limited support facilities. Today, schools are information centres and self-developmental resources. Personal computers and air-conditioning are standard issue, along with specialist teachers, ‘special needs’ teachers, developmental officers and programs for ‘at risk’ students. Our views on education have changed according to new technologies, emerging understandings of learning acquisition and cognitive development and changing professional philosophies and market forces (such as the supply and maintenance of an appropriately skilled labour force). Public finance theory suggests that government responsibilities and their levels of expenditure increase over time to meet such changing demands. Theorists claim there is a relationship between the level of development of an economy (its maturity or sophistication) and the complexity of demands satisfied through the public sector. Mature economies have higher social

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demands, and hence higher levels of government expenditure compared to their gross domestic product (Wildavsky 1985, 1986; Racheter & Wagner 2001). Agrarian societies are likely to have relatively few needs met by government, while post-industrial societies or service economies are likely to involve government across the board (such as with tertiary and technical education, high levels of health care, environmental programs). Societal demands could potentially be infinite and susceptible to endless transformation and reconfiguration. This is especially so if ‘free-riding’ is a problem. Also called the ‘collective action’ problem, free-riding as defined by the OECD (2009) ‘occurs when one firm (or individual) benefits from the actions and efforts of another without paying or sharing the costs’. Thus, the identification and promotion of needs may increase markedly in response to a perceived capacity on the part of governments to pay for new services or new configurations of existing services. This is a constant source of political conflict and debate. Interest groups, lobbyists, non-government organisations (NGOs) and activists are constantly in the business of promoting particular causes requiring government intervention while others are anxious to contain or repel pleas for special assistance. Hence, terms such as the ‘welfare lobby’ can be used both as a descriptive label by those advocating on behalf of the disadvantaged, or as a pejorative term by those seeking to constrain their demands (implying welfare is wasteful and its advocates supporting ‘rent-seeking’ behaviour). Community demands are captured and codified over time in legislation, through policies, conveyed in budgets or business plans. Governments are asked to arbitrate over competing demands – usually to adjudicate which needs are important priorities relative to others. By addressing some demands, governments in effect are ‘legitimating’ these claims from the community – although this does not mean, by extension, that non-endorsed demands are not important to some. To use an expression from John Maynard Keynes, we could refer to ‘effective’ demands – meaning the nominated demand has achieved some shared acceptance, has gained political salience, or can be seen to have been taken seriously by participating actors. Hence, making demands ‘real’ involves arguing for their acceptance, gaining political support and, over time, having the claims credibly accepted. ‘Non-effective’ demands are

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the wishes or claims of some people that have not yet acquired wider political acceptance.

T h e po l itica l natu r e o f ‘ socia l p r ob l e ms ’ Social problems are many and varied. They are the subject of much public debate and there is enormous difference of opinion about their causes and cures or, indeed, whether they are problems at all. Many, but not all, social problems make it onto a formal policy agenda for action. Helco has famously referred to many social problems as ‘wicked problems’ – meaning they are impossible to define, they keep changing form, and proposed ‘solutions’ do not necessarily alleviate key aspects of the problem (Helco 1978). More recently, Loseke has also made five important observations about the politics of social problems (Loseke 2003). She argues: 1 Social problems are not a ‘stable category’ – perceived problems change over time, they are constantly redefined, reranked and reprioritised by the public, governments and the media. So ‘today’s worries are not necessarily tomorrow’s worries’ (Loseke 2003: 4). 2 There is seemingly no end to the list of conditions that might be regarded as social problems and that list is ever changing. Apart from enduring broad classes of problems such as crime or ill health or poverty or inequality of opportunity, the specific configuration of these problems is constantly changing and new conditions are constantly emerging that might be regarded as social problems. 3 Social problems are about ‘disagreements’ – disagreements about the nature or extent of problems, disagreements about preferred solutions or whether, indeed, they are problems at all. Loseke offered the example of ‘homosexual rights’ suggesting that, depending on one’s perspective, this could be construed either as a problem of ‘too many rights or too few’.

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4 Social problems are about ‘conditions’ (something) and they are about ‘people’ (somebody). This might be explicit (for example unemployment and unemployed people, poverty and poor people) or implicit and subtle (for example deindustrialisation and labour force displacement). 5 Conditions that are regarded as social problems are characteristic of particular times and places. The perception of and political salience accorded to particular social conditions may vary through time and between places depending on prevailing values, norms, beliefs, attitudes and understandings. An example might be smoking in public places, now banned or restricted in most Australian jurisdictions on public health and occupational health grounds. As recently as the late 1980s there were relatively few restrictions on smoking and little recognition of the potential adverse health effects of so-called ‘passive smoking’. By comparison, in much of Asia, there are far fewer restrictions on smoking and little recognition of passive smoking as a social problem. Loseke goes on to suggest that it is possible to argue that conditions are not ‘social problems’ until they have been categorised as ‘troublesome and in need of repair’ (Loseke 2003: 14). She points out that constructing a social problem requires that an ‘audience’ be persuaded that something is troublesome, widespread and capable of a solution – this is the process of ‘claims-making’. Also, there can be multiple ‘audiences’ and these might be segmented in ‘hierarchies of significance’. In other words, while there may be some consensus about particular social problems within particular audiences, this does not necessarily equate to a majority view in the community as a whole. Loseke suggests that over time claims-makers begin to resemble a ‘social problems industry’, by which she means ‘that segment of the social world that produces, manages, and attempts to resolve social problems’. Principal actors in these social problems industries are politicians and lobbyists, professional experts, administrators, organisational advocates, ‘social policy activists’ and even the mass media.

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I nt e r e sts an d lobb y ing There are about as many different theories of interest group influence in the policy process as there are interest groups (Tollison 1991, Thomas 1993). These theories discuss the relative power of interest groups vis-à-vis government and each other, the types of power exercised, policy impacts in sectoral areas, and the implications for democratic societies. Studies often categorise interest groups according to their sectoral orientation (economic/political/ social/moral), status and tactics (insider/outsider, lobbyists/institutional influence, advocacy and lobbying/sectional influence) or range of interests (narrow/ broad, single issue groups, or composite/diverse/amalgamated organisations). There is also much discussion of the types of influence interest groups can exert or attempt: agenda-setting, issue attention and mobilisation, redefining issues, issue suppression, distraction tactics, protests, lobbying or organising political donations. At the broadest level the role of interest groups can be similar to political parties – except that interest groups do not stand for public office and tend to have narrower sets of interests than most parties. In pluralistic models of society, societal demands figure in both the contest of ideas and the pursuit of interests by organisations. Pluralists see the needs contest being about the promotion of ideas and policies in a process that is likely to generate countervailing interests and lobby groups. One preference is likely to generate proponents for and against, who often battle each other in ritualistic combat. These proponents can also opt to lobby behind the scenes, taking pride in attracting little attention but still furthering their interests. For instance, some firms pay consultants to keep them out of the media, while governments sometimes make contentious policy announcements on major public holidays to minimise negative publicity. But countervailing interests are not all equal: powerful structures overlay issue politics. Business has both structural power and lobbying power – but remains a powerful player (because of employment and investment implications) even if it chooses not to lobby. Other lobby groups are next to irrelevant unless they can mount campaigns and create some ‘issue’ or controversy. Many charitable lobbies exist on public donations and community goodwill,

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although the larger ones now have large corporate arms often delivering community services on some profitable basis. In the social services, non-government organisations (typically comprising not-for-profit voluntaristic or charitable organisations and frequently referred to collectively as the ‘third sector’) are important organisers of dissembled interests and a source of lobbying effort. They are significant players in the agenda-setting and ‘claims-making’ process. Most importantly they are active at the coalface and gain not only credibility from this work but an authoritative voice on sectoral matters. Third-sector organisations include large and small charitable organisations, advocacy groups, voluntaristic helping organisations, sporting and social clubs, religious bodies, professional associations, trade unions and political parties. Many of these organisations fall into the category of what Loseke (2003: 37–38) calls ‘social problems activists’, insofar as they are often organised specifically for the purpose of claims-making – persuading particular audiences of the existence of a social problem and mobilising support for social change.

A cto r s o f in f l u e nc e Politicians, parties and platforms Formal political candidates and political organisations compete to form government and produce policy. In theory, political parties serve to aggregate interests and transmit those preferences into policy options. They are engaged in the battle of ideas over policy, take policy positions, attempt to distinguish themselves or agree to compromise over their stances, or broker deals as the political circumstances dictate. But, in practice, today’s parties are often ambivalent on policy or even vacuous or non-committal. There is less emphasis on policy platforms, and policy statements are crafted to be as non-offending as possible. Modern parties are also highly cartelised or oligarchic, controlling the system and conveying only ‘endorsed’ representatives into public office. Party representatives are no longer ‘local’ or ‘popular’ representatives of the

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people, but representatives of the party preselected for chosen electorates and then ratified by the wider public. The major parties are now a political class of professional politicians – almost exclusively groomed from university, from a narrow range of professions (law, business, education), and with almost no experience outside politics before they accept political office. Politics is their first and only career – until they retire to take up other things after their time in public office. This has significance in that ministers are selected from this pool of parliamentary talent – making them pragmatic, technocratic, managerial, cautious and equivocal. Parties have become increasingly presidential with a focus on the party leader and a core of inner advisers. Policy-making is about adjustment and modification, not necessarily about new directions. Influence is driven according to opinion polls, and in some cases orchestrated according to ‘wedge’ tactics (taking stances on issues that one side knows will split their opponents, wedging them on a dilemma). Many local members and party backbenchers have little input into policy settings – but are expected to sell announced government/party policy. ‘Spin’ has become perhaps more important than the policy substance. In contrast to interest groups and community advocates who usually seek to expand the agendas of debate, political leaders and governing parties will often attempt to constrain the marketplace of political ideas. Policy-makers (elected and officials) may try to ‘contain the politics’ or limit the range of influences with which they have to contend. They may seek to manage or guide the marketplace in preferred directions – using various means to achieve their ends (for example limiting agendas or topics for deliberation, pre-determining decisions or the range of options available, limiting or guiding consultation processes, or with whom consultations take place). They may attempt cynical tactics such as shifting the goalposts part-way through a policy process, selectively releasing information, or aborting the process if they do not find the outcomes they desire. Community representatives frequently become jaundiced and disillusioned by such disingenuous governmental behaviour. They often resent the levels of control government officials would like to impose over consultative processes.

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‘Rational actors’, professionals and experts Public policy is organised into consigned sectors and specialisations. In almost all these sectors, professionals and policy experts tend to predominate – their judgments are regarded as authoritative and ‘scientific’, they have expert knowledge and technical information at their disposal, and they have enormous influence in framing policy issues/problems. Health policy, for example, is driven largely by medical specialists and health policy experts. Transport and urban planning is dominated by engineers, planners, surveyors and architects. Education policy is dictated by teachers and professional educators (often through teacher unions). Social policy is managed by social workers, the caring professions, psychologists and sociologists. Crime is largely managed by criminologists, crime prevention and security agencies and the police. Justice policy is driven by lawyers, bar associations and corporate lobbies. Such professions are not neutral – they have biases, ingrained preferences, they work from assumptions and professionally accepted conventions. The major professional groups, if not a conspiracy against the public as George Bernard Shaw once argued, operate as ‘societies’ or clubs with shared norms and ethical dispositions. Their training gives them a certain Weltanschauung (a philosophy of life or way of seeing the world) that privileges certain types of information and techniques. Each profession has its own sanctioned methodologies and endorsed work practices that inform their behaviour and analytical routines. They are also self-referential (they appeal to each other through the profession) and rely on reference points that tend to reinforce ‘professional silos’. One of the consequences of such professional-based silos is the compartmentalisation of policy within specialist agencies and according to professional trainings. This has two further impacts: it matters to the policy process which profession ‘captures’ the particular problem; and discrete professional philosophies make it difficult to attempt integrated or holistic solutions to problems. Many areas of service delivery can be viewed by professionals and technicians as longitudinal designs that are historical, but planned and comprehensive. The nature of the services provided is seen to be driven by professional

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understandings and commitments. Accordingly, most professions adopt variations of the ‘rational actor model’ of decision-making. Rational actor models assume that needs and interests are individual or group-based, and that with relevant information actors will behave rationally in given circumstances. In terms of actual decision-making, such models advocate a rational comprehensive approach to policy-making based on identifiable stages of data collecting, evaluation and judgment (one variant is ‘cost-benefit analysis’ – see the next chapter). Although these ‘scientific’ models have been critiqued as apolitical and value-dependent, they remain powerful processes in the professional approach to policy-making. In contrast to these professional views, outsiders may consider the composition or arrangement of services in any sector to reflect a set of temporary compromises more or less relating to perceived social problems. Such compromises are likely to sustain most existing services while varying service provision at the margins according to political logics or even expediency. The compromise may be arbitrary or orchestrated, reflecting a political reality rather than a perfect world.

Bureaucrats and agency cultures Public officials do not seek to influence the policy process as external interests might. They do not attempt to ‘capture’ government from outside. Instead, they wield considerable influence precisely because they are inside the system and are the advisers of first and last resort to government. They exert great influence through their control over the process itself. Although some bureaucrats argue that they are above sectional interests, provide impartial advice and can argue for the public interest (Shergold 2007; Briggs 2006), in reality officials have bureaucratic interests, field turf wars, and defend their policy preferences. To the extent that a rhetorical myth exists that the public service defends the public interest, it is a selective and nuanced view of the public interest. In practice, officials can enhance (or curtail) ideas and the ongoing processes through which notions of the public interest can be deliberated. They are also meant to be responsive to ministers who may have little interest in wider deliberations about the public interest. Agencies also have their own vested

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interests. They take from the budget what they can get, but few agencies will ever voluntarily return money to the budget that they do not need or which remains underspent. Agency cultures – or as it is sometimes called ‘the departmental line’ – are also powerful imperatives shaping public policy. This may not be readily perceived as political. Some departments display a propensity to opt for regulatory solutions to problems, others to opt for grants and spending programs. Some may have strong preferences for direct service provision, while others will favour outsourced provision. In policy determinations, departments will rarely suggest policy initiatives that do not suit their preferences or behave contrary to their cultures. This at times can be problematic – as in the case of agencies that are very rule-bound dealing with volatile situations or highly contingent developments. Treasuries constantly make noises about wasteful expenditure and poorly thought-out policy proposals, but from an austere stoical vantage-point and without detailed knowledge of implementation or the benefit of street-level experience. Long-serving bureaucrats see many different ministers and governments come and go. They have zigzagged throughout their careers between different directions in policy. Over time they often become hard-nosed sceptics tending to see the world through the lens of bureaucratic norms and constraints. In policy, these actors will often adopt a default position based on what is most convenient or easiest for them to administer or over which they can maintain a semblance of control.

Policy networks Policy-makers, especially in areas of human services and social policy, must engage with loose participatory networks found in policy sectors. These networks consist of a variety of community bodies that may have some purchase within a policy field but which are not organised or mobilised as tight interest groups. These looser coalitions of interests involve civil society groups, welfare bodies, faith-based organisations, voluntary and community associations. They may have limited organisation, little leadership across the community

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sector, and limited resources. However, they may attract considerable media and public policy interest as ‘spokespeople’ for the sector or for disadvantaged groups who cannot readily speak for themselves (for example homeless people, the poor, aged pensioners). Such policy networks and policy communities operate in almost all settings. They comprise the main activists, players, and interested organisations with whom interactions are likely to occur. They are self-forming and adaptive, semi-autonomous and difficult to contain or direct – and it is often impossible to ‘manage’ them despite the best efforts of some public managers. They are mutually dependent (that is they each contribute things to the policy network – resources, information, enthusiasm or access). But they are also difficult to hold to account for services or performance in the public realm. In most cases, policy networks have grown around a policy field or pressing issue and have adjusted their structures and interactions to fit such circumstances; they are naturally conservative and often impede change or the possibilities of more radical sectoral reform. Policy communities can change, but generally do so as a result of external forces rather than internal leadership or innovation. Nevertheless, these policy networks are often effective channels of communication between powerful interests on the one hand (governments, business, unions or the media) and unorganised or disparate community needs on the other. They form the fabric of delivery networks that are essential to most policy-making ventures – not just to delivery logistics but also to issue identification, establishing what is possible or practical, collaborative involvement and policy adaptation. Policy networks have organic and iterative qualities insofar as they provide a forum within which actors seek to compromise, persuade, mobilise, influence or bargain for preferred outcomes.

Non-governmental advocates NGOs frequently seek to influence government policies on particular social issues or classes of constituents. Commonly referred to collectively as ‘third sector’ organisations, NGOs might be consumer-based (representing the

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interests of existing or potential beneficiaries of policy and/or services) or issues-based (for example concerned with broader social, environmental or political concerns). Described by Lyons (2001) as social movement organisations, they use a variety of tactics to pursue their agenda including direct lobbying, public campaigns and/or some form of direct action aimed at capturing media attention. NGOs might also be professionally-based (representing the interests and/or concerns of professionals working in a particular sector) or even industry-based (representing the interests of providers). The latter types are described by Lyons as ‘interest associations’ (Lyons 2001: 191). They are generally focused on the needs or interests of their members and their approach to the task of influencing government is characteristically discreet and highly tactical. Given they are at the forefront of the delivery chain, many third sector bodies seek to address wider issues confronting the social problems they are mobilised around. The relationship between so called ‘peak bodies’ (so called because they operate at the apex of groupings with common concerns and represent collective interests) and governments is often fraught with political and professional tension. Their efforts to influence the direction and content of policy may meet resistance from government or the bureaucracy. Some peak bodies might even consider a combative relationship with the government or public sector agencies as a tangible proof of their legitimacy. From time to time relations between the peak bodies and government become strained, or even adversarial, especially when the former are explicitly critical of government policy and actions. Under these circumstances, governments may become defensive or even hostile towards particular peak bodies and attempt to ‘freeze them out’ of the process of policy deliberation. For ministers and public officials, managing relationships with NGO peak bodies is a significant part of the overall management of risks associated with policy development and implementation. Managing organised opposition or resistance to policy and program implementation can be time-consuming and costly. Peak bodies may even vie with one another for influence with government or public sector agencies and make competing claims of representativeness or legitimacy. Unlike other interest associations, social movement organisations (such as

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those representing disadvantaged groups) usually have no wealthy memberbase to support their activities. There is a tendency for governments to treat social movement organisations as political irritants by portraying them as unrepresentative repositories of minority interest (see Johns 2001 and Johns & Roskam 2004). There is also evidence that Australian governments have occasionally used the threat of de-funding to persuade such organisations to temper their public positions on government policy. Generally, it suits governments to laud the contributions of third sector organisations and posit them as repositories of core community values. Governments may willingly co-opt broadly sympathetic NGOs to further political or policy agendas. Governments can also formulate policies with third sector organisations in mind – hoping they will act as agents of service delivery with a high degree of social commitment. In some cases, partner alliances or close links will develop between governments and particular NGOs based upon a mutuality of interests or moral-philosophical alignment. In Australia, for example, the Howard coalition government was receptive to the Salvation Army with respect to its zero-tolerance drugs policy and Protestant values in caring for those less fortunate. Indeed, coalition governments typically have chosen to cultivate relations with more socially conservative charitable organisations on such contentious social issues as family policy, same sex marriage or substance abuse (Maddox 2005). By contrast, Australian Labor governments tend to be more receptive to bodies whose mission is derived primarily from social justice concerns and whose activities centre on basic needs such as housing, labour market programs, education, health, social security and disability services. In the United Kingdom, the Blair Labour government came under fire from political commentators who questioned its patronage of the left-of-centre Institute for Public Policy Research (Coates 2007). We summarise these forms and models of political interest in Exhibit 2.2 below, indicating the flow of influence, how decisions are taken, the influences on policy-making and implementation, and the different accountability implications associated with each set of influence.

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Exhibit 2.2

A summary of political influences Representative model – liberal democrat view

Rational actor model – expert view

Bureaucratic politics model – hard-nosed scepticism

Types of influence and promotional activity

Community needs and demands are fed into the system through parties and interest groups – pluralist democracy sees the most important issues dominate the political landscape

Experts identify important needs and priorities with reference to professional knowledge; technical solutions that reflect expert biases predominate

Bureaucrats and ministers define and determine the ‘interests’ they are prepared to act upon (or resist) – ‘government knows best’ prevails. Needs and demands are what governments accept

Competition for influence

Electoral politics ensure median voters decide who forms government; electoral competition decides policy commitments – so governments represent majority interests and govern to be re-elected by meeting those needs

Options are formally weighed and evaluated by technocrats; governments rely on professional advice; consultation with the community may be necessary but is likely to introduce expediency or subjectivity

Governments selectively address issues in office and make ad hoc announcements around election times in the hope of being elected. They then work out which bits they will implement – core and non-core promises

Influence over implementation

Governments seek to implement their platforms and policy commitments; they use the public service to give expression to their policy proposals

Governments both rely on and become captured by technocrats; bounded rationalities can limit options contemplated

In office governments avoid doing what they can get away with and only attempt the things they are compelled to do. Policy is expedient and reactive

Types and degree of input into policymaking

Public agencies are responsive to the community, citizens and clients have various inputs into policy-making; agencies monitor their performance through customer satisfaction ratings

Community involvement can erode ‘best policy’ options; market research and surveys may form an indispensable part of the input to decisionmaking

Communities do not have much input into policymaking, agencies work from a ‘government knows best’ orientation

Formal accountabilities are exercised through various mechanisms: parliament and parliamentary committees, the auditor-general, various public commissioners, misconduct agencies, the media, the opposition, pressure groups

Professional accountabilities exist but these are rarely formal or public; evaluation of ‘rational’ projects is highly context sensitive; there is a reluctance to hold professionals to account for their decisions

The accountability chain is weak and hit-and-miss; due procedure and criminal acts are policed, but accountability for performance and service quality is negligible

Accountabilities

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l–

Interest group model – pressure and lobbying

Policy network model – differentiated & disaggregated polity

Third sector and NGO advocates

efine

Interest groups compete to promote their preferences and version of needs; countervailing groups vie for prominence and influence; needs reflect the most powerful interests

Demands and ‘voices’ are widely scattered across loose self-organising networks – network actors tend to focus on the immediate and proximate issues

Third sector bodies advocate welfare interests of their client base; often use standard lobbying; wide diversity of influence

Interests compete to become ‘insider’ groups with the ear of government; there is a distrust of electoral politics; influence tends to be focused on specific issues rather than generic policy

Decisions emerge slowly guided by experience and existing practice; internal relationships can be important sources of influence; some shared understandings can develop within issue networks – mutual adjustment is pronounced

Larger more established third sector bodies will seek to become ‘insider’ bodies; often feel they have a special place and obligation to speak for clients; they are representing others, not necessarily themselves

Governments risk becoming clients of powerful interests in policy sectors (‘clientelism’); policy networks of interests can impede change and lead to stasis

Delivery of policy is mediated between government agencies and network participants – actors have differentiated and diffuse roles they largely set themselves

NGOs perform much real policy work with the community; they have considerable hands-on influence and expertise

Insider groups attempt to get their messages across quietly to government; groups attempt to mobilise the community if they sense they have little power

Network actors are mutually dependent but not solely responsible for delivery systems; network membership and roles are variable; networks are constantly permeable and porous

Input is related to how much effort is expended in delivery chains by NGO bodies; in some sectors close links between government and the voluntary sector is generally evident

Sectional groups tend to adopt a consistency of views to shore up their credibility; interest groups argue that in part they hold government to account; formal accountabilities can be exercised when group representatives are appointed to government boards

Formal accountabilities are weak and disaggregated; network actors are mutually dependent but often not solely responsible for delivery or performance; the ‘many hands’ problem makes it hard to hold one body to be accountable for policy outcomes

Some formal accountabilities through their own structures and values; behaviour is guided by status and professional standing, advocacy norms, and via the expediency of voluntarism

n ows

ents

dress hoc tion

nt –

y ings olicy

eak dure , but ce ble

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I nstitutiona l m e c h anisms In the 1990s, ‘let the managers manage’ was a dominant mantra of New Public Management. Devolution, delegation, decentralisation provided the intellectual bedrock of administrative and structural reforms aimed at breaking down organisational ‘silos’, placing the locus of decision-making nearer the consumer, and rendering agencies more responsive by ‘flattening’ decision-making structures. In the 2000s, however, we have witnessed some efforts on the part of national and sub-national governments to reassert centralised program administration and co-ordination, in part to regain control of outlays, to more effectively manage the fall-out arising from policy failures and to contain perceived organisational entropy. There are a number of institutional mechanisms available to governments to achieve enhanced control and co-ordination. In Westminster-style systems such as we find in Australia, Canada, New Zealand and the United Kingdom, cabinet is an ultimate arbiter and decider of action. Budgets and budgetary processes provide an ‘allocative’ mechanism to reflect choices and priorities. Central agencies operate cabinet co-ordination processes to help anticipate, identify and resolve policy contradictions between portfolios before submissions are considered by cabinet (in Australia, these include Prime Minister’s or Premiers’ departments, and department of Treasury or finance). Interdepartmental committees and special taskforces can assist in resolving differences in design and implementation. Interagency co-operation can be assisted by joint funding arrangements, protocols, partnership arrangements and combined operational teams. In theory, these can be effective mechanisms, but in practice they may contribute further to conflicts and disagreements.

C onc l usion This chapter has explored the intricacies of how politics shapes policy processes and service provision. In doing so we discussed the underlying fundamental nature of politics in society as well as in all areas of policy. We acknowledged

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the role ideologies and belief systems can play in predetermining our understandings of problems and solutions. Social problems are often considered special kinds of ‘problems’ that are hard to contain or even define. We then turned to interests and lobbying, and the roles of key actor groups involved in the service delivery ‘industry’. Recognising the pervasiveness of politics, the difficulty for both policy managers and non-government actors involved in implementing services is in anticipating policy conflicts and contradictions. Examples of policy disagreement abound. Conflicts occur over what needs to be done, how to do it, what options to pursue, and what constitutes success. Contradictions can occur when policy in one portfolio or jurisdiction has unintended perverse consequences for policy in another portfolio or jurisdiction. Non-government providers can fail to comprehend government preferences, or, conversely, governments can change their minds about what they say they prefer. Policy conflicts and contradictions are a pervasive and recurring part of the policy process. We cannot pretend conflicts do not exist, and they cannot be airbrushed away. They can bite. So no matter how prepared governments are to anticipate differences, conflict will reappear with regular consistency. Governments can intend to resolve conflict but will often exacerbate it either unintentionally or by design. No matter how much they are prepared or forewarned, it is difficult to fully anticipate all conflicts or potential adverse consequences of policies. Despite considerable prior scrutiny, consultation and planning processes and ongoing monitoring, governments cannot eliminate political conflicts – we live in a political world. The ultimate issue for government in implementing services is threefold: deciding between alternative options, weighing or balancing competing interests and resolving conflicts.

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3: Understanding   the economics of   service delivery Even a cursory rummage through the toolkit of policy scholars should be enough to reveal a dominant manufacturer’s label: ‘Made in Economics’. For good or bad, much of quantitative policy analysis rests squarely on a set of concepts and techniques that are imported directly from economics. (Smith 2006: 729) … economists have a responsibility and an opportunity to contribute to the policy debate in ways that others in the community cannot or will not do. The economic paradigm provides us with a unique capacity to do this. Perhaps, for this reason, there is a tradition of providing independent advice in defence of the public interest that seems to be stronger within economics than in most other disciplines. (Pannell 2004: 554)

W h y t h e n e e d f o r e conomic app r oac h e s ? In an episode of the BBC TV political satire Yes Minister, the Permanent Secretary for the Department of Administrative Affairs, Sir Humphrey Appleby, is summoned to a meeting with the Prime Minister, Margaret Thatcher. The Prime Minister tells a startled Sir Humphrey: ‘I want you to abolish economists’. She offers as her rationale, ‘They never agree on anything. They just

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fill the heads of politicians with all sorts of curious notions, like the more you spend, the richer you get’. This humorous aside illustrates the often ambivalent relationship between politics and economics. Often regarded as the ‘dismal science’,1 economics often labours under seemingly esoteric concepts and jargon that are not always accessible to those without formal economics training. Despite evidence of such ambivalence, it is essential that governments – and the public policy process generally – demonstrate ‘economic literacy’ when shaping options for the design and delivery of services. The fact is that economics not only provides much of the language of public policy, but also the analytical tools to assess policy ideas and evaluate existing programs against intended objectives. While we can never take politics out of the picture, an understanding of the economics of service delivery is essential to the fulfilment of policy aims.

T h e impo r tanc e o f e conomic ana ly sis The economics of service delivery can be understood in two fundamental senses. On the one hand, human services are produced and delivered within a particular economy and given resource context. A national economy, for example, will be characterised by particular economic attributes such as its level of economic output, the composition of its industries, the structure of its labour force, government revenues and expenditure, and so on. Consideration of these factors and other variables will be important in determining fundamental questions, such as how much government expenditure can be afforded to achieve desirable policy aims. Of course, governments can – and often do – choose to do nothing. Superficially, it may appear that it is impossible to arrive at a consensus with respect to particular problems in terms of their causes, impact or solutions. Here economic analyses can assist policy-makers to clarify and make judgments about the costs of failing to respond to identified social

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problems and, in the event that some response is necessary, choose which option or service model has the best chance of achieving policy aims. On the other hand, government policies, programs and services are themselves subject to the operation of economics which, if appropriately understood, can tell us how to deliver programs and services in ways that optimise the twin goals of efficiency (with regard to cost and effort) and effectiveness (insofar as they create benefits and achieve desired outcomes). Within particular ‘service economies’ or ‘service industries’ (health, education and welfare) – policy interventions are subject to a range of factors, including: the direct costs of inputs (salaries, capital expenditure and overheads); the costs of access (which might be borne by both the provider and the user); the likely distribution of benefits; the opportunity costs of standardisation versus customisation; and whether offsetting income streams is possible or desirable (such as through the application of user-charging). From an economic viewpoint, we can consider the implementation of public services to consist of three discrete stages: • the combination of various inputs (the upstream capabilities) comprising material resources, skilled labour, time allocation, technology, knowledge, assets and financial resources – all of which have associated costs and must be produced and supplied by their own sub-markets; • the production of outputs (or the downstream results) comprising specific activities or products, units of service (variously defined in terms of hours, occasions of service or particular levels of service) as well as the quantum and/or distribution of services, and the value created as a result of the application of inputs; and • the bringing about of outcomes (the intended societal benefits) by using inputs and outputs to leverage changes in the environment or target population from a problematic condition to a less problematic condition – say, from poverty to economic security, from low opportunity to high opportunity, from unproductive to productive, from unemployed to employed or from ill-health to good health.

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Managing the relationships between inputs, outputs and outcomes requires the application of economic analysis and an understanding of core economic concepts. This is why managers of service delivery systems need to be adept at the practical application of economic principles and concepts. Although economics is by no means the only lens through which service delivery could be viewed – as we have seen, public policy is as much a product of politics, societal values, institutional cultures and policy histories – an understanding of the economic underpinnings is essential for determining the feasibility and viability of service delivery systems. This chapter examines how an understanding of economics can contribute to service delivery and the successful implementation of public policy. It addresses the following central questions: • How might an understanding of economic analysis help us as policy-makers? • What methodologies, or tools, does economics bring to the design and delivery of public services? • How have economic theories of the state and human behaviour influenced the extent and form of service delivery? • How can a better understanding of the economics of resource deployment transform or improve service delivery?

C h oosing t h e app r op r iat e sca l e o f ana ly sis There are three broad and cascading levels of economic analysis that can be applied to the understanding and design of service delivery systems: macro-, meso- and micro-level analysis (Freyens 2008). When choosing between competing policy formulations or intervention strategies, the policy practitioner’s choice of economic concepts, analytical frameworks and methodologies will depend on the level at which their analysis is focused.

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I: Macro-economic analysis Macro-economic analysis is concerned with economy-wide issues such as aggregate demand, spending and outlays. It analyses the broad economic trends in the economy and the relationship between a national economy and prevailing global trends. Governments will, on the basis of macro-economic analysis, determine the underlying fiscal policy settings that govern expenditure; they will set broad priorities and determine the allocation of resources across policy domains; and will subsequently adapt the key policy instruments to be employed in achieving their objectives. Policy-makers are concerned with the following core macro-economic issues: • What economic circumstances prevail at a given time, and how does this impact on society and the fulfilment of government responsibilities? • What are the dimensions and characteristics of expressed needs in the community? • What macro-economic and demographic factors are likely to shape the characteristics of expressed need and, therefore, demand and supply? • Should government mobilise to meet these needs and, if so, to what extent? • Is there a rationale for government intervention? • How much can we afford to devote to meeting needs, or alternatively can we afford not to meet them? • Is it technically and economically feasible to address these needs in a substantive way? • What are the opportunity costs or trade-offs associated with taking a specific course of action or inaction?

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Macro -economic analysis, fiscal and budge tary policies

Macro-economic analysis is central in guiding fiscal policy and public finance. It provides a basis from which to assess the impact of government action in an economy: does government action stimulate or inhibit growth; does it create or limit opportunities for wealth creation; does it encourage or deter investment and economic participation; does it constrain or stimulate economic and social capacity. Over the economic cycle fiscal policy can be used in an expansionary manner (to encourage demand and output) or in a contractionary way (to reduce demand, control inflation or suppress overheating). Macroeconomic analysis allows us to conceive of the tax-benefit relationship (or trade-off ) in a given society which will often determine levels of public spending relative to Gross Domestic Product (GDP). It allows us to ask questions about the type and magnitude of revenues available to governments and how these ‘compulsorily acquired’ resources are to be allocated and deployed. We can use macro-economic analysis to understand and explain the dynamics and distribution of costs and benefits arising from government budgets (who ‘wins’ and who ‘loses’). Macro-economic analysis tells us which policy domains (or areas of functional expenditure) are growing (or shrinking) in terms of size and importance and how much resources are used for economic or social ends. Nevertheless, government budgets are not purely driven by economics or science – they are subjective and political. Any budget is a set of economic outlays influenced and constrained by a combination of factors, including history, choices, vested interests, ameliorative measures and cost impositions. It is also important to recognise that decisions made under conditions of ‘bounded rationality’ or ‘imperfect information’ will necessarily have strong – and possibly adverse – implications for street-level implementation (Pressman & Wildavsky 1973). Macro -economic impacts on progr ams

Macro-economic changes or ‘variables’ also exercise subtle influences on the supply of or demand for services by citizens-consumers and the outcomes of service delivery. These effects can have profound implications for policy both

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in the implementation and evaluation stages of delivery. It is essential that program managers and agents of service delivery be aware of these influences or potential influences, not only to predict the direction that service demand and provision costs may take in the short term – and take appropriate actions – but also because it will often be difficult to distinguish program contribution from other economic effects in the evaluation of the program’s outcomes. A large number of statistical economic studies have been conducted on human services to understand the influence of macro-economic factors on the outcomes of policy. For instance, in 1973, Brenner discovered that business cycles were the single most important predictor of admission rates in mental health hospitals (Brenner 1973). He found unemployment and difficulties for job-seekers in obtaining employment due to economic recession had an immediate impact in worsening the incidence of mental health illnesses. Other studies have shown that price increases and inflation also contribute to deteriorations in mental health and to the expansion of mental health services, stressing again the relationship between business cycles and psychiatric illness (Ceccherini-Nelli & Priebe 2007). In this context, evaluations of mental health policy cannot be dissociated from the macro-economic environment, and the evaluation of psychiatric service delivery outcomes (for example measurable improvements in mental health) can be confused by economic ‘noise’. Similarly, the impact of labour market programs such as the ‘Job Network’ in Australia or the ‘Private Reintegration Market’ in the Netherlands cannot be examined in isolation from the macro-economic environment. Contemporary labour market strategies in a number of OECD countries include elements that can be broadly characterised as ‘welfare-to-work’ programs. These are premised on the notions that meaningful employment contributes to self-esteem and wellbeing, and that jobs can be found (OECD 1999). They are also driven by the need to boost labour supply to respond to ‘supply-side constraints’ at a time of strong economic growth. The type of unemployment these policies seek to overcome matters a great deal. If unemployment is mainly frictional (informational mismatches between job searchers and job providers) these policy formulations can introduce the level of

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job-searching flexibility required to match prospective employees to available jobs. If unemployment is mainly structural (fundamental long-term mismatches between skill supply and demand) such policies cannot alone address the inherent capacity constraints in the economy, and must be complemented by investment in school retention and tertiary education. If unemployment is in essence cyclical (that is, related to downturns in the business cycle) the performance of these labour market policies will decline as the number of available jobs dries up. Addressing these issues requires more than a routine reading of relevant macro- and micro-economic indicators. It requires a capacity to produce or collect quality data while developing the capacity to question and analyse it using rigorous statistical methods. Programs and implementation strategies likely to be sensitive to macro-economic circumstances may not always be appropriate or effective depending on timing; and if such programs appear successful in good economic times it may not necessarily be because the program is well-designed and effective but because of favourable economic conditions (see chapters 7 and 8 in this volume). The success (or not) of economic forecasting will depend on the identification of other factors that can influence economic outcomes, such as supply and demand elasticity, spill-over effects or possible multipliers.

II: Meso-economic analysis and public provision Meso-economics deals with industry structures and industry-specific analysis. Meso-level analysis focuses on the characteristics and dynamics of the ‘internal economies’ of particular industry sectors, whether they be manufacturing, primary industry, financial services or, in the case of the public sector, human services, health care, income support, or disability services. Each of these ‘industries’ represent distinct markets in their own right with their own policy settings, enterprise characteristics, cost-drivers, demand structures, pricing, labour force composition, operational cultures, stakeholders, logistical and administrative processes, delivery frameworks and supply characteristics. It may,

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for instance, take another seven years to train additional medical doctors for the health labour force if shortages are recognised today. Industries will also have their own delivery and capacity problems, bottlenecks, skills shortages, regulations and standards. Governments and their agencies might seek to optimise potential synergies between different sectors (for example, between education and labour market programs), or fine-tune their implementation strategies to achieve a better quality of care (say, in relation to homelessness), or encourage behaviour change (perhaps to discourage risk-taking behaviour or over-consumption of diagnostic services), or bring about cultural or structural change in particular industries (such as through regulation or deregulation). Policy-makers and program designers/managers should understand the sub-markets within which service providers operate and, as an integral part of their planning, ought to ask the following questions: • What industry are we in and what are its key characteristics? • What are the principal capacity constraints in this industry? • How ‘mature’ is the market? What is the source, type and extent of market failure? • What are the key cost drivers in this industry (technology, assets, labour)? • What is the extent of over- or under-supply in particular labour markets? • What scope exists for genuine competition/marketisation in this industry? • What scope exists for cost-recovery of offsets (for example compensatory behaviour change)? • What are the trade-offs in outsourced arrangements (cost cutting, quality of service, access to services)? These questions are pivotal to the delivery of any social policy: if designers and managers do not understand clearly the dynamics of their industry, there is enormous potential for failure.

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A ssessing risk s, appr aising industry char acteristics

Assume the government has enunciated a policy that will lead to the delivery of supported employment services for people with disabilities. Persons accessing the service will be either supported in open employment or provided with supported employment in a sheltered enterprise, but with the capacity to progress to open employment. One component of the support provided will be a wage subsidy or ‘top-up’ to recipients. The task of designing the program architecture and implementing programs and services will be delegated to a nominated government entity. In order to carry out its mission, the entity will require a clear understanding of the industry – or industries – in which they are operating. They will need to ascertain whether they are in the disability support business or the disability employment business or the payments business. Answers to these questions may influence choices about the skills base required by the program. The entity will then need to make some assessment of the availability of appropriately skilled workers, the price of labour, and the security of future labour supply. They will also need to understand the enterprise structure of the industry: is it dominated by commercial enterprises, not-for-profit organisations, or is it a mixed economy? For example, many areas of service delivery – such as child care, aged care, health, education or labour market programs – are characterised by a mixed economy comprising public sector providers, nongovernment not-for-profit providers and private for-profit providers. Such appraisals should be undertaken in order to accurately identify the opportunities and constraints that will underpin the eventual success – or failure – of the program. Meso-economic analysis provides useful tools to help assess the difficulties and performance of different service industries. Economic analysis of these service industries allows us to discover the relative costs and benefits of direct public provision against sole market provision or mixed economy models (see Exhibit 3.1 below). Meso-scale analysis also supports the analysis of differences in the working conditions and salaries for staff, training requirements, inspection regimes, licensing requirements and other professional

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norms. It is more difficult, however, to directly compare the implications of incentive frameworks operating within the public, non-government and private sectors. While various participants in particular service industries may be working towards the achievement of policy outcomes, managers in each sector might be motivated by quite different sets of ideas and rewards. In government entities, managers might be primarily motivated by career considerations; in non-government organisations, altruistic concerns might predominate; and in private firms, profit maximisation might be the guiding value. Providing ‘public goods’ in service industries

In many areas of public provision the government delivers services that are ‘public goods’ or ‘quasi-public goods’. They provide goods to the community that it may not be possible to provide through market mechanisms, or that would be provided in ways that we would not prefer. Public goods are goods that are both non-excludable – all individuals can experience the benefits – and non-rivalrous – one person’s consumption does not affect another’s enjoyment. So, public industries such as defence, police services or public art galleries provide pure public goods to the community. We can conceive of some forms of market provision in these domains but this would involve private militias that could not be relied upon to serve collective interests, or private security firms that would serve only their paying clients rather than delivering public order more generally, or private art collections/galleries that would not necessarily contribute to widespread art appreciation. Hence, while some forms of public goods could be delivered in theory through purely market mechanisms, in practice such provision would not work at the level of the whole community. Moreover, if some individuals chose to establish some form of police or defence services for the community (say a benefactor) it would require substantial payments or fees from the community for ongoing operation and would suffer the ‘collective action’ problem of free-riding (people enjoying the services but not themselves paying for them). What this means for service delivery is that the level of provision is arbitrary (what is ‘enough’ defence?) and often driven by the professionals

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Exhibit 3.1

The economics of health care – a case study

The health care industry is characterised by: • Uncapped demand or what we might call a derived demand (where the demand for health services derives from the demand for good health – or, rather, the demand for alleviating ill health; a reactive rather than preventive need, and accordingly, a reactive policy), and where demand generally exceeds supply – each new service, technology or medial test appears to exacerbate the demand side, and demand factors drive costs and spending; • Supply shortages: acute skill shortages, and with technology being a significant costdriver many providers or hospitals are forced to establish queues (causing patient rationing) or pass on expensive costs to private patients; • Various forms of market failure: such as information asymmetries between doctors and their patients (who knows what is best, how many tests are ‘reasonable’ given limited resources, how many repeat appointments or interviews are needed?) The partial provision of health services by the public sector is motivated by market failure arguments: fostering good health in society and controlling endemic diseases are considered to be beyond the capability of either entrepreneurial or voluntary action. Arguments in favour of public engagement in health provision are essentially ‘merit good’ arguments (societies ought to have such services). Health services generally take on a ‘quasi-public goods’ character – that is, they are generally provided (someone’s consumption does not prevent someone else’s consumption and they are said to be ‘nonrival’) and access to services is ‘universal’ (the services are ‘non-excludable’). Providers of health services include all possible actors in the policy arena (public, private and notfor-profit organisations, community providers, church and charity, family members), some of whom will not appear in national accounts reporting (Johnson 2001). Health policy is usually not formulated according to consumers’ willingness to pay, although various partpayment and private insurance schemes are utilised where patients seek more choice or enhanced levels of service provision. The health care industry has long suffered from intrinsic input problems (skill shortages, technology-driven costs, etc.) and demand problems (expenditure is demand-driven and therefore hard to control). Health services also tend to suffer from ‘supplier-induced demand problems’ where doctors over-prescribe or over-supply services. Supplier-induced demand is an ‘agency problem’ by which the service provider adds his/her own demand for the service to that of its clients, say in order to maximise service revenue (for example, a doctor who requires unnecessary procedures and testing). This problem has long been recognised in the medical and allied sector, but applies in effect to all social services characterised by imperfect information.

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Although health authorities seek to control over-supply problems through regulation, it is hard to police effectively or eliminate. Health services consist of a large array of medical and clinical services, hospital and nursing care, subsidised pharmaceutical products, health research and health insurance. In such a complex environment, outcomes are hard to measure (good health outcomes appear less related to health services than income). Economic theories about how to reform health funding, health services procurement practices, containing costs, offering incentives to agents, etc., are so prolific that various economics journals focus solely on health economics.

working in these fields (supply-driven options funded episodically or incrementally by government). Other mixed industries, such as education or health, are jointly provided by the public and private sectors so cannot be regarded as pure public goods. The fundamental infrastructure, research and training is generally provided (or substantially provided) by governments while private suppliers focus on the profitable services that can be directly chargeable to customers (for example, in health: pharmaceuticals, private hospitals, private doctors or care workers, or cosmetic surgery, and in education: private schools or universities, textbooks, computers). Nevertheless we have chosen as a society to provide these goods universally according to need (no one will miss out). Because of the hybrid nature of these service industries we have intense policy debates about how to pay for services, how to ration or limit supply (for example queues or curtailed entitlement), how accessible such services should be to the community, and what component of the service is of individual benefit as opposed to collective benefit. It can also be the case that such industries were originally established in the public sector when ‘market failure’ arguments once prevailed, but that these arguments do not necessarily hold today – and markets can now deliver all or parts of these services. Clearly, not all social services lend themselves equally to market provision or experiments with private suppliers. Meso-economics provides the tools and evidence not only to determine what is technically feasible but also what model (or models) of delivery is socially desirable in order to improve the workings of specific social industries given their constraints and characteristics. We need to analyse the origins of an industry’s market failure, the mix of

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public–private ownership characterising the industry, the possibilities for private provision into the future, and the links between provision and payment to both the community and individuals. One way of considering this mix of public and private was proposed by Rebecca Blank. Based on European evidence, she identified four types of government provision of social services applying traditionally to different industries (Blank 2000): 1 private ownership and management of a service but with government oversight or control (regulated services); 2 private ownership and provision but with public vouchers offered so that individuals can consume (for example food stamps, housing vouchers) or a fee for service is required (for example health services, private education); 3 government ownership and funding of services but with outsourcing of management and operations to private or not-for-profit providers (labour market programs, home care services, some health care services); 4 government ownership, funding and management of services (prisons, public schools, welfare services, pensions, public hospitals). Just as the characteristics of an industry might be historical and almost accidental, so too might the public–private mix within industry sectors. But such mixes can, and do, change over time, often in response to deliberate policy choices and explicit policy preferences (Wettenhall 2003, 2008). For instance, if service quality can be monitored and performance evaluated in employment programs which are designed to redress market failures, contracting out is the better delivery model over direct government provision because of the incentive structures, delivery flexibility and options for customisation available to private providers. Government review and market forces will eliminate poor providers and generally lift the quality of service over time. However, measuring service quality in a timely and accurate way is a thorny issue, which we discuss in further detail in chapters 5, 6 and 9.

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III: The micro-economics of service delivery At the smallest level of economic analysis we examine the behaviour of individual actors or providers. Micro-level analysis focuses on the behaviour of specific firms or organisations within particular sectors or industry groupings. At the micro-level, each service purchaser, provider, or program manager in an organisation is an economic unit, endowed with a set of resources (income, assets, workforce, time, social capital). Organisations can exhibit marked differences in operational culture, supply environment and cost structures as well as having widely varying standards of legal and/or regulatory compliance. Moreover, in many of the areas of public provision, market testing or market disciplines will not apply – hence providers have no real market constraints affecting their decisions or performance. When we examine the micro-economics of service industries we find that a plethora of units, organisations, private providers, networks, voluntary associations and community providers exist. Each will have its own motivations for being in the industry – to seek profit, to break even and cover costs, to recover partial costs, or to provide charity. Each will have its own dimensions of consistency and reliability – private firms deliver when they are paid; charitable organisations, to the extent they have donations of resources and time; volunteers will provide to the extent they are motivated and willing. Often services such as care for the aged will rely on a patchwork quilt of specific micro-providers that may not be integrated or closely co-ordinated. Hence, potential consumers (or their families) may have to negotiate their way through a maze of possible providers to secure an appropriate mix of services. Industry mediators may also take on this role (for example general practitioners may provide wider aged care connections and advice). For government policy-makers it is important to consider where governments can best add value into these micro-networks of delivery. For instance, it is important when designing a service delivery option that involves outsourcing to be mindful of the cultural, regulatory and operational differences between notfor-profit and for-profit (or proprietary) providers – not to mention their respective capacities and capabilities. While it was once considered important

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to distinguish between for-profit and not-for-profit providers (say in tendering processes), in recent years this distinction has generally been eliminated. The not-for-profit providers gain government ‘business’ increasingly on the same basis as profit providers. Nevertheless, the nature of their organisation is fundamentally different and the rationales for offering services are different. Examining economic behaviour at the micro-level, policy-makers and program managers will be concerned with the following core issues: • Do we set ‘prices’ for the service and if so how do we set the price of the service? • What is the cost of the inputs required to produce a given unit of output? • How do providers determine their fixed as opposed to variable costs? • Are the economic units in the industry using their resources optimally and efficiently, and how much is publicly funded resources compared with private resources? • Is cross-subsidisation occurring either within the economic units or between them – and if so is that desirable or effective? • How do we as a community value the output produced by the service? • Are there structural or systemic barriers to optimal resource utilisation? In many cases detailed answers to these questions are not always available to policy-makers. Firms and voluntary associations can be notoriously nontransparent and uncommunicative. Networks can be amorphous and opaque. Private businesses can maintain their privacy. Yet, governments can seek some of this information when providing funding or as part of its regulatory oversight. For example, governments can insist on statements of capability before funding certain organisations, quality assurance information and in some cases business case projections. They can also provide ‘global’ funding for a set of services or itemise them and fund each according to estimates of cost – and perhaps securing greater value for money. Micro-economic information

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can also come from other sources such as national and regional statistics, stock market information, industry surveys, or annual reports of organisations. ‘Pricing’ public services

Public policy and the provision of public services should depend on our capacity for informed decision-making. We wish to know whether or not public provision goes some way toward creating or improving the welfare of recipients (that is, the equivalent of consumer surplus in the market sector). To do this, information needs to be collected with regard to the perceived value of the service to its users compared to the costs incurred by providers. In the private sector, ‘price’ is distinct from ‘costs’, as profit margins are required; but in the public sector notions of cost and price are often conflated. The public sector (largely funded from revenues commanded by the state) is not meant to ‘make a profit’ as this would be seen to be a case of double dipping (taxing once for a service then charging for it to make a profit). Often there are no markets or market prices available to governments, especially when they deliver monopoly services or cannot charge individuals (even if there are usually comparative charging data available – say for water, hospital beds, nursing home charges). But in recent times governments have become interested in pricing their services, principally for two reasons: establishing a price for governments to pay and for providers to accept; and establishing a price for consumers to pay. There has been much debate about establishing ‘prices’ for publicly provided goods and services, especially when individuals gain some tangible benefit. But how are such prices established? Do they reflect demand or supply considerations (or both)? Can non-market prices (‘social value’) be contrived that allow governments to make judgments about the efficiency of their programs or interventions? Can prices for government services be used to prioritise such services and/or their preferred implementation strategy? Contracting out public services to for-profit or third sector operators can be viewed as part of an economic impulse to ‘price’ public services (what is the market price for a given service). But as we indicate below, there is no single agreed pricing mechanism to set prices for the public sector. Consider some of the

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main options governments can adopt.

Nominal or decreed pricing In the absence of demand and supply information, governments may make use of their monopoly power to arbitrarily impose ‘decreed’ prices, which constituents will often perceive as another kind of taxation. Governments can do so unilaterally ‘because they can’ or via some specially commissioned advisory or price-setting body, which provides a degree of ‘independence’ to the decision. Public managers may have a preference for arbitrarily high decreed prices, which may maximise the revenues of monopoly services, or they may prefer arbitrarily low prices when they maximise the market share of competitive services funded through consolidated government revenue (Abelson 2008). Decreed prices may take the following forms: • in many higher education systems, per subject student fees are imposed by the government and set at an arbitrary percentage of their true cost; • in the health sector, general practitioner fees are generally set and paid by governments (then paid out as lump sums) and the time duration of consultations are also capped to regulate the service; • virtually all licensing services (passports, driver’s licenses, etc.) are provided at decreed prices, which bear no connection with service demand or cost of provision information; • in aged care, nursing homes may receive a decreed proportion of a public resident’s pension for supplying care services. In some cases, governments allow some degree of price discrimination or variation on the base decreed price. For instance, a passport may be less expensive if you are ready to wait a month for its delivery, or agree to a lesser number of pages, even though these factors have little bearing on the cost of their provision. In the UK, local councils have considerable discretion setting fees for non-residential home care services to those who cannot afford the services of a home care provider. In several countries, general practitioners can charge a higher fee for services provided on weekends, and prospective patients can choose between providers who charge the full consultation fee

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up-front over those who charge only the differential between their consultation fee and the government rebate. In European countries, universities have largely different set fee structures for EU students and non-EU students. In Australia higher education providers are allowed to increase fees for domestic students by up to 25 per cent, and are free to set their own fees for international students. When providers offer a range of different prices, this gives consumers some degree of choice and can assist in determining the real level of demand or need. Yet, none of these methods of administrative pricing originates in market signals. In turn this means that when governments choose to impose usercharging regimes they will often set prices according to a predetermined schedule of charges or a specific band of charges, which will not (and cannot) vary with market fluctuations. This raises obvious concerns about the efficient valuation of user-charged services and the accountability of the service provision process.

Non-market approximations Another option for governments, in the absence of market information, is to put a value on the non-tangible aspects of a given service that society deems important but that individuals may not personally feel they are consuming (such as improving the quality of life, creating happiness, bringing harmony, investing in artistic expressions, preserving nature, protecting citizens). Such non-market approximations will estimate how far citizens are willing to pay for services they may never or rarely intend to use (for example coastguards or ambulance services, art galleries or the opera). In this case, government agencies can resort to various types of approximations: • Hedonic pricing: pricing services by estimating the market value of their characteristics or attributes. • Imputed willingness to pay: pricing services by induction – what would it cost to replace suppressed services (or deal with the consequences if such services were not available). This method is not based on market usage, but on what citizens are prepared to pay to have the service available (and have potential access).

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• Travel cost pricing: infers the price of a non-market resource by studying the cost individuals are ready to incur to access that resource (for example, the fee people are prepared to pay to enter a national park). We can estimate the value of a service to individuals by what cost they are prepared to incur in order to receive it, whether the cost be in terms of money, time or effort (hence, agencies collect data on patronage numbers for museums, galleries and recreation grounds). • Contingent valuation (CV): this method resorts to surveys asking recipients or potential recipients to directly express their willingness to pay for hypothetical services, or express views from which their willingness to pay can be derived. This method remains controversial with economists, because it is based on stated rather than revealed preferences.

Cost pricing and market approaches When a market exists for a service (or could potentially be created), then the simplest approach to price the service is to let providers compete for service provision. In this approach, demand and supply information, which might not have been available from a control and command viewpoint, is transferred from well established markets or arises from the workings of newly created markets. Service price becomes tied to suppliers’ marginal costs, since supply cost acts as a reservation price for providers (Borland 1994). Regulatory influence can also affect the prices charged for such market services. Economists distinguish between direct and indirect costs of service delivery. The direct costs consist of the prices of inputs pertaining to the program considered (staff wages and salaries, purchase of equipment, rental of facilities, interests on borrowing), while indirect costs refer to opportunity costs incurred by providers that do not relate directly to service delivery (for example administrative and overhead costs, depreciation of existing provider equipment, fleet, premises). In times past, indirect costs (and accrualised liabilities) were often not counted in the costs of service delivery. Governments would regularly omit all sorts of opportunity cost information from their financial accounts and, as a

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consequence, gave the appearance of providing services at a much lower cost. For instance, the cost (and, therefore, the price) of public housing programs should include amounts including the overheads of the administering entity, and the costs incurred by the government in developing the policy and obtaining the approval of parliament. Such global costing should also take into account the long-term liabilities of staff (long service leave, parental leave, sick leave), rental costs of offices, lease costs, and costs of training staff or turnover. These combined – rather than the figure that might appear in annual budgets – are the total costs. Privatised services (using for-profit or non-profit operators) tend to work closer to the economic (opportunity) costs incurred. Private providers will usually apply an indirect cost coefficient to the direct costs of delivery, covering their full opportunity cost of service delivery. Any incentive to overcharge on indirect costs (which are by definition less observable) should be kept in check by audits, both internal audits and performance audits. Once the full cost is estimated, agencies are sufficiently informed to charge appropriately (either to the taxpayer via the public purse or to consumers or to a combination of both). Public agencies may wish to include an additional element to the price as good risk management to allow for a buffer zone against future contingencies (legal or insurance costs related to claims, accidents, dismissal cases, mistakes). In this way, the pricing of government services has tended over the past 25 years to move closer to an approximation of commercial market pricing, especially where there is a mixed economy of public and private service providers. This not only ensures that public providers compete on a level playing field with private providers – in other words, they are ‘competitively neutral’ – it serves also to enable potential consumers to exercise greater choice, thereby leveraging the capacity of competition to exert downwards pressure on price. Agencies and organisational heads will frequently be told they have to ‘break even’.2 For a service to be delivered to a market, providers may need to aim to break even on average (that is, to cover their costs with their revenues). Their calculations will depend on the quantity of outputs provided, or to put it another way, on the number of customers served. To understand this point,

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consider the distinction in micro-economic theory between fixed and variable service costs,3 and the use of marginal analysis.4 For example, labour market programs of special assistance to the unemployed often require operators running training courses to consider the fixed cost of the activity (renting a room and paying staff plus a share of overheads) and the variable cost (providing additional items per participant – such as training manuals and computer access, or repeat delivery if demand is high). As more participants join the program, fixed costs per participant decrease steadily, overall revenues increase and service provision moves towards positive territory. The ultimate fee charged for the service should then derive from both cost considerations (the need to cover fixed and variable costs) and demand considerations (the expected number of service users). In calculating fixed and variable costs there are other caveats we need to keep in mind (Martin 2001). First, physical factors such as room size and the amount of equipment needed can act as a capacity constraint: if the breakeven level of output exceeds capacity, the service is unlikely to be delivered successfully (at least in the long term). Second, if there is a going market rate for the service, it will act as another constraint: if break-even requires setting a price that exceeds the market rate, purchasers or users may boycott the service. Third, agencies providing essential human services may have to use variable fees (means-testing or capacity to pay principles) to allow for the differing economic circumstances of recipients with different socio-economic characteristics. This complicates things, as agencies now must set their fees based not only on the expected number of recipients, but also the socio-economic characteristics of their client population. Cost-benefit analysis of service provision

Assuming a price or fee can be set, economists will still seek to evaluate the net benefits yielded by social programs. The real economic value of a service per se derives not from its price but from the consumer surplus generated by the market provision of the service over and above any costs associated with its provision. In purely market terms, valuing public services comes down to estimating the costs of provision (which establish minimum supply prices) and

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the willingness to pay by recipients. This can be captured in quantitative research known as cost-benefit analysis. In cost-benefit analysis, pricing is not only a matter of cost appraisal. If a rational decision is to be made on competing policy options, some idea of the value of benefits accruing to recipients is also required. ‘Social benefits’ are often hard to quantify and measure. They might include such factors as the impact of a policy on life expectancy, or on education outcomes, or on ‘public happiness’. We regard them as important attributes to wellbeing but find it hard to define what is meant by these terms and how we ought to assess them. Cost-benefit analysis is a form of projected modelling that attempts to capture such benefits by including additional types of information in the decision-making process and in the assessment of ‘value’ and ‘social benefit’. This additional information will include quantitative and qualitative data, often created specifically for the purpose. Cost-benefit analysis involves comparative analysis and hence requires options. It was initially devised to make comparisons between capital works projects. Such options can either be associated with the ends of policy deliberations (rival projects or priorities) or the means of providing them (ways of building or delivering a desired outcome). Cost-benefit analysis methods are based on a rational comprehensive decision-making approach involving logical decision ‘stages’ that can be depicted in linear sequential form or as a policy cycle (Nas 1996). The stages run from the identification of values and objectives, through consideration of policy alternatives, to the calculation of welfare impacts, to estimating the cost and benefits of each alternative, identifying risk and uncertainty, to committing a decision, before evaluating the outcome. It often uses commercial valuation methods – such as net present value, internal rate of return, or cost-benefit ratios (Abelson 2008: 141–44) – to ascertain value. Cost-benefit analysis has the strengths and weaknesses associated with all ‘rationalist’ planning models (Layard & Glaister 1994). It tends to produce judgments of the type: ‘If option A is equally costly as option B, we should fund the option with highest benefits valuation’ (and there is an assumption made that this would then make both economic and political sense – which,

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as we suggested in the previous chapter, may be a dubious assumption). For instance, in the case of the previously mentioned employment program, the social value of the program would be the total number of jobs created multiplied by the social value of the average job, from which we would deduct the cost of the program (Oslington 2005). To capture the various dimensions involved in cost-benefit analysis of projects and programs, the following techniques are the most commonly used. The first two are used principally in public economics, while the last two derive from applied welfare economics research: • Cost feasibility analysis (CFA): this ex ante indicator compares the estimated costs of delivering a service with the resource constraints. • Cost-effectiveness analysis (CEA): this ex post method measures the program’s outcomes (for example the monetary value of a drop in smoking or obesity figures) in order to compute a cost to achievement ratio. Its main drawback is its reliance on physical measurement units. • Cost utility analysis (CUA): this alternative to cost-benefit analysis contrasts the utility (rather than the consumer surplus) generated by a specific service, with the cost of providing it – for example the QALY method used in health care valuation research (Torrance 1986; Drummond et al. 1987). • Shadow pricing: uses general equilibrium theory and linear programming techniques in situations for which a price cannot be charged or where the price reflects neither the effort made in producing the service nor the distortionary effects of the means used to generate its funding (Jones 2005). While such rationalist techniques as those above can be used to assess the validity of data, cost-benefit analysis suffers because of its reliance on pure logicality. As we saw in the preceding chapter, political factors, conflicts of values and interests, and other decision-making processes have a major influence on decisions taken by government. It is difficult to undertake a cost-benefit analysis of a project if there is no agreement at the outset as to what values are

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paramount and what objectives are to be achieved. Ironically politicians are some of the least likely people to be explicit about those matters on which the entire edifice of cost-benefit analysis rests. However, these critiques should not necessarily lead us to discard cost-benefit analysis as a useful policy tool but, rather, to be realistic and pragmatic in its use and cautious when acting upon its findings.

C onc l usion This chapter has introduced some major economic concepts and specific analytical techniques of importance to those engaged in public policy and service delivery. In many cases policy-makers will be expected not only to understand such concepts but to actually apply them in policy contexts. Economic analysis will not only assist managers to evaluate and enhance the performance of services, it also assists them to consider what relative value particular policies play in the broader economic and social environment. It is not the intention of this chapter to imply that economic analysis should alone be the basis of decision-making but that economic concepts and methodologies are crucial to the development, implementation and evaluation of ‘good public policy’. At the macro level, we saw that economics begins with a view of economic capacities and resource flows between individual and collective actors. In this context governments are themselves active economic actors, consuming and redistributing economic resources but also attempting to manage the economic pie through fiscal policy, regulatory policy as well as supply and demand interventions. Governments may claim to act in the ‘public interest’ by making collective decisions (say, on the level of defence required) or attempt the aggregation of individual welfare (to improve social outcomes). We can use a macro-economic lens to analyse overall levels of government spending (compared to GDP or assessed over time) or to probe the relative levels of functional spending on specific policy sectors. It is evident that the

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scope of government responsibilities has increased over past decades and is likely to continue to increase into the future. Using macro-economic analysis we can pose larger questions about the tax-benefit trade-off between citizens and government. And we can attempt to assess the broader economic contribution of a given policy or set of programs to overall efficiency and collective welfare. At the meso, or industry level, economic approaches can assist governments in determining the most desirable forms of policy involvement in specific industry sectors. With significant powers at their disposal, governments can seek to shape industry dynamics to better reflect principles of efficiency, effectiveness or equity. Markets for public services are notoriously imperfect and they differ markedly from one another in their degree of autonomy from government control, the nature of the market failure encountered, the skills required, and the quasi-market architecture. In many service industries we have seen greater emphasis placed on competition and performance where previously there was very little. Such competitive pressures are likely to continue and, as a result, meso-economic analyses will continue to be an important element in the design and delivery of services and the evaluation of existing service delivery systems (our back legacy). At the micro level – for example, at the level of the individual enterprise or firm – understanding the economics of resource flows (income and outlays, the costs of finance, the importance of inventory control and human resource management) is essential to managing effectively. As such, micro-economics provides guidance to bidders in contract tenders for social services, to program managers in the cost-benefit evaluation of their activities and to street level practitioners trying to anticipate daily needs and demands. Microeconomics also offers ways to evaluate the ‘price’ of public services in the absence of market signals. Each of these three levels of analysis requires the framing of economic hypotheses, the collection of economic data and the analysis of those data in an effort to forecast likely trends and developments. Identifying such trends can assist in the comparative evaluation of policy options or in measuring the projected outcomes attributable to particular policy interventions. Policy

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professionals, whether they are program designers or administrators, or involved more closely in implementation and service provision, will generally be mostly concerned with the meso and micro levels of economic analysis and, increasingly, with the tools of cost-benefit analysis.

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4: Choices in  delivery

Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them. (Peter 1982) The kinds of problems that planners deal with – societal problems – are inherently different from the problems that scientists and perhaps some classes of engineers deal with. Planning problems are inherently ‘wicked’. … the problems of governmental planning – and especially those of social and policy planning – are ill-defined; and they rely upon elusive political judgement for resolution. (Not ‘solution’. Social problems are never solved. At best they are only re-solved – over and over again.) (Rittel & Webber 1973: 160)

In this book, we are mainly concerned with the political, institutional and policy responses to ‘public policy problems’. As we discovered in chapter 2, most of what governments do in the form of policies, programs and services exists, ultimately, to address or resolve social problems. Many, but not all, perceived social problems make it onto a formal policy agenda for action. They are the subject of much public and political debate and there is enormous difference of opinion about their causes and cures or, indeed, whether they are problems at all. Many will have multiple dimensions, change over time or appear as ‘wicked problems’. Similarly, there is also much debate over how to resolve such problems. Policy-makers have a broad menu of policy options from which to choose when designing specific interventions to address acknowledged problems.

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This chapter is concerned with the actual delivery of policy. It identifies the range of choices available to policy-makers for the achievement of policy objectives. It surveys four key sets of choices governments encounter in the policy process: • What is the policy intent or objective – what does the government seek to achieve or what would it like to do in relation to an issue or matter? • For whom is the policy intended – who will be affected or is the intended recipient, and what scope of provision is envisaged? • How is the policy to be delivered – what modes of delivery are available or preferred? • What policy instruments are preferred to produce the desired intent, and what choice or mix of instruments is available? Governments face some limitations in relation to these choices: they are often constrained by pre-existing patterns of delivery that can be hard to change over the short term; policy legacies and path dependency often remove much of the discretion governments might wish to impose in sectoral delivery systems; and some policy choices may be forced on governments, caused for instance by global factors, powerful lobbies or organised interests. While in theory policy-makers may have a broad menu of options from which to choose when designing policy to achieve priorities or address acknowledged problems, in practice their choices are likely to be circumscribed and subject to the deployment of resources already extant. In this chapter we explore the choices underlying policy provision and the consequences for policy itself of making those choices. As we show in chapter 7, the design of service provision will reflect a combination of choices, which may be iterative (in that one influences another and vice versa), or mutually dependent (in that one predetermines another), or relatively separate (in that one option does not preclude others).

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P o l ic y int e nt – d e si r e d impact All policy is about affecting behaviour, seeking to preserve or change social outcomes. It can involve the allocation of benefits or services or the compliance to desired norms or rules. Governments make choices about their priorities and in the process search for ways to implement these choices. They intend to have impact. Most governments want to possess the capacity to enable their desired policy impacts to be achieved; we call this ‘policy integrity’. In theory, policy intent could be decided in isolation at the outset of the policy cycle – say, in electoral commitments or policy platforms before a party forms government. More frequently, policy is generally formed within the policy context using the considerable resources of government with input from the various interests and the wider community. They could also be ‘evidenced-based’ in that analysis and evaluation of the merits of existing policies prescribe the options for policy adjustment. Hence, most policy choices (where the action is) are formed iteratively within existing policy settings, where problems, preferences and policy instruments interact continually. When examining the ways service provision could be delivered, policymakers should know and understand the objectives or priorities governments are seeking to achieve. It is valid and legitimate for policy to be revised, replaced, adjusted or cancelled. Organisational cultures and existing modes of delivery may have to be changed or realigned with changing priorities. One aspect of policy intent is that governments may wish to devise or be prepared to finance a particular policy proposal but not be prepared to deliver it themselves. In both federations and unitary states, governments might choose to fund programs but rely on other levels of government or nongovernment providers to deliver them. Hence, the link between policy intent and the eventual mode of delivery can involve a chain of players and organisations, each with their own priorities and interests.

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T h e scop e o f p r o v ision One of the most basic decisions involved in policy choice is to do with the intended recipients or the scope of provision. The latter involves choices about what is provided, to whom, and on what basis. Governments generally have to resource the full costs of their service delivery choices, so the immediate question they have to determine is whether they wish to opt for a broader or narrower eligibility. Hence, questions of policy scope generally come down to determining extensiveness, applicability, and criteria of entitlement or cut-off boundaries (means-testing). Policies can be shaped to suit different populations or markets, different clientele or beneficiaries, different users or audience types. Generally we can conceive of a spectrum of modes ranging from universal provision to the entire population through to selective provision to targeted groups deemed as priorities.

Universal provision Universal programs are available to a whole community for which entitlement is conferred by the relatively simple test of citizenship or legal residency. They are ‘universal’ not because they are given to everyone the whole time but because they are available for all in society when they may require such services or assistance. Among the main types of universalist programs emerging over the post-war years were financial benefits and entitlements, such as aged and disability pensions, income maintenance and family support schemes, unemployment benefits and worker compensation payments. In addition, governments also provide some essential services universally including public education, health care programs and pharmaceutical provision. Universal programs were traditionally ‘uncapped’ financially, not meanstested, and were given legislative sanction and protection. In Westminsterstyle jurisdictions – including Australia, Canada, New Zealand and the ultimate Westminster jurisdiction, the United Kingdom – universal programs were usually funded from government revenue. By contrast, many universalist policies in continental Europe were based on contributory schemes (‘social

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contributions’ or ‘social insurance’ schemes where individuals contributed to the benefits through taxation or levies) so there was a strong sense of ‘earned investment’ rather than charity. Identified contributions (taken through the tax system) provide tangible benefits such as pharmaceutical subsidies or workplace insurance cover. Other social contributory programs provided entitlements irrespective of income, rank or economic circumstance. Hence, while social programs may be premised on universalism (in that they applied to everyone when necessary) it was not the case that the level of benefits was equal or standardised. For instance, contributory pension or unemployment schemes in Europe often paid recipients different rates according to their degree of entitlement and how much they had ‘personally invested’ into such schemes – so displaced managers would receive higher unemployment benefits than ordinary workers who lost their jobs. The benefits flowing to the community from these types of programs were generally held to be the mark of a mature, civilised and compassionate society and, as a result of universalist entitlement, these programs enjoyed support across the political spectrum – becoming, in the process, political ‘sacred cows’ unable to be touched or dismantled. We may well inquire, given the potential costs and expensiveness of universal schemes, why previous governments so enthusiastically embraced these policies. The answer lies not with one specific reason but rather a range of contributory factors. In the decades following the Second World War many economies experienced high rates of economic growth, and so they considered they could afford universalist state welfare. Electoral demands played a part. An increasingly aspirational working and middle class contributed strong electoral pressure for the extension of health, education and income support programs. Social democratic governments came to power aiming to effect a broad scale redistribution of national wealth and the broadening of opportunity within their societies. Conservative governments often felt that they had to maintain (and even expand welfare measures) to match their opponents or to dispel notions that they were anti-provision (Castles et al. 1996). There was also the notion that people deserved basic services irrespective of their social circumstances; and that people had ‘paid for’ their benefits

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through their contributions to society or compulsory contributory insurance schemes – and accordingly were entitled to payments or services when the need arose. Moreover, making these programs universal in nature helped to increase their acceptability across the political spectrum because everyone in the community stood to benefit from them. It was only later after the long economic boom ended that concerns about the affordability and sustainability of universalist programs served to move governments and electorates towards stricter eligibility criteria or more stringently targeted programs (to selective recipients). Such concerns also tended to be reinforced with criticisms of the perceived failings of ‘welfare dependency’. So, although most European nations have largely maintained their universalist programs, they have also attempted to ration them in other ways (such as increasing the age at which people can claim an aged pension).

Selected or targeted provision More recently, in many other advanced democracies, selected provision or targeting is increasingly accepted as an appropriate stance underpinning most areas of social provision. The scope of intended provision is deliberately restricted. Governments have sought either to contain costs by rationing eligibility or to focus resources on specially desired targeted groups. They do this by limiting payments to select groups who fall within certain pre-specified criteria. Australia has had a long history of targeted provision. The cornerstone of this ‘residual’ provision was industrial arbitration (the wage-earner’s welfare state), which introduced means-testing of benefits and payments. Targeted family payments or income maintenance rely on rigorous systems for determining eligibility based on assessed need, available income or assets, citizenship status or place of residence. Access to public services is a function of the finite capacity of available resources. Governments have argued that under budgetary pressure they can only commit limited additional resources to fund desired programs. If resources are capped, then some rationing of usage has to be imposed, restricting eligibility or involving consumer decisions about particular trade-offs (are users prepared to queue and

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wait for their turn; will they seek an alternative service at their own expense, or will they go without?). In part, this is about demand-management and curbing demand-driven or open-ended access. Targeting both prioritises and excludes; it can restrict access, cap entitlement, and put in place disincentives to access public services and incentives to seek private, market-based alternatives. Targeting enables governments to focus resources on areas of persistent need and to tailor programs to the circumstances of potential beneficiaries while preserving the financial viability of programs, maximising the return to the community and controlling outlays. Targeting allows for strategic intervention to address needs and/or problems having definable characteristics or dimensions pertaining to behaviour, health status, economic participation, geographical disadvantage, risk to wellbeing or any combination of these or other presenting problems. The increased use of targeting initially coincided with a period when governments became increasingly uneasy about carrying budgetary deficits. It also coincided with the emergence of managerialist approaches to public sector management that emphasised a focus on a more precise identification of outputs as well as the achievement of measurable outcomes within a rational performance framework. Such changes in thinking within governments led to a fundamental reappraisal of the systems for financing and delivering services.

M o d e s o f d e l i v e r y A threshold issue for governments in designing new policy initiatives or adjusting existing provisions will be a consideration of the most appropriate means of delivering the policy aims. These ‘means’ go to the essence of the issue of how a given service will be provided and through what medium – the state itself, or other non-government organisation. Determining ‘appropriateness’ is a complex issue and likely to be influenced by history, today’s preferences for delivery, available options and their anticipated effectiveness. It

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might involve considerations of political and practical feasibility of a range of program and service models, relative costs and the capacity for integration and complementarity with other programs and services. Governments occasionally rule out options of which they do not approve, or disregard them due to other political considerations. A key decision-point in the design of delivery modes will be whether governments wish to provide the service themselves directly, quasi-directly or indirectly via third parties. The choice about the means of delivery can be connected to the fundamental design intentions of whether the service is intended to be universal or selective, as shown in Exhibit 4.1 below. Exhibit 4.1

Modes of service delivery

Scope of provision – target group

Mode of delivery – through whom

Policy example

Universal and comprehensive provision

Direct – government provided

Compulsory public schooling; universal health coverage or ‘core services’; tax rebates; child protection services

Quasi-direct – required universally but delivered by others

GP health services; superannuation; payments through the banks; home care support; support for aged care

Indirect – mandated but not provided by government

Third party service provision; curricula in non-government schools; universal building codes; food standards

Direct – government provided

Family payments; entitlements and pensions; seniors’ cards; child care subsidies to parents; rebates for water-saving measures

Quasi-direct – funded to particular subgroups not provided by government

Child care centre subsidies; specialist health care for veterans; assistance payments to GPs for related health services; deferred income loans such as for higher education

Indirect – mandated but not provided by government

Employment services for the disabled; employment services provided by private firms; private prisons; homelessness programs

Selective or targeted provision to sub-groups

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Direct provision by one tier of government Until the 1980s, the predominant trend in most OECD countries was for services to be provided directly by national and sub-national government agencies. This was often supplemented with a wide variety of charitable and voluntary not-for-profit organisations in the provision of education, health and other human services.1 Government service provision became the preferred norm, partly to ensure control over both the means of service delivery and recipients, and to guarantee delivery where markets were weak or non-existent. Governments would establish enabling legislation, and then deliver services directly using government funding and government employees. In many cases special public agencies were created both to administer the services and undertake the delivery. This reflected a belief in the superior ability, or reliability, of governments to leverage maximum economic and technical efficiency in meeting societal needs, creating opportunity and addressing social and economic disadvantage. The command structures of the state could be relied upon to ensure the consistent delivery of standardised services. In addition, direct provision provided the state with a powerful mechanism to assist social redistribution – and eventually a wider package of programs to the disadvantaged under the label of ‘social wage’ provisions. Direct provision remains a significant mode of delivery. Most mandated services are still predominantly supplied directly by governments. These include services such as hospitals, primary and secondary education, tertiary education, policing, income support and basic public infrastructure services (roads, transport or libraries). These are services that governments in most developed countries are generally expected to provide. Where services have associated regulatory functions attached to them, with ‘coercive’ or ‘enforcing’ aspects of administration – such as with child protection services, some mental health services, censorship regulation or correctional services – direct provision may be the preferred option owing to the levels of moral hazard that might attach to their delivery if provided by third parties or agents. There can be exceptions to the rule if governments can ensure compliance, as is the case with immigration detention centres or

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public prisons operated by private-for-profit firms under contract to national or sub-national governments.

Direct provision through intergovernmental arrangements In federal nations such as Australia, Canada and the United States, national governments have found it expedient over the years to enter into bilateral agreements with sub-national levels of government to deliver services in furtherance of agreed aims. It should be noted that the politics of these arrangements can differ significantly between different countries. In the Australian federation, for example, states long ago (1942) ceded the power to collect income tax to the federal government, thus severely restricting their direct revenue base and making them dependent upon federal grants to meet the costs of service provision. In contrast, Canadian provinces and American states can directly tax income and enjoy a broader revenue base generally. Although subnational jurisdictions in both countries receive grant funds from their national governments, there is greater capacity to match funding, and provinces/states enjoy greater leverage in negotiations about how services will be provided. In Australia intergovernmental agreements are generally funded through Special Purpose Payments (SPPs) or, more recently, National Partnership Payments (NPPs) which come with performance bonuses. These payments from the federal government to state and territory governments can only be used for specific purposes set out in legislation and/or heads of agreement negotiated between governments. Such agreements are not contractual in the strict sense, although breaches can incur sanctions (generally involving the withholding of subsequent funds). The nature, extent and standards of services to be provided by sub-national governments are specified in the agreements as are financial, accountability and reporting provisions. Multilateral agreements are currently used in Australia to provide services for people with disabilities, hospital and medical care, mental health services, public and community housing and home and community care services for the aged and people with disabilities. In many respects, intergovernmental agreements are policy

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compromises arising from specific historical and political contexts. Exhibit 4.2 below illustrates the interconnectedness of intergovernmental service delivery in housing policy. Exhibit 4.2

Housing policy: a patchwork of service provision

In Australia, government involvement in the provision of housing assistance commenced with the first Commonwealth/State Housing Agreement (CSHA) in 1949. Originally intended as a post-war reconstruction measure to house returning servicemen and their families, the original CSHA provided for the provision of funding by the national government to state government housing authorities for the construction of public housing as an alternative to private rental or ownership. From their inception, the universalist flavour of the first agreements gave way to a more targeted scheme focusing on the provision of housing assistance on the basis of disadvantage. The current CSHA embraces a variety of service delivery strategies including the direct provision of housing stock owned and administered by other government authorities, head-leasing of properties from the private market to be re-let to public housing clients, and community housing funded by government but owned and operated by not-for-profit organisations. Rent charged to clients is means-tested (tenants contribute a proportion of their rent based upon their reported income) and priority for placement in public housing is targeted. State and territory housing authorities plan and deliver services – including determining the mix of services and the locations at which they are provided – and report financial and performance information against agreed service standards, outputs and outcomes to the Commonwealth. Some state housing departments have established low-cost entrepreneurial building companies (operated at arms-length from government but funded through foundation trusts) to accommodate homeless clients. The CSHA is complemented by parallel systems such as rent assistance (paid through the Commonwealth’s income support system) and accommodation support programs provided under the Commonwealth State/Territory Disability Agreement. These also reflect a mix of approaches and providers. State and territory regulatory programs also operate in this mix, governing physical and operational standards for designated boarding houses and hostels for people with housing support needs. A range of ancillary community support services further augment housing assistance programs by assisting people to live independently. The Commonwealth also allows private landlords to negatively gear (claim tax concessions) their mortgage payments on rental properties in order to add to the rental housing stock. Finally, both Commonwealth and state/territory governments operate first home ownership schemes to enable new housing market entrants on low incomes to purchase their own homes. Taken together, we can see that housing provision and assistance in Australia exhibits

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elements of direct service provision, indirect service provision, arms-length delivery, targeting, means testing, payments, subsidies and tax expenditures. These assistance measures have largely arisen in an ad hoc way with new initiatives being added into the system for identified clients. From a client’s perspective the system appears atomised and disaggregated rather than comprehensive and they may not know which scheme they qualify for or which agency they ought to approach.

Quasi-direct provision – hybrid or mixeddelivery systems A variety of human services operate through hybrid forms of delivery. These can exist in connection with or parallel to the pattern of public services. Private ‘for-profit’ and non-government ‘not-for-profit’ providers have long coexisted to provide health services in private hospitals and clinics often subsidised by government, or education provided through private schools. There are often varying degrees of integration or co-ordination with the public sector and/or the public subsidy regime in different jurisdictions. Some jurisdictions have been characterised by relatively ‘loose’ integration while in others, regulatory, financial and practical integration is such that non-government service providers are, to the consumer’s eye, virtually indistinguishable from service providers in the public sector. In some cases, hybrid or mixed-delivery systems take shape in service delivery landscapes in which non-government service providers have been historically dominant – even predating the advent of public systems. As government becomes more active in service provision, voluntary, charitable or other private sector players can be co-opted in an enlarged and regulated service delivery market. In other cases, non-government service providers have arisen in response to a perception that generic public systems do not cater for the needs of particular groups in society (as is the case with many alternative or faith-based schools). Non-government service providers might also arise as a function of government’s attempts to create new markets (and providers) for service delivery either through the provision of grant funding or tendering for services.

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In some policy sectors, the main role for government may be facilitative, oriented towards achieving a better alignment and fit between public provision and the activities of non-governmental service providers (such as through the application of a standardised core school curriculum or standards of care in private treatment facilities), or to achieve equity between those who prefer to use non-government services (either through direct subsidy to service providers or to service consumers in the form of rebates or tax concessions). In rare cases, governments have sought to resolve the potential tensions between public and non-governmental systems by absorbing the latter into the former, as was the case of the Home Care Service of New South Wales and child welfare institutions in Tasmania in the 1980s, or more recently, the nationalisation in the United Kingdom of failing public schools (Curtis 2009). The nationalisation of non-government service providers is, however, more commonly observed in developing countries – where an expanding state sector can subsume existing private and non-government providers – or in countries characterised by long periods of civil and political unrest, where social and political control are key policy drivers. For example, during the 1990s the Burmese military junta progressively amalgamated non-government service providers into ‘government organised non-governmental organisations’ subservient to the regime’s political goals (Turnell 2009). In the case of developing countries with fledgling democratic systems, such mergers can be consensual, as in South Africa in 1994, where some non-government social welfare providers, which were also civil rights advocacy groups, joined the ranks of the first post-apartheid government (Habib & Taylor 1999).

Indirect provision through third-party providers Governments frequently elect to provide services indirectly using other nongovernment providers to perform the actual delivery. This can occur through third-party service providers who are either funded or contracted by government to deliver specified services or by enabling consumers to ‘purchase’ prescribed services from a provider of their choice. Even with mandated services

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(those required by law), governments can express a preference to provide such services indirectly. Third-party service providers consist of non-government entities that are in the business of providing services and, as such, form part of the policy network of service provision. They are not themselves the consumers of the services. Third parties are so-called because they are delivering services for the first party (government) to a second party (the end-user, client or consumer). Third-party providers can range from profit-making commercial businesses answerable to shareholders to not-for-profit (or third sector) organisations motivated by charity, philanthropy or faith-based considerations. When contracting these bodies to deliver services, public agencies need to be able to quantify the required level of inputs (human and material resources) and accurately describe expected outputs (that is, service standards); project realistic cost structures appropriate to the level of service required under the funding agreements, and put into place appropriate control and compliance regimes. When ‘purchasing’ services to be provided by third parties, public managers need to consider and manage a variety of business and continuity risks associated with: • the reputation, governance and operational viability of selected providers; • the relative merits of private-for-profit or not-for-profit service providers for particular end-users or target communities; • issues associated with liability and duty of care (for example, if inputs of volunteer labour form a part of the service model); • the vulnerability of particular end-users or target groups together with the degree of compulsion inherent in the service design; • commercial and client confidentiality as well as possible conflicts of interest; and • the ‘maturity’ of the relevant market and the characteristics of supply. While ‘arm’s length’ relationships between the public sector purchaser and the private sector provider can seemingly confer important advantages to

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government, failure to fully canvass the range of potential business risks and opportunity costs can have politically and operationally damaging consequences (as was the case in Australia with the failure of ABC Learning, a private sector child care provider, which at the time of its collapse in 2008 accounted for around one-fifth of long stay child care places nationwide, necessitating an A$22 million bailout by the federal government).2 In some instances, governments will not act as the ‘purchaser’ but will instead seek to provide grant funding (which can be either ‘tied’ or ‘untied’ to specific purposes) to community groups or other types of non-government not-for-profit organisations engaged in activities that are broadly aligned with government objectives and policies. Examples might include capital grants for the construction of community facilities or the purchase of equipment; financial contributions towards the recurrent costs of identified positions or nominated activities; or one-off grants towards the costs of community events. Many incorporated non-government organisations also benefit from tax expenditures in that they are not liable to pay tax on their income or in the form of offering tax deductibility for charitable donations. However, while grant funding from government to non-government organisations enables the provision of a wide variety of services to organisation members, particular needs groups or the community at large, these do not necessarily form part of the service mandate of government. Notwithstanding, dependency on government funding for the activities of community groups can create the expectation of continued public sector support and even give rise to the perception that the services provided enjoy the express sanction of government.

Facto r s d r i v ing c h oic e s on t h e mo d e o f d e l i v e r y Governments are continually re-engineering the balance between direct and indirect service provision. In some cases, these choices derive from fundamental ideological or value positions within a polity: France or Sweden, for

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example, continue to broadly accept the logics of direct state intervention and the benefits of a robust state sector, whereas in the Anglo-American world the rationale for state intervention and direct service provision has been comprehensively challenged. In a world where the affordability and sustainability of government programs is a central consideration, governments have also needed to subject their decision-making to market-derived logics, including decisions about whether to ‘build or buy’: in other words, should programs and associated infrastructure be wholly developed in-house (with all development costs absorbed by the commissioning agency) or sourced from the market? There does not appear to be a steady state or equilibrium norm. The fact that some services have been outsourced to private providers does not mean that they will necessarily remain outsourced – and there are many examples of governments wavering between direct and indirect provision over time. There are a number of important reasons why governments might opt to outsource, including: • Controlling costs – historically, governments provided services directly because no obvious market existed for their provision. Also governments were able to realise important economies of scale, achieve policy integration, leverage the supply of inputs and deploy resources geographically. Imperatives to control costs arose in the face of significant growth in public sector outlays and the inability of some service delivery departments to contain cost explosions. There is now a perception that costs can be better controlled by fixed-price contracts with third-party providers. Cost concerns were important as governments accepted wider responsibilities for social provision and experimented with variegated expressions of ‘need’ including more customised and case-managed services. • Offering flexibility, responsiveness and choice – a persistent criticism of direct provision has been that public sector providers are inherently inflexible in service provision. This inflexibility is generally attributed to a culture of strong bureaucratic control (that is, risk averse, hierarchical and incapable of innovation or entrepreneurial

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behaviour); a conservative, rule-bound operating environment characterised by relatively high levels of union membership and restrictive work practices; and requirements to treat clients equally or with standardised provisions. Third-party providers exhibit diverse cultures, organisational styles and workforces. They are not bound to the same degree as public sector providers to provide standardised services – or even to deliver services equitably – and may deliver government services in addition to other services they may already offer. They may allow clients more customised services and greater choice. They are often more agile and able to respond expediently to local needs. • Greater access and equity for clients – when delivering directly governments must have organisational capacity on the ground where services are needed. This is both expensive and often impossible in remote or regional contexts. Outsourcing enables third-party providers who may already operate in the area, such as churches, voluntary organisations and local councils, to deliver services locally and increase access for the particular community. Governments can ensure greater equity of access to services by working through others. Countervailing reasons as to why governments might seek to retain ownership of the arrangements for direct provision include: • the capability to overcome market failure in order to respond to needs wherever they arise – there may be no providers available or prepared to deliver; markets may not be fully contestable (market failure); provider firms may collapse or vacate the industry; providers can face capacity constraints such as the inability to recruit and retain staff; • the ability to cross-subsidise operations in higher-cost locations and the capability to leverage constructive linkages with other arms of government service delivery; • as the co-ordinating authority, governments are in a position to integrate or combine policies or agencies, and use their superior

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resources to invest in or create value chains. For instance, governments can influence the supply and costs of labour for a particular policy sector through associated policies in the technical and tertiary education sectors; • government bodies are budget-dependent and therefore do not need to generate a profit for distribution to shareholders or even recover costs from income; • it may be considered important for governments to maintain authority and control or to have a visible presence, as with policing, some prisons, air traffic control, child protection officers and some care workers. Ministers may insist on direct provision of a service for other reasons perhaps not associated with the service itself. Direct provision of social services to regional centres is often undertaken to sustain the local economy as much as to ensure the services are provided well.

C h oosing app r op r iat e po l ic y inst r um e nts Governments have a variety of policy instruments or tools they can use to achieve their intended goals or in order to have impact (see Salamon & Anheier 1996, 1997). Policy instruments are the levers selected by the state to give expression to its intentions. They vary according to the degree of compulsion in the use of public power, the resource configurations that can be applied, the types of incentive arrangements preferred, and the forms of influence desired. We can regard them as a spectrum of instruments – ranging from ‘hard’ coercion to ‘soft’ coercion. In most cases, policy sectors will consist of a mixture of different policy instruments rather than individual discrete instruments. There will always be issues of whether the precise mix within the sector is the most appropriate or most effective, and perhaps whether it is compatible with the aims of other policy sectors. Within a policy sector, specific programs

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may primarily involve one or two instruments or tools, such as funding and some regulatory requirements. At the broadest level we can identify five generic forms or groups of instruments. These are: • authority and compulsion (using state power to command and enforce – through statute or regulation); • taxation and spending (taxing to spend or alter behaviour – for example ‘sin’ taxes – allocating expenditures, funding schemes, grants and subsidies); • other resource exchanges (vouchers, user-charging, special levies, licences, rebates or various tax expenditures or concessions); • advisory and analytical capacities (policy advice and evidence-based analysis, research findings, statistics, surveys); and • education, persuasion and promotional instruments (education campaigns, advertising, marketing, promotional work, speeches and symbolic gestures). We discuss each at some length in turn below.

Authority and compulsion The state can enforce its policy choices by using legislation and regulation as an expression of its command power underscored by its standing as the legitimate and accountable authority. Statutes establish and can change the legal framework within which a policy domain operates. Laws set parameters or enforceable provisions through which government policy is administered or interpreted. They determine eligibility for entitlements; they set down penalties and enforcement regimes; they provide for licences, inspections and audit requirements; they provide guidance for policy processes (for example planning requirements); and they can express a government’s intentions (as with legislation governing human rights or privacy). Most importantly, the statutory framework generally enables subordinate regulations and by-laws to be promulgated and enforced by the relevant authorities. The government’s policy

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intent with any legislation is meant to be contained in the act itself (clear reading provisions), but assisted by the minister’s second reading speech in parliament (where the government’s rationale is usually advocated), and in associated administrative arrangements orders. These provisions provide a basis for legal interpretation in the courts should any disputes occur over the intent or meanings of the legislation. The benefits of legislative instruments are that they provide overarching laws providing a coherent framework for a policy sector attempting to cover all contingencies. They express in explicit terms a government’s intentions on the statute books, and they can mark out an area for policy attention (for example environmental acts) or signal changes in the direction of policy (for example detention policies). Most acts of parliament these days are in fact amendments to existing legislative provisions – which implies over time that most statutes become omnibus compendiums, extensive in amendments, and full of subordinate sections. Occasionally governments undertake major revisions and replace old legislation that has perhaps become unduly complicated with a new streamlined act to refresh the policy purpose (for example the new Australian Public Service Act 1999 reduced around 600 pages of detailed statutory regulations to around 40 pages of principles). The main disadvantage of legislation is that it cannot anticipate every occurrence and eventuality. Statutes are by nature generic frameworks that often leave much scope for latitude and are open to interpretation by administrators and the courts. Some acts are not well drafted to cater for different circumstances. Many acts contain majeure clauses in them such as ‘until the minister decides otherwise’ to allow for political discretion, but this then rests on gaining the minister’s attention and convincing them to take action. Acts are often hard to keep up to date, revisions can involve a lengthy process and amendments can be protracted and unpredictable. The parliamentary calendar is tight and there are many potential bills pressing to get onto the business paper. In the legislature governments cannot always guarantee they will get their way and may have to agree to amendments, some of which may add unwanted complications. Even if statutes are well and truly outdated, ministers may not be convinced that revisions are an immediate priority for the

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government. In some cases legislative revision can, for a variety of reasons, take years. Although governments can actively sponsor legislation, it is not always the case that adequate resourcing is provided to accompany the legislative intent, thus undermining the potential impact of the legislation once passed. In some cases, undoubtedly, governments might choose not to actively champion legislation (it may be enough, for appearance’s sake, to introduce legislation, but hasten slowly with regard to passage). In the case of bicameral systems such as Australia and the United States, passage of legislation requires the support of two legislative chambers, but it is not always the case that the government of the day enjoys a majority in both. Governments might enjoy an electoral mandate for their policies, but the political fortunes of bicameral systems can serve to thwart government ambitions. Subordinate legislation covers the myriad regulations, rules, by-laws and ordinances imposed by delegated authorities (ministers, government departments, commissioners, statutory officers). The ability to make subordinate legislation is delegated by an enabling act of parliament that lays down the procedures and scope of regulatory provision. The main difference between legislative provisions and subordinate provisions is that the former go through the parliament, whereas the latter are determined by executive government (but are often subsequently tabled in the legislature for information purposes by the executive). Compliance with these acts is mandatory both for administrators and members of the community. However, enforcement is potentially more problematic. It relies fundamentally on public acceptance of the regulations, and largely on a preparedness to voluntarily comply with them. Dedicated enforcement practices can gauge the prevalence of compliance and reinforce controls where necessary. Some regulations have to be policed when people do not voluntarily comply or misbehave. And again the resources attached to enforcement are an issue.

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Taxation and spending Government’s capacity to command resources legitimately from the community for collective purposes makes it fundamentally different to any other private actor in society. Taxation receipts provide government with considerable resources (approximately 35–55 per cent of GDP across the OECD) through which to implement their priorities and influence behaviours of which they approve. But taxation is not solely concerned with extracting resources for public purposes; it can also be used as an instrument to shape behaviour by penalising or rewarding taxpayers. Thus, luxury taxes may reduce consumption of luxury goods, and higher taxes on alcohol or gambling are meant to discourage users by increasing the costs of partaking. Occasionally taxation can have deleterious or reverse effects to the intended aim – such as high marginal rates on overtime may discourage productivity. There is no exact science or objectivity when it comes to tax regimes. They are all amalgams of historical decisions, variations and compromises. However, some principles underlie taxation policies. Revenues are meant to be guided by ‘adequacy’ – meaning that only sufficient taxation is taken for the government’s essential services. Taxes should be based on equity principles (such as ability to pay, fairness, broadly based, and according to who benefits). Taxes should be neutral (or efficient) in that they do not distort markets or consumer behaviour. Tax systems should aim for simplicity and convenience, and maintain stability and predictability over the medium term. These principles are all drawn largely from economic theory. In practice almost all tax regimes breach these economic principles because other political principles inform tax decisions – such as what items or things can effectively be taxed (the main reason for customs duties), and what governments think they can get away with in a given political context. Many taxes we pay today were initially introduced as emergency measures that, once in place, were gradually extended. Expenditure commitments are also not an exact science, but shaped by budgetary politics and practices. Budgeting is used to allocate collective resources across collective needs (using provision, largesse, or rationing). But

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levels of spending may additionally be driven by fiscal considerations concerning how far governments wish to stimulate or contract the macro-economy. It may also be driven by how many resources are available from the taxation system (how effective and robust is the tax regime). Moreover, governments can spend today while deferring taxing until later – using borrowings and debt as a lever – which, if used excessively, amounts to an intergenerational transfer of liabilities. As a policy instrument expenditures fall into three main categories or outlays: • expenditure to public organisations (departments and agencies) for administrative and program purposes (mostly these expenditures will tend to be spent on staff salaries and other operating expenses); • expenditure to private organisations to perform functions on behalf of government or supply goods and services to government (procurement of goods and services); • expenditure directly to individual citizens and recipients to influence their activities (benefit payments, cash handouts, family payments). Direct expenditures enable governments to load considerable leverage behind their policy choices. They have the power to give and take, and can commit dedicated resources to achieving their desired ends. By far the greatest proportion of government expenditure is in the form of recurrent spending – where the funds are consumed or used up in the distribution process on items such as administrative salaries, program costs, consumed services or supplies (phones, post, electricity), or transferred as benefit payments to meet living costs. Recurrent spending will be an annual cost to the budget, generating ‘lock in’ effects that reduce its discretionary nature. Non-recurrent spending is far more discretionary, involving the purchase of assets (capital spending) or issuing of one-off grants that may or may not be repeated in following periods.

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Other resource exchanges Across the OECD there has been significant growth over the last 30 years in the use of other resource exchanges between governments and the community to affect incentives and behaviour. These instruments include vouchers, subsidies, rebates, user-charges and tax expenditures and have been adopted to change the structure of incentives to encourage choice or participation in the use of some services or products. Vouchers are public commitments of resources to consumers or entitlements to a service for users. They may allocate ‘placements’ or permissions to intending users and can be capped or limited in various ways (although pure voucher systems are extremely difficult to operationalise in practice). Subsidies and rebates provide financial incentives to consumers to alter consumption behaviour. User charges represent levies or co-payments for services enjoyed.3 Tax expenditures or tax concessions can be provided to firms or citizens for undertaking certain actions governments wish to promote (such as the deduction of training costs or research and development costs). The major reason for the appeal of these policy instruments lies in the potential to drive behaviour change by introducing a set of more complex transactions and trade-offs into the decision-making of consumers. Consumers are free to make choices based upon a calculation of costs and benefits unique to their situations, but public subsidies can be used to both increase demand and ensure providers remain in the business of providing. In Australia, for example, one can obtain a tax benefit by electing to take out private health insurance and seeking medical care from within the network of privately owned hospitals and clinics. Alternatively, higher income recipients can choose to incur a penalty (an additional levy) through the taxation system if they elect not to join a private insurer. By offering rebates or tax breaks to offset the cost of private health insurance, governments can both increase the attractiveness of private health care and possibly reduce the demand for publicly funded services.4 The other attraction for government is that such subsidies often cost them far less to achieve their desired objectives than would be the case if they attempted to use direct expenditures to achieve the same goals. Rebates and

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subsidies give more bang for the buck. User charges contribute to public financing and provide some evidence of how much the community values (and is prepared to pay for) a service. Tax expenditures mean governments forego income (revenue) from citizens who qualify for the tax break through their actions or choices. Sometimes characterised as ‘middle class welfare’, the provision of subsidies, rebates and tax breaks tends to disproportionately benefit households on higher incomes – largely because these groups are sufficiently economically privileged to be able to benefit from these schemes and perhaps too because of the superior political clout they represent.5 While middle class welfare often works to the political advantage of governments, it presents potential disadvantages to the ‘polity’ – the collective wellbeing of the community – insofar as it entrenches an inequitable distribution of social expenditure and constrains the capacity of governments to preferentially invest resources according to need. By encouraging middle to high income earners to invest their own money in services such as health or education, these schemes tend to encourage a greater provision of services from the private sector. In turn this can result in declining support for public sector provision amounting to a disinvestment in public services. Rebates and tax deductible expenditures are subject to various forms of control or rationing: • structural rationing, which relies on the fact that potential claimants must first have sufficient disposable income to incur rebatable or taxdeductible expenditure; • informational asymmetry, in that such schemes require both awareness that the schemes exist and the extent of one’s entitlement; and/or • administrative design: occasionally, the processes put into place for the purposes of claiming a benefit are confusing or complex and place high demands on the ability of individuals to navigate ‘the system’.

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Typically, persons with higher disposable incomes and higher levels of education are advantaged and more likely to obtain a benefit. Those with lower income levels or the less well educated may not be able to exploit such schemes and therefore are obliged to rely upon ‘free’ public systems.

Advisory and analytical capacities Governments can have policy impacts through their advisory capacities and the use of advisory mechanisms to seek to influence citizen or community behaviour. Policy analysis and advice are powerful instruments inside government that play a large part in determining how problems are defined and what policy looks like. They are instruments in their own right in which governments invest time and resources. Usually policy advice is employed in conjunction with other policy instruments such as resources, legislation or regulations. Specialist advisory bodies have been established to consolidate expertise and provide some consistency of message. For instance, various health boards, water commissions, productivity commissions or scientific bodies provide advisory services based on expert panels and commissioned research. Some of their advice may later extend into regulatory determinations or reshaping regulatory regimes. But often it does not extend to implementation matters – their advice remains an authoritative source of information and guidance. Governments are also active in offering specific forms of advice to assist the community’s wellbeing. These advisory messages seek to influence community attitudes and behaviour over such issues as safety information with international travel, warnings on unsafe products, health warnings, fire or emergency warnings, or marriage guidance or advisory services for those intending marriage. Governments have invested in and maintain extensive analytical capacities, both through their technical expertise in departments and agencies and by collecting data and information that can be used in policy settings. National statistical bodies have responsibilities and certain powers to collect data across the range of social, demographic, economic and cultural variables.

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Specific surveys and periodic censuses produce data used by both government in formulating policy and by the non-government sector (firms, interest groups, parties and individuals). Departments and agencies collect information relative to their responsibilities – using it for policy adaptation, and releasing some publicly. Public universities and research institutes (often not directly government-managed) nevertheless contribute analytical and evidential knowledge in the public interest. Most of this information is quantitative in nature (attitudinal surveys, attendances, retail sales, trade volumes, price movements, birth rates) although occasional qualitative analyses are undertaken (such as evaluations of the effectiveness of social programs). The current emphasis on ‘evidence-based policy-making’ has increased the importance of such primary data in most areas of policy. Base data and trend analysis feeds into the deliberative process, with many agencies relying on projections in preparing policy advice. Scenario modelling is another way of linking possible outcomes with policy responses.

Education, persuasion and promotional instruments Finally, governments can use their knowledge and resources to launch educational and promotional campaigns. The intent of the instrument is the message. Generally these campaigns are focused on promoting knowledge of government policy (for example over changes to the tax system or industrial relations) or promoting certain messages to target groups in the community (for instance, campaigns to promote better health, safe sex, reduced drinking, testing for diabetes or cancer, and against childhood obesity). These campaigns extend for periods of time and are usually evaluated for their effectiveness in generating community awareness. Governments may use these promotions for political purposes and there have been moves to involve more independent authorities in attesting to their appropriateness and legitimacy – such as the auditor-general or public service commissioner. But ultimately the instigator (and spin-weaver) of these campaigns is government itself. While oppositions may complain about government self-promotion, it is difficult

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for other public actors to declare that a particular advertisement is not in the public interest if government claims it is.

The mix and dependency associated with policy instruments These five groups of instruments are rarely used singly or in ways that are mutually exclusive. Different instruments are combined in various ways to achieve desired impacts. Legislative solutions will usually be combined with resource deployments, possibly the establishment of regulatory or delivery agencies, and even promotional advertising. The mix and composition of instruments is important to the effectiveness of the policy. Poor mixes of instruments, or – in cases where the mixture creates confusion – disincentives or even perverse incentives usually lead to bad policy outcomes (see Exhibit 4.3 opposite). The mix of instruments across the entire policy sector may also be important – as in the health sector where patients can often ‘game’ or ‘play the system’ by swapping between GP services and hospital casualty services with significant resource implications. Often one set of instruments can substitute for another, as with reduced demands on public spending if public education programs change the behaviour of vulnerable clients. In most areas of policy, path dependency becomes a powerful set of contours shaping policy development and future choices. Instruments chosen initially will often survive and continue to guide decisions whether or not they are most appropriate or the best mix available in subsequent times. Regulatory agencies tend to see the world in terms of regulation and rely on this instrument often as their preferred choice of action. Spending agencies routinely frame new spending options in their submissions to the budget round. Agencies with no real relationship with a client-base will have to resort to legislation or promotional campaigns if they seek to have impact. Path dependency also tends to be reflected in the personnel and types of staff agencies employ. To the extent that some government agencies exhibit particular technical, disciplinary or professional predispositions (such as accountancy, engineering, medicine, social work or teaching) they are prone to intellectual

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Exhibit 4.3

The economics of perverse incentives

Policy interventions can give rise to ‘perverse’ incentive effects. For example: • Over-consumption in health care – if general practitioners are exposed to increased legal risk, this can result in an over-consumption of diagnostic services thereby contributing to rising health care costs without demonstrable improvements in health status. • Demand exacerbation in child care services – providing income tax rebates for the use of child care services when these services are in excess demand will often exacerbate existing shortages and perhaps generate increases in fees that could well defeat the avowed policy objectives (such as making child care more affordable and accessible). • Asymmetric information problems – if governments decide to outsource employment services to private operators it exposes policy-makers to problems of asymmetric information and collusive behaviour; outputs may be geared toward short-term performance measurements, quality may drop, agencies may know little of what is occurring on the ground, and monitoring costs will increase significantly. Anticipating these likely perverse effects and their (‘unforeseen’) consequences requires a good understanding and application of important economic logics.

‘capture’ in that their outlook, approach and preferences are shaped by the professional mindset of their employees.

M anaging d e man d t h r oug h po l ic y Policy instruments can breed or restrict demand for a public service – and demands have to be managed in any public policy. Many governments have chosen to retreat from uncapped, universalist programs, particularly in the areas of income support and public health. Their principal mechanisms for containing demand are through the redefinition of eligibility criteria, the setting of various ‘tests’ (such as income, residency or asset tests), requiring upfront fees or co-payments and relying on queuing. Indirect service provision

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through third parties can also operate to dilute demand, in part by increasing the transaction costs associated with identifying and applying for a service and, in general, by increasing the complexity of the service ‘marketplace’ – thereby contributing to a degree of demand attrition. The application of ‘user charges’ or ‘co-payments’ is an increasing feature of many programs of service delivery and, more recently, such financial impositions have been joined by coercive notions of ‘mutual obligation’ or reciprocity involving other types of co-impositions. Co-payments serve, essentially, two broad purposes: they act as a constraint on demand; and they provide an additional stream of revenue for the purposes of cost recovery (although they are usually regressive in character). Some user fees may be symbolic contributions but in other situations user-charging business ‘cost centres’ can be self-funding or profitable. Governments often consider that making services available totally free of charge contributes to overuse or excessive consumption. The application of some form of co-payment, therefore, is a form of demand management that introduces a price threshold into the decision to consume a particular service which will usually contain demand. In addition, the application of fees or co-payments can reflect an underlying belief that individuals do not properly value services or benefits unless they contribute to their cost. The preparedness to pay fees or charges will then reflect the utility value of the service to the consumer. From the government’s perspective, the application of a fee might reflect the fact that the quantum of funds appropriated for a given program may be insufficient to address the level of demand, so some measure of user contribution is required to offset the actual cost of delivering the service. Setting the level of fees, charges or co-payments can be tricky, especially given the mix of policy objectives being sought. Setting a threshold too high runs the risk of contributing to disadvantage in ways that exacerbate rather than alleviate the particular problems or issues being addressed. Setting fees or co-contributions too low runs the risk of encouraging over-consumption. It can also exacerbate structural diseconomies in which compliance and transaction costs associated with administering the regime are not cost-recovered, thereby increasing the unit cost of the service provided and, ultimately (and

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perversely) restricting the supply of services. A more enforced form of co-production is the notion of reciprocity or ‘mutual obligation’ in which beneficiaries are required to behave in certain ways under pain of some defined penalty. Unlike voluntary co-production, mutual obligation requirements are characterised by a degree of compulsion imposed on recipients in order to continue receiving certain pre-specified services or benefits (comply with behaviour ‘y’ in exchange for receiving service ‘x’). They are usually codified in some ‘shared responsibility agreement’ or ‘reciprocal service agreement’ with the community and government. These shared agreements are typically used in social policy areas where governments find it hard to make a difference with standard policy responses. Governments hope that such requirements will change the behaviour of recipients, encouraging them to make other desired contributions as members of the community. Mutual obligation schemes have been extensively used in relation to labour market programs aimed at transitioning people from welfare support into the labour force. Participation in such schemes is usually required as a condition of ongoing receipt of unemployment benefits and usually requires participants to enter into a personal ‘contract’ that stipulates both the minimum level of compliance with the terms of the program as well as prescribing escalating penalties for non-compliance (culminating, ultimately, in the loss or deferment of benefits). In labour market programs, mutual obligation schemes usually rest on some level of objective assessment of an individual’s ability to participate in pre-employment training and/or paid employment. Hence, some people with disabilities or severe behavioural, educational or skills deficits or even geographical disadvantage might be excused from particular aspects of the mutual obligation regime. The principle of reciprocity has also been applied to other types of programs and services targeting particular problems and issues such as: • school attendance – where parents on government benefits might be required to ensure their children go to school to avoid having their income support deducted or suspended;

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• child protection – where family members might be required to attend parenting classes, anger management programs or submit to drugtesting regimes; • mental health – where persons with a mental illness might be required to comply with the terms of voluntary medication plans or even compulsory treatment orders imposed by a court; or • juvenile justice – where young people charged with minor offences might be bonded to attend school regularly or perform community service in exchange for not registering a criminal conviction or applying a custodial sentence against them. However, while mutual obligation regimes have become popular with governments, they are often contentious with relevant interest groups and some of the clients affected. Criticism usually focuses on the triviality of many of the obligations, their arbitrariness or the non-connectedness between the obligation and the benefit (for example forcing school attendance in Australian Indigenous communities in order to gain a local swimming pool). It should also be remembered that some of these schemes are directed not solely at the intended recipients (for example young offenders) but at the mainstream community who often ‘want’ these recipients to ‘earn’ their entitlements (see chapter 6 below).

C onc l usion Most OECD nations provide public policies that blend some types of universal programs with residual service provision and means-tested eligibility. In recent years we can detect a certain retreat from old-style statist universalism and the rise of a new-style quasi-universalism. Old-style universalism involved governments in the direct delivery of services to the entire population. A number of drivers – among them cost pressures and ideological movements – have led governments to recast the ‘universalist’ settlement by redefining entitlements and eligibility rules and by placing greater emphasis

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on targeting according to some normative construction of ‘need’ (for example, through the application of means and assets tests). Arguably, universal entitlement to aged pensions is gradually being replaced by the emphasis on compulsory superannuation and private pension schemes. The retreat from oldstyle universalism is progressively being supplanted by a ‘new universalism’ in which self-provision for a considerable proportion of the population is expected to be supported by state-based safety-net provisions. In Australia, successive governments have sought to offer a range of incentives for working age persons to make voluntary contributions to private superannuation schemes or to invest in other assets that will provide their retirement income. In addition, the payment of the age pension is subject to income and assets tests. The clear preference of government, therefore, is that retirement income should be self-funded. A form of universalism still exists but nonetheless many retirees have contributed directly to their own benefit entitlements. In the case of Australia, the instrument of taxation policy has been used as the primary vehicle for requiring self-contributory superannuation from those in the labour force. This new style of quasi-universalism rests on different mixes of provision but with greater emphasis on self-provision, self-insurance, co-payments and reciprocal obligations. Eligibility for public provision is likely to be restricted to lower income recipients, those with no other options or chronic sufferers. Policy settings have been adopted that are designed to steer consumers away from public services and from the public purse. While governments are charged with ensuring that an acceptable standard of universal access is available across the community (for pensions, nursing homes, health services), they no longer consider that they have to meet the full costs of financing these services to all and sundry. The consequence of these directions in policy is that governments will use policy instruments to shift their responsibilities and liabilities. Governments may invest more on schemes making provision for self-funding (with incentives or penalties applying), while ensuring some degree of residual public provision is available for those unable to provide for themselves. It resembles a neo-liberal interpretation of universalism.

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5: Purchasing  services

The crucial question is whether the apparent benefits of privatisation and competitive tendering reflect genuine improvements in efficiency or simply transfers of wealth and risk between different groups in society. (Quiggin 2003: 27)

In this chapter we present an analysis of the important distinctions to be drawn between the act of purchasing services and providing them, as well as distinctions between the motivations and behaviours of purchasers and providers. The relationships between the buyers and sellers of public services can be complex, not only because of the variety of contractual arrangements commonly used to effect these transactions, but also because purchasers and providers often act on behalf of other agents or clients. Often the chain of roles, relationships and accountabilities linking taxpayers, beneficiaries, buyers and providers is complex and sometimes difficult to untangle. In this chapter we will: • provide an overview of principal-agent (or purchaser–provider) frameworks and explain why governments have adopted these frameworks in the delivery of public services; • identify the characteristics and motivations of the ‘buyer’ in public service markets; • identify the characteristics and motivations of providers, or agents, in public service markets; • discuss the dimensions of service that are being purchased and the

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principal mechanisms used by public sector entities to procure public services; and • discuss the range of difficulties and problems associated with these arrangements.

W h at is p r incipa l - ag e nt t h e o r y ? The  principal-agent problem, or  agency dilemma,  seeks to account for  the difficulties that arise in  transactions characterised by  conditions of incomplete and asymmetric information. This can arise in situations where a principal (for example, a public sector agency) engages an agent (for example, a for-profit child care provider) to pursue the interests of the former (for example, to deliver affordable child care) even though the interests of the principal (affordable child care) might differ from those of the agent (running a profitable business). In this case, the problem might arise if, in delivering child care services, the agent deviates from the intentions or preferences of the principal (say, by reducing operating costs in ways that adversely affect the quality of the service or by creaming potential clients). In the absence of optimal contract design, the agent may thus pursue a different objective than the principal, and agent performance will be difficult to observe by the latter. The practical expression of principal-agent theory is therefore substantially informed by the application of contract law and the discipline of contract management. The contract gives effect to the will of the parties to an economic exchange and typically embraces the following elements: • the principal (the ‘buyer’) stipulates the nature of the goods or services he or she wishes to buy;1 • the buyer identifies a prospective agent (the ‘provider’) of the goods or services and agrees a price; • the buyer and provider enter into a contractual relationship that binds the parties to perform their respective obligations under the agreement; and

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• the contract usually specifies the nature and quality of the goods and services to be provided, when and how they are to be provided, the quantum and timing of payments, the notification of breaches of the agreement and avenues for redress or compensation in the event of non-performance by either party. The essence of principal-agent theory is that the respective roles and responsibilities of buyers and providers are clearly articulated, thus offering greater clarity with respect to expectations, responsiveness and transparency. The exchange of ‘consideration’ (payment for goods or services provided under the terms of the agreement) is fundamental to the contractual relationship. It is assumed that the payment by the principal of ‘consideration’ will encourage providers, being rational economic actors, to align their interests with those of the principal. Any misalignment of interest between the two parties may result in additional ‘transaction costs’ (costs arising from the need for additional assurance or enforcement of the contract) and may, over time, erode the practical and economic benefits flowing to the buyer, possibly leading to the buyer seeking to identify an alternative provider or providing the goods or services themselves. Principal-agent theory and classical contract theory provide the foundation for most commercial relationships in the West (it is important here to note that newly industrialised centrally planned economies like the former Soviet Bloc eastern European states and China are still in the process of laying the foundations of contract law and property law). It was the advent of public choice theory and New Public Management that provided the catalyst for the application of principal–agent theory to government bureaucracies in order to re-engineer government operations and the delivery of programs and services.

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W h y us e p r incipa l - ag e nt t h e o r y f o r s e r v ic e d e l i v e r y ? Public choice theorists articulated a critique of government monopolies and public bureaucracies premised, in part, on the principal–agent problem inherent in the delegation of authority by executive government to bureaucratic officials. The public choice critique argues that the self-interest of bureaucratic agents might lead them to implement legislation or policy in ways that deviate from the intentions or preferences of the legislators (moral hazard). Except for replacing senior executives or restructuring the administration, the legislatoras-principal cannot sack the bureaucracy-as-agent and offer the job to an alternative provider. By displacing delivery to a third party, legislators can exert more control by insisting on executive approval and generate more transparency through public scrutiny of the terms of the contract. Public choice advocacy of the use of performance-based contractual arrangements between governments and service providers also draws from principal-agent theory insofar as it provides a powerful rationale for exercising special care with contract design and the specification of performance. The fact that this degree of contractual specification can be more readily achieved in transactions with non-government agents (and contractual remedies more readily applied) provides further impetus for third-party contracting. Thus, the current preference of many governments for the use of contractual or quasi-contractual instruments with third-party service providers owes much to the public choice critique of government. In some cases, these contractual arrangements have taken the form of privatisation or outsourcing; in other cases, they represent a refinement of systems of grant funding to require recipient organisations to provide services in particular ways, to specified communities or to approved standards. Public choice economics argues that the direct provision by government of public services constitutes a form of ‘fiscal dumping’, that is, government instrumentalities deliver tax-financed services at little or no cost to endusers who often have little or no say in the configuration of these services. In the process, this also has the effect of crowding out potential private sector

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providers. Public choice theorists such as Buchanan and Tullock (1962) and Niskanen (1971) argue that the direct provision of services by public sector entities is inefficient, non-competitive and often inflexible. In addition, they argue that governments have, in the past, been subject to ‘bureaucratic capture’ thus accentuating a tendency to deliver services in accordance with historical legacies (‘doing what we’ve always done’) and may not even know how much of a given service is either needed or desirable. Public choice economics focuses principally on exchange relations and posits that although individual economic actors cannot meet all their own needs or demands, they are nonetheless free to engage agents to provide the special expertise, goods or services required to meet their needs. In this, public choice economics relies heavily on classical contract theory which, in turn, provides the basis for contract law.

W h y was t h i r d - pa r t y cont r acting so wi d e ly a d opt e d ? How did third-party contracting become so widespread, and why was the public choice critique so effective in changing traditional service delivery conventions? As discussed in chapter 1, from the late 1970s governments – and the public – became increasingly dissatisfied with what they saw as bureaucratic, monolithic, unresponsive and inflexible modes of direct government provision. Governments were often unable to redress perceived deficiencies because the public service was shielded from economic fluctuations and, as a result, had neither the incentive nor the capability to respond flexibly to economic signals, thereby allowing supply-side bottlenecks to emerge. The public sector was regarded as uncompetitive, highly unionised, having a high degree of job protection and poor levels of performance management accountability or measurement. New Public Management sought to address these deficiencies and one of its principal tools was the selective use of purchaser–provider frameworks for the delivery of public services.

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Exhibit 5.1

The challenge of providing affordable rental housing

The Brisbane Housing Company Ltd (BHCL) is a state government-sponsored, not-for-profit organisation that builds houses for rental at non-market prices to low-income earners referred from Department of Housing and homeless hostels waiting lists. The challenges of providing non-market rental housing to this community are significant: finding available and affordable land in a major capital city, adjacent to public transport, integrating tenants (many of whom require additional social support), and managing the transition of tenants to market rental when their income improves. Because it is a loss-making activity, the business model was originally viable only with government subsidies, government concessions and community grants. The Brisbane City Council (BCC) made this private initiative possible through a seeding grant of $60 million (amounting to about half of all grants obtained by the organisation). Why would the BCC wish to proceed this way? Why not provide public housing directly? By helping to start BHCL’s activities, the BCC harnessed the resources of local communities (community stakeholders, voluntary work, etc.) who are better motivated by being in charge of a project perceived as independent from government and not hamstrung by formal bureaucratic processes. BHCL has since diversified its business model (including cross-subsidisation, joint ventures, commercial stakeholders) to ensure its financial autonomy while locking-in its assets to ensure long-term community benefits. As a consequence of this shift in thinking, the public sectors of many OECD countries (but more especially, the Anglo-American liberal welfare states) underwent a radical overhaul. Government operations were ‘managerialised’ and infused with business logics; and government businesses and some service functions were divested to the private sector. Although core policy responsibilities were retained, the delivery of programs and services was subjected to market-testing, competitive tendering or outsourcing. Within government operations the employment of staff via fixed-term contracts replaced permanency, managers were given greater discretion, performance management regimes were introduced and contract management became the new currency of public administration. The prospect of outsourcing and privatisation extended even to ‘traditional’ welfare programs once thought to be the inviolable domain of public sector provision (although not usually the payment of benefits such as pensions). Governments began creating and stimulating markets where no, or weak, markets had existed previously in order to generate, or approximate, the competitive forces attributed to the private sector. In Australia, the most prominent experiment with marketisation of service delivery was perhaps the full outsourcing in 1998 of labour market programs previously provided by the Commonwealth Employment Service through the establishment of the Job Network – a unique experience in the OECD.

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Through the 1980s and 1990s, governments came to the view that markets could deliver many mandated services more effectively and efficiently than public sector monopolies. There were expectations that by using markets policy-makers would get better value for money, lower costs of delivery and higher service quality. (Whether these promises of higher performance ever materialised is a matter of high contention [King 1994; Schichor 1995; Smith 1996; Chalmers & Davis 2001; Oslington 2002; Eika 2004]). Governments believed they (and the community) could gain by turning to competitive markets in which providers (agents) would be responsive to the demands of the buyers (principals). In addition, governments tended to portray an increased reliance on markets as conferring sovereignty on both purchasers and the tax-paying public. Delivering services via the market nexus would result in enhanced transparency, reduced costs, improved quality and enhanced choice. In short, it would mark a clear departure from the old ‘takeit-or-leave-it’ culture of direct service delivery (see Exhibit 5.1 above).

W h o is t h e pu r c h as e r ? When seeking to apply principal–agent theory to public policy, identifying the principal, or buyer, can lead us into something of a conundrum. Just who is the buyer? Is it the taxpayer from whom governments derive a mandate, and on whose behalf services are purchased from providers? Is it the end-user of the service, on whose behalf the service was purchased and who has a direct relationship with the service provider? Is it the government itself, as the legal entity with whom the contract for service provision is entered into? Is it the minister, who is delegated by the executive government to give effect to mandated policies aimed at procuring services from third-party providers? Or is it the public servant who specified the services to be provided, developed the contract and tender documentation, conducted negotiations and undertook due diligence and executed the contract on behalf of the government? We will address these questions in turn.

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.

Although individual taxpayers effectively pay for the services purchased on their behalf by governments, they are not the actual buyers of services. Although taxpayers are ultimately able to reward or punish governments with their vote, they are not a party to the transaction for the provision of services from which they stand to benefit. Alternatively, the end-users of services may appear to be principals: after all, the services are meant for them and they consume them. They might even pay a fee to the service provider and there may be reciprocal contractual obligations arising from the transaction. Even so, end-users are sometimes two or three times removed from the principal–agent relationship. The services they consume have been specified and purchased not by themselves but by governments mandated to do so by the electorate. End-users may become involved in monitoring the quality of services provided, and their levels of satisfaction with those services can exert strong influence on future procurement decisions. These issues are discussed in greater detail in chapter 6. Government, and in particular ministers with portfolio responsibility for policies and programs under which services might be purchased, might also be considered as the buyer insofar as they exercise decisional and purchasing power to commission services for the community. Governments enjoy mandates to govern based on their policy platforms and have the legal authority to purchase services on their own behalf or on the community’s behalf. However, minsters are not usually the direct beneficiaries of the services purchased, nor are they usually present at the receiving end. They may commission the purchase but are not the consumers of service outputs nor necessarily cognisant of when or how the service transaction occurs. In a strict legal sense, government is the principal. Ministers will generally give formal approval to service specifications, contract and tender materials and procurement processes but in this they are reliant on public servants delegated to provide advice, identify potential providers, conduct negotiations, manage risks and, ultimately, advise them that services have been provided appropriately and effectively. Arguably the real ‘buyer’ is the public manager acting on behalf of a government and minister. It is these public servants who are delegated by

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government to understand what government wants, apply their expert knowledge of the policy field in order to determine what the market can deliver and give effect to strategies to procure required services. As professional broker-buyers they, more than any other actors, are actively engaged in buying services from other public or private agents. Of course, government entities can also be buyers in their own right. Government departments and agencies routinely purchase a wide range of services from the market such as IT support, telephony, audit services, human resource management, travel services, utilities, accommodation or office supplies. The distinction here is that the government entity is purchasing goods and services for its own consumption, rather than on behalf of the government for the benefit of a third party. So, we find in the public sector a complex – and sometimes confused – set of principal–agent relationships which, of course, can lead at times to a lack of clarity with respect to accountability (this is addressed more fully in chapter 10). The above discussion serves to illustrate the complexity of what, on the surface, seems a straightforward question: ‘who is the buyer?’ Although taxpayers and end-users pay for services (either collectively through taxation or through fees when services are consumed) they are neither responsible nor accountable for the services. Ministers may oversee the broad implementation of the government’s policy intent and accept responsibility and accountability for that component, but will often deny responsibility for failures in downstream delivery (which in itself is continually tested through the application of accepted principles of ministerial accountability). Public servants charged with the task of negotiating service provision agreements are not personally legally liable (except in cases of proven malfeasance) although they can be held accountable for any errors and omissions that compromise the operation of the contract. Even so, public servants might in some cases argue that they cannot be held accountable for shortcomings in the policy design – their job, after all, is to implement faithfully policy determined by the government of the day. This argument might also be mounted in the face of failures associated with the purchase by government entities of goods and services for their own consumption, especially where departments and agencies are compulsorily required to adhere to prescriptive procurement regimes as a consequence of government policy.

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How d o pu r c h as e r s bu y ? Accepting, for the sake of simplicity, that the principal, or buyer, is effectively the government and that public servants act on behalf of government to facilitate the purchase of services on its behalf, what options exist to give effect to the government’s policy intent? Two dimensions come into play: first, what are the characteristics of the services to be sourced from the market; and second, what forms of purchasing or funding arrangements are available to give effect to the government’s policy intent? When governments look to markets to provide public services they typically rely on a combination of: • classic outsourcing using competitive tendering to purchase services from the market that were once provided ‘in-house’ by government agencies; • competitive tendering to identify potential non-government providers of services under new policy initiatives (services that were never delivered ‘in-house’ by government agencies); • hybrid funding and delivery models that rely on a mix of purchaseof-service or quasi-contractual approaches to leverage additional nongovernment service provision as a complement to public provision; or • the allocation of payments, subsidies or vouchers (either direct or indirect) to the end-user who can purchase prescribed services from a provider of their choice. Governments can use their legislative, regulatory and resourcing powers to facilitate markets and to encourage embryonic markets to respond to demands for particular types of service. This may be one way to stimulate nongovernment provision. For example, a market shortage of general practitioners in a country might be addressed by encouraging the immigration of people with appropriate qualifications as well as by streamlining processes for local accreditation. If the government wishes to particularly address a shortage of GPs in rural areas, the government might choose to require prospective

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skilled migrants to practice in rural areas as a condition of entry. Similarly, governments frequently extend preferential tax regimes to not-for-profit nongovernment organisations in order to encourage their activities, or offer taxdeductibility for individual and corporate donations for charitable purposes to prescribed organisations.

F r om w h om d o pu r c h as e r s bu y ? When governments choose to enter into purchase-of-service agreements for mandated public services from the private sector, the decision may involve a choice about whether services will be sources from the not-for-profit nongovernment sector or from the private for-profit sector. On rare occasions, governments may consciously choose to allow government entities to competitively ‘bid’ for tendered services, however, in such cases the bidding agency might be required to first establish a ‘trading’ entity so as to preserve, as much as possible, the kind of level playing field that maximises the potential benefits of competition.2 Where a market does not already exist governments may be obliged to create one. This can happen, for example, where governments elect to outsource a function for which government has always been a monopoly provider and private markets have never arisen. The decision about whether to source services from for-profit or not-forprofit organisations might be informed by ideology or belief, such as a conviction that private sector businesses offer a superior ability to both deliver economic efficiency and generate economic multipliers; or the countervailing conviction that not-for-profit organisations bring altruistic purpose and greater affinity for the communities they serve and, therefore, are better aligned with government aims. Governments might choose a mixed sector model in which services are sourced from both the private and the not-forprofit sectors. Let us now explore some of the rationales guiding governments’ choice of providers.

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Not-for-profit organisations It is often claimed that not-for-profit non-government organisations offer significant advantages over either public sector entities or private for-profit firms as agents for the delivery of many mandated services. Governments may preferentially invite expressions of interest or tenders from not-for-profit organisations to provide particular types of public service, especially for human services (services that meet basic human needs) because: • not-for-profit organisations often exhibit lower cost structures owing to lower wages and a degree of reliance on inputs of voluntary labour – although this does not mean that governments pay not-for-profit organisations less for delivering services; • they often have a long history of engagement with particular communities or target groups and represent an important source of both expertise and legitimacy; • they exhibit altruistic purposes with respect to the communities and interest groups they were established to represent or serve and, in this regard, may be seen to be better aligned with the purposes of public policy. It is often claimed that not-for-profit organisations possess characteristics that give them inherent advantages over either public sector or for-profit firms as providers of human services (in particular) such as: • they are more flexible and innovative; • they have more participatory organisational structures; • they demonstrate a strong adherence to clear values and philosophies; • they are responsive, supportive and empowering to consumers (McDonald 1999: 87–88). Notwithstanding these considerations, policy practitioners also need to be cognisant of inherent risks arising from deficiencies in capacity and capability in the not-for-profit sector that can have implications for service delivery, such as:

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• the majority of organisations are small and operationally unsophisticated, possess little in the way of business acumen and may experience difficulty in responding to a purchasing agency’s requirements for financial and other reporting; • the tendency of not-for-profit organisations to strongly identify with their clients (many not-for-profits have their origins as selfhelp groups established expressly to aid members or their families) may lead them to under-bid for services in a tender in the hope or expectation that any shortfalls in their operating costs can be crosssubsidised from other programs; • many not-for-profit providers are motivated by an altruistic mission that can conflict with their role as an ‘agent’, sometimes leading to disputes with the purchasing agency about things like disclosure of client information or conflicts between their advocacy and service delivery functions; and • many have entrenched operational policies, workplace practices or philosophies that may not be entirely compatible with the standards required by purchasing agencies. In fact, some of the positive characteristics imputed by policy-makers and enthusiastically claimed by the not-for-profit sector itself contain elements of myth (Osborne 1998; McDonald 1999). In Australia, commonly accepted propositions about the qualities presented by the not-for-profit sector are largely untested by empirical research (Butcher 2006). McDonald (1999: 95) argues that more research is needed to establish the truth or otherwise of the purported qualities of not-for-profit organisations and to better apprehend how the sector has been affected by its participation in the contemporary mixed economy of welfare.

Private for-profit organisations The underpinning logic of New Public Management – and neo-liberal constructions of the state generally – holds that the market mechanism offers

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greater promise for meeting the range of human needs in ways that enhance choice, economic and technical efficiency, and effectiveness. This logic has been enthusiastically embraced by governments and applied to the operations of government entities in order to break down the perceived rigidities and inefficiencies of public sector bureaucracies. When seeking to source the provision of mandated public services from outside sources, governments perceive the private for-profit sector as inherently better placed to meet government’s needs because: • the profit-making motivation of private firms requires a comprehensive understanding of the relationship between the cost of inputs and the price of outputs, leading to maximum operational efficiency; • private firms are accustomed to rigorous accounting practice and records-keeping, meaning they will be well-positioned to meet the purchaser’s requirements for transparency and accountability; • business culture depends on the cultivation of effective purchaser– provider relationships thus offering the strong prospect that the provider will align its business priorities with those of its client; and • for-profit firms operate comfortably in an environment in which the contract is the dominant operating paradigm and are therefore more ‘savvy’ participants in the principal–agent exchange. It is noteworthy that among the first types of public services to be outsourced were those that could be directly benchmarked with a private sector analogue, such as roads maintenance, rubbish removal, public swimming pools or the cleaning and maintenance of public facilities. Among the considerations that must be weighed up by policy practitioners when considering whether to invite tenders from private for-profit firms for the provision of public services are: • Is there a private sector analogue – does the activity or function being sourced from the market have a direct counterpart in commercial practice (the so called ‘Yellow Pages test’)? And, if not, are there analogous business models against which services proposed for

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tender can be benchmarked (this may be difficult in the case of many human services)? • Are the proposed cost structures for tendered services compatible with those available to private for-profit firms (especially with respect to salaries and working conditions)? • Is the regulatory and legal environment within which for-profit firms operate compatible with either the public interest generally, or the rights of end-users particularly? • Is the profit motive compatible with the social aims of the program or service (or might it give rise to perceptions of trading on the misfortunes of vulnerable people)? This is the process of ‘market testing’, which amounts to the formal testing of public service provision over what might be available from the private sector through competitive procurement strategies. Market testing is generally undertaken as a first step towards potential outsourcing, but does not lead inevitably to outsourcing. In general, market testing is undertaken ‘when market capacity and capability is unknown or uncertain, and enables comparison of service levels and costings prior to making the decision to outsource’ (Aulich & Hein 2005: 36).

Does size matter? Whether we are talking about for-profit or not-for-profit service providers, the issue of size is also an important consideration (see Exhibit 5.2 opposite). As discussed in chapter 1 in the context of social capital, competitive tendering regimes have tended to favour larger firms and organisations over small. In part, this reflects a deliberate strategy on the part of governments to manage commercial, legal and reputational risks by inviting tenders only from organisations with the ‘critical mass’ to provide assurances of commercial or operational viability, responsiveness, financial and performance reporting, and economic and technical efficiency. The performance of public sector entities

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is intensively scrutinised by legislatures, public auditors, the media and the public generally. Exhibit 5.2

When size matters

Like private sector firms, not-for-profit organisations can be stratified into micro, small, medium and large enterprises. Most not-for-profit organisations are small, operate on a purely voluntary basis, have no paid employees, and have fewer than 100 members at any given time (Lyons 2001:15). Others, such as the following, are very large. • The Australian Red Cross has been in existence since 1914 and reports that it has over 32,000 volunteers delivering 60 local programs throughout Australia, mostly funded by private and corporate donations. In its 2007–2008 Annual Report, the Australian Red Cross reported total net assets (after liabilities) of A$164 million, total revenues of A$191.2 million and total expenses of A$206.7 million (excluding the blood service). • The Salvation Army Australia is perhaps one of the best known of the Christian helping organisations providing a range of community support services for disadvantaged communities in Australia. Part of an international evangelical movement, ‘The Salvos’, as they are called in Australia, operate in two administratively separate jurisdictions or territories (East and South) that in 2008 together accounted for A$522.7 million in total operating expenditure, A$578.9 million in total revenues and A$651.5 million in net assets. • Mission Australia, another Christian organisation providing a range of community and employment services, reported operating revenue for 2008 of A$297.4 million and operating expenses of A$295.9 million. • The Smith Family, a secular non-profit organisation assisting disadvantaged communities, reported operating revenues for 2008 of A$85.5 million, operating expenditures of A$85.0 million, and net assets of A$29.9 million. • The Brotherhood of St Laurence, self-described as ‘a non-government, community-based organisation concerned with social justice’ was established in 1933 as a religious order of the Anglican Church in Australia. It is now a largely secular organisation incorporated under an Act of the Victorian State Parliament. In 2008, the Brotherhood of St Laurence reported total revenues of A$48.7 million, total expenditure of A$54.9 million and net assets of over A$91.2 million. Included in its reported revenues was about A$30 million for social services such as employment services (A$4.8 million), aged and community

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services (A$19.8 million) and community services (A$5.5 million). Significantly, expenditures in these areas exceeded revenues by over A$5 million, suggesting the cross-subsidisation of programs funded primarily by government grants and/or contracts. At the other end of the spectrum, the national peak welfare organisation, the Australian Council of Social Services (ACOSS) reported operating expenditure in 2008 of just over A$1.44 million and revenues of A$1.5 million. However, as Lyons observes, ‘[m]ost third sector organisations operate from the kitchen table of whoever is their most active member’ (Lyons 2001:16). Most are highly localised and a few operate from a number of locations. Many larger Australian not-for-profit organisations operate Australia-wide (generally these are federations comprising state and territory organisations) and a smaller number take the form of a single national organisation with state branches (Lyons 2001: 16). Some not-forprofit organisations, generally the larger ones like the Australian Red Cross, are international in scope.

Governments usually require rigorous due diligence processes when sourcing services from the non-government sector. The complex and costly nature of due diligence processes precludes most small to medium for-profit firms and not-for-profit organisations from participating in public tenders. This leads to large, bureaucratic firms winning a disproportionate share of tenders for service provision. This is as true for the purchase by government of operational inputs (advertising, design, human resource management, IT and telephony) as it is for the purchase of outputs (services to the community – see Exhibit 5.3 below). In Australia this tendency has been a constant source of dissatisfaction to small and medium enterprises, as well as small and medium sized not-for-profit organisations.

Exhibit 5.3

Purchasing inputs and outputs

Government entities (departments, agencies, statutory authorities) purchase a wide range of operational inputs (those goods and services that enable the organisation to carry out its essential functions and fulfil its statutory obligations). These include such things as stationery, information and communication technology, legal services, payroll services, human resource management, accounting and auditing services, fleet management, secure document disposal, cleaning and a host of other essential operational needs. The cost to the organisation – and the government – is essentially the cost of doing business. Until the

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1980s and 90s, government entities generally had few incentives to use their purchasing power to leverage savings from competition in input markets, or to outsource corporate support functions to the private market. Historically, public sector entities either sourced their operational inputs internally or, where they were obliged to go to the market, their purchasing procedures reflected historical costs and supply dependencies (in which projected costs were extrapolated from costs incurred in previous years and service providers seldom changed). The application of New Public Management, coupled with resource constraints resulting from economic shocks in the 1980s and 90s, forced governments to find sources of savings (especially if they were looking to expand programs). Outsourcing a range of operational functions and rigorously applying competitive procurement frameworks was an obvious avenue for ‘rationalising’ government expenditure. Why indeed did government agencies each need an internal graphic design or fleet management unit when the capacity latent in the private sector could, in principle, be harnessed at lower aggregate cost across government? Initially, in Australia, the full benefits of competitive procurement were slow to materialise. Government entities were not, to begin with, savvy buyers and they laboured under major informational asymmetries and a lack of experience with the scoping of service requirements, evaluating tenders and managing contractors. Over the past ten to 15 years, however, those commercial disciplines have matured on the input side: contractual relationships are well established, markets are well defined and comparative price information is well known. On the output side, however, these disciplines are less well developed. For a variety of reasons, the organisational cultures of large public bureaucracies inhibit the transfer of learning from one part of the organisation to another. Hence, there has been little knowledge transfer from that part of organisations with experience in the procurement of inputs to program areas charged with the procurement of outputs. At the root of this discrepancy are the larger economic distortions experienced in output service markets (essentially all the market and state failure arguments discussed in chapter 3) which hinder the establishment of market structures.

Sole traders, private practitioners Public sector agencies may elect to purchase services from private practitioners trading under their own name, as opposed to a corporate identity. While this is relatively common practice when it comes to the purchase of inputs (particularly with respect to the purchase of research or consultancy services) it is less

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common with respect to publicly mandated services. In some circumstances, public agencies may purchase services from medical specialists, dentists, psychiatrists, psychologists, speech pathologists, or other private clinical practitioners. The services purchased may be provided in a public clinic or in some other setting such as a school or nursing home. The services may be procured either through a fee-for-service agreement, under which practitioners provide agreed services at an agreed price, or through a quasi-employment contract under which the practitioner agrees to work a prescribed number of hours for government while also continuing in private practice. These options may best be suited to addressing a demand for publicly mandated services in locations where practitioners in particular fields are in scarce supply.

Interagency and intergovernmental agreements It is also useful to be aware of other mechanisms that on the surface look like principal–agent relationships, but in reality are not. These are: • Interagency funder–provider arrangements, where a ‘funding’ department commissions a service from another public sector entity – such arrangements do not constitute genuine principal–agent relationships. In the first place, the services are not provided within a fully contestable market (the supply relationship is mandated) and the contracts are not legally actionable under law (in other words, the buyer cannot sue the provider for non-performance as both entities are ‘owned’ by the government). A classic example in Australia is Centrelink, a statutory agency established by the Australian government to provide a range of services to a number of ‘client’ departments, including case management, counter services, enforcement and the issuing of payments. • Intergovernmental financial transfers, through which sovereign levels of government agree terms under which funding is provided by one level of government to another for specific purposes. These similarly do not constitute a purchaser–provider model. They are

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conditional financial transfers rather than purchasing agreements and they are typical of federal states, such as Australia, Canada and the United States. In Australia these include the Medicare agreements, the Commonwealth State/Territory Disability agreements and the Commonwealth/State Housing agreements. In Canada, transfers from federal to provincial governments for specific purposes take the form of the Canada Health Transfer and the Canada Social Transfer while a second mechanism involves the transfer of funds by individual federal departments to support specific program areas, such as labour market development. Under these arrangements provinces and territories are required to report on the use of the funds and to provide audited financial information or submit to an audit by the federal government (Auditor-General of Canada 2008).

W h at a r e pu r c h as e r s actua l ly bu y ing ? When governments purchase services, in effect they are buying products comprising inputs and outputs leading towards their desired outcomes. Purchasing entities should understand what is being purchased and ensure that this understanding is adequately reflected in the tender documentation and contract materials. It is not unusual, however, for both principals and agents to become confused about the precise nature of inputs, outputs and outcomes and the misunderstandings that arise can lead to disputes about the performance of purchase of service contracts. In short: • The inputs of service delivery are the economic and human capital resources that go into the production of services (outputs). Typically, this includes: materials and supplies, equipment, premises and accommodation, as well as labour, expertise, professional services and various intangible resources such as information, know-how and entrepreneurialism.

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• The outputs of service delivery are the goods and services produced in pursuit of particular policies and programs. Outputs are activities or products that are expected to contribute to the attainment of desired changes from one state to another (from ill health to good health) or changes in behaviour (reduction of risk-taking behaviour, such as smoking). These changes of state are ‘outcomes’. Outputs are quantifiable and measurable, and take a number of forms such as the number of patients treated, the number of beds or meals provided, the quantity of social housing constructed. • Outcomes are the eventual policy impacts felt by target populations as a consequence of the production of outputs. Outcomes are much harder to assess with quantitative methods and will typically be summarised in succinct terms, such as ‘decreased dependency enjoyed by the elderly’, ‘increased wellbeing or health among Indigenous communities’, or ‘increased ability for the disabled to take part in social activities’. Measured outcomes (that is, assessing impacts) represent an important criterion for the evaluation of service delivery. Other important criteria are efficiency, quality, costeffectiveness, equity and effort. In general, when an organisation – or even an individual – purchases a good or service, what is being purchased is an output. The purchaser does not usually specify the nature of the inputs used by the provider to produce the output, although the purchaser may undertake appropriate due diligence to assure themselves that the provider is capable of delivering the good or service to the required standard. As for outcomes, it could be assumed the purchaser has already concluded that the outputs being purchased will result in desired outcomes; or they may merely hope improved outcomes eventuate. If a service provider provides the desired goods and services to the required standard and in the manner specified by the contract, then some improvement in outcomes should follow if the buyer has done their analysis. Purchasers of services would generally only be interested in the inputs of contracted services to the extent that these represent the direct cost component

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Exhibit 5.4

Policy failure: relieving the costs of child rearing

Governments can facilitate access by families to child care either by offering tax deductions for direct costs incurred or by the provision of cash grants. While tax deductions certainly have political appeal, and can be readily implemented using existing administrative systems, they do impose additional administrative costs and, perversely, they fuel demand and lead to higher child care fees. To the extent that higher fees negate the effect of the tax deduction, this is a case of policy failure. If, however, governments provide cash grants directly to families (on the assumption that parents will use their enhanced market power to act in the best interests of their children) they have no way of knowing whether, in fact, the funds are being used for the purpose of accessing child care or diverted to other purposes. This is another form of policy failure. One way to address this problem is to bypass the end-user and enter into direct contractual relationships with child care providers in order to rebate an agreed portion of the actual costs of the child care provided, thereby obtaining assurance that expended funds are in fact used to enhance access to child care. In 2002, the Australian federal government introduced the ‘baby bonus’ scheme aimed at offsetting the expenses associated with rearing a child. The scheme involved a lump sum payment to resident parents of infants born in Australia and was also intended to increase Australia’s fertility rate and to mitigate the effects of an ageing population. The then Treasurer, Peter Costello, famously exhorted Australians to go forth and procreate: ‘have one for mum, one for dad, and one for the country’. The amount of the non-means tested, untaxed, lump sum payment increased from A$3000 in 2003 to A$5000 in 2008. The policy has been criticised on the grounds of both cost and effectiveness. There is little evidence that trends in the number of live births in Australia is attributable to the baby bonus and a number of political and economic commentators now call for the policy to be abolished on the grounds of cost alone (there were 259,800 births registered in Australia in 2005, representing payments totalling about A$779.4 million). Although there are calls to scrap the program outright, this may be difficult due to ‘endowment effects’, which refers to resistance from sectors of the community to abolish a benefit once introduced, even if they did not actively advocate the policy previously. The Labor government, elected in late 2007, has amended the policy in order to reign in expenditure. From January 2009, it was made subject to a ‘family income test’ (offering payments only to families with household incomes under A$75,000 and subject to assets tests) with payments to be made in 13 fortnightly instalments.

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of the services being purchased. When assessing the tenders of competing bidders, for example, it is essential to understand the input cost structure if one is to make a reliable and meaningful comparison. In some instances, purchasers may need to specify particular inputs to be used by providers, perhaps to ensure that particular regulatory requirements or service standards are met. One example might be where the purchaser needs to specify the qualifications or skill sets required by employees of the service provider, or the ratio of staff to clients, or the use of particular business systems or information technology. In addition, purchasers need to be informed about the market conditions affecting the cost of inputs when setting the price they are prepared to pay prospective providers. Human services, for example, are often highly labour intensive and rely on skill sets often in short supply. Set the price too low and tender processes may fail to attract conforming bids. The most important focus for purchasers lies in accurately determining the nature of the outputs they wish to buy – in effect, correctly and comprehensively articulating the precise design of the services they wish to buy and seeking assurance that the service design will produce the desired outcomes. After all, if services fail to produce outcomes, it may be because services were not provided in accordance with contractual specifications or it may be because the service model was inappropriate in the first place. The first amounts to contractual failure, for which there are legal remedies; the latter amounts to policy failure, for which the remedies and costs are largely political (see Exhibit 5.4 above).

B o l d ly going w h e r e ma r k e ts h av e not gon e b e f o r e Markets are needed in order to obtain the benefits of principal–agent relationships, even if they are only markets of sorts. Yet in many areas of public policy there is little or no history of private market provision or involvement (indeed, governments often entered these areas because of market failure). When

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governments began to test the market for opportunities to source public services from private sector providers using competitive tendering strategies they found, for some types of services, few private providers with capacity or capability to respond. This required governments to create quasi-markets. They used their regulatory and financial levers to create new markets within which some level of competition could operate.

Quasi-markets Quasi-markets are imperfect markets where the existence of healthy competition may be limited or constrained. In ‘quasi-markets’ purchasers might buy services from various actors with the intention of developing market capacity over time. In some cases, governments may facilitate the establishment of providers by assisting with capacity building. Purchasing agencies might also employ selective-tendering strategies in which only invited providers are permitted to participate in a tender process. In part, this is about ensuring that the provider has a range of capable tenders from which to select and, in part, it is about ‘grooming’ the market for any future expansion of competitive tendering. An Australian example of the creation of a quasi-market was the creation in 1998 of the Job Network, which was established to provide ‘employment placement assistance to unemployed job seekers in receipt of Australian Government provided income support payments’ (Thomas 2007). The Job Network, which consists of a myriad of non-government providers, progressively replaced the Commonwealth Employment Service (CES) – the incumbent public provider of labour market programs. Although the government established Employment National, a ‘publicly-owned private corporation’ to replace it, and compete head-to-head with private sector counterparts (Considine 2001: 25), it was later disbanded after failing to win a reasonable market share, leaving the market to non-government providers only. The Job Network sought tenders from what was in 1998 an embryonic market. According to the Australian Productivity Commission the Job Network represented ‘one of the first comprehensive attempts internationally to apply market

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Exhibit 5.5

Problems with quasi-markets

Purchasing services within quasi-markets presents a number of practical dilemmas and assessment issues. When government buys, but does not consume the services provided, there is a discontinuity between consumer (end user) and client (government) satisfaction. Consumers directly observe the quality of service delivery (but may not be able to interpret it correctly), while the client does not (Webster & Harding 2001).This, in turn, can lead to serious evaluation questions (Considine 2001; Productivity Commission 2002; Burgess 2003; Considine 2003). In addition, because government acts as a monopoly buyer (there being no other buyer of the services produced), issues of dependency arise (on the part of providers) as does the possibility that they might be exploited (by government bidding down the price of services), excluded from participation by escalating transaction costs (associated with tendering) or compromised by the terms under which they participate (including a diminution of their advocacy role or by having to bear the burden of contractual risk). The not-for-profit sector is especially vulnerable to these effects (Oslington 2002). An important US-based study examined the application of purchaser–provider approaches in a variety of service delivery domains (Hart et al. 1997). The authors concluded that in-house (direct) provision is preferable to purchaser–provider arrangements when ‘non contractible cost reductions have large deleterious effects on quality, when quality innovations are unimportant, and when government corruption in contract procurement is a severe problem’ (Hart et al. 1997: 1159). Based on these criteria, the study recommends the purchaser–provider model for the delivery of garbage collection services and for education, but not necessarily for health or corrections services. Research in health policy suggests that community health services are also ill-suited to competitive models of service delivery and require more centralised, collaborative approaches (Flynn et al. 1995; Chalkley & Malcomson 1998). Echoes of such findings are also heard in other OECD countries. In Sweden, the outsourcing of health and old age care has resulted in claims that ‘choice’ came at the expense of equality of access and opportunity (Fotaki & Boyd 2005). In the United Kingdom, the contracting-out of children’s residential care (coupled with a withdrawal of local authority provision) is perceived as costineffective and detrimental to policy goals (Kirkpatrick et al. 2001).

mechanisms to the provision of subsidised employment services’ (Productivity Commission 2002). When persons apply for unemployment benefits at Centrelink, the agency established by the government to manage the payment of social welfare benefits, they are assessed and, if considered employable, required to register with a Job Network provider for the duration of their unemployment episode. Under the terms of the policy, continued access to unemployment benefits is tied to participation in recognised job seeking activity, thus ensuring a clientele for contracted service providers.

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The Job Network has been subject to a number of changes and refinements since its inception. While there have been problems along the way, it is generally agreed that these were the result of ‘teething problems’ in an under-developed market.3 Among the problems experienced with Job Network’s contracting out of employment services were ‘creaming’ – which refers to providers preferentially concentrating their efforts on easy-to-place clients (thus generating outcome payments) – and ‘parking’ – which refers to service providers diverting resources from higher fee-attracting, but difficult-to-place clients to those with more favourable prospects. Problems associated with creaming and parking are also found in other quasi-markets such as health care or rehabilitation services (see Exhibit 5.5 opposite).

A r e quasi - ma r k e ts coste f f e cti v e ? A core assertion of purchaser–provider models is that they lead to improvements in both technical efficiency and cost-effectiveness4 – in other words, reducing service delivery costs while increasing the quality of the services provided. Although such claims are commonly made for purchaser–provider arrangements, they can be difficult to substantiate. If the purchaser–provider relationship takes place in quasi-markets then governments may have less confidence that they are realising cost efficiencies – they could be subsidising the providers who may not be subject to rigorous competition. For example, the Australian government claimed after four years of operation that the Job Network might have reduced costs of service provision by up to 50 per cent and that policy outcomes (exit rates from unemployment) were substantially improved. However, independent research to assess these claims was hampered by a lack of access to government data, and various sources of measurement bias were identified in government reporting of performance (OECD 2001; Oslington 2005). Quasi-markets are often characterised by a relative scarcity of suppliers.

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Borland (1994) distinguishes between ‘thin’ and ‘thick’ supplier markets: thin markets exist where the expertise required is highly specific, suppliers are few, and there is no reason to expect competitive prices to arise from the bidding process. Oslington (2002) developed this argument, stressing that thin markets are more likely to occur in local and rural service delivery markets. Thick markets, by contrast, are characterised by less specific, or substitutable expertise, an abundance of suppliers, and abundant prospects for cost saving from competition. Various Australian empirical studies have examined the experience of purchaser–provider arrangements at levels of government – local, state/territory and federal – and have substantiated cost savings averaging in a range from 20 to 30 per cent of service expenditures.5 The efficiency gains from purchaser–provider arrangements would, therefore, appear to be significant.

Quiggin (1994), however, questions the technical efficiency improvements observed by empirical studies, arguing that, much of the time, these gains are in fact masked transfers (for example, from workers working for lower wages under worse conditions). Hence the net outcome of purchaser–provider arrangements is not improved efficiency but redistribution with no indication of improvements in overall social wellbeing, particularly if governments exploit their monopsony power.6 In addition, critics of purchaser–provider regimes often assert that efficiency gains are offset – or even negated – by corresponding losses in other values such as service quality, equity, or effectiveness (Grimshaw et al. 2002). After all, the end users of services are unlikely to derive much comfort from a lower cost to government derived from efficiency gains if that comes at the expense of effectiveness, appropriateness, timeliness, accessibility or availability. In service delivery, as in many production environments, quality and efficiency can often be mutually exclusive. It is possible to have services that demonstrate accepted attributes of ‘high quality’ but are not economically efficient. Conversely, it is possible for services to be economically efficient while being deficient in terms of quality. For example, in human services (such as aged care, medical and allied care or mental health care), staff who spend time talking informally to patients, getting to know them and their

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circumstances, attending to their personal needs, might be said to offer a high quality but inefficient service, since such ‘non-essential’ staff time could have been dedicated to attending additional clients (Schlesinger 1998; Blank 2000). Much of the debate here relies on an appropriate definition of ‘essential service’. For age care it could easily be argued that these ‘non-essential’ services constitute the main demand component. The tension between quality and efficiency is frequently demonstrated where service providers are reimbursed by government on a ‘fee-per-item’ or ‘unit-of-service’ basis (particularly where the level of reimbursement is ‘capped’) as is the case in Australia with refunds under Medicare for medical treatments. Patients who cannot afford to pay a ‘gap fee’ (a payment over and above the schedule fee set by Medicare for a consultation or treatment) may not receive the same quality of service from a medical practitioner as those who can (in the sense that they may not benefit from the difficult-to-measure attributes of sympathy or empathy). In addition to the potential for ‘efficiency-quality’ trade-offs in the provision of human services, there is also the potential for ‘inter-temporal tradeoffs’ in which a reduced quality in human services today can exacerbate the future needs of end-users. This is experienced in many policy areas such as preventative health, mental health or criminal rehabilitation. If current social needs are neglected such inter-temporal trade-offs will impose higher social costs in the future (such as with chronic health care, depression, crime rates or community dysfunction). Short-term contracts with for-profit providers (especially for-profits with market power) typically fail to internalise these long-term effects (Eika 2004). Such ambiguities over cost-effectiveness do not mesh well with the rhetoric of contracting out. Many scholars have taken an agnostic, if not downright sceptical view, of the alleged advantages for the cost–quality relationship claimed for purchaser–provider models. Some economists have suggested that any cost efficiency gains are likely to be short-term, because purchasers will observe and eventually adopt the methods and practices of market providers, and as they become more efficient or effective the rationale for outsourcing may disappear over time (King 1994). Others have suggested that

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one of the lasting effects of contracting out will be the loss of service implementation and management capability in public sector agencies. Some commentators have, in recent times, suggested that government zeal for outsourcing might have run its course, and even talk of ‘re-insourcing’ or sourcing internally as a first preference (mainly in the case of operational inputs, such as IT and communications). This begs the question of whether contemporary agencies actually have the resilience, knowledge, skills and experience to ‘deliver’ services directly.

C onc l usion In this chapter, we have examined the purchasing of services from a public policy perspective. We have explored the use by government of purchaser– provider arrangements in terms of their rationale, the mechanics by which they operate and the observed effects. It seems clear from both the literature and from actual practice that purchaser–provider arrangements are a work in progress. Policy-makers began with clear intentions to use public money more efficiently, to introduce greater choice for end-users, to improve quality through competition where it existed, and to obtain better value-for-money through opening up various modes of provision to contestability. Governments often had to create markets or experiment with quasi-markets so that they could purchase services. They also had to determine exactly what services they intended to buy. Such considerations often enhanced the quality of policy advice and policy delivery, but the purchaser–provider model was not without its shortcomings. Governments could lose hands-on delivery and implementation expertise, and had to rely on imperfect markets. Governments may also absorb greater risk and accountability problems especially if providers do not deliver services or are casualties of financial crises. It was never axiomatic that the purchaser–provider model would be appropriate for all public service functions. It is an option to be considered and judged prudentially. But as a way of

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delivering services, the model is here to stay. It will undergo refinements and adaptation to address its efficiency and effectiveness, but not many governments will ever return to the days of ‘in-house’ direct provision. Markets have strengths and weaknesses, capacities and risks, and the trick for governments in the future will be to get the balance right to improve policy in action.

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6: Who is being   served?

Each OECD member country has a public service … but the public often wonders whom it serves. (OECD 1987: 9) There are forms [of public organisations] that can better develop and deliver public policy by engaging more citizens in more engaging ways … the politics of participation is complex but not fatal. (Shergold 2009: 6)

Policy may be largely made by governments (framed, authorised, advanced and ‘owned’), but it is made on behalf of and for the ‘public’, and legitimated as having been conceived for their benefit (although not absolutely so – there is a dark side to government). Virtually all government entities claim they serve the public, even if they do not have direct relationships with specific endusers. Typically, they assert that they are serving the public interest, working for taxpayers, delivering to citizens, meeting their customers’ needs and so on. At the same time, it is understood that government entities are ultimately accountable to the public for their performance. This chapter focuses on the end-users and recipients of public services. It explores the issues associated with the people or groups who receive services or benefits, or on whose behalf policy is ostensibly made. In an important sense this chapter adds a new set of complexities and dynamics to those we have already emphasised in previous chapters. It initially explores the identity and characteristics of end-users – what status they have, what expectations they may express and what rights they enjoy. In most cases, public managers of services and service providers have been instrumental in characterising

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the attributes of the end-users of their services: the terminology is often their terminology. We briefly explore the legal status of service recipients and the circumstances under which services might be restricted to citizens and permanent residents for essentially political reasons. The chapter then canvasses consumer-based approaches to improving services for recipients – from customer service philosophies to client or consumer satisfaction ratings. It also adds another dimension by including end-user views of the policy process. Finally, it explores cultures of engagement and consultation that can be used to good effect in the better formulation, adaptation and revision of policy. By the end of this chapter, we will have a good understanding of: • who the recipients of policy are and what terms are used to describe them; • what implications flow from labels given to recipients of public policy; • how different assessments of service recipients can have consequences for implementation and delivery; • what recipient-focused delivery techniques are available to improve service quality; • how recipients ‘see’ policy, and what is their ‘take’ on the policies they receive; • how community engagement and meaningful consultation strategies can be used to good effect and to improve policy; and • how we might keep the community engaged, interested and supportive of public policies, thereby instilling a sense of ownership of them.

W h o is t h e r e cipi e nt ? Governments talk of citizens, clients, customers and consumers as if there is no ambiguity or disagreement about what these terms mean or to whom they

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refer. Indeed, these terms are often used interchangeably as if one can readily substitute for another. But whether agencies define their recipients as clients, consumers or customers, or any other term, is actually a secondary question. The first question that has to be asked is: for whom and to whom is the service meant to be provided? In the public sector there is almost always a distinction between those who commission the service (for whom) and those who actually consume the service (to whom). Both are service beneficiaries, and the service may satisfy both sets of needs, but their wants and aspirations, their roles and attitudes, prerogatives and entitlements are different. It is not clear that both have an equal voice in determining the service provided. Some end-users of public sector services are highly dependent on the services they use and may not have access to alternative options (this scenario might be typical, for example, of those in receipt of income support, or residing in public nursing homes). So, dependency rather than ‘voice’ may be more typical. One way of illustrating this distinction recognises that governments traditionally commission services. In this case the minister (or cabinet) is the chief beneficiary or client. Some agencies refer to their minister as their principal client – but this is internal ‘departmental speak’, not the expression of some broad agreement. If asked, ministers do not like being viewed as clients. They see themselves as ministers – responsible for their portfolio in many important respects (politically, administratively, accountably) – and not simply a ‘client’. Yet ministers benefit from the social programs and services provided by their respective agencies insofar as they satisfy political needs or fulfil promises to the electorate. New Zealand has perhaps gone furthest down this track – stipulating that ministers, as commissioning ‘principals’, purchase the services they want from their agencies. Similarly, under outsourcing arrangements government departments often commission (purchase) but do not consume the services provided. They could regard themselves as the principal client or the customer of the service providing agency. In Australia, Centrelink talks of its ‘client departments’ – meaning policy departments that use Centrelink to administer programs and make payments to beneficiaries (see Halligan & Wills 2008, chapter 7).1 Such departments are not the consumer of the service and in such circumstances

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‘client satisfaction’ can have different meanings. For instance, the ‘client department’ may be pleased with the cost-effectiveness of service delivery, while ‘service consumers’ may be appalled by the deterioration of services on the ground. Individual recipients of public services may actually consume the service but have no say over its commissioning. So, the unemployed are recipients of services (cash benefits and job placement services) but have little influence over the design of what they receive (resources, quantity, frequency, etc.). Their basic needs are socio-economic (surviving deprivation, finding shelter, having access to education). They receive services to meet their socioeconomic needs as part of their rights and entitlements as residents of their country. They have little political power to obtain these services from their government other than by voicing complaints and voting for programs that defend their interests. Some providers may see the community as a collective recipient – but again, there might be little recipient voice over the commissioning of the service. For instance, police are commissioned to perform protective services for the community, but members of the community do not usually have a say in the priorities or operations of policing. Immigration detention centres may consider that detention is provided for the benefit of the wider community, rather than for those detained. Other public agencies may consider their recipients are specific groups rather than individuals. A public environmental agency may number among its clients farmers, miners, loggers, tourism operators, lobbyists, local councils, local chambers of commerce, or conservation societies. The precise identity of the ‘client’ may depend on who they are talking to at the time. Other agencies will see their recipients in more generic terms still. A climate change agency or a department of defence will often see the ‘public interest’ as the client. In this case, it is an abstract, faceless construct of ‘the current and future interests of the public at large’ that is being served. Similarly, some service providers consider their creation of ‘public value’ as the surrogate client. In this approach (see chapter 1), providers try to improve the value of public services to their clients by anticipating or imagining potential needs. A

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public library or archive might open for longer hours on a particular evening to enable some of its users to access the collection after work. The extra service might not necessarily respond to an expressed need by users, but librarians will see it as adding value to their notion of what clients might want. Being clear about who is commissioning the service and who is consuming it, and their relative needs as beneficiaries, is fundamental to our understanding of who are the recipients. If staff of a correctional centre, for instance, regard inmates as involuntary ‘clients’ of the service whose unfortunate life circumstances have led to incarceration, then they might be more likely to seek to improve their lot and assist their rehabilitation. If, however, the authorities consider the wider community as the primary beneficiary of their service (to the extent that by incarcerating offenders the community is temporarily protected from criminal behaviour) then they might adopt a different attitude to prisoners, regarding them as non-law-abiding obligatees. In most cases a balance has to be struck between these competing attitudes (see Exhibit 6.2 on page 176).

Terminology referring to end-users There are many arguments over the terminology and nomenclature used to refer to end-users. Over time these arguments appear to come and go – so, we ask, are these arguments highlighting real differences or merely senseless demarcations? We consider that there are some important differences, but we also realise the terminology is rarely used in any systematic way. There is no agreement on consistency among jurisdictions or between agencies, or over time, or across all types of recipients. Here we attempt to provide a little more consistency. In the policy context, language is important. The terminology and nomenclature used to describe the end-user or ‘the subject’ of policy is significant if it has effects – shaping delivery norms and the quality of services. Nomenclature can be a mere label but it can also be a signifier indicating how the ‘other’ is to be regarded and treated. Within agencies, terminology performs many roles – it can be a rhetorical positioning device, a rationale

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Exhibit 6.1

Terminology and key attributes

Terminology

Basis on which service is provided

Recipients’ relationship to service

Who provides the service and how?

Choice of service & limitations

Exit, voice, feedback, loyalty

Citizens

Political, legal obligation, authority, responsibility to citizens as voters

Entitlement, legal right, mass provision, universal, but citizens have multiple rights

Government agencies, sole providers, provides as a right or obligation, usually free or small cost

Very little, standardised, equal service, equal access, rationing, queues

Citizen complaints, citizens’ charters, enforced loyalty, public accountability

Clients

Professional judgment, case management, as patients or users

Individual receiving service, limited choice, often passive relation, interested in service quality

Specialists, consultants, managers of the service, provided on case basis, user-charging

Targeting, selected person, parcelled services, waiting lists

Manage client expectations, quality of service, clients can depart, professional accountabilities

Customers

Economic exchange, voluntary purchase

Market, purchaser, active choice relation, informed buyer

Commercial, contractual, price-based, competitive providers

Paying for service and how much used, selffinancing

Can reduce or withdraw, stop purchasing, go elsewhere, commercial accountabilities

Consumers

Provided and consumed, usually based on volition

Anyone consuming a service, neutral or vicarious consumption

Any provider of service, usually free or limited user-charge

Consuming service, some choice, level provided

Can complain, avoid consuming, choose not to participate, public accountability

for delivery behaviour, or an evolving discourse about how the agency sees its role. It can also serve as political instrument or management technique. Language has important consequences for how we conceptualise and justify what we are doing, how we behave and respond to recipients and what we

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consider to be appropriate behaviour, communication and engagement. Sometimes nomenclature is faddish and a function of managerial preference. But we can also see emerging trends over time. We have seen governments and their delivery agencies move from more neutral-sounding labels for recipients to more active business-inspired labels. Neutral labels include: citizen, recipient, beneficiary, taxpayer, audience and member of the public. More personable labels include: client, patient, student, child, parent, tenant or inmate. Business-inspired labels include: consumer, customer, purchaser, stakeholder and end-user. However, the diffusion of business-inspired terms borrowed from the private sector also raises new questions for governments, such as: are welfare recipients ‘customers’? Are prisoners ‘clients’? Are hospital patients ‘consumers’? The terminology used is often ambiguous or used interchangeably, and the translation of consumerist concepts can be difficult to apply to many areas of service delivery. A table summarising the key attributes of different categories of service recipients is shown on page 173. We take the main four labels found in most public sectors and analyse them below to give greater clarity.

Citizens, clients, customers and consumers Managerialist reforms of the 1980s and 1990s changed the standard message of governments servicing their respective publics to the rhetoric of client or customer service (Keating 2001). The management of public services has refocused from the mere fulfilment of statutory functions to an emphasis on their ‘core business’ and ‘market’. Patients, parents or tenants of yesterday are now the clients, customers and consumers of today. This change of terminology, often referred to as ‘customer focus’ or ‘consumerism’, became prominent in a number of OECD countries from the 1990s onwards. While the term ‘citizen’ is still widely used, other business terms such as clients, customers or consumers have come into vogue (see Exibit 6.1 above). The term ‘citizen’ is particularly problematic. Although commonly used by politicians and public servants as a synonym for members of the general public, ‘citizen’ has a particular legal meaning. Citizenship is a legal status

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that confers defined rights and obligations on individuals. Citizenship is usually conferred by birth in a country or awarded subject to the person meeting specific criteria (such as meeting minimum residency requirements). Citizens generally enjoy civil and political rights and other statutory entitlements not enjoyed by non-citizens (see below). For example, citizens might enjoy superior access to a range of public services to non-citizens, such as health, education or income support services. In turn, non-citizens who are legal residents of a country might enjoy the same civil rights and similar statutory entitlements (the right to access public education), and yet not enjoy the same political rights (such as a right to vote in elections). A client is presumed to seek and receive the help of professional expertise (as with medical, legal or counselling services), entering the relationship voluntarily and through their own volition. Clients have some choice about whether to take the service (they can choose not to present themselves, or can refuse treatments or advice) but often the choice is one of necessity – trusting professional judgment on a take-it-or-leave-it basis. They are usually dependent on the personalised service. Provider–client relationships can be characterised or backed by legal authority and power of the state (concerning, say, a legal prescription, the right to practice medicine or law, the legal authorisation to grant a degree). Another power relation derives from asymmetric information involved where the provider has particular expertise and specialist knowledge compared to the client who may have none. This is a subservient relationship. Provider–client relations can be more mutual and collaborative, focusing on the transfer of attributes and skills through the assistance of professionals (Vardon 1997). The term client has been in use in the public sector for much longer than other business-inspired terms and is still often used to characterise the professional and paternalistic dependency of end-users in traditional welfare states (Gyford 1991; Clarke & Newman 1997). A customer is primarily involved in an economic exchange relationship, buying identified services from a seller, and exercising voice and exit to express discontent. Customers generally expect to have a degree of choice with regards to the type and quality of the services they buy. In general, they look to competitive forces in markets to ensure that services of an acceptable

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Exhibit 6.2

Are prisoners clients?

Who is the client of corrective services? A celebrated exchange occurred between Australian Public Administrator Sue Vardon and political scientist Pat Weller ( AJPA 56: 1) over whether prisoners were indeed ‘clients’. Both had been involved in prison administration. Vardon argued that involuntary clients are very common in social work in situations touching on mutual obligation, child protection and unemployment benefits (Vardon 1997). Intervention programs aimed at people at risk very often involve some degree of coercion. Vardon argued that the client status should not be denied to prisoners who had lost their liberty temporarily. Her main point was that the ‘future of correctional services in contributing to public safety depends on [regarding prisoners as clients]’. In her view the corrective system had four clients: the minister, the courts and the offenders, together with front-line prison staff who should be treated as ‘internal clients’. She did not see the community as a client because in her words there was no ‘direct service’ to the community and because the community did not care about prisons until the media highlighted an issue. Her philosophy was to convert prison culture from a repressive, negative, mass-management and punishment-oriented one to a more positive, personalised, educative, opportunitydriven culture. This, she maintained, would give prisoners skills and self-worth and reduce reoffending and recidivism. Against this Weller suggested prisons did not want return business and so should not pamper their inmates (Weller 1997). Client satisfaction was not a suitable criterion for internal management; rather he suggested that the basic requirements were to maintain security, contain offenders securely and humanely, ensure they are adequately fed and housed, and given the chance to rehabilitate themselves. Much of the time, he argues, the prisoners will be ‘chronically dissatisfied’. And ‘if the purpose of good first impressions emphasised in management literature is to encourage return trade, that is exactly what prisons do not want’ (p. 126). He rejected the notion that prisoners ought to be managed, hoping they would be ‘contented customers’. Instead, prisoners were subject to the coercive powers of the state and were locked down, disciplined and could be ‘shanghaied from prison to prison without notice’. This was not a client relationship. Weller is concerned with the prisoner as customer – and effectively shows prisoners cannot be customers (the customer being first and foremost the corrective service agency that pays for the services). Vardon is concerned with the prisoner as consumer – and shows effectively that the success of the policy promoted by the purchasing agency will depend on prisoner co-production, so prisoners are consumers of prison service (McGuire 1997).

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standard are available at an affordable price. Importantly, customers are expected to purchase the service(s) they receive at a market price, although with monopoly utility providers this is a decreed price. They buy to consume, and the provider wishes to encourage repeat business and return custom. Customers are willing to pay the asking price for services they consider to be useful and necessary. A survey of local and central government public servants in the United Kingdom revealed that most define ‘customer focus’ in terms of personalised service, choice, and tailored responses to individual needs (Needham 2006). The survey also suggested that in public sector agencies a customer focus is as much about changing cultural attitudes among service delivery staff as it is about devising tailor-made, competitive services for end-users. Indeed, the motivation for switching to a customer focus often stems from perceived client dissatisfaction with professional, paternalistic public services coupled with a willingness to experiment with more commercial-style relationships inspired by market exchange. Finally, the term consumers is a more generic label implying someone who receives a service but whose relationships with the provider could be highly variable. Consumers are not necessarily clients or customers. They may consume public goods, such as free-to-air broadcasts, or merit goods, such as the provision of home-based care for persons with a disability. Public good enjoyment is unlikely to be personalised (they are non-exclusive), whereas the consumption of merit goods may have a personal dimension (such as individualised aged care based on assessed needs). For instance, users of public library services ‘consume’ the service by reading or borrowing library books. They are not customers as they do not pay directly for the service (although some do pay indirectly through taxes levied by various levels of government), nor are there competing providers of similar services or much capacity for the service to be ‘personalised’. Library users would not necessarily be considered clients either, as there is little to suggest that they are seeking superior professional expertise, nor are they dependant upon this expertise (in the same way that a client might be dependent upon the superior expertise of a solicitor). In the case of library services, the reality is quite prosaic: library users are usually

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referred to as ‘borrowers’, which rather neatly sums up the functional nature of the exchange relationship. The term ‘consumers’ has often been used as a generic substitute for ‘customers’ or ‘clients’. In the United Kingdom, for instance, the ‘consumerist agenda’ introduced over the 1980s and 1990s under the Thatcher and Major governments (Vidler & Clarke 2005) openly conflates the citizen-consumer with the citizen-customer. Service consumers are characterised by the same principles of choice, personalisation, quality and cost-effectiveness as customers. The tensions inherent to these role redefinitions have increasingly struck a raw nerve among street-level agents of service delivery (see Exhibit 6.3 below). At one time the OECD attempted to coin a new term ‘prosumer’ to cover people who were producers and consumers simultaneously (for example parent volunteers in schools contributing services their children enjoy). Exhibit 6.3

Are health patients consumers?

The UK’s National Health Service has been at the fore of two decades of government efforts to reduce the costs of public services, and introduce choice through purchaser–provider arrangements to ‘de-centre’ medical knowledge (Vidler & Clarke 2005). Over this time, the control of hospital services moved from medical professionals to business managers running an ambitious agenda of increased efficiency and quality in service delivery. Patients and health care users became ‘customers’ and ‘consumers’. Although the drive to tailor the service around the patient was nothing new, patients behaving as demanding consumers was. The reforms proved somewhat traumatic to the ‘sharp end’ of the services, the nursing profession. Not only did nurses gradually have to assume the dual role of detached carer and ‘smiling’ customer attendant (Bolton 2002), they also had to interpret conflicting business and customer-centric directives. Few nurses could see ‘spending less time with patients’ as an improvement to the service’s quality. Yet management’s emphasis on ‘quality costing’ and ‘getting it right first’ created a dilemma for the profession. Surveys consistently showed a rejection of the ‘patient as customer’ model by the nursing community (Clarke & Yarrow 1997). Surveys showed instead a preference to empower patients as partners in the co-production of the services, for example their involvement in treatment decisions (as in ‘surgery or diet’ decisions). The fundamental asymmetry of information characterising relationships between medical professionals and patients suggests patients are at most clients but never sovereign consumers (Keaney 1997).

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T o w h om s h ou l d s e r v ic e s b e provided? The end-users of public services are usually persons who have legal rights of residency in a country and thereby enjoy defined statutory entitlements. Some are citizens and are endowed with the full range of political and civil rights conferred by the state. Others may be ‘permanent residents’ – persons who, although not citizens, are legally entitled to remain in a country, but who may not enjoy the full range of rights and entitlements of citizens (for instance, EU residents living in a different EU country cannot vote in that country). Others may be temporary residents or visitors, who will typically be entitled to a much narrower set of state-provided services. For instance access to health and education services may only be accessible on a full cost-recovery basis and

Exhibit 6.4

Illegal migrants and the rights to social services – a short history of California’s Proposition 187

In November 1994, at a time of high unemployment, high rates of illegal immigration and several years of economic decline, the state of California passed Proposition 187 (a citizen’s initiated referendum), which denied welfare, health care and public education to illegal migrants. So-called ‘undocumented residents’ remained eligible for care in life-threatening emergencies and prenatal health services. Popular with the Californian electorate, Proposition 187 quickly became the subject of court challenges by Mexican–American and civil rights associations. A federal judge decided that the resolution was unconstitutional but his injunction was then dismissed by California’s Attorney General in 1997. This controversial law was gradually eroded in lengthy court battles and was eventually withdrawn by Governor Gray Davis in 1998. Yet the matter regularly flares up in legislative debates and remains divisive today. Opponents of the law often take a pragmatic view; that illegal immigration across the nearby Mexican border simply cannot be prevented and denying social services to these new residents is cruel and conducive to black market and criminal activities, and not an effective way to prevent illegal immigration. Providing social services to new unofficial residents (such as schooling to their children) helps their integration into mainstream society and provides additional sources of labour. Supporters of the law point out these illegal residents have no citizens rights and should not expect to enjoy public services. They place an extra burden on an over-stretched social security system – and if working ‘black’, do not pay taxes on their incomes to help pay for these services.

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other forms of support such as disability services or income assistance will not be accessible. There may be exceptions, however, if reciprocal agreements exist between countries that confer special entitlements to citizens of either country. While citizens, permanent residents, and persons on temporary work or visitor visas have defined entitlements, there will be others, such as illegal immigrants, visa over-stayers, refugees or asylum seekers, whose rights may be highly circumscribed. Most Western countries still extend minimal civil and legal rights to these groups, but not without political contention. In the US state of California immigrants without documentation (mostly from Mexico and Central America) were eligible for driver’s licences until 1993 (see Exhibit 6.4 above). In 1994 laws were tightened to make it mandatory for a social security number to be provided before a licence could be granted. Then Governor, Gray Davis, reversed this policy in 2003; however, on gaining office later in 2003, the new Governor, Arnold Schwarzenegger, overturned the law. According to the Institute of Governmental Studies at the University of California Berkeley: Those who oppose licenses say giving undocumented immigrants driver’s licenses offers government approval of their illegal immigration status which could lead to even further immigration in the future. They also claim that national security is at risk if undocumented immigrants are allowed such licenses … Those who oppose illegal immigration believe that stemming illegal immigration is a necessity because of the drain on social services that undocumented individuals create. They claim that providing health and welfare services to undocumented immigrants also breaks the word of law and legitimizes illegal behaviour. 2

Similarly, most OECD nations attempt to prevent illegal residents (and people without work visas such as tourists and persons on student visas) from working and earning an income, although some European countries routinely grant universal free access to important social services (such as education) for children of illegal migrants. In some countries, health service entitlements are often contingent on one’s employment status. Hence, having a job usually ensures access to social entitlements regardless of one’s residency status.

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In Australia, the government once proposed to impose a surcharge for noncitizens undertaking tertiary education (including permanent residents) but the measure proved to be hugely contentious (especially among large numbers of British and New Zealand permanent residents who had not taken out citizenship). In 1996, the Australian government under Prime Minister John Howard restricted entitlements to some public health and social services for certain categories of new immigrants. This was possibly a response to public concerns about arrivals under the family reunion and humanitarian immigration streams who, in general, are less skilled and educated, and experience higher than average rates of unemployment and welfare dependency.3

C ustom e r s e r v ic e app r oac h e s to imp r o v e s e r v ic e d e l i v e r y Traditional welfare approaches to service provision tended to be both bureaucratic and paternalistic. Agency staff regarded recipients of any government benefit either as numbers in a queue or, worse, as ungrateful (and possibly unworthy) mendicants. These attitudes predisposed service delivery staff at the coalface to be complacent or indifferent to the circumstances and needs of service recipients. Administrative rationing devices such as queues and formfilling were used to discourage applicants or impose transaction costs on those seeking a service. The ‘managerialist’ reform era under New Public Management sought to turn these attitudes and behaviours on their heads, although genuine behaviour change lagged somewhat behind changes in official rhetoric. Endusers or recipients became clients and customers of ‘the business’. Policies were not just rolled out to an impersonal multitude but were now oriented to service client needs and expectations. Indeed, serving clients (as opposed to merely fulfilling the policy program of government) was portrayed as the principal reason for the existence of government agencies. Customer charters were developed to inform users of their rights and entitlements, including the

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Exhibit 6.5

The origins of customer charters

Interest in ‘customer charters’ emerged in the mid-1990s in Australia, inspired in large part by reforms initiated in the United Kingdom by Conservative prime minister John Major in 1991. The British ‘Citizen’s Charter’ initiative aimed at improving public services through the publication of service standards, mandating a right of redress, performance monitoring, penalties for non-performance, tighter regulation of privatised utilities, and leveraging the benefits of competition. Charters would set out the standards of service that consumers could expect and, in some cases, specify that compensation could be claimed if performance was deficient. The concept was enthusiastically embraced in Australia where it was thought that customer charters could serve to establish ‘fair trading benchmarks’ for public bodies, particularly those (such as public utilities) engaging in commercial activities. Because effective charters involve receiving inputs from consumers, they ‘replicate, in some way, the impulses from the marketplace’ and ‘act as a form of surrogate competition where none exists’ (Fels 1994). In an address to the 1994 Annual Conference of the Society of Consumer Affairs Professionals in Business Australia, the then Trade Practices Commissioner, Allan Asher, suggested that a Consumers’ Charter can: • focus on service from the consumer’s perspective taking into account their particular needs; • establish service performance standards for the organisation to achieve and pitting these against benchmarks which are recognised best practices; • establish a consultative process between the public service provider and the customer; • establish a means to inform consumers about the service, their entitlements and reasonable expectations; • establish a mechanism for responsive and accessible complaint handling; • establish a redress mechanism where standards are not met; • act as a substitute for some of the forces of competition where none exist; and • be a mechanism for compliance with fair trading laws that operate at the Commonwealth, state and territory level throughout Australia (Asher 1994). It is important to view the introduction of customer charters in the mid-1990s within the context of other prevailing public sector management reforms aimed at introducing commercial principles into government activities, including the sale of government enterprises; private sector involvement; competitive tendering and contracting out; pricing

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reforms; performance based rewards and sanctions; regulatory reforms (both deregulation and self-regulation) and the restructuring of agencies to separate policy and regulatory functions from operational and service delivery functions (Miller 1994).

Exhibit 6.6

Consumer rights and service provision

A consumer is anyone involved in a consumer transaction. In Australia, legislative provisions in relation to consumer rights have, in part, been driven by an increased awareness of, and demands for, citizen/consumer protection (through standardisation and regulation) and avenues for the redress of grievances. The attention given to consumer rights in service design and delivery is the logical extension of the civil rights movements of the 1960s, the consumer rights movements of the 1970s and a sharpened focus on accountability and performance in the 1980s and 90s. There are three basic components to rights: 1 the liberty to do something; 2 claims to have someone else do something; and 3 immunity or protection against the actions of others (Erh-Soon Tay 1986). In general, consumer rights embody each of these components to some degree. In addition, most constructions of consumer rights also involve reciprocal obligations or duties with respect to: 1 positive rights or rights of entitlement (such as the right to education, health care or income support through social programs); 2 negative rights which impose specific obligations not to impinge on the rights of persons to engage in lawful activity; and 3 natural justice and the notion of procedural fairness (derived from natural rights or rights of choice – also called moral or inalienable rights). Consumer rights regimes generally try to strike a balance between strict legal regulation and voluntary self-regulation, which in turn implies the need for a careful balance of coercive powers and educative functions (Hayes 1987). The realisation of consumer rights in relation to government services and programs requires legal instruments to either enforce or enable rights to be asserted. In Australia, these take the form of federal and state legislation guaranteeing due process in administrative decision-making under statutory powers, including, but not restricted to, the empowering of federal and state ombudsmen to review the decisions of government authorities, departments and instrumentalities.

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In Australia today, all services provided under Specific Purpose Programs (including health, disability, housing and home-care services largely funded by the federal government and administered by state/territory governments) require the implementation of formal mechanisms for the purposes of enunciating: 1 the rights, entitlements and obligations of service users and service providers; 2 expected standards of service quality and delivery; and 3 mechanisms for the resolution of complaints and disputes.

articulation of service standards, complaint mechanisms and, in some cases, even setting out penalties payable by the provider to the client in the event of service failures (see Exhibits 6.5 and 6.6 above). Organisations were restructured and re-profiled on business lines to better reflect their main purpose, and to achieve a stronger focus on their ‘core deliverables’. Internal administrative processes were reviewed to make them more client-centred rather than devised for administrative convenience. Agencies created ‘customer service managers’ to identify key responsibilities and underscore the philosophy. Staff were identified to their clients and encouraged to use case-management approaches in order to focus their efforts or to ‘bundle’ services. Refocusing on customer service complemented efforts to improve overall service quality and efficiency. The notion of ‘customer service’ is based on an understanding that endusers have legitimate expectations about the quality of the services they receive and the manner in which they are provided. They also have expectations as to how they, as consumers, should be treated in the episodes of delivery. From the early 1990s government service providers began to publish citizen or consumer charters to provide information to consumers about the service standards they should expect and their rights and entitlements with respect to the consumption of those services. This was as much about putting service providers ‘on notice’ as it was about informing end-users. In this regard, it amounted to an additional measure of public accountability for actual performance (that is, consumers could complain if the stipulated performance requirements were not met – the power of ‘voice’). Agencies had to redesign their consumer interface using information

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drawn from client surveys, market testing, customer satisfaction ratings, complaints monitoring and consumer feedback. For instance, one large local government in Australia, after undertaking extensive customer feedback, identified that what consumers found most annoying was not being able to speak to the ‘correct person’ on the phone, being ‘fobbed off ’ or ‘given the runaround’. As a consequence the council adopted a consumer-centred policy of not allowing phones to ring for more than a few seconds, with 95 per cent of inquiries being directed to the ‘correct’ person by the second connection. This resulted in call-centre staff being offered better training in dealing with public inquiries. Customer service can also be improved by realigning or better integrating services. Electronic kiosks, internet-based business portals and one-stop shops can package a range of related services, making them available to clients at one location or one point of contact. The integration of databases also has enormous potential to improve service delivery and response times (for instance, in health and personal records, tax administration, transport information, land-use planning and place management) as well as providing a basis for ensuring compliance (in Australia, data-matching between income support agencies and the Australian Taxation Office has long been used to identify incorrect payments and prosecute fraud).

S u r r ogat e m e asu r e s gauging p e r f o r manc e to consum e r s There are two broad methods by which governments can measure the degree of client or consumer focus in their policies and programs: agency activity measures and consumer satisfaction ratings. Both can be sampled, quantified and monitored over time. Activity-based measures attempt to provide information on service performance from the vantage point of the organisation (such as how many services were provided, how many clients were treated, and how long did they have to wait). If consumers want good performance from

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public agencies, then activity monitoring can act as a proxy for performance. It provides some information about the quantity (and sometimes quality) of outputs from the agency. The information can be relatively objective (that is, it is not arbitrary) and verifiable. But the weakness with these measures is that they usually record indicators of ‘busy-ness’ telling us what the agency is doing, not how well or effectively it is operating. Moreover, there is often a trade-off between efficiency and service quality, meaning that activity-based measures of performance are poor proxies for quality and satisfaction (Lyons et al. 1993). More activity may mean the quality of service deteriorates. These issues are discussed further in chapter 9 below. Gauging client or consumer satisfaction is another surrogate measure of both program effectiveness and agency performance. Consumer satisfaction can be generally conceived as the gap between the perceived quality of the service provided and the quality expected by consumers (Zeithaml et al. 1990). But such measures are both moving targets and highly subjective. The issue of ‘expectations’ is crucial to the whole exercise. Expectations can vary widely between consumers, be idiosyncratic, more or less informed, reactive to crises, or based on normative behavioural trends (for example ‘keeping up with the Joneses’). Expectations can also be influenced or manipulated by marketing techniques. In the private sector, ensuring customer satisfaction (to improve sales or market share) is fundamental to business but is rarely the main objective of profit-maximising firms. Firms spend considerable resources training staff in customer relations and in shaping and reshaping preferences and quality expectations, usually through advertising and marketing. Yet there are some important differences between this and what occurs in the public sector. In the public sector there is no ‘bottom line’ (that is, profitability) to measure business performance and, hence, there is a danger of consumer satisfaction becoming an end in itself rather than a means to the achievement of other policy objectives. Although it provides managers with a quantifiable surrogate of performance measurement, consumer satisfaction is but one element of importance in the development and delivery of public policy. Policy exists to fulfil social and economic purposes and is about much more than the

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satisfaction levels of end-users. Moreover, the public sector principally delivers services rather than products. Preference reshaping may be more difficult with services than products since the intangibility of services often makes judgment about quality more difficult to ascertain (Fontaine 2001). For example, Heskett et al. suggest ‘The medical profession, for example, has done a masterful job of … conditioning prospective patients to expect to be treated like little children, told little, accept much of what happens to them on faith, and not be disappointed with failures to correct medical problems’ (1990: 7). There is also the matter of whether service recipients have sufficient information, incentives, or education to make informed judgments about service quality (Webster & Harding 2001). In the private sector, customer satisfaction rests on the assumption of consumer sovereignty: if customers are unhappy about the quality of a product or service they can refrain from buying. This threat constantly forces private firms to address customer needs, but this incentive is not necessarily manifest in the public sector. Certain cohorts of end-users have no option other than to accept public provision. Many are locked in various dependency relationships with the government (for example, welfare to work recipients) or are tied to sole public providers. As well, public providers are usually obliged to treat recipients equally (Kelly 2005). Public service providers cannot segregate potential customers in socio-economic terms (that is, serve the affluent first and the deprived last) although they may have explicit responsibilities to use triage strategies to give priority to those whose needs are most urgent. Governments generally seek to redress socio-economic imbalances rather than accentuate them.

T h e ‘ bottom - up ’ v i e w o f po l ic y f r om e n d - us e r s If we are seeking to gauge the effectiveness of, say, unemployment programs or welfare-to-work services, do we simply sample the attitudes of the unemployed

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in the programs concerning how well they are treated? Or do we ask working people what we should be doing for or to the unemployed to assist them find work? Should we ask taxpayers whether they feel that their resources are being put to good effect? Enforcement and compliance elements of the policy such as work-tests or evidence of job-search activity are mainly addressed to ‘taxpayers’ rather than to those who are directly affected by the rules. The satisfaction of program participants has to be balanced against the satisfaction of the broader community who expect public policy to ‘make a difference’. We can gauge end-user views or recipient perceptions of policy across three dimensions: • public or popular attitudes to government and the public sector, including trust, credibility and legitimacy; • perceptions of and confidence in organisations and agencies affecting the public (and with which they may have had contact); and • attitudes to specific programs of which they are aware or with which they have had some experience. Public attitudes to government include measures such as public trust and confidence in government, or whether governments are seen to display integrity and observe high ethical standards (or, expressed negatively, as evidenced by corruption indices such as the Corruption Perceptions Index published by Transparency International).4 Trust in government is a problematic concept as it can involve abstract or highly personalised notions of government. It can centre on trust in politicians, or in public officials, or in institutions such as the police or courts. Moreover, many argue that it is a healthy sign of liberal democracy to have some scepticism or distrust of government because of its command powers and ability to make laws. Different countries can demonstrate varying degrees of trust in government that may have more to do with their civic cultures than actual performance of government (see also Transparency International’s Global Corruption Barometer 2009, published on their website).5 Attitudes to public institutions such as the central bank, courts, the tax office, or planning agencies may be formed from general impressions and not

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drawn from personal experience with the agency. How well an agency is perceived will depend partly on perceptions of performance, visibility and observed competence. It may also be coloured with personal impressions and with whether the respondent ‘agrees’ with the basic policy direction the particular agency is following, or whether any crises have embroiled the agency in recent times. Lapses in administration can affect an agency’s reputation for years. Some agencies with coerced or hostile clients – such as a child support agency which administers maintenance payments from non-custodial parents – may always excite negative assessments from their clients, but even so, many of these agencies sample clients’ attitudes about their professionalism, due diligence and the fairness with which they administer the law. Some clients – such as the disadvantaged or those living in remote communities – may have experience with many agencies and programs simultaneously or sequentially, often representing different jurisdictions or levels of government. Here the issue for the client is whether the actions of such multiple organisations are coherent, consistent and integrated. Clients often talk of the ‘seagull syndrome’ – where officials fly in, then fly out – leaving them to cope with myriad demands or fragments of policy. Institutions collectively must suffer some criticism when they cannot join up or co-ordinate services to provide ‘whole of government’ responses. Client attitudes to specific programs with which they have had some personal contact can feed into many aspects of public policy. While measurements of consumer satisfaction will provide information about whether the expectations of the consumer were met vis-à-vis the service, broader attitudinal surveys can provide input into other aspects of policy – policy redesign, communication strategies, evaluation analysis, policy succession and policy learning. Gauging broader attitudes may not necessarily tell us how well the agency is delivering the program, but can tell us whether the program objectives are known and shared, whether people know about the program and the intentions behind it, whether people’s incentives are aligned with those of the program (do they work with the program or against it), and whether they see the program adding value to their lives. For instance, surveys sampling residents’ attitudes over competing modes of transport or transportation routes

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may not be a ‘satisfaction’ issue, but will say more about what policies residents want to receive, what preferences or intentions they have, and what actions or inactions are they prepared to take to assist their own mobility and transport needs.

R e sponsi v e go v e r nm e nt – e ngag e m e nt an d co l l abo r ati v e go v e r nanc e Arguably the best means to serve client or consumer needs is to engage them from the outset in the preparation, design and implementation of the policy. Engagement is perhaps the next big reform challenge facing governments and the public sector, following the managerial and service delivery reforms of the past two decades. It will herald a new era of public policy, sometimes called ‘collaborative governance’ (O’Flynn & Wanna 2008). But it is no miracle cure for all the ills of the public sector. In reality engagement is hard, dogged work, not particularly glamorous, and extremely time-consuming. Many agencies and policy actors have in recent years learned to ‘talk the talk’ of engagement but have not yet learned to ‘walk the walk’ and routinely enshrine these principles in standard policy-making. Governments often distrust or fear engagement strategies. They may be wary because of the threat of losing control, raising expectations or getting bogged down in consultative processes with no guarantee of a resolution. Engagement remains an optional add-on for many agencies, something that can be attempted and managed if timescales permit. But in many complex policy areas – those that involve network interdependence and alternative delivery systems – community and stakeholder engagement is essential and perhaps the only option available if policy is to be improved and aligned more with community needs. Engagement philosophies are not premised simply on improving the inputs into policy-making (ideas or suggestions from those likely to be affected), but on engendering a supportive climate for the genuine collaborative

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development of policy. It aims to foster a sense of ownership of policy choices and the resulting implementation options. Consumers are not merely passive recipients who receive services others have devised for them, but are active policy stakeholders and shapers (see O’Flynn & Wanna 2008; Stewart 2009).

Conc l usion In this chapter, we examined the end-users of services, and helped demarcate some of the terminology used to label service recipients. We argued that, historically, end-users were often an afterthought in service delivery. We also observed that with the arrival of managerialist philosophies in government, agencies adopted a customer or client focus – using the managerial discourse to reframe their relations with end-users and take their needs more seriously. Business lines delivered services to clients, customers and consumers. Agencies reorganised themselves to reflect their mission to service client groups. And customer service models were used to improve service quality and provide more integrated services through such means as case-management and integrated care across disciplines and needs groups. Consumer satisfaction and monitoring of client experiences have been used to better guide management in the delivery of services whether they were directly provided or provided through third-party providers. Even more recently governments have emphasised the need to extend or reorient the relationship with end-users to centre on community engagement – widening input into policy deliberations, but also improving design, creating ownership, and enhancing public support and commitment to share policy responsibilities. In the future, community empowerment will become one of the most important conduits for deciding and implementing policy. It will not suit every circumstance or policy arena, but communities will take a more active role and involvement in policy settings. Not only will this trend ensure that community needs are better reflected in public choices but that policy choices are more resilient and community-owned.

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7: Program design   and planning

Anyone involved in human services can easily see the limits of pure rationality. (York 1982: 3)

In this chapter, we will introduce readers to the broad range of practical and political considerations that ought to be taken into account in the development of policy and the design of programmatic interventions. Governments expect public managers to observe and follow appropriate design norms when planning social programs. These norms can be formal and officially sanctioned or informal and contingent, originating from workplace cultures. Governments would like to believe that those charged with the task of designing the ‘architecture’ of programs work in rational ways, identifying real needs, formulating clear goals, weighing options and implementing solutions in the most cost-effective manner. Politicians themselves may not always appear rational beings but most would prefer their officials were. However, their hopes may be tempered or dashed in practice. According to Reginald York (York 1982, 2008), social planning can be decomposed into interventions designed to either provide direct individual assistance (a ‘supply-side’ approach – responding by providing a service) or seek to alter the social relationships that are at the root of the problem within the target group (a ‘demand-side’ approach – responding by reducing the demand for the service). For instance, curbing crime statistics in a given locality can be attempted by increasing the presence of police or providing additional street lighting (increasing supply of security), or by working on the socioeconomic prospects of the community, for example by providing or helping

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create job opportunities for the youth (thereby reducing the demand for security). Similarly, family break-up or depression can be addressed by providing a service (for example counselling) or acting on reducing the causes of these social problems (for example income support, workplace policies, etc.).

N o r mati v e r e qui r e m e nts v e r sus p r agmatic r e a l it y At the most basic level, the norms for program design respond to political and professional requirements – requirements for accountability, public scrutiny, professional standards, due process, sound administrative practice and transparent audit. Norms provide not only recommended (or even mandated) courses of action to follow in achieving some goal, but also defensible procedures to protect decision-makers from criticism or charges of arbitrariness or dilettantism. Norms can also provide time and space for analysis, deliberation and consultation, but they do not guarantee good policy outcomes. In real world situations, many programs are assembled expediently to meet the political needs of the day with little consideration given to rational design or to how government might assess the effectiveness of such programs. Poorly designed programs almost always produce no noticeable improvement in the social problems to which they are directed and may further deteriorate an initially bad situation. The implementation of poorly conceived programs very quickly becomes a hazardous enterprise without adequate design and planning. So, how does program design contribute to successful implementation? First, design and planning provides rules of engagement and sanctioned conventions. It helps keep those charged with delivery to remain focused on the real objectives. Administrators in the government or non-government sectors tend to adopt pragmatic approaches to implementation and may easily miss the purpose of some decisions. Design links intentions to policy instruments and attempts to anticipate the logistical dynamics of implementation. Second, design locks in a sanctioned or preferred modus operandi and may

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reduce the incentives for deliverers to ‘move the goal posts’ while implementing the program. Third, disclosing the program’s means and ends contributes to enhancing the credibility of the program among its stakeholders and recipients. Design processes can enhance success by encouraging wider consultation and participation in decision-making. Finally, design processes themselves should be testable and evaluated to seek continual improvement.

S tatic an d d y namic   d e cision - ma k ing There are many standard models of decision-making that have been applied to public policy. The models depend in part upon cognitive understandings of human thinking processes and behaviour as well as on the desired types of impacts or outputs we wish to see. These models are invariably partly normative and prescriptive in that they recommend sequences we should seek to follow, and partly empirical and applied in that they draw from concrete experience. They also operate from various notions of causality or determination between perceived problems and solutions (cause and effect). They attribute different combinations of primacy between the three major decisional forces: agency or actor volition, structure or organisational behaviour and strategy or intent. Finally, these models posit different temporal characteristics (how much time do we have to decide or need to take) and relational orientations in terms of stability and change. Rational comprehensive models are idealised and highly normative while privileging the ‘planners’. They are logic-based, positivistic and evidencebased, involve sequential stages, tend to be led by strategic considerations (agreement on ends), and assume a stable environment in which ample time is available for decision-making. Rational planning is distinct from ad hoc decision-making because it ‘entails a set of decisions organized in some systematic form … a decision can be any choice among alternatives, planning usually refers to a set of decisions that are rationally organised’ (York 1982: 15).

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Perfect rationality assumes agreement on values and ends, faith in the evidential base, and fully informed comparisons of alternatives and instruments so that desired goals can be reached with the best available means. It assumes a high degree of consensus among those that are parties to the project. Rational planning may be suited to specific projects or contexts (construction projects perhaps) but it tends to be advocated and employed as a generic model. At the general level rational planning follows a sequence of steps sometimes referred to as the ‘Generic Planning Process’, which requires the needs of the target population to be assessed, overall goals to be established, specific objectives to be specified, program alternatives evaluated, implementation plans developed and monitoring and evaluation procedures thought out (Lewis et al. 2006). At a more applied level, rational planning approximates or feeds into strategic management or project management disciplines. Having said that, in public policy it is rare that we find a high degree of consensus or collegiality on values and ends, or even find agreement about program alternatives. It is also rare that the interests of participants align. Fully rational planning, thus, has an element of utopian decision-making to it beyond what is physically and realistically feasible. At the other extreme, incrementalism – or the art of ‘muddling through’ – is behavioural and pragmatic but with some normative aspects. Incrementalism is familiar, experience-based and risk-averse, goals and means are mixed up, policy proceeds by increment, mutual adjustments are constantly made, decisions are driven by bargaining (agreement on ends), and the model assumes an environment characterised by uncertainty in which little time is available for comprehensive decision-making. Program managers should not attempt to pursue rationalism but merely try to create cohesion among program participants in a context where political expediency, past practice and resistance to change dictate events (Lindblom 1959). The approach emphasises the cognitive limitations (bounded rationality) of actors who tend to adjust existing programs by small increments, fixing issues as they arise, in a spiral of otherwise unquestioned repeated actions. Incrementalism often appeals to the administrative mind and has been a powerful influence in policy development, but it has been criticised for its

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conservatism and defence of inertia (Dror 1964; Etzioni 1976). It does not explain or give guidance to larger policy or organisational changes. It was also seen to promote disjointed action, and sometimes the lowest possible denominator solutions. While Lindblom attempted to argue a case for strategic incrementalism (incrementalism guided by synoptic strategic directions), and others tried to reconcile rational and incremental models (for example mixed scanning techniques), the approach was seen not as an optimal model but as a limiting administrative phenomenon that had to be challenged and regularly dispelled. Both rational planning and incrementalism fell out of favour, first, as managerialism swept through government and then as the advent of globalisation, world crises, terrorism, financial meltdowns and climatic turbulence rocked the policy world. It was now imperative that governments and their public services had to adapt to an increasingly changing environment. Contingency approaches stressed the significance of change and rupture, the need to be agile and capable of renewal. Problems cascaded around governments, meaning policy-makers had to be strategic, flexible, pragmatic and opportunistic. Contingency approaches do not simply broker a compromise between the excessive demands of perfect rationalism and the practical but unambitious routines of incrementalism. Rather, they premise decision-making on higher degrees of uncertainty and discontinuities. Decision-making emphasises pragmatic rationality, the assessment and management of risk, new accountabilities for performance, and contingent decisions within a set of strategic and feasible options. Contingent approaches welcome new options over previous designs that did not work in the past or have become obsolete given a new environment. New technologies offer new potentialities, but resource constraints mean policy-makers and program managers have to be smarter and more adept at managing change. Impact and performance become the new logics by which to judge decisions (see Exibit 7.2 below). The crucial issue with each of these decision-making approaches is which issues or problems are they being asked to resolve. Wicked problems or complex social problems are unlikely to be solved by rational planning, and incrementalism is not likely to make much improvement. Contingency approaches

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may foster a multi-pronged strategy aimed at recording some progress. Large projects with long timelines are not suited to a contingent or incremental approach, and a rational planning process will ensure options and project logistics are considered thoroughly. The choice of model boils down to understanding context, managing information, assessing the appropriate decisionmaking approach, and specifying strategic impacts (see Exhibit 7.1 below). Moreover, it is important to proceed on an understanding that policy-making, to be successful, has to be cognisant of the ‘organic’ nature of the problems it seeks to address and leavened with a good measure of pragmatism. Exhibit 7.1

Comparing competing decision-making approaches

Quality

Rational planning

Incrementalism

Contingency

Cognitive

Positivist, formal rationality, stresses certainties

Inductive, bounded rationality, stresses uncertainty

Deductive and inductive, pragmatic rationalities

Normative/ descriptive

Normative

Descriptive and normative

Descriptive and normative

Causation

Plan to action, decision leads behaviour, authority centred

Behaviour shapes decisions, partisan mutual adjustment, limited comparisons

Stress and events trigger action, anticipatory, experimental

Strategic

Strategy-led, agreement on values and ends, separate problems

Actors and structures-led, agreement on means

Renewal, agility, opportunistic, flexibility over means and ends

Decisionmaking processes

Stages, sequential, research based

Continual, routine, risk-averse

Episodic, mixed scanning

Time involved

Substantial, deliberation and evaluation

Immediate, continuous process

Punctuated, regular reinvention

Stability/ change

Stable and predictable

Gradual change, adjustment

Responsive to major changes

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Exhibit 7.2

The lure of zero-based budgeting – attempting to make budgets less incremental

In the past, government budgets were inherently incremental – hard to change, hard to amend, and operating on historical legacies. Budget decisions focused only on ‘new’ expenditures that proposed changes to previous allocations. Existing expenditures were accepted year after year without discussion or justification. In the 1960s, zero-based budgeting (ZBB) was introduced in the United States to enable more strategic resource allocation and to counter the negative effects of incremental budgeting. ZBB requires expenditure justification for each and every program item (starting from a zero-base), taking no program for granted. ZBB ranks program alternatives with regard to performance, affordability, purpose and cost benefits, and highlights the opportunity costs associated with each option. Decision-makers can calculate the cost-benefit ratio of programs by comparing resources requested to performance levels promised. Any recommendations for increased funding can also be judged against expected performance improvements. The popularity of ZBB among decision-makers rested on its analytical clarity and the credibility it conferred on its users. The main drawback was the considerable cost in terms of time and effort by those who implemented it. Even advocates confessed to the difficulties of running the method on a yearly basis, suggesting instead larger time intervals or a focus on selective programs, which perhaps illustrates the trade-offs between a rational evaluation and incremental methods.

C omp e ting r o l e s   f o r d e sign e r s In this chapter, we will refer often to ‘program designers’. This is really a form of shorthand to refer in a generic way to that cadre of (usually public service) professional charged with the task of designing the architecture and planning the implementation of programs and services. There is no job title called ‘program designer’, and no tertiary qualification in program design. It is possible, however, to devise a basic set of selection criteria for this function: • designers will have relevant tertiary qualifications in economics, social science, or a relevant clinical discipline;

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• they will have excellent analytical and research skills and it will be highly desirable that they have specialist knowledge, or equivalent practical experience relevant to the program; • they will have high level communication skills and will be able to work effectively and constructively with a wide range of stakeholders, including politicians, officials, civil society organisations, professional bodies and end-users or their representatives; • they will be able to work effectively under pressure in a dynamic, unpredictable and often ambiguous environment and will be able to produce work of a high standard within tight time frames; • they will be adaptable, flexible and agile in their thinking – able to ‘think outside the square’ – and have superior organisational, planning and time management skills; • they will be capable of leading teams or projects, as well as working constructively within teams in the pursuit of agreed and sanctioned objectives; • they will have an excellent understanding of the core public sector values, governance and financial, human resource and operational management disciplines; and • they will get the job done. This is a demanding, but absolutely necessary skill set for successful public policy design and implementation. Of course, a variety of exogenous factors can impinge on the performance of program designers, such as poor organisational leadership, unclear goals or terms of reference, ineffective communication among internal and external stakeholders, and organisational culture. But program designers also perform various specific roles in the process of decision-making, which often predisposes them to the different decision-making approaches mentioned above. The main roles are discussed below.

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Designers as experts and technical authorities Program design requires relevant expertise and technical input. Experts bring a technical coherence and analytical tools to the task of making program decisions. Such tools include systematic sets of questions, information types and technical procedures designed to segregate or decompose problems into solvable components. Many professionals dissect problems artificially, and treat only particular aspects of the potentially much larger problem (for example doctors treating only medical aspects of a patient’s problems). The mindset of experts can influence design significantly. Some experts are naturally more inclined to analytical reflection while others are more prone to intuitive thinking. Some will favour action over reflection, some will see more value in theoretical frameworks whereas others will only trust empirical approaches.

Designers as brokers and facilitators Designers often act as mediators between relevant stakeholders or community representatives. They perform the role of brokering deals to facilitate the implementation of the program, which in turn can shape the design. They may prioritise components of the program (resources, inputs, timing, sequences or communication). They can be involved in resolving conflicts between parties (and at times between government agencies or within planning teams). A crucial role here is driving the communication strategies and communicating with stakeholders. In so doing, the program designer must bring communication and political skills to bear.

Designers as advocates or promoters Designers often act as promoters for issues or causes that they consider need attention. In these instances they become advocates as well as technocrats. They have specialist knowledge and as ‘policy insiders’ have the capacity to influence program content. It is generally expected that designers will perform the ‘neutral competence’ role of providing professional advice and expertise,

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rather than exercising an advocacy role per se. Advocates usually put a case for the policy sector (‘professional judgments’), or on behalf of the prospective recipients of a much needed service (patients or clients), or for specific stakeholders (doctors, clinicians, teachers, carers). If engaged in by designers, this kind of advocacy can compromise their credibility.

Designers as ideologists Designers also work from value sets, influenced by their training, experience and personal beliefs. Ideological predispositions influence one’s perception of problems and policy preferences for addressing them (see Exhibit 7.3 below). For instance, if policy or clinical professionals assume that ‘problem behaviour’ in children is indicative of family dysfunction, they will be naturally predisposed towards interventions that target family behaviour. Others might believe that the fault lies with the education system or that broader socio-economic factors are to blame, implying the intervention needs to address institutional and/or environmental issues. As John Murphy argues, ideologies can appear as ‘barriers to good human service programs’: The ideologies of funding bodies, the program’s auspicing organisation, the values and beliefs of staff within the organisation, especially senior management personnel, will have a strong bearing on the decisions made about the selection of service approaches. Program planners need to be prepared to negotiate or to deal with conflict if they recommend program approaches which are at odds with the ideologies of the decision-makers. (Murphy 1996: 42)

Murphy remarks that it is common for designers to mount arguments based in ideological grounds that can serve as a screen for other rationales such as changing resource commitments or public image. Arguments for the deinstitutionalisation of mentally ill patients were usually based on notions of community care and normalisation, when they were also premised on motives to reduce expenditure.

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Exhibit 7.3

The range of ideological influences

Bernard Neugeboren has listed the most common ideological perspectives together with the most common program responses (Neugeboren 1985): 1 economic ideology – believing the distribution of material wealth is the source of social problems, so the provision of material benefits (cash) offers the best solutions; 2 political ideology – emphasising the distribution of political power in a society seeks solutions through ‘empowerment’, consultation, participation or capacity-building; 3 social ideology – assumes social factors, such as class, are the root cause of society’s problems, and so sees solutions in affirmative action programs such as public housing, education, employment creation and community support services; 4 psychological ideology – believing that people’s problems derive from behavioural or psychological disorders requiring treatment, counselling, behaviour modification or therapy; 5 ecological ideology – believing that social problems are caused by problems in the physical environment such as overcrowding, air or water pollution or poor urban design for which greater engagement in environmental planning and regulation is the key; 6 somatic ideology – assuming people’s problems are organic in origin and that medical or pharmacological intervention is necessary; 7 cultural ideology – positing differences in values and beliefs as a principal cause of social problems, requiring programs to promote inclusion and mutual respect; and 8 legal ideology – emphasising individual rights to ensure fair and equitable treatment, then focusing on legal remedies such as free legal advice or consumer advocacy services.

Designers as collectives and teams Designers exist both as individual professionals and as members of teams or professional communities. Teams and professional communities can hold collective views that might be quite different to those held by individual members, and often it is the view of the collective that exerts the greatest influence. Programs are usually planned by a team that may include practitioners from a

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range of disciplines, consultants, finance officers, policy personnel, academics, and administrative or managerial personnel. These collectives can include participants from outside the organisation, but teams need to balance the competing imperatives of greater input and inclusivity versus differentiation and unwieldiness. The number of participants consulted or hired may vary with the degree of in-house knowledge and expertise. To determine the desired size of a planning team, designers must first determine the information needs and the likely sources of information. If there is sufficient knowledge about the program within the organisation then there may be little to gain in design terms from external augmentation. If there is little in-house knowledge available, it is important for the team to develop a culture that facilitates the flow of information into the design process and between the planning team, agents of implementation, stakeholders and recipients. Many implementation failures occur because existing knowledge is not sought or transmitted to the design team and so ‘history repeats itself ’.

W r e st l ing wit h n e e d s ,   caus e s an d p r ob l e ms Government agencies provide services ostensibly to address identified needs in the community. Governments might also announce policies for reasons that may have less to do with actual community needs, but more to do with a need to respond to media pressure, turf wars, organisational interests, or interest groups. Ideally, policy practitioners identify and advise governments about real needs, make the case for program intervention and assess possible (or announced) policy responses to address identified needs. Where a particular program response arises from the political needs of a government (rather than the objective identification of community needs), program designers may be required to retrospectively construct a credible rationale for the intervention! Where programs clearly correspond to community needs, designers will want to assess the gap between the likely demand and the proposed supply of the

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service. This is usually done by acquiring contextual knowledge (such as social or epidemiological research) and by consulting communities, their representatives and other stakeholders.

Acquiring contextual knowledge before intervening Timely contextual knowledge is hugely important. The agency promoting or auspicing an intervention may possess, or have access to, relevant data. Agencies may have access to, or they may commission comparative studies of, past or current programs targeting similar problems in other jurisdictions. It is important to bear in mind that past data or research might be obsolete or superseded: key demographic or economic indicators will have changed or the characteristics of target populations will have changed. Program design needs to be premised on the best available current research. It is not always necessary to commission new research: in many OECD countries public research organisations such as the Australian Institute of Health and Welfare, the National Research Council Canada, the Institute of Environmental Science and Research (New Zealand) or the Productivity Commission (Australia) are important repositories of social, scientific and economic research. So too are some of the larger civil society organisations (trade unions, universities, business associations, charities or ‘think tanks’ such as the Institute for Public Affairs in Australia or the Brookings Institution in the United States), although the impartiality of their work is sometimes compromised by their policy advocacy functions. Street level practitioners are often a good source of both anecdotal and empirical information relevant to the program. Moreover, their practical ‘on the ground’ knowledge gives street-level practitioners real insights into the practicalities of addressing community needs (whether they are government employees, contracted service providers or voluntary associations). Their knowledge comes from front-line experience with service provision; they know the main stakeholders well, they understand their core concerns and the difficulties they face in having their needs met; and they know what issues are

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particularly sensitive. They might also have access to longitudinal data and/ or can guide service planners towards other sources of reliable information. Another source of useful knowledge is the community affected by the problem. Designers can obtain information from the community either by traditional survey sampling techniques (telephone enquiries, online questionnaires, face to face interviews) or by using various open forums. Another method widely used by large research organisations, such as Australia’s Productivity Commission, consists of calling for submissions followed by public hearings. This not only allows a large amount of relevant material to be gathered, it provides an opportunity to canvass and appraise divergent stakeholder perspectives in an exhaustive and cost-effective way.

Stakeholders and needs A stakeholder can be a group or an individual with an interest in a policy, program or service. They may also have some capacity to exert influence on the content of the policy or program, although their degree of influence will vary greatly (some will have more ‘clout’ than others in the contest over policy influence). Stakeholders typically include: • recipients of the service (the target population); • intended service providers (the deliverers of the program); • community actors who have identified or have an interest or ‘stake’ in the problem (community leaders, businesses, local associations, advocates, action groups); and • other institutions with an interest in the issue (central government agencies, other line agencies, other levels of government, professional bodies, universities, the media). Some program designers actively engage stakeholders in the process of identifying needs and possible solutions. Others are more reticent, either believing that stakeholders have less understanding of the problems under consideration, or because they believe constructive engagement with stakeholders is too difficult to manage. Too often, policy-makers do not have the time, resources

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or skills to consult sufficiently with stakeholders. In some cases, policy-makers only consult when the options have been largely determined. Yet, consulting stakeholders is an important step in an appropriately informed policy development and program design process. Not only are the insights gained important in informing the content of policy and program design, the act of constructive engagement can assist in mobilising support and acceptance of the program and help to manage expectations. Stakeholder consultation immediately poses a series of dilemmas for designers wrestling with the complexities of need analysis. Different stakeholders will have different perceptions of the needs the program is supposed to meet. This will stem from differing interests in the program, different ideologies about what the cause and effects of the problem are, and different views on how to approach the problem (see below).

Types of needs and their articulation in society There are four broad types of needs in society, according to Bradshaw (1972): • Normative need refers to the condition when an individual or group falls below community standards or standards set by some knowledgeable authority. Standards include poverty, education, labour market participation, health or morbidity measures. ‘Closing the gap’ between Indigenous communities and non-Indigenous groups is a contemporary Australian example. Normative standards, however, are subject to change over time and opinions may differ about their validity. • Felt need is defined as the needs a community believes it has and relates to the problems they believe need to be addressed. Felt needs, however, tend to be articulated from a narrow appreciation of the complexity of problems or the range of possible solutions. • Expressed need refers to a felt need for which programmatic responses have been established but which remains un-met because of high demand or long waiting lists or other barriers. Expressed need

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requires careful interpretation. Waiting lists, for example, might result from inefficiency rather than insufficiency. • Comparative need is established by comparing the level, availability and quality of services found in different jurisdictions with similar population characteristics. Comparative disadvantage might reflect insufficiency in one location, or it might reflect over-supply in another.

Assessing the causes of the problem Understanding the nature of a problem, or need, does not mean one understands its causes. Additional analytical effort and stakeholder consultation will usually be required to identify the factors that lie behind observed problems. In policy-making we very often rush to devise solutions before we have fully comprehended the causes of a problem. For instance, an increased incidence of clinical depression and suicide in a community might be due to poor economic conditions (fewer jobs, rising unemployment), social tensions (cultural or socio-economic divides, or growing inequality), or political alienation (political exclusion, barriers to civic participation). In such circumstances, we struggle to separate subjective impressions from objective observations. The policy process might be subject to capture by particular interests or ‘experts’ or even disproportionately influenced by anecdotal evidence, uncorroborated beliefs or plain prejudice. Analysis and research is integral to the accountability framework within which policy formulation and service delivery occur (Underwood & Lee 2003). Reviewing the professional or academic literature can assist the analysis and widen the field of inquiry. Publications in the areas of social policy, health and welfare economics usually require firm evidence of any scientific claims – often supported by rigorous data testing. The advantage to the designer is that they may gain a deeper knowledge of issues and their causes. One drawback is that it is sometimes difficult to review specialised literature without being familiar with the professional or academic way of writing, or the methodological limitations of the findings. Also, there may be thousands of articles in a given field and it may be difficult to locate authoritative sources.

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If causes cannot be established with any degree of certainly, policy-makers can respond experimentally, setting up competing pilot programs to test which produced the best outcomes. And some may work. But a successful pilot program does not necessarily indicate the cause has been discovered, because other factors may have shaped the effectiveness of the pilot.

S e tting goa l s , ob j e cti v e s an d d e signing int e r v e ntions Assuming some work has been undertaken to identify needs and problem causes (it will always be an iterative exercise), designers will face the dilemma of how ambitious the intended program should be; in other words, what it is hoped to achieve vis-à-vis the problem and by which yardstick success can be evaluated. As a starting point, the designer can usefully distinguish mission from goals and objectives: • The organisational mission (or purpose) will usually be the entire strategy (or raison d’etre) for the agency existing (why it exists and what it wants to achieve). Mission statements can also be represented in desired outcomes or clusters of outcomes – such as improving the lives of the population by creating opportunities for economic and social participation by individuals, families and the community. • Goals state a desirable or preferred outcome within the mission measured against relevant standards or expectations. Goals typically express general ambitious intentions as, for instance, in ‘reducing poverty rates’, ‘building a modern social and income support system’, or ‘reducing drug consumption among the young’. • Objectives express a statement of intended activity in relation to the stated goal. There is usually more than one objective pursued to achieve a goal. If the goal is to ‘reduce poverty’, the objective may be ‘targeted interventions to support those in most need’. Such

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Exhibit 7.4

The Queensland government’s toward Q2 initiative

In September 2008, Queensland’s Department of Premier and Cabinet launched ‘Tomorrow’s Queensland – Q2’. The plan provides a macro-scale set of directions for service program planners: citizens have to be steered toward strong, green, smart, healthy and fair behaviour. The plan establishes long-term ambitions (goals) and targets (objectives) against current performance indicators to address a number of identified threats to the state’s lifestyle and economic growth (for example climate change, water shortages, skill shortages, hospital waiting times) or areas of untapped potential (social capital, conservation). The plan also specifies general strategies delineating the government’s undertaking to achieve these objectives. For instance, the ‘fair’ direction is characterised by: Goal

Supporting safe and caring communities

Identified threat:

Children living in jobless households have lower school outcomes, poorer career opportunities and greater exposure to crime. Long-term unemployment is 14 per cent. Fast rising child care fees may further reduce labour force participation

Untapped potential:

Volunteering makes people active, involved and connected. It also creates positive externalities, but volunteerism is low among the young and the old, and the ageing population adds to demand on an ever busier workforce

Objective 1

Halve the proportion of Queensland children living in households without a working parent

Strategy 1.1

Targeting employment programs for disadvantaged and long-term unemployed

Strategy 1.2

Offering training, child care and transport support to these groups

Strategy 1.3

Funding traineeships through local governments and NGO subsidies

Strategy 1.4

Funding early years ‘hubs’ (‘one-stop’ core health, education and social services for younger children) in high growth areas

Objective 2

Increase by 50 per cent the proportion of Queenslanders involved in their communities as volunteers

Strategy 2.1

Promote the economic, social and environmental benefits of volunteering

Strategy 2.2

Grow the volunteer workforce in the State Emergency Service and the Rural Fire Service

Strategy 2.3

Encourage diversity in volunteerism

Strategy 2.4

Help communities supply their volunteer streams

source

Adapted from ‘Toward Q2: Tomorrow’s Queensland’, Queensland Government (09/2008).

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objectives may also be broken down into more specific program subobjectives such as ‘to make sure affected communities gain awareness of the social and employment services in the area’, ‘to ensure adequate services are set up to improve communication, financial and negotiation skills in the community’, ‘to provide matrimonial and parenting counselling, to provide stress and anger therapy’, and ‘to ensure minimal standards of nutrition and hygiene are met in the community’. The point of specifying objectives is to enable performance to be assessed and progress towards the overall goals measured (see Exhibit 7.4 above).

Program selection Programs represent clusters of activity designed to achieve the stated objectives. They generally consist of packages, or blends, of policy resources and policy instruments and they should aim to deal with the problem and its causes in the most cost-effective manner. Therefore, if we are proceeding logically, we will have thus far: • gathered and analysed information; • sought evidence of causes; • set our goals and objectives. We are now able to select and design the intended program. Program activity will usually emerge in the shape of a decision tree – specifying the exact nature of the intervention, how much it costs, who will perform what activities, in which location, and to what targeted group. Program plans become detailed action plans or business plans that ‘bound’ the activity (in policy and administrative terms) and specify, as much as possible, all the activities that will have to be carried out by those implementing the project. The plan should also nominate timelines or milestones indicating at which point in time specific activities should be carried out and some evaluation of progress undertaken. Depending on the political and organisational context, program designers

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may have large discretion with program selection or, on the contrary, they may have none (for example, if government has ‘locked in’ a preferred delivery model, the capacity of the program designer to influence the basic program architecture is necessarily constrained). Generally, the method of program selection is not only generated in response to the problem or desired objective, but is also framed within a defined set of constraints, histories and possibilities. All programs are shaped by existing circumstances, and anchored in structures and norms. Prevailing organisational ideologies may either facilitate or be a serious impediment to program selection and possibly the effectiveness of the resulting program. Politics and the preferences of significant actors will shape choices. The logic of sequential decision-making can be perverted or inverted. The recommendations of program designers closest to the intended delivery may not be heeded. Where the potential exists to do so, program designers should consider possible alternatives or different mixes of policy instruments. They may have to be prepared to argue their case or compromise if their preferred analytically-based proposals clash with the convictions of the hierarchy above them. They may also be up against the tide of history: what has worked well for the agency in the past, or what previously failed, will be powerful influences on the selection of alternatives. There are many pitfalls to avoid in formulating programs. One obvious but persistent problem consists of logical flaws or confusions within the decision tree – especially over the link between the proposed activities and the desired objectives. Such flaws will typically translate into implementation failures subsequently as delivery agents misinterpret the orientations of the program or grapple with its guidelines. The desire to ‘do something’ (and register action or demonstration effects) can lead to hasty decisions and suboptimal outputs. Programs that rely largely on others to make them work take big risks in assuming that the priority of one agency or actor will be matched by the same degree of priority in another. Another pitfall in program selection is the desire by some managers to be seen to innovate and break through with new solutions even when the old ways had demonstrated some merit. They may opt for innovation not out of logic, but for reasons of organisational reputation, personal prestige or not

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wanting to be seen to emulate others. Sometimes innovation can lead to too much chopping and changing and disruption to the program’s achievements. The real effect of programs can take a long time to be demonstrated, and frequent changes that negate past approaches will have a disproportionate chance of failure, not least because they themselves have not had the time to be appraised adequately (see Lewis et al. 2006). Alternatively, it is also clear that many programs have systematic weaknesses or have failed to improve outcomes. Programs can be well administered but still ineffective. In such circumstances, more drastic changes are appropriate and if the shortcomings come to light publicly then it may also be a political necessity. Sometimes social problems are so new or recent (for example computer game addiction) that there may be no existing program to benchmark any proposed program against and designers have no other choice but to experiment with new solutions. Designers may still find inspiration in existing programs that targeted vaguely similar problems (for example gambling or other types of addiction). In general, though, brand new program experiments will require a much higher level of follow-up and stepwise evaluation than more established programs.

Consultation about implementation Engagement with stakeholders on issues of implementation is a key factor in program success and may even exceed the value of the information gathered through initial consultation. Consultation about implementation enables program planners to ‘sell’ the program to stakeholders, leveraging commitment and co-operation from communities of interest. The design of an implementation plan should proceed with sufficient consultation with the relevant stakeholders and delivery agents, especially if policy choices have been driven by branches within exclusively policy departments. Consultation is not merely undertaken to anticipate and avoid delivery problems, delays or bottlenecks, but more fundamentally to communicate the program’s objectives with the intended deliverers or recipients. It should be a two-way process (interested readers might well want to refer to Arnstein’s [1969] ‘Ladder of Citizen

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Participation’ or Stewart’s [2009] The Dilemmas of Engagement). However, there are many factors which mitigate against good consultation over implementation plans. Often agencies do not consult or only do so perfunctorily. Policy issues may be sensitive, sometimes confidential and subject to media scrutiny. All these factors tend to impede adequate consultation. Stakeholders also complain that while consultation may have taken place, no account was ever taken of the advice and information provided – it was a oneway process. Frequently, consultation will be consigned to a small window of opportunity at the outset, rather than an ongoing commitment. Stakeholders and community actors will feel excluded from decisions about the actual implementation process, nourishing a feeling that consultation is merely conducted to ‘tick the boxes’. Moreover, many government agencies are not well equipped to consult or engage over implementation, and it is not part of their culture. The problem may be greater the more remote governments are from the community. Experience suggests that community engagement is more likely to occur and succeed in local government programs than in national programs. Governments may consult specialised stakeholders about technical information or specifications, but not feel the need to consult if they do not need such specialist input. Governments will also tend to consult (and negotiate) when they are forced to do so by powerful interests who cannot be otherwise appeased. Meaningful consultation is more likely to occur when there is a mutual respect and a balance of power between government and non-government players (leading to real negotiations over the program rather than responding to government diktats).

P l anning t h e capacit y to deliver Programs for the delivery of public services often require a statutory basis – that is, legislation that authorises the appropriation of funds by a legislature for

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approved purposes. Assuming that statutory authority exists, program managers need to turn their attention to three important resource domains when planning the capacity to deliver: human resource capacities, material or physical resources (equipment, facilities, and supplies), and budgetary or financial resources. Ideally, managers might prefer to assess their human resource needs and material necessities before estimating costs and seeking budget allocations. But often the process operates in reverse, and programs have to cut their coats according to their cloth.

Human resource capacities Public services are frequently labour-intensive and usually require specialised skill sets or skill mixes. When framing an implementation plan, identifying the necessary skills base for the program is a vital first step. A vital second step is assessing both the existing human resource capacities of the organisation (as an in-house source of the requisite skills) and the availability of required skills in the labour market. This involves determining the size, composition and remuneration of the program workforce. Program design requires a full specification of the positions to be filled, including titles, job descriptions, expected responsibilities, accountabilities, recruitment, skills, education and experience and salary range. Strategic workforce planning analyses undertaken by agencies of their own organisational capacities and the available skills profile in the wider workforce (where they occur at all) provide an important source of information to support analysis, as might supply projections and labour market data produced by statistical agencies or trade unions. There are some fundamental issues to consider in terms of human resource needs, including: • Are existing staff transferable to other – even remote – locations or can they be sourced locally? • How can agencies develop and nurture the right mix of skills and team attributes? • Does the organisation have the flexibility to offer above-market wages

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and other incentives (for example overtime payments) to attract staff that would otherwise be difficult to find? • Can the program expect to obtain funding to train future staff in the required skills? • Should the program anticipate longer-term contingencies associated with staff turn-over (recruitment, retention and replacement)? Many agencies simply assume required skills ‘will be found’ and it is not uncommon that considerable down-time occurs while the agency attempts to harness elusive human resources. Understaffing is one of many potential sources of stress that can significantly compromise program performance (others being ‘burn-out’, long hours, lack of management support or direction, unhappy clients, media criticism). Conversely, overstaffed programs are prone to internal tensions arising from workload inequities that might lead to the loss of talented staff or high staff turn-over, possibly resulting in a loss of corporate memory and knowledge. They are also less efficient and subject to the law of ‘diminishing marginal returns’ which holds that beyond an optimum size each additional member of a given team will contribute less and less to the final outcome. Public organisations who do not have the required in-house skills bypass these difficulties by outsourcing implementation to non-government agencies. The practical problem of staffing the program then becomes a matter for the contracted agency. Yet staffing requirements will still need to be considered by designers as contracted agencies may face the same staffing difficulties as the host funding organisation. Increasingly, social programs have also turned to volunteers to help deliver services. In some cases this works well, such as in programs requiring few professional skills or qualifications. There are limits, however, to what volunteers can be expected to do, particularly when services have coercive or enforcement elements or when there are intractable issues such as occupational health and safety, security, privacy or other issues of personal liability involved.

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Material or physical resource capacities Programs require material and physical resource plans covering such general items as accommodation and facilities, fleet and travel needs, equipment, supplies, non-salary overheads (insurance, legal or financial services). In addition, programs may have special requirements comprising, for instance, advertising and promotional inputs, special IT requirements, grants for community infrastructure, subsidies for recipients. Some of these material resources will be consumed within the budget year (recurrent spending) but others will have a lifespan greater than the time. Asset management plans and multi-year planning will be required if the program needs substantial material resources, and some allowance for longer-term contingencies should be incorporated in costings (for example market-driven increases in raw materials or supplies). Calculating and sourcing required material resources can pose difficulties not unlike those experienced with human resource planning. For example, some highly specific supplies or equipment may be in short supply in nonmetropolitan areas and the program may consequently experience implementation delays. If the program calls for geographically decentralised management, accommodation for some local headquarters may be difficult to obtain or may not meet the standards expected by program staff, or may be too expensive for the program.

Budgetary and financial capacities Budgetary allocations are often the essence of program design. Budget resources indicate the degree of priority awarded to the program and provide a specific amount to use. Budgets are both facilitating and controlling instruments. While governments often talk about ‘program budgeting’ they generally do not use this method to budget for programs at the centre of government. Rather, agencies sub-divide their organisational budgets into programs clustered under output or outcome structures. Program managers will work from program budgets day-to-day but often this information is not transparent and open to public scrutiny.

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Ideally, program budgets should reflect the full cost of attaining a specific goal with respect to agreed objectives and strategies. Although it seldom occurs in practice, global program budgeting should also take into account the cost of overheads associated with program design and implementation as well as ongoing head office administration costs. Program budgets tend to reflect the reality of how much can be afforded rather than an ideal cost structure based on ‘best practice’. In practice budget bids are rarely granted in full and governments will generally opt to fund only a proportion of the funds requested in the program plan – forcing agencies to either scale down the program or make up any shortfall by internal reallocation (although contemporary accountability frameworks discourage crosssubsidisation). The challenge, then, for program managers is to devise programs and services that will contribute to the attainment of policy goals with the available resources. Miscalculations here are likely to add another source of implementation failure. Other implementation failure risks include cost under-estimation (the program risks running over budget) and cost over-estimation (where the program risks under-spending). Both under-estimating and over-estimating budgetary requirements risk negative perceptions of agency competence; a loss of staff, public and end-user confidence; and adverse political and media commentary. If funds have been allocated as a lump-sum payment or commitment from day one of the program, managers will often respond rationally by allocating these funds evenly over the duration of the budget year, committing no more than one-twelfth of the funds per month. However, costs do not necessarily fall due in regular, predictable increments: the actual pattern of program spending may be lumpy or uneven. Funds are more likely to be consumed as the program evolves or when any large payments are due. If managers behave conservatively it is not unusual for initial costs to remain under budget for months but then for programs to have an end-of-year surge in spending. This may look wasteful, but it is often a rational way of managing risk over the budget year by holding off some discretionary spending until the end of the period.

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A typical budget for a small program may look something like that presented in Exhibit 7.5 below. The crucial relationship is the balance between the expected income (revenues) and the total expenses. Nominal expense amounts can be internally allocated to assist management, implementation and budgetary control. Exhibit 7.5

Aggregate budget for a program

Program income

Program expenses

(funding by source)

(by nominal items)

Budget allocation from consolidated revenue (new funds)

$200,000 Salaries (including on-cost)

Internal transfer from agency

$75,000

Income from trust fund

$25,000

Donations

$12,325

Return on investment

$8550

Training

$10,000

Equipment

$12,000

Fleet services

$10,000

Rent

$20,000

Advertising

$3000

Travel

$5000

Consulting services Insurance Overheads $320,875

Total

$200,000

Total Projected carry-forward

$20,000 $2000 $35,000 $317,000 $3875

C onc l usion In this chapter, we discussed the main approaches to decision-making in policy work and the practical aspects of designing policy interventions and programs. We began with a comparison of the strengths and weaknesses of rational planning, incrementalism and contingency models. All have a role and

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usefulness, but each needs to be carefully applied. We stressed the importance of understanding community needs, evaluating the causes of identified problems, consulting data sources, setting goals and objectives, choosing among alternative solutions, consulting stakeholders over implementation and finally three critical factors involved in planning the capacity to deliver – human, material and financial resources. Sound program design should not only provide clear guidelines to policy implementation and service delivery agents, but also provide benchmarks against which to assess performance and ongoing evaluation as well as assist in anticipating potential threats to implementation strategies, thereby allowing managers to manage risk effectively. One of the limitations we experience in introducing these various aspects of policy design and planning is that the impression is often conveyed that policy is made in some sort of sterile laboratory, where objectives are clear, relevant information is known, time is available, resources are forthcoming, and the relevant skills to deliver policy are abundant. Such instances may occur in real life but they are a rarity. A far more likely scenario is one in which policy is made under conditions of uncertainty or adversity, competing priorities, partial ignorance of relevant data, insufficient resources and inadequate consultation. Design principles and methods are valuable guides to assist decision-making and improve policy as it evolves, but they have to be tempered with experience. We need to acknowledge that they will generally become infused with or contaminated by context, circumstance, political realities and an element of chance. This is one of the reasons why policy remains iterative and one of the reasons why policy is constantly having to be reconsidered, remade, revisited and adapted in a dynamic world.

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8: Program   implementation   and management

I have a simple message: project management is too important to leave for nerds! … Project management can sound dull if worthy, a matter of routine process, necessary but uninspiring. It is not. It is about getting things done through innovative methods, organisational change and committed leadership. And its significance to public administration is even greater. The quality of the implementation of government policy is central to community support for the institutions of democratic governance … (Shergold 2007: 11)

Service delivery is an inherently complex enterprise. It requires managing across a huge number of fronts, often simultaneously. Managers are accountable for the use of resources associated with the delivery of services (people, money and physical assets); maintaining constructive relationships with a variety of stakeholders (parliaments, ministers, clients, communities, advocacy groups, contractors and suppliers, unions and professional associations, among others); and results (demonstrating that the application of resources achieves outcomes). Failures on one front can have cascading effects across others. In this chapter we explore the practical and political dimensions of the management challenges in implementation. First, we explore the main approaches to implementation theory. We stress that implementation should be responsive and reflexive. It also needs to be locationally directed and assisted by new technologies including information and communication technologies. Operational logistics test the integrity and resilience of government’s

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management systems and disciplines. This is especially so when agencies are required to implement programs in times of crisis such as emergency and disaster relief. We then look at three additional dimensions crucial to good implementation and common to all programs or services that have to be managed – risk, demand and the media. Finally, we examine that subset of issues that must be addressed when, as is increasingly common, public services are provided under contract by third parties.

I mp l e m e ntation t h e o r y The field of implementation theory is one area of social science where theory has followed practice. Theories have not so much led practice but gradually emerged from the process of doing implementation. They are grounded theories based on generalisations from applied contexts. Many of the theories also relate to other theoretical literatures found within social science – such as social theory, state theory, bureaucratic theory, organisational theories, theories of power, decision-making approaches, planning and projectmanagement techniques, and accountability theories. Implementation theories are not stand-alone entities and should be understood within this broader context. They posit generalisations about the processes of implementation. Traditionally, implementation was not seen as problematic. Governments announced policy and it would automatically be implemented by faithful servants. From the 1970s, however, the field of implementation theory arose in response to concerns about the problematic nature of implementation. Increased attention was given to implementation theory as governments experienced disappointments with the results of implementation or found distortions occurred over the original intent throughout the implementation phase. One of the path-breaking books of this era was Implementation by Pressman and Wildavsky (1973), which charted how policies announced in Washington were distorted, misapplied or failed when attempted on the ground in the San Francisco area. Great hopes were dashed in practice and the authors

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suggested ‘… it’s amazing that federal programs work at all’. Implementation and the issues involved suddenly became problematic. Implementation theory tends to focus on policy failure and what goes wrong in implementation. So theories talk of non-implementation when announced policies are poorly implemented or not implemented at all. Alternatively, some policies can be unsuccessfully implemented – that is when conscientious implementation takes place but other factors intervene to make the policy a limited success. Others refer to ‘implementation gaps’, referring to the absence or loss of crucial connections or essential components in implementation processes on which successful outcomes rest. The artificial separation between policy formulation and policy implementation (which often takes place in different locations, with different agencies, and with different actors involved) has been the subject of much criticism in the literature – especially over the lack of policy learning, feedback loops, organic connections, technical proficiencies, and experiential evidence. Furthermore, the changing context within which implementation is conducted has been identified as a major cause of policy disappointments – with the implication that implementation has to be more agile, flexible and reflexive. One attempt to step around this ‘explaining failure’ genre of implementation theory was the attempt by Hogwood and Gunn to sketch out the ten preconditions for perfect implementation (Hogwood & Gunn 1984). Their list of criteria could be seen as a bold attempt to present an unrealistic set of preconditions which would never be met, but this was not their point. They argued that the success of implementation would be weakened or impeded by the degree to which the actual implementation strategy departed from the list of perfect conditions. They were not arguing that perfect implementation was possible. Rather their preconditions are a scientific control against which all attempts at implementation would fall somewhere on a spectrum from being fully realised to unrealised. Their ten preconditions for perfect implementation against which actual implementation could be judged were: 1 there were no crippling external constraints; 2 there was adequate time and resources;

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3 the required combinations of resources were available at each stage of the implementation sequence; 4 that policy was based on a valid theory of cause and effect; 5 that the cause–effect relationship was direct and had few intervening barriers or disruptions; 6 that one agency was responsible for implementing the plan and it was not dependent on other agencies or actors; 7 that there was complete understanding and agreement on policy objectives; 8 that tasks to be performed by each participant could be specified beforehand and managed in sequence; 9 that perfect communication existed; and 10 that implementers carried out their tasks with complete obedience. Policy-makers are meant to benchmark their own implementation experience or circumstances against this checklist. The message such models stress is that implementation is logical, procedural and sequential. It proceeds by approved processes that need to be managed and controlled. But the political world and policy environment often challenge these messages. Policy can be ad hoc, procedures can be invented or discarded, and sequences can be staccato, broken and disjointed. Implementation procedures may give more comfort to officials than explain how they are implementing – they offer a semblance of order in a disorganised environment. Two other approaches to implementation find prominence in the literature and appeal to practitioners – deductive versus inductive approaches. Deductive approaches begin with notions of knowledge and power that stress formal policy pronouncements and authoritative solutions. Implementation is hierarchic and top-down running from cabinet or ministers, through departmental organisations to delivery agents and frontline staff. They carry out or attempt to carry out the intentions of the hierarchy, and consistency is likely to be emphasised. By contrast, inductive or bottom-up approaches

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place greater emphasis on discretion and the repeated interaction with recipients and clients. Implementation is built on accumulated knowledge and experience and fed back through organisations and hierarchies. Rather than a single agency implementing programs directly, bottom-up implementation suggests multi-organisational involvement, network delivery and considerable scope for street-level administrators (Lipsky 1980; Bergen & While 2005). The issue for practitioners with these two models is not that one is more correct than the other, but which approach best suits the policy sector, the delivery chains, organisational cultures and political imperatives. The administration of tax policy may suit a top-down, standard and consistent practice of implementation whereas social workers engaged in case management are likely to operate from bottom-up discretionary models within an overall policy framework (Simpson et al. 2003; Lewis et al. 2006).

Reflexive implementation Policy rigidity is a source of potential risk to program administration and service delivery, raising tensions between top-down and bottom-up philosophies. It arises when the custodians of the core policy settings resist attempts by street-level delivery staff to make adjustments. Policy-making does not stop when implementation starts. In fact, depending on the type of service considered, the agents of implementation (street-level bureaucrats and third-party providers alike) can wield significant influence on the core policy settings as well as the operations of programs. Head office policy-makers (mostly executives and managers removed from the action) may not have had access to the practical experience and insights of the range of actors engaged in the actual implementation of a program or service – the social workers, counsellors, counter staff, police officers, teachers, nurses or volunteers working at the coalface. Programs and services need to have a reflexive capacity to take into account frontline opinions and experience and adjust policy or operational settings as necessary – see Keating (2001) and Exhibit 8.1 opposite.

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Exhibit 8.1

The risk of contractual rigidity – a former Mandarin speaks

According to the former Secretary of the Commonwealth Department of the Prime Minister and Cabinet, Peter Shergold, one of the advantages of engaging third sector organisations in the delivery of mandated public services is the latter’s capacity for ‘social innovation’: ‘I worked with a lot of the not-for-profit organisations and the thing I worried about most was that they were being constrained by their contracts from doing things that were imaginative and innovative, and if you’re trying to get the not-for-profit sector working with government that’s precisely what you should be seeking to purchase. If you have a rigid contract ... it seems to me that undermines the whole purpose of contracting out ... ‘One of the things, unfortunately, you do is you enter into a relationship during the contract with not-for-profits. First of all, very often you don’t negotiate with the not-for-profit sufficiently at the beginning. You don’t allow them to actually have an input into the policy framework within which they’ll be operating ... And then when you try and administer the not-for-profit you try and bind it in a rigid contract. What I think government has got to realise is that to be fully effective, to get the real advantage from the not-for-profit sector, you’ve really got to move from contract management into relationship management – build a long-term relationship in which you are equals, in which it is a genuine partnership. ‘I think it’s something that all governments are having to come to terms with. I don’t know of any government that has got this completely right, yet.’ source Peter Shergold interviewed by Peter Mares on ABC Radio National’s The National Interest , 7 March 2008. Accessed 31 March 2008 at .

Program guidelines cannot address each and every idiosyncratic aspect of ‘on the ground’ service delivery. Those charged with the task of delivering services will, from time to time, be required to make judgments and exercise discretion without the benefit of clear guidance. Although this introduces a risk that those decisions might not be fully aligned with the policy intent of the program, it also represents an opportunity for street-level agents to exercise creativity when formulating strategies to balance need against program requirements and resource constraints. In so doing, according to Weatherley and Lipsky, the role, feedback and discretion of street-level actors in policy implementation creates a bottom-up force that runs against the downstream flow of top-down policy planning and governance:

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Exhibit 8.2

Community nursing, the UK’s Care Program Approach

In the UK, the Community Care Act (1990) introduced the Care Program Approach (CPA), a purchaser–provider/de-institutionalisation policy that began on 1 April 1993. The CPA made the social services departments of local authorities responsible for organising and funding community care (residential and nursing) to promote independent living for people affected by ageing or disability. Originally meant to address the lack of accountability and flexibility shown by a state and professional monopoly (as well as tackling the looming service shortages brought about by the ageing bubble), the CPA sought to introduce ‘care management’ (a form of case management) into community nursing practice. The care manager is appointed by the local authority to assess in-patients’ needs for potential community care after hospital discharge, and design service responses to individual client needs. Once assessed, clients’ needs are then met through a competitive quasi-market of public, private and third sector providers. Under this model, the community nurse becomes a purchaser–manager (or broker) of services rather than a direct provider. The implementation of the Act sparked controversy in the nursing community. Some saw it as an opportunity for empowerment: a chance for the profession to influence policy-making rather than policy-doing. Others questioned the benefits of bureaucratising the profession. In 1997, the Labour government rephrased CPA’s ideology in terms of partnerships and devolved commissioning, but did not depart from the case management paradigm. However, the Act never made clear the skill set required to fulfil the case manager function, nor the model of care management to be adopted. The reforms were certainly prescriptive about the process of care management but not about how to go about implementing it. Consequently, community nurses were given a lot of discretion with regard to their involvement in the reforms and the manner in which they would interpret them. The extent to which this level of discretion was exercised was, above all, a function of the clarity of policy guidance, its alignment with professional nursing values, and local authority practice. Fifteen years on, there is evidence that some practitioners embraced the opportunities offered by the Act (Bergen & While 2005) but, overall, the lack of prescriptive guidance about how to interpret the new roles and care management models has been detrimental to its successful implementation (Simpson et al. 2003).

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… these accommodation and coping mechanisms that they are free to develop form patterns of behaviour, which become the government program that is ‘delivered’ to the public … street-level bureaucrats are the policy makers in their arena. (Weatherley & Lipsky 2002: 172)

Just as the development of policy and the design of programs require research and analytical skills (a ‘thinking policy’ mindset), implementation and streetlevel management requires pragmatism, excellent human skills and sound judgment (a ‘doing policy’ mindset – see Exhibit 8.2).

Implementation logistics and location Policy-makers need to give as much attention to the regional and geographical distribution of need/demand as they give to the socio-economic dimensions of need. Social disadvantage is often compounded by location (for instance remoteness) requiring special implementation logistics. As access and equity have become more important policy philosophies, agencies have had to devise regional implementation strategies which can involve working through or utilising different deliverers in different localities. ‘Place’ plays a significant role in the design and implementation of public programs and services: the attributes, strengths and limitations of particular locales have a significant bearing on both the behaviour of potential end-users and on the attributes of the service model required for success. Techniques of ‘place management’ (the integration of clustered services from different sources to targeted recipients) is a particularly co-ordinated approach to local delivery. Australian policy-makers often cite ‘the tyranny of distance’ when alluding to the challenges of providing services and exercising administrative oversight over programs in a big country with dispersed populations. Canadians and Americans would have considerable empathy with the scale of the geographic challenges facing Australian policy-makers. That is not to say that smaller, more densely populated countries do not have to consider the geographic dimensions of service delivery. While there is no doubt that the provision of publicly mandated services is particularly challenging in rural or

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remote areas, physical distance is not the only variable that needs to be considered. In some respects, social distance can be just as challenging, and much more salient. Examples include the provision of services targeting particular ethnic or cultural communities, providing services to the urban fringe, or providing services in disadvantaged inner-city communities. Among the logistical and locational issues policy-makers need to consider are: • the mobility and travel behaviours of the target population (are endusers dependent on public transportation, do they exhibit high or low geographic mobility, can they physically access the services offered to them?); • the presence or absence of ancillary services and amenities (are services co-located with other services and amenities end-users might require, including other public services, banking, shopping, public transport or parking?); • the ability to attract and retain appropriately skilled staff (can the service provider either locally source appropriate personnel or encourage them to commute to, or move to the service delivery location?); • does the service operate according to a centre-based model or an outreach model (do end-users attend the service or can the service go to them?); • are there any negative externalities associated with the location that might dissuade end-users from accessing the service (such as social stigma or concerns for physical security and safety?); • are there any positive externalities that can be leveraged in the interests of enhanced service provision (such as local voluntary associations, community groups or supportive local businesses?); and/or • the potential for local service administrators and providers to feel disconnected with central administration and core policy settings (and in the process, feel ‘abandoned’ and become insular or alienated?).

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Implementation using ICT-enablement Information communication and technology (ICT) has been a powerful, transforming force both for industry and the business of government. Only 20 years ago, facsimile machines were a novelty in the workplace and few public servants had a computer on their desktop. Records and files were maintained manually. Cellular phones were expensive, bulky and a rarity, and laptop computers were not even dreamed of; neither was the World Wide Web (internet services did not appear on administrative desktops until the mid to late 1990s). Over the last decade ICT systems have become a core business tool of government, and have transformed the operations of government, for example: • the way services are delivered (the payment of benefits can be made via electronic funds transfers to clients’ bank accounts; forms can be completed and submitted, or tenders lodged online via agency websites; tax returns can be filed, health claims lodged, fees or traffic fines paid, or library books reserved online); • the ways in which officials and stakeholders network and share information, participate in decision-making (mobile phones, SMS, BlackBerries, email, social networking websites, video conferencing); • the ways in which public consultation is undertaken (using SMS, electronic kiosks, online questionnaires, or via blogs and social networking sites (see Chen [2007]); • the ways in which government manages and disseminates information (new releases, documents, forms and user information are now routinely published online in a variety of file formats and downloadable on a variety of media including computers, mobile phones and BlackBerries); and • the ways in which government can manage the vast amounts of data generated by its operational and service delivery systems (using data matching to identify fraud, manage payroll and human resource management systems, produce and reconcile accounts, enable casemix management).

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These are only a small sample of the existing and potential applications of ICT available to governments to support the delivery of services. It should be added that governments need to be aware of the power of personal communications media to leverage social utilities such as Facebook, MySpace, YouTube or Twitter to mobilise public opinion and collective action. This was evidenced in the 2007 elections in both Australia and the United States (in which the Kevin Rudd and Barack Obama campaigns used social networking media to mobilise their constituencies) and, at the other end of the spectrum, by those opposing the contentious electoral result in Iran’s 2009 presidential election (in which protesters used mobile phones to record and post videos of government crackdowns on YouTube, and used Twitter to bypass official restrictions on media coverage). The crucial questions for the designers and implementers are: • can we use ICT to leverage enhanced efficiency and effectiveness in the delivery of mandated programs and services? • can we comprehensively define the functionalities we require the ICT to deliver? and • do we ‘build or buy’? The last question, ‘do we build or buy?’, has perhaps become less salient over the past decade owing to the extent to which public sector organisations outsourced their ICT capability. Many observers have commented on the loss of knowledge, expertise and corporate memory that accompanied large scale IT outsourcing initiatives across the OECD from the late 1990s. This means that many organisations that once might have purpose-built their own IT-enabled business systems can no longer do so. As a result, new ICT capability tends to be bought, rather than built, which introduces other problems. Sometimes those procuring ICT and those supplying it simply do not understand each other, or they fail to communicate clearly or sufficiently the levels of functionality required or the capabilities of the ICT being offered. Business process failures arise from the mismatch between required functionality and ICT capability. Queensland’s ‘go card’ is a case in point (see Exhibit 8.3 opposite). Experiences such as these have led in some cases to a degree of outsourcing

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‘backlash’ in the form of re-establishing internal capacity for in-house provision or ‘hybrid solutions’ characterised by a pragmatic and market-focused mix of in-house and externally sourced provision. Exhibit 8.3

Managing IT-enabled services: Queensland’s ‘go card’

In 2004, the Queensland government created Translink, a ‘one-stop’ agency responsible for a network of 17 transport operators (including buses, trains and ferries) and over an area covering 10,000 square kilometres. Between 2006 and 2008 Translink introduced the go card, a ‘single ticket’ smart card using GPS technology (‘tag-in, tag-off’) to determine exact trip duration and length. As a prepaid ticket, the go card was intended to speed up transport transactions in a busy region with a fast growing population. From the start, criticism of the go card project focused on Translink’s implementation of the technology, rather than the technology itself, which had a proven track record in other jurisdictions (a similar system had successfully been adopted by Perth earlier on). The IT provider, with relevant industry experience was a US-based, media-shy operator, who left an often poorly briefed Queensland government the task of making public announcements. Under a constant barrage of media cynicism, the introduction of the go card was subject to many delays between 2005 and early 2008 because the technology was not ready. The capacity to deliver the project was very much in doubt. Tagging systems had to be installed on every type of transport, technology testing had not been completed and cards were introduced well before any effective information campaign could be conducted to explain how to use them. These problems were compounded by poorly thought-out base fare structures that offered few incentives to switch from paper tickets to the smart card. Initially the take-up of the new card by customers was low, frontline staff commitment was compromised, and customer complaints grew. In desperation, the Transport Ministry hired an independent consultant to resolve outstanding problems and prevent a collapse of the implementation process. By the end of October 2008, uptake numbers revealed the crisis was over and the card was being widely adopted.

The designers and implementers of programs and services need to be aware that the design, build and roll-out of business-enabling IT can be extremely complex, is characterised by long lead times, can be subject to delays and cost blow-outs, and requires intensive system testing and verification. As

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a case in point, in January 2006 the Commonwealth Scientific and Industrial Research Organisation (CSIRO), an Australian scientific research organisation, awarded a four-year A$34 million contract to implement, manage and support SAP, an enterprise-wide system designed to integrate information about organisational finances, human resources, payroll and other operations. By March 2007, the project had not met its delivery timelines, was significantly over-budget, and was reported to have adverse effects on the operational efficiency of the organisation. By 2009, the system had ‘gone live’ but is not loved by the staff of the organisation, having been described by the CSIRO staff association as a ‘scourge’.1 When they work, ICT systems are great enablers of program implementation. However, ICT can also become a source of frustration, delay or alienation. For example, the use by many public sector organisations of call-centres is a constant source of frustration to clients who resent being put on hold for long periods of time, or having to make sense of long lists of options recited by recorded messages, or failing to be understood by voice-recognition systems, or, when finally speaking to a ‘customer service representative’ finding that they are located on the other side of the country and unfamiliar with the caller’s local situation. On the operational side, if ICT does not deliver expected functionality, staff may resort to legacy systems, or subvert or bypass approved systems, resulting in short-term efficiency gains but long-term operational dysfunction. Automated customer interface systems or systems designed to guide staff through a checklist of question/answer prompts can lead to a ‘disconnect’ between staff and end-users by compromising the capacity for staff to apply discretionary judgment in evaluating end-users’ circumstances and context. In such cases it is easy for staff to forget why particular questions are being asked and feel disconnected from any decisions taken as a consequence of the exchange. A recent, tragic case in the Australian state of New South Wales involved a teenage bushwalker who died of exposure and dehydration after becoming separated from his companions in a remote area. A coronial inquiry found that the young man made six calls from his mobile phone to an emergency hotline, five of which were taken by the New South Wales Ambulance

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Service. In each case, call-centre operators who took his calls spoke over the top of him, repeatedly asking for a street address – which he could not provide. The Deputy Coroner hearing the case found that the operators’ fixation with getting a street address was evidence of systemic failure and recommended major changes to the way the Ambulance Service deals with emergency calls, such as ensuring that ambulance call-centre workers be given medical training, training in relation to empathic skills, and an overhaul of the computer system.2

Implementation in times of crisis Extraordinary events challenge even the best laid plans of governments, public sector agencies and communities. Public emergencies can range widely in their type, severity, duration and geographical impact, and include: • natural disasters (bushfires, severe storms, flooding, landslides and earthquakes); • failures of nationally significant infrastructure (power outages, disruptions to communications infrastructure, disruptions to transportation, stoppages arising from industrial action); • pollution events (oil spills, high smog days, chemical spills, nuclear accidents); • failures of critical business systems (failure of IT-enabled business processes, banking and payment systems, data loss); • outbreaks of disease (pandemics such as swine flu, severe acute respiratory syndrome [SARS], or equine flu); • breakdowns of social order (riots, civil disorder, endemic social dysfunction); and • national security threats (war, terrorist attack, insurrection). Today most national governments, and many sub-national governments, develop ‘disaster management plans’ and have dedicated agencies (such as Emergency Management Australia, Public Safety Canada, UK Resilience or the

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Federal Emergency Management Agency in the United States) to provide policy, planning, co-ordination and oversight. Organisations such as these are intended to anticipate risks, develop scenario plans and protocols, and facilitate co-operation and co-ordination between different arms of government; national, regional and local authorities; the business community and civil society organisations. The intent is to have emergency management and disaster recovery plans that cascade downwards and upwards. On the basis of this planning activity, governments hope to be able to mobilise necessary resources and co-opt the input of multiple actors. Australia, in particular, has a lot of experience with mobilising recovery efforts in the face of natural disasters: Cyclone Tracy which devastated Darwin on Christmas Day 1974, the Newcastle earthquake in 1989 which was the first earthquake in Australia’s recorded history to claim human lives, and Cyclone Larry in 2006. Add to these events Australia’s long history of devastating bushfires that have caused hundreds of millions of dollars in property damage, lost productivity and injury and have claimed 439 lives since 1939, including 173 lives lost in the ‘Black Saturday’ fires on 7 February 2009. If, as we observe in chapter 10, co-ordinating the efforts of various agencies across and between governments is difficult at the best of times, extreme events such as these make the task so much harder. For, despite the planning, discussion, scenario-setting and rehearsal, these kinds of events happen suddenly, are unpredictable, and are largely beyond the control of any human agency. Furthermore, by their very nature, disasters also disrupt the infrastructure and business systems upon which responding agencies rely, thereby impairing the speed and effectiveness of the response. Failures in decisionmaking, communication, co-ordination, equipment, procedures and administration can prolong suffering, exacerbate damage, cause anger and frustration and/or delay recovery. These issues were brought into stark relief in August 2005, when Hurricane Katrina flooded over 80 per cent of New Orleans, Louisiana in the United States, causing extensive property damage, economic losses in the billions of dollars, and displacing hundreds of thousands of people. There were about 1100 deaths, and civil disturbance in the form of looting and criminal

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Exhibit 8.4

Managing relief support: Centrelink’s response to Cyclone Larry

Tropical Cyclone Larry hit the far north Queensland coast near the town of Innisfail in the early morning of 20 March 2006, leaving a trail of destruction. Besides Innisfail, various townships reported large numbers of commercial and residential buildings damaged or destroyed; 80 per cent of Australia’s annual banana production was wiped out (putting 6000 jobs at risk and pushing banana prices to unheard-of levels across Australia), and power, water and telecommunication services were severely disrupted. The magnitude of the destruction prompted multi-pronged intervention by the state and federal governments. The following day Centrelink announced the provision of relief payments under the Disaster Relief Act 2000 , which provides for one-off payments of A$1000 per affected adult, and A$400 per child. To be eligible for relief payments claimants needed to have had a house destroyed or uninhabitable for more than 14 days. The problem with this criterion was it would take at least 14 days before any payments could be made – a situation that not only prolonged the desperate situation of claimants but also placed intense political pressure on government. The authorisation process was subsequently streamlined and, with the co-operation of major banking institutions, the waiting period for relief payments to be transferred to specified bank accounts was reduced to about two days. Control and verification of payments was made easier by the fact that many service recipients were already Centrelink customers. Due to the demand-driven nature of the response it was not known in advance how many claims might be made. At the start of the relief response, Centrelink, expecting up to 4000 claims, assigned one officer to the program. In the end, Centrelink assigned146 staff to settle 47,000 claims at a cost of A$37 million (financial aid to farms and businesses totalled A$147 million). Despite the difficulties, the intervention was considered a success. The agency’s leadership moved close to the front line (Centrelink’s CEO and the regional general manager worked from the nearby Cairns office). Considerable attention was paid to supporting frontline staff, which consisted mainly of local staff backed up by a non-local recovery team. There were no reports of confrontation or conflicts with frontline staff, and the speed and expediency of the response carried a message of empathy and competence.

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activity. Of course, these events pale in comparison with the scale of loss associated with the 2004 Indian Ocean tsunami that created havoc in coastal areas of at least eight nations, or the 2008 Sichuan earthquake that devastated central China. Even so, Katrina was a test of the putative capabilities of the world’s wealthiest and most powerful nation. The response by the US federal government was widely regarded as slow and inadequate, afflicted by confusion and poor co-ordination. Australian governments carefully noted the lessons of Hurricane Katrina and attempted to apply them, with mixed success, in the aftermath of Cyclone Larry which laid waste to extensive areas of northern Queensland in March 2006 and had a lasting adverse impact on agricultural production (see Exhibit 8.4 above).

M anaging ot h e r d im e nsions o f imp l e m e ntation Beyond the specifics of implementation planning, agencies have to manage three additional dimensions in the oversight of implementation, and as a way of exercising corporate and program governance. These dimensions are: risk management, the management of demand, and the management of the media.

Risk management The ongoing management of risk is an essential requirement of any enterprise or activity. Managing risk is tied to better performance (Barrett 1999). The delivery of public services, in particular, is an enterprise fraught with internal and external risk including: • operational risk, associated with potential business system failures, failures in technology, failures in communications, failures in human resource management, failures in accountability or decision-making; • business interruption risk, arising from catastrophic events such as the failure of third-party service providers, natural disasters (fire,

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flood, cyclone, etc.) or large scale failures in essential infrastructure (power outages, telecommunications failure, etc.); • financial risk, arising from failures to adequately cost services, failure to pay suppliers, misuse or misappropriation of funds; • legal risk, arising from claims made against the agency owing to negligence, duty of care failure, non-performance in relation to contracts or other sources of liability; and, ultimately, • political risk, arising from service delivery failures being brought to public prominence in the media or the Parliament. These and other potential sources of risk need to be identified and managed: they need to be anticipated, the likelihood of their occurring needs to be assessed and contingency planning undertaken to provide ‘work-arounds’ in the event of any of these risks arising (see Exhibit 8.5 below). Exhibit 8.5

A word from former Australian Auditor-General, Pat Barrett on risk management

‘A sound risk management framework can help agency managers to be more confident of their approach to achieving required results as well as being able to publicly defend their decision-making as part of their overall accountability for agency performance ... Risk management is clearly not a discretionary activity ... It is an important part of an organisation’s control structures and the innate discipline that a robust control environment can provide for both internal and external confidence in management. As well, with the increased emphasis on contestability and the greater convergence of the public and private sectors, there will be a need to focus more systematically on risk management practices in decision-making that will increasingly address issues of cost, quality and financial performance. Another important aspect of an effective risk management framework is the transparency of decision-making processes as part of public sector accountability. Transparency is achieved by genuine openness which includes ensuring that the decisionmaking process and the reasons for decisions made are adequately documented and communicated to stakeholders’ (Barrett 1999).

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Managing demand Managing demand is an ever-present concern. Whether we are talking about ‘un-capped’ programs (in which there are no notional limits on the quantity of services to be provided to the customer base) or ‘capped’ services (which can accommodate only a finite number of end-users, such as supported accommodation for people with disabilities) the authorisers, designers, implementers and managers of programs and services need to understand the dynamics of demand. Growth in demand for uncapped programs and services can place governments under enormous budgetary pressure. In Australia, the demand for public hospital services led John Howard’s federal government in 1999 to introduce a Private Health Insurance Rebate to encourage the uptake of private health insurance while at the same time applying a tax levy on those without private health cover who were above a defined income threshold. This measure had twofold aims: to support a struggling private health insurance industry, and to relieve pressure on public hospitals. In 2009, the federal government under Kevin Rudd announced its intention to introduce legislation to gradually increase the eligible pension age from 65 years to 67, in large part to control future outlays arising from an ageing population and increasing longevity. Managing the demand for capped programs and services presents a different set of demand management problems. In 1959, the pioneering health services researcher, Milton Roemer, made a finding later to be known as ‘Roemer’s Law’, which holds that ‘in an insured population, a hospital bed built is a bed filled’ (Roemer & Shain 1959). What Roemer and his colleagues found was a positive correlation between the number of hospital beds per 1000 population and the number of bed days used per 1000 population (the same applies to prison cells). Although the effect observed by Roemer and his colleagues is often attributed to ‘induced demand’ (in which people consume more of a good because there’s more of the good to be consumed), it is probably more likely a reflection of ‘latent demand’: a demand for a good or service which either does not currently exist or is unattainable by reason of cost and/or other factors.

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The concept of latent demand might be said to apply to forms of public services other than hospital beds, such as supported accommodation, refuges for women and children, home help services and so on. Certainly, there is un-met demand for a variety of public services – demand that cannot be fulfilled because there is not enough of the service to go around. Capped services are those funded via government appropriation where the amount of funds available to provide services – whether directly or indirectly – has a finite upper limit. The quantum of services provided is limited by what can be afforded. Governments can stipulate the amount of funds allocated to particular programs and services, and influencing governments on such matters is the preoccupation of advocates and lobby groups. The principal policy responses to un-met demand are to: 1 establish stringent targeting criteria to limit access to the service to ensure those whose need is greatest enjoy priority access, and establish queuing protocols to ensure that access to services is managed fairly and equitably; 2 adjust existing service delivery models, or implement alternative modes of provision that allow the quantum of service provided to increase within the existing appropriation; or 3 seek an increased budget allocation. Demand management, in the context of capped services, is not purely about changing behaviour (for example encouraging the take-up of private health insurance) or eligibility (for example raising the pensionable age), it is also – and perhaps most importantly – about managing expectations. Officials and service providers of capped services are usually in a state of constant engagement with their communities of interest, whether it be those actively seeking a service for themselves (individuals, carers, families) or those advocating on behalf of those in need (non-government organisations, lobbyists, local government). They are generally acutely aware of the extent of un-met demand, and, within government, are often determined advocates for additional resources (sometimes working more or less collaboratively with non-government actors to mobilise support within government for additional funds).

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There is not much the public sector manager or the service provider can offer to those in the queue, apart from reassurance that assessment for and allocation of services occurs in a fair and equitable manner (essentially, ensuring that the process is transparent), and by extending understanding and empathy. In circumstances where persons with un-met needs are seeking access to services for which there is an under-supply, it can be important to see the public sector manager or service provider as an ally, rather than an adversary. It is in this context that creative frontline public managers can exercise ‘policy entrepreneurialism’ and use the limited discretion at their command to provide stop-gap assistance until those in need progress further up the queue. Finally, the credibility of government initiatives can hinge as much upon the adequacy of the response as upon the design of the intervention. For example, particular models of supported accommodation or community health practice might very well represent ‘best practice’, however, if the quantum of service provided does not make a significant impact on the size of expressed need, the program might be judged a failure. Policy-makers need to carefully assess the extent of presented need and/or demand when developing policy responses. Over-estimating, or under-estimating, likely demand will result in policy failure, loss of trust and loss of credibility.

Managing the media Governments, ministers and public sector agencies are acutely sensitive to the media cycle, by which we mean the daily processing by various media of events, their reporting on those events, the impact of their reporting on public opinion, and the government’s political and policy responses, both to reportage and to public reactions. All public sector organisations have a communications or media relations arm whose business it is to be on constant alert for issues or events that either have, or are likely to arise in print, broadcast, the internet media and even social networking sites such as Facebook and YouTube. Public sector managers are expected to peruse daily alerts from media monitoring services and prepare briefing materials for senior management and their minister on

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current or emerging issues. In Australia, there is a tradition of departments and agencies preparing briefing notes on ‘possible parliamentary questions’ (called PPQs) for the purpose of apprising ministers of matters they are likely to be asked about in Parliament, and suggesting recommended responses. Politicians of all stripes are constant users of media to get their messages across but also to gauge expert commentary and public opinion. Talkback radio is another avenue used by politicians to manage and shape public discourse about policy issues, sometimes to powerful effect (it has often been said that former Australian Prime Minister, John Howard, was masterful in his use of talkback radio to reach out to parts of his natural constituency). Public servants are also increasingly finding themselves explaining issues before the media. Public sector agencies often seek to insert messages about current policy issues, explaining choices or criteria, offering background briefings to selected journalists and by issuing media or press releases. In the case of the latter, changes in media markets and the consequent rationalisation of cost structures, particularly in print media, sometimes mean that reportage is strongly influenced by the content of a ministerial or departmental press release (too often with little or no media analysis). All public sector organisations – and particularly those in the public eye – need a media management strategy. Although it is a time honoured lament of public servants that they spend too much time ‘fighting bushfires’ and not enough time on policy development and implementation, managing the media cycle is an unavoidable necessity. Indeed, media interest in policy can present important opportunities for governments to raise public awareness and mould public opinion on current or emerging issues. Working through the media is a potentially powerful way for a government to mobilise public support for particular public policy initiatives. Although traditionally, the role of media organisations is to hold governments to account, in practical terms, it is the object of media outlets to make commercial returns. Here, ‘bad news usually sells papers’. Good news about government achievements is often hard to find. Instead coverage tends to focus on scandals, policy failures or operational failures. This constant threat of sanction by media advocacy can be partially managed by closely maintaining

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and nurturing communication lines both with media and the community at large. Increasingly, public sector organisations are using internet-based media to reach out directly to end-users and communities to provide information about programs and services as well as to solicit feedback from communities and end-users. To manage the risk, strong internal communication and reporting frameworks are essential in the early identification of likely ‘hot button issues’, preparing lines of defence and pre-empting media-reported policy failures.

I mp l e m e ntation t h r oug h cont r act manag e m e nt As previously discussed, service provision by third-party providers is increasingly a feature of the contemporary service delivery landscape. Where once the main sources of risk would have resided predominantly within the agency, the use of third-party service providers has transferred more risk outside the direct control of the agencies responsible for policy determination. As a consequence, government agencies that rely on third-party service providers need to observe best practice with respect to contract management processes. If anything, the use of contractual arrangements for the provision of mandated services has constrained government agencies to more precisely quantify minimum performance criteria, productive capacity, input costs and the valuation of outputs. This requires the application of business disciplines that have been progressively refined in the face of almost two decades of public sector outsourcing (Chalmers & Davis 2001). Below we discuss a number of key considerations that ought to be addressed when using contractual arrangements for the delivery of mandated public services by third-party providers.

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Due diligence In the context of third-party service delivery, due diligence refers to the process whereby the agency seeking to procure services from an external provider undertakes an investigation of a range of matters that have a material bearing on the ability of a prospective service provider to reliably supply the services in accordance with the terms of the contract or other funding agreement. Due diligence investigations might go into such matters as the financial viability of the prospective provider; financial encumbrances or other liabilities; the state of the premises and the quality of the business systems; the operational culture, including workplace practices and human resource management frameworks; governance structures and audit processes; the business history of the provider; the composition and experience of its board of management; the character of the principals as well as security checks for staff engaged in the provision of the service. The aim of the investigation is to provide assurances about the viability of the prospective provider and so avoid giving rise to risk.

Conflicts of interest Issues of conflict of interest should form a part of any due diligence investigation of prospective service providers. Potential conflicts of interest might be difficult to identify. Moreover, even the perception of a conflict of interest might be sufficient to give rise to political risk. For this reason, special care should be taken to obtain declarations from principals and directors/board members in relation to potential conflicts of interest such as memberships in political parties, relationships with politicians or officials or investments or shareholdings that might benefit directly or indirectly from the operations of the service provision agreement.

Commercial confidentiality and privacy Contracts or funding agreements with non-government service providers need to address the ownership and transmission of information pertaining to the

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service provision agreement, data about clients and the levels of service provided and personal information about clients. This is essential to protect the integrity of the commissioning agency and the program under which the service is provided. In effect, third-party service providers are acting as agents of the commissioning agency. They are therefore bound to provide the service and undertake operations in a manner that is consistent with government policy. To the extent that third-party providers use unpublished information or data about a funded service as part of, say, a political campaign or public lobbying activities, they may be in breach of the confidentiality provisions of their funding agreement. This would be analogous to a public servant commenting publicly on matters of government policy. Non-government service providers – particularly not-for-profit organisations – often have their origins in advocacy or social activism. It is often difficult for such organisations to reconcile their organisational ‘mission’ with their obligations as a ‘contractor’. There are important public interest considerations associated with commercial confidentiality (also referred to as ‘commercial-in-confidence’) provisions of contracts entered into between governments and non-government service providers. For example, there are legitimate public-interest reasons to observe the confidentiality of parties to public sector tendering and contracting processes (for example, by not disclosing commercially sensitive information about winning tenders or about other tenders, which could favour collusion in future procurements). However, it has long been of concern to public interest advocates that both governments and service providers sometimes show a propensity to rely upon the ‘shield of commercial confidentiality’ to avoid public disclosure about financial or operational matters. For example, in 1997 the Australasian Council of Auditors-General (ACAG) noted ‘the concern that some Governments are routinely agreeing to the insertion of confidentiality clauses in agreements. Such secrecy provisions are relevant to and could be seen as being adverse to Parliament’s right to know – a right which is basic to Parliament’s legislative and oversighting roles’ (ACAG 2009). More recently a 2009 parliamentary committee inquiry into the privatisation of prisons and prison-related services in the Australian state of

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New South Wales (Fazio 2009: 52) observed that ‘difficulties arising from the commercial-in-confidence nature of information’ concerning a privately operated prison had acted as a ‘barrier to independently assessing [its] performance’ as well as serving to exempt disclosure under freedom-of-information legislation. It should be noted that concerns about the inappropriate use of commercial confidentiality provisions are not confined to prison services, nor are they confined to Australia.

Protecting end-users and clients Protecting the interests of end-users or clients of public services is a paramount consideration. There is an added imperative when mandated public services are provided indirectly by third parties, and the operations of the service are outside the direct control of the commissioning agency. It is essential, therefore, to fully and clearly set out the service standards expected to be achieved under the term of the service provision agreement, including standards of conduct expected of staff providing the service and avenues for the resolution of problems. Service provision agreements might, for example, specify the ratio of staff to clients; minimum staff qualifications; requirements for police record checks for staff; service charters setting out the level of service clients can expect; protocols for data and records management, including disclosure of client records or personal information; periodic inspection and audit; as well as mechanisms for investigating and resolving complaints.

Contingency planning Despite the best endeavours of commissioning agencies, the possibility exists that non-government service providers might become non-viable. Not all risks can be foreseen and unforeseen risks can occur. The bottom line is that all risks have to be managed. Contingency planning is an essential complement to risk management. Risk management is about identifying potential sources of risk and estimating the probability of those risks arising. Contingency planning is about preparing for the worst: it is about having in place feasible strategies that

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can be activated in the event of risk arising. In the case of major failures, the contingency plan should spell out measures to be taken to minimise the interruption of services, such as switching to alternative business systems or even alternative providers. Closely allied to the contingency plan is the business resumption plan, which the commissioning agency will rely upon to restore full functionality to its service networks. Both contingency planning and business resumption planning may require a high level of interagency and interorganisational coordination and co-operation, especially as agencies or services experiencing failure may be able to utilise the capacity of another agency or service provider to enable operations to continue. Even with risk management, contingency and business resumption plans in place, preventable risks still arise and recovery from the risk event sometimes fails. This can occur as a result of operational failures, under-resourcing, complacency, lack of communication, or failures to validate assumptions or test recovery systems. In effect, these represent significant risks to risk management itself! Routine audit of risk and contingency management planning and recovery strategies can, and should, be built into the governance systems of all public sector organisations and their programs. Furthermore, risk and contingency management planning and audit should be a contractual requirement for all third-party providers of mandated public services.

Allowing for capacity gaps Commissioning agencies need to be mindful of the administrative burdens placed on third-party providers of mandated services, particularly with respect to the level and frequency of reporting required under the terms of service provision agreements. For example, small to medium not-for-profit organisations and enterprises may have difficulty complying with multiple or complex reporting requirements. Non-government service providers frequently lament that they are not fully compensated for the overhead costs associated with the provision of contracted services, resulting effectively in a form of involuntary co-contribution by the service provider (possibly by cross-subsidising the

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contracted service from other income streams). Moreover, for those organisations or enterprises whose income derives from more than one commissioning agency, there may be requirements to produce quite different information for each agency. Accountability is an ongoing challenge in much of the not-for-profit sector owing to its heterogeneity and the absence in Australia of coherent, and appropriate, legislative or regulatory frameworks (Lyons 2001, 2003). A variety of management models operate in the not-for-profit sector, ranging from corporate structures (run along similar lines to private enterprises) to collectives, and the choice of management model reflects a number of factors such as the age, size, history, purpose and business mix of the organisation (Lyons 2001: 130). Although not-for-profit organisations do not have a built-in tendency to act against the public interest, they do have a tendency to disappoint their members, supporters and clients, a tendency that careful law and regulation can limit (Lyons 2003: 89–90). An examination of the websites of the larger not-for-profit organisations reveals that many have made efforts to improve the quality of their published information, including the publication of annual reports containing information on their activities and audited financial statements. There is also evidence of a growing appreciation of and commitment to capacity-building in areas of governance, operational management and knowledge management, particularly among those organisations that have adopted corporate-style management models.

Managing communications Communications – by which we mean both communications between the parties to a service provision agreement and communications between the service provider and its clients and other parties – can be a source of tension between commissioning agencies and service providers, particularly where service providers also have advocacy functions. These tensions were particularly evident during the term of the Howard coalition government, when it was suggested by various commentators that commissioning agencies sought to restrict the

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capacity of non-government service providers to comment on, or seek to influence, government policy (Melville 2003; Maddison et al. 2004; Hamilton & Maddison 2007). However, commissioning agencies may have legitimate reasons to place conditions on communications about services and clients subject to service provision agreements. In practical terms, service providers are acting as an agent of the commissioning agency and, in the eyes of clients and the community, there may be little to distinguish the service provider from government. It is reasonable, therefore, for the commissioning agency to require that communications in relation to the service conform with the standards and protocols applicable to the commissioning agency itself. Things become tricky when service providers, exercising their advocacy functions, comment adversely on government policy or seek changes to policy. Governments are sensitive to the potential for political embarrassment and ‘mixed messages’ that might arise from such a situation. Nongovernment service providers, for their part, are also alert to the perception that their independence and capacity for advocacy is compromised and diminished by their entering into a service provision agreement with a government agency.

Continuity and relationship management Because managing a service provision agreement is about managing relationships, it is particularly important that the parties specify preferred channels for communication and, if possible, nominate the individuals (or positions) vested with responsibility for managing the relationship. The public sector workforce is internally mobile, meaning that people frequently change jobs within or between public sector organisations. High levels of turnover can mean loss of continuity with respect to relationships and the loss or dislocation of corporate knowledge. This can be an enormous source of frustration for third-party service providers (having built up a relationship with one person, they may frequently have to start all over again with someone new). Although commissioning agencies cannot guarantee that a nominated relationship manager will

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remain for the duration of any service provision agreement, good succession planning can at least ensure an appropriate degree of continuity.

Dispute resolution Regardless of the nature of the administrative instruments used to give effect to a third-party service agreement – whether it is a ‘classical’ procurement contract or a ‘relational’ funding agreement – it is prudent to make express provision for steps that ought to be taken in the event that the relationship between the parties deteriorates. The relationship between the commissioning agency and the third-party service provider might founder on a variety of issues but, barring some fundamental shortcoming in the due diligence processes of either party to the service provision agreement, most issues under dispute should be capable of resolution provided there is goodwill and sound communication between the parties. Service provision agreements should specify arrangements for periodic meetings between the parties for the purpose of tracking the implementation of service provision agreements and addressing such operational matters as payments, financial and other reporting, and the identification of any issues arising that might adversely affect the execution of the agreement by either party. To the extent practicable, service provision agreements should articulate a dispute resolution mechanism to be activated upon notification by either party of potential breaches or inconsistencies in the execution of the agreement.

Contractual remedies, sanctions and rewards Service provision agreements can specify sanctions to be applied in the event of non-performance as well as rewards for superior performance. Sanctions and rewards are usually monetary in nature, and could involve the withholding of payments pending rectification by the provider of identified problems or the payment of a financial premium or dividend in the event the

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provider surpasses agreed performance targets. The application of sanctions and rewards is also usually the prerogative of the commissioning agency, and to that extent, their inclusion may introduce an adversarial element into the service provision agreement that could work against a spirit of co-operative goodwill. While either party to a service provision agreement might wish to preserve the option of recourse to legal action to seek remedies for nonperformance, in practice these prerogatives are seldom invoked because of the great potential for political damage. Both parties have a vested interest in protecting and strengthening the integrity and legitimacy of the policy framework and the service delivery architecture, as well as preserving the confidence of clients and the public. For these reasons, access to legal remedies or the application of sanctions should be subservient to other, less legalistic forms of problem solving.

C onc l usion In this chapter we have examined the critical dimensions essential to sound policy implementation and management. We have attempted to identify both the core issues for successful implementation and management, as well as some of the possible constraints and risks that need to be controlled along the way. There is much more that can be said on this topic – the subject matter is worthy of a book in its own right. Our intention here is to canvass those ‘red flag’ issues that policy-makers, program managers and service deliverers ignore at their peril. As all practitioners will be aware, competent planning and budgeting of a program, the careful design of the service delivery model, and the establishment of effective contractual arrangements and program governance are not alone sufficient to assure successful outcomes. As the saying goes, ‘the proof of the pudding is in the eating’, and so it is with the implementation of public services. Often between the design and implementation of a program

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or service, original intentions can be misinterpreted, perverted, lost or ignored. Success generally depends on the effective management of key relationships – between purchasers and providers, central policy custodians and street-level implementers, and between service providers and stakeholders.

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9: Performance   management

The plethora of idioms and acronyms for performancemanagement initiatives – planning, programming and budgeting, performance-based budgeting, pay-forperformance, performance planning, total organizational performance system, management by objectives, and more – impede a facile understanding of how and why we measure public-sector performance. Yet as conceptions, designs, and methodologies for performance measurement continue to evolve, a single, central purpose of these initiatives has been unchanging: to improve public management and program outcomes. (Heinrich 2002: 712)

‘Managing for results’ has become a mantra for public sector managers over recent years. In this chapter we will assist the reader to unpack this simple phrase to reveal the depths of meaning within. ‘Managing for results’ is more than a catchphrase, because encoded within these three words is a suite of concepts, tools and approaches that come under the broad heading of performance management. So what is performance management? Let’s start with performance: performance refers to the manner in which tasks, activities or processes are undertaken, and the extent of successes achieved. Performance is measurable and can be assessed according to a range of criteria such as quality, timeliness or value for money. Management, on the other hand, refers to the attitudes, behaviours, norms, business processes or rules governing the manner in which tasks, activities or processes are performed. Expressed in economic terms, performance equates to outputs, or products, and management equates to inputs, or resources.

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Performance management is composed of three core elements: performance measurement, performance reporting and evaluation. Performance measurement provides the means by which performance management can be more evidence-based and involves the identification and definition of relevant measures or performance indicators according to which the quality of performance can be assessed. Public sector managers might, for example, develop measures to ascertain whether services are being provided in accordance with accepted service standards; whether services provided are consistent with contractual provisions; whether service providers meet relevant fiduciary or governance requirements; whether prescribed elements of service are being provided within budgeted cost structures; or, even, whether clients are satisfied with the quality and quantum of the service. Performance reporting is an important element of the corporate governance framework within which performance management occurs. It is concerned with the provision of assurance to senior management, executive government, the parliament or legislature, and the public about the use of public monies (see chapter 10). Delivering public services requires both legal authority and the expenditure of public funds, raised primarily through taxes, to meet the costs of performing functions mandated by political processes. Because the electorate has conferred authority on elected governments to undertake these functions and approve the spending of public money, they are, at a minimum, entitled to be provided assurance by governments that: 1 resources have been expended in accordance with approved policy; 2 mandated services have been provided; 3 resources associated with the delivery of those services have been used effectively; and 4 mandated services are achieving their desired purpose. The primary reporting mechanism for public sector organisations is the production of annual reports in which organisations declare their financial position for the preceding fiscal year as well as information about their performance across the major components of their business (usually reported on a program basis). The availability, extent and quality of information presented

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in the annual reports of public sector organisations has grown over the years in line with increasing community expectations. In turn, the production of annual reports relies on the upwards reporting of performance from the program level. It is not our purpose here, however, to engage in a detailed discussion of reporting frameworks or formats available to public sector managers. In many cases these are idiosyncratic, either with respect to legislated or organisational rules and norms or with respect to accepted best practice for given service types. Finally, evaluation is primarily concerned with assessing the technical and economic efficiency of particular public interventions at the program level. Technical efficiency is a necessary precursor to economic (or allocative) efficiency and represents the maximum level of production of a good or service with the optimal use (or minimal waste) of available resources. Economic efficiency, on the other hand, is achieved if the highest possible level of satisfaction is derived from the consumption of goods and services relative to the investment of resources used in their production. It should be noted that technical efficiency might not always result in economic efficiency. For example, it might be possible to efficiently produce quantities of particular goods or services with minimal waste of resources (hence, production is technically efficient) however, if there is no demand for the goods and services produced, or if they are not appropriate to the needs, wants or expectations of the market and are not consumed, then they fail the test of economic efficiency. Evaluation is usually retrospective in nature in that it looks back on performance over a defined period of time. It is also reflective in that it aims not only to observe the performance of programs or services but also to understand the causes of and contributors to the observed performance and, in so doing, generate findings or recommendations for the purpose of making adjustments or improvements that will enhance future performance. Other questions for which evaluation seeks answers are: • Has the program or service achieved its aims? • Is the program or service well-designed and well-managed? • Is it well-targeted and cost-effective?

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In this respect evaluation goes beyond the examination of inputs and outputs (technical efficiency) to encompass the examination of outcomes – the extent to which policy objectives have been attained.

T h e cont e mpo r a r y p e r f o r manc e e n v i r onm e nt Governments in the past did not always – or even usually – require either program evaluation or performance measurement. It was once common for public sector organisations to report on activities they routinely undertook such as ministerial briefs prepared, correspondence processed, plans or reports inspected, grants administered or financial transfers processed. However, such volume measures of administrative outputs tended to serve the purposes of internal compliance and control and said little about the actual performance of programs or services. As observed by Flynn: In a traditional administrative approach to public services, the emphasis of management control is on money. Public sector organisations can be seen as machines spending money voted by Parliament or by a local authority. The information systems are traditionally directed towards seeing how much money is spent in each period, and the main target is to spend very close to the budgeted amount: spend too much and the organisation may be in trouble; spend too little and there is a danger of next year’s budget being cut. Only recently have other performance criteria become more prominent as accountability has concentrated more on what is being achieved through the expenditure of money and other resources in addition to the probity with which the money has been handled. (Flynn 1990: 99–100)

In previous eras administrators may have been diligent and conscientious but they were not managed under performance regimes. Many agencies did not know or count what they did or produced. Reviews of activities or administrative processes did occur but they tended to take the form of routine reviews of financial outcomes or compliance with operational policy. Reviews might also

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be occasioned in response to some crisis such as a major policy failure becoming public. Agencies might also be subject to periodic or occasional efficiency or performance reviews by external entities such as auditors-general or committees established by a parliament or legislature (as indeed they continue to be today). Once governments began to think in terms of programs with declared intentions and desired consequences, contemporary approaches to performance management began to take shape. From the early 1990s interest in performance management spread across the OECD, propelled in part by the advent of New Public Management and the associated appropriation by governments of market-based management strategies such as market-testing and outsourcing. Historically, interest in performance was strongest in the United States, whose classical liberal tradition of government encouraged a dedicated ‘performance movement’ to flourish in the 1960s (Radin 2006). The performance movement grew out of the (then) increasing application of program planning and budgeting (PPB) in larger government agencies. The expectation was that performance information about programs and services could be integrated with budget decisionmaking to enable governments to make rational judgments about whether to re-invest in programs seen to be performing well or, conversely, re-prioritise or abolish programs seen to be performing poorly. There are many reasons for an enhanced emphasis on performance management. Taxpayers want assurance from governments that tax-funded services and programs are delivering value for money; the clients of services and client advocacy organisations want assurance that services are accessible, effective and responsive to clients’ needs; government ministers and officials need to be able to provide assurances to parliaments/legislatures, the public and clients about the quality, effectiveness and efficiency of government services; and, in an era of significant growth in the outsourcing of a wide range of services to third-party providers, governments and their commissioning agencies want to know that services are being provided in accordance with legislative/regulatory requirements and contractually specified levels of service. Over a relatively short period of time, a focus on performance grew to become the ‘dominant force in public management’ (Bouckaert & Halligan

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2008: 1). In some jurisdictions special units have been created to review implementation progress in order to ascertain whether agreed plans or milestones have been met and to provide advice about improving performance. Examples include Gateway reviews of major project management exercises such as are used by Australian governments and those in the United Kingdom (DOFA 2007; Glenday 2007; Sharpe 2007).

A ust r a l ian int e r e st in p e r f o r manc e manag e m e nt Although Australian state and territory governments began to experiment with various approaches to performance management and measurement in the late 1980s (in some cases via the application of ‘total quality management’ precepts, derived originally from manufacturing, that emphasise consumer satisfaction while reducing the net costs of production), performance was firmly entrenched as the main organising principle in government with the commencement of national competition policy reforms spearheaded by the Commonwealth government in the early 1990s. Competition policy reform included commitments to progressively corporatise, commercialise and privatise government business enterprises and public utilities. In 1992 Australian Commonwealth, state and territory governments – through the Council of Australian Governments (COAG) – first met to discuss, agree and implement a series of intergovernmental agreements concerning the application of competition policy in Australia. The outcome of these discussions was the National Competition Policy legislative package agreed by all Australian governments in 1995 that provided for the ‘uniform protection of consumer and business rights and increased competition in all jurisdictions’. Governments saw a need to reassure the public about issues such as service standards, quality of service (including timeliness, price and reliability) and consumer rights.1 Although the competition policy framework was principally concerned with the commercial or business environment, the

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fact that it had been driven initially by public utility reform meant that public sector managers naturally considered the applicability of competition policy to mainstream public programs and services. This culminated in governments using a much broader palette of concepts and tools to assess and shape performance across the entire public sector, including: • defining and setting service standards more generally; • implementing customer charters including formal avenues for complaint and redress (see chapter 6); • standardising, measuring and reporting inputs, outputs and costs; • applying tax equivalent regimes and competitive neutrality principles – particularly where services provided by government existed in direct competition to private sector providers in a contestable marketplace; • separating the functions of service purchasing agencies from service provider agencies (the ‘purchaser–provider split’) so that the specific performance of agents could be stipulated and monitored; • establishing cost centres and business units premised on cost-recovery principles; and • identifying and costing community service obligations – especially in relation to the commercial operations of government businesses. The Commonwealth government extended the application of performance management and competition reforms to services delivered under the terms of Specific Purpose Payments (SPPs) through which financial transfers are provided to states and territories for the provision of health, housing, disability and other social services. Accordingly, intergovernmental agreements in areas of health and housing required states and territories to report against agreed performance indicators (including outcome measures) and establish consumer rights charters containing clearly articulated service standards, measures of client satisfaction and mechanisms for complaint and redress. The clearest expression of the application of performance management

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principles to mainstream service delivery came with the establishment in 1997 of the Commonwealth Service Delivery Agency, better known by its trading name, Centrelink. This new entity was the embodiment of the separation between a purchasing agency which has primary responsibility for the development and oversight of government policy and a service providing agency responsible for the delivery of services (policy implementation). Established as a statutory authority, Centrelink provides services under the terms of Business Partnership Agreements negotiated with its ‘client departments’, the purchasing agencies (see chapter 6). In order to give effect to these arrangements, Centrelink, of necessity, has invested considerable effort in precisely quantifying its inputs and outputs as well as the levels of service to be provided to its client agencies and customers/end-users (see Halligan & Wills 2008).

M e asu r ing p e r f o r manc e Measuring performance tends to be based on the premise that ‘what gets counted gets done’ and, therefore, focuses on the operational aspects of administration and service delivery through measures of inputs (of time, money, human resources and capital assets) and outputs (in the form of the number of clients served, hours or units of service and the monetary value of valueadded services). The phrase with which we began this chapter – ‘managing for results’ – is deceptive because ‘results’ is far too ambiguous and amorphous a term. ‘Results’ do not equate to ‘outcomes’ or ‘impacts’. ‘Results’ can mean anything from ‘breaking even in budgetary terms’, to ‘delivering the targeted level of outputs’, to ‘meeting approved recruitment and retention targets’: it conveys little meaningful information about the impact of programs and services on problems. In the now legendary episode of the 1980s BBC satirical comedy series Yes Minister entitled ‘The Compassionate Society’, the UK Minister for the Department of Administrative Affairs, Jim Hacker MP, is informed that a brand new hospital in North London has been operating for 15 months with 500

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administrators and ancillary staff but no medical staff and no patients. Despite this, he is informed that, in fact, without doctors or patients, the hospital is a paragon of efficiency! Although clearly farcical, the episode offers a tongue-in-cheek illustration of how a narrow focus on inputs and outputs can mislead understanding of overall performance. Ideally, therefore, a focus on outcomes (being the extent to which the desired effects of the policy or program have been achieved) is needed to complete the performance picture. We say ‘ideally’ because public sector performance has historically tended to focus primarily on public sector activities (that is, inputs and outputs). For example, politicians and officials frequently couch their statements about the actions of government in terms of dollars spent, roads built, hospital beds commissioned or extra police hired without addressing the efficacy of those actions. Measuring outcomes is difficult and problematic. Thomas (2006: 2) has drawn attention to the ‘analytical challenges involved in applying the concepts of performance measurement to public policies and public programs’. Although he observes that ‘developing measures to track inputs (the combination of money, staff, materials and other resources) and outputs (the goals, services and activities produced) is fairly straightforward’, valid and reliable measures of outcomes (being the actual impacts of policies and programs) are more problematic. Furthermore, the development of ‘causal models’ that both support the attribution of outcomes to programs and serve to ‘distinguish program impacts from non-program effects within society’ is subject to significant technical and analytical challenges, particularly in fields like health, social policy or the environment, which are characterised by complex interactions among different jurisdictions, programs and other actors within society (Thomas 2006: 2–3). Notwithstanding these difficulties, if we accept that public policy and programs for the delivery of services exist to address perceived ‘problems’, a truer measure of performance will be the extent to which problems have been ameliorated. Inputs and outputs are important parts of the performance equation but they are not ends in themselves (Bouckaert & Halligan 2008: 16). That said, Bouckaert and Halligan argue that even outcomes are not

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the ultimate measure of performance: rather, the ultimate objective of public policy is to engender a ‘functional level of trust by the citizens’ in government, its institutions and organisations (2008: 17).

What to measure and why Performance measurement techniques range from the ‘narrowly managerial to the broadly political’ (Thomas 2006: 11). Public sector managers need to consider the aims and purposes they are hoping to achieve with performance measurement, examples of which are set out in Exhibit 9.1 below. Exhibit 9.1

The aims of performance measurement

• to help clarify organisational goals, directions and expectations; • to help organisations learn how to accomplish goals more effectively; • to communicate the priorities of the organisation; • to support strategic/business line planning by linking broad statements of direction to specific operational outputs and outcomes; • to support budgetary planning and resource allocation processes; • to monitor the operation of programs and to make continuous improvements; • to motivate public servants and to restore pride within the public service that it is making a positive contribution; • to enable citizens to make better informed decisions in the use of public programs; • to restore public confidence that they are receiving value for money in public spending; • to assess whether the organisation is achieving its goals; and • to strengthen internal administrative and external political accountability. source

Thomas 2006: 11.

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Only when these aims are clarified can appropriate performance indicators be identified. Drawing on Jackson (1995), Thomas suggests that successful performance measures and indicators need to be: 1 clear – performance indices should be simple, well-defined, and easily understood; 2 relevant – performance indicators need to be relevant to their special needs and conditions; 3 comprehensive – indicators should reflect those aspects of behaviour that are important to decision-makers; 4 consistent – the definitions used to produce the indicators should be consistent over time and between units; 5 comparable – following from consistency, it is only reasonable to compare like with like; 6 bounded – concentrate on a limited number of key indices of performance – those most likely to give the biggest pay-off; 7 controllable – the manager’s performance should only be measured for those areas over which he or she has control; 8 contingent – performance is not independent of the environment within which decisions are made. The environment also includes the organisational structure, the management style adopted, as well as the uncertainty and complexity of the external environment; and 9 feasible – performance measurement should be based on realistic expectations (Thomas 2006: 28). Public sector managers also need to concern themselves with the cascading effects of operational variables that might impinge upon the ultimate performance of programs and services such as research and development functions, financial management and reporting, human resource management, working conditions, rewards and incentives schemes, asset management and information management. Although too narrow a focus on any of these variables may distract from the job of measuring the overall outcomes achieved, failing to assess their contribution to the achievement of policy goals would be

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short-sighted. Conversely, it might be possible to achieve results while failing to meet better practice standards in respect of the operational components – thereby compromising the public interest on efficiency grounds (Barrett 1999). At the end of the day, performance management requires a performance culture in which attitudes, values, practice and behaviour align with and contribute to the achievement of policy and program objectives.

T h e compa r ati v e d im e nsion It needs to be borne in mind that performance indicators and measures in themselves seldom represent objective truth: much depends on the manner in which they are interpreted, how they are used and to what purpose. The assessment of performance information frequently has a comparative dimension. For example, league tables might be produced in order to compare like services (such as hospitals or schools) according to standardised performance indicators. League tables have been used for some time in the United Kingdom to compare performance across the National Health Service and local government. The Australian government is currently working towards publishing league tables of standardised performance indicators for government schools. However, while league tables have enormous political appeal they are also contentious because the data reported can often mask social or environmental factors beyond the direct control of service providers. For example, a school in a socio-economically advantaged area might exhibit higher retention rates and superior academic performance by comparison with a school in a disadvantaged area. This in itself does not necessarily mean the school in the disadvantaged area is not performing well, nor does it mean that it is less deserving of continued public investment. Performance information might also be compared over time for the same organisation in order to identify trends in costs, productivity, efficiency, customer satisfaction or any other variable capable of being measured and tracked through time. Comparisons of performance over time can generate useful

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and reliable information provided the information collected is standardised and exogenous factors (for example, changes in policy, customer preferences or market conditions) are taken into account. Finally, meaningful comparisons of performance might be made with other organisations having similar programs or services. The challenge in comparing public sector organisations is often in identifying appropriate comparators. Comparisons between organisations operating in different industry sectors or in completely different policy environments would not generally be considered valid or useful. Similarly, comparisons between public and private sector entities might be of limited value because of their quite different operating environments, although such comparisons do become important when consideration is being given to outsourcing or competitive tendering (Flynn 1990: 104).

P r og r am e va l uation McDavid and Hawthorn define program evaluation as a ‘structured process that creates and synthesises information intended to reduce the level of uncertainty for stakeholders about a given program or policy’ (2006: 3). Program evaluation can occur through the articulation of a formal research design or it may rely upon informal processes. Both formal and informal approaches will rely on a mix of quantitative and qualitative methodologies and produce evidence which requires professional and/or political judgment to interpret (McDavid & Hawthorn 2006). Evaluation is not simply about collecting data about performance, it is about undertaking analysis, providing interpretation and forming defensible and justifiable conclusions, explanations, hypotheses about causal relationships and/or recommendations. Whereas performance measurement is usually a ‘live’ process in that the collection of performance information is generated and collected contemporaneously with the delivery of the service, program evaluation is often retrospective and involves the ex post analysis of systems, actions and outcomes. Program evaluations are undertaken for a variety of reasons, including:

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• to understand, verify or increase the impact of programs or services (to what extent are programs meeting predetermined goals or objectives?); • to identify possible improvements to service delivery systems to make them more efficient and effective; • to verify the original objects, aims and strategies envisioned (how were program goals established and intervention strategies selected and are they still relevant?); • to genuinely engage government and senior management thinking about the program, how it meets its goals and whether or not it is successful; • to produce data or findings that can be used to promote services to end-users and gain community acceptance and support; • to produce valid comparisons between programs to decide which should be retained; • to examine and describe effective programs for possible adoption and duplication elsewhere (McNamara 2006). These objectives are not mutually exclusive and many evaluations will have multiple and/or cumulative objectives. In some cases the original reasons for the evaluation may change or drift over time. In practice, evaluations tend to be categorised into three basic types. First, policy evaluations aim to assess and comment on the appropriateness of the policy directions. Policy evaluations are goals-based and serve the purpose of confirming and verifying the original aims and objectives of a program and the strategies selected to give effect to it. Second, formative evaluations focus on the implementation of programs. These tend to be process-based and seek to understand how a program works, how well it works, and how observed performance is achieved. Third and more ambitious, summative evaluations seek to confirm whether the program is achieving its desired aims. These are outcomes-based and seek to ascertain whether the program has achieved its intended objectives (see McDavid & Hawthorn 2006; McNamara 2006).

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The following questions need to be addressed in preparation for the design and implementation of a program evaluation: 1 What is the purpose of the evaluation itself and what questions or issues are considered as needing to be explored? 2 Who are the audiences or clients for the results of the evaluation? 3 What are the fundamental assumptions upon which the program is based, what was the program designed to do, what is it about and what do we know about it already (have any previous evaluations been done)? 4 What kinds of information do you need to support decisionmaking or to satisfy the needs of the intended audiences; can it be accumulated, does it exist, and are back-histories available? 5 From what sources should the information be collected and has any been previously collected from these sources? 6 What research methodologies and research designs are appropriate to collect the required information? 7 What are the timeframes available to complete the evaluation and report on findings? 8 What resources are available to carry out the evaluation? 9 What evaluation strategy is least problematic in light of the answers to the above questions? 10 Should the program evaluation go ahead? (see McDavid & Hawthorn 2006: 26; McNamara 2006). The Centers for Disease Control and Prevention in the United States advocate a framework of six interdependent steps that can be used as a starting point to tailor an evaluation for a particular public health effort – although it should be noted that these steps are sufficiently generic to be applied in other policy settings. The six steps are: 1 Engaging Stakeholders – Stakeholders are persons or organisations having an investment in what will be learned from an evaluation and what will be done with the knowledge. Stakeholders must

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be engaged in the inquiry to ensure that their perspectives are understood. When stakeholders are not engaged, evaluation findings might be ignored, criticised, or resisted because they do not address the stakeholders’ questions or values. 2 Describe the Program – Descriptions should be sufficiently detailed to ensure understanding of program goals and strategies. The description should discuss the program’s capacity to effect change, its stage of development, and how it fits into the larger organisation and community. Program descriptions set the frame of reference for all subsequent decisions in an evaluation. 3 Focus the Evaluation Design – The direction and process of the evaluation must be focused to assess the issues of greatest concern to stakeholders while using time and resources as efficiently as possible. Not all design options are equally well-suited to meeting the information needs of stakeholders. After data collection begins, changing procedures might be difficult or impossible, even if better methods become obvious. A thorough plan anticipates intended uses and creates an evaluation strategy with the greatest chance of being useful, feasible, ethical, and accurate. 4 Gather Credible Evidence – Persons involved in an evaluation should strive to collect information that will convey a well-rounded picture of the program and be seen as credible by the evaluation’s primary users. Having credible evidence strengthens evaluation judgments and the recommendations that follow from them. Although all types of data have limitations, an evaluation’s overall credibility can be improved by using multiple procedures for gathering, analysing, and interpreting data. Encouraging participation by stakeholders can also enhance perceived credibility. When stakeholders are involved in defining and gathering data that they find credible, they will be more likely to accept the evaluation’s conclusions and to act on its recommendations. 5 Justify Conclusions – Evaluation conclusions are justified when they

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are linked to the evidence gathered and judged against agreed-upon values or standards set by the stakeholders. Stakeholders must agree that conclusions are justified before they will use the evaluation results with confidence. 6 Ensure Use and Share Lessons Learned – Assuming that lessons learned in the course of an evaluation will automatically translate into informed decision-making and appropriate action would be naive. Deliberate effort is needed to ensure that the evaluation processes and findings are used and disseminated appropriately. Preparing for use involves strategic thinking and continued vigilance, both of which begin in the earliest stages of stakeholder engagement and continue throughout the evaluation process (CDC Evaluation Working Group 2009). Formal approaches to program evaluation are based upon bounded, structured and disciplined research design. This both legitimises and bounds the analysis, thus ensuring clarity about objectives, the credibility of the process and the acceptability of the findings. Informal approaches exhibit less structure and greater flexibility with regard to scope and duration. The findings derived from an informal evaluation process might be less robust in a positivistic sense, but no less valid if the evaluation is performed well. Both might rely on one or some combination of research methodologies including executive reviews by experienced evaluators or consultants, data sampling, surveys, structured or unstructured interviews, focus groups, numerical modelling or participant observation (shadowing program administrators or participants). It is important to bear in mind that public sector organisations already collect a mass of information relevant to program evaluation. Many public sector organisations have entire business units geared towards the collection and processing of information, including financial and output data. However, few public sector agencies have maintained the dedicated research capacities necessary for the purpose of undertaking reflexive analysis and evaluation – let alone publication – of the data they collect. One, perhaps unintended, consequence of New Public Management has been the withering

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away of what research and evaluative capacity public sector agencies might once have possessed. Nowadays, if public sector agencies require research or evaluation, they will generally look outside their agencies to specialist consultants or universities. To the extent that public sector agencies have retained their analytical capacities, they tend to be exercised elsewhere. Policy branches in line or central agencies tend to be preoccupied with new policy proposal rather than with evaluating existing policies. Senior executives tend to exist in a reactive space, in which they need to respond to existing and emerging problems, the expectations of ministers and affected stakeholders. Containing the damage from political and operational bushfires requires all their analytical capacity. For this reason, the ideal of regular or periodic program evaluation tends to be placed on the back burner.

Ideal versus reality In an ideal world, all public policy, programs and services would be subject to periodic evaluation. Public policy would be ‘evidence-based’ and there would be no arguments over the evidentiary basis for policy decisions (Argyrous 2009). The findings of evaluations would, in turn, feed back into the policy process and either adjustments would be made to programs and service delivery models, or alternative models would be commissioned. Program evaluations would be public and transparent, and would provide a forum for constructive debate and the canvassing of stakeholder opinions. The ideal world exists, however, only as an intellectual construct. The real world is far ‘messier’. As we have maintained throughout this book, policy takes place under conditions that are seldom purely rational and are instead governed by various contingent and political rationalities. For governments program evaluation is a high wire act. They invest considerable political and reputational capital in the promotion of policies and programs. Elections are fought and won (or lost) on policy platforms that often prefigure particular program proposals and service delivery models. On gaining office, governments set the public service bureaucracy on the path of

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giving effect to that policy platform. As we observed in chapter 7, depending on the degree of the government’s policy and programmatic specificity, there may be more or less room for program designers to select from a range of alternative program architectures and service delivery models. As interest in performance grew, the conventional hope of government was that program evaluation would become the means by which programs were judged, revised, replaced or discontinued. In practice, program evaluation often became a thinly disguised plea for additional resources or timeframes so that anticipated benefits could be realised into the future according to the original policy intent. Hence, the commitment by governments to the spirit of program evaluation is often politically contingent. Governments are loath to formally evaluate programs if there is a possibility of their having to repudiate past policy decisions (and effectively admit error). Understandably, if such circumstances arise service delivery agencies and their ministers can become defensive and may choose to ‘dig in’ rather than respond constructively to adverse findings about the services in question. On the other hand, governments may be more prepared to commission formal evaluations of programs or services if they wish to build a policy case for decommissioning or replacing a particular program or service. It becomes a political as opposed to a technical or operational choice. Government actions, policies and programs are subject to intense political, stakeholder and media scrutiny. Governments, therefore, have a vested interest in defending their policy choices, decisions and actions. Although it might well be in the public interest to know whether or not programs and services are ‘working’ and policy objectives are being achieved, governments might not perceive it to be in their political interest to subject their policies and programs to a high level of public scrutiny. Political interests might not be served by finding that policies are founded on erroneous assumptions, programs are ineffective, services are inefficient and end-users are dissatisfied. Governments might be more willing to publicly evaluate programs if: 1 they have a high level of confidence that the evaluation will return favourable findings, or at least make recommendations that do not

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reflect adversely on past decision-making; 2 they are not fully committed to the program or service and would welcome a pretext to discontinue it, or if they wish to mobilise broad support for major reforms; 3 the government can disclaim ownership of the program because it was an initiative of a previous government and, therefore, any blame for policy failure can be attributed elsewhere; or 4 the program utilises third-party providers, government may be willing to evaluate the providers (but only if any failures cannot be attributed to the government). So, if governments are sometimes reluctant to expose themselves to the political risks attendant upon a transparent program evaluation process, what options exist for them to obtain information about program effectiveness? To say that governments are sensitive to potential criticism is not to say that they are prepared to wilfully ignore evidence about the strengths and weaknesses, successes and failures of their policies, programs and services. Short of commissioning a fully transparent program evaluation, governments (through the relevant agency or department) can: 1 initiate an internal review, reporting confidentially to senior management and the minister (however there are risks that the review or its contents might ‘leak’, become subject to freedom-ofinformation applications, or rumours spread about its contents, thereby fuelling potentially destabilising opposition and media speculation); 2 where the commissioning agency does not possess the capability or capacity, engage external consultants to undertake the program evaluation and report confidentially to the agency (although subject to similar risks as those stated above, the evaluation report might enjoy the shield of ‘commercial confidentiality’). Executive joint management reviews (by senior evaluators from other agencies) were once favoured approaches;

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3 commission an inquiry or review to be undertaken by a public research institution operating under carefully defined terms of reference (the reputation of the research organisation serves to legitimate the process and create an impression of objectivity while binding the institution to confine its enquiries to a limited set of questions); or 4 request a review of performance from the auditor-general or call for a review by a parliamentary/legislative committee within strict terms of reference. In large measure, government agencies undertake a degree of continuous evaluation of the programs and services for which they are responsible. This does not take the form of formal evaluations with open processes and rigorous methodologies. Rather, it involves the more opaque analytical processes routinely undertaken by agencies through which they identify ‘hot button’ issues, existing or emerging problems and stakeholder views for the purposes of advising government, solving problems and managing risks.

T h e l imits o f p e r f o r manc e manag e m e nt Public policy is concerned with serving the ‘public interest’. Although the precise nature of the public interest is difficult to define, among its many interpretations it frequently translates to the delivery of ‘value for money’ through the application of public resources (see Edwards 2008). In order to maximise the value delivered by the organisation, performance management disciplines emphasise the efficient and productive use of financial, material and human resources to realise policy and organisational objectives. Performance measures provide data, but performance management and sound professional judgment are required to assess the performance levels, provide organisational and public assurance, and maintain a focus on the efficient and effective delivery of value.

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Performance management is attractive conceptually, but, for a variety of reasons, can be notoriously difficult to put into practice (Thomas 2006; Bouckaert & Halligan 2008). Bouckaert and Halligan observe that: managing performance is vulnerable to disconnects in the policy sequence and other sorts of communication shortfalls (several of which are conditions that arise under any public administration framework). The persistent theme is that performance information alone is insufficient in much decision-making, and that professional judgements must enter the mix at some, perhaps many points. (2008: 180)

They point to the following four principal critiques of performance management and measurement: 1 rationality is ‘unrealistic’ and technical specifications are problematic and cannot, therefore, fully capture the complexity and contradictions inherent in the phenomena we are observing; 2 rationality has ‘costs’ in terms of up-front investments and the transaction costs of maintaining systems, not to mention the costs of retrofitting the performance measurement framework to account for ‘unintended consequences’; 3 the performance approach fails in practice because it cannot be delivered in the face of operational, institutional and attitudinal shortcomings; and 4 linear constructs do not match reality – the world is far ‘messier’ than can be fully accounted for by any performance management system (Bouckaert & Halligan 2008: 157–58). Thomas (2006: 2–3) observes that, owing to ‘institutional obstacles’ it would be ‘simply naïve and unrealistic to expect public organisations and the people who work in them to conduct and to present unbiased and complete accounts of their own performance’. He also points to other barriers such as: 1 the ‘multiple, vague, shifting and even conflicting’ nature of public policy objectives; 2 the ‘hierarchical, rigid and fragmented’ structure of the public sector;

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3 the written and unwritten rules of behaviour; and 4 the high cost of ‘generating data, staff time and investments in information technology’ (Thomas 2006: 3). Thomas identifies the main institutional barriers to the effective utilisation of performance measurement and management as: 1 public sector organisations having difficulty agreeing on operational measures owing to vague or poorly aligned mandates, missions and goals; 2 the unavailability of appropriate data and the lack of administrative and technological capability to gather new types of information; 3 capability gaps in the form of deficiencies in relevant knowledge and skill sets required to gather and to analyse the performance data; 4 resistance or a lack of commitment to performance measurement arising from perverse incentive systems within public organisations; 5 the absence of leadership support because performance measurement is seen as tedious and expensive; and 6 the culture of the organisation does not promote and support the constructive use of performance measures (Thomas 2006: 48). While the cultures and behaviours of public sector organisations and the people who work in them might not always be conducive to the realisation of a performance culture, it is also important to recognise that although they may be held accountable, public sector managers do not always exercise control over all aspects of the ‘performance chain’ linking behaviours, inputs, outputs and, ultimately, outcomes. In some cases results may occur (either positive or negative) irrespective of what managers have sought to do. In many cases, public sector managers operate within rigidly defined constraints: they have little control over the quantum of funds appropriated for their programs or over the specific configuration of the service delivery system. They may be constrained further by legislation; the human resource practices and policies of their organisation; and the governance framework within which decisionmaking occurs. They can influence, but have little practical control over the

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policy framework mandated by the government of the day. Even if the service delivery system exhibits best practice in its functional and operational components, misguided policy will not deliver results. It should be stressed that monitoring performance does not necessarily entail an assessment of the policy underpinnings of a program or service. Failures on the part of service providers to meet expected performance standards or targets do not necessarily bring into question the validity of the broad policy underpinnings of programs or services: rather, any such failures may be suggestive of the need for ‘fine tuning’ or increased scrutiny.

Perverse effects of performance measurement Hans de Bruijn (2007) has argued that performance measurement can have a number of potentially perverse effects on public sector performance. He contends that rigidity, a lack of dynamism, an inability to reflect complexity or accommodate trade-offs, and a tendency to discourage knowledge transfer can seriously undermine the ostensible aims of performance measurement to promote transparency, innovation, productivity and agile decision-making (de Bruijn 2007: 17–33). Under certain circumstances the application of performance measurement can have perverse consequences. It can: 1 Provide an incentive for gaming behaviour – to the extent that organisations are rewarded for meeting particular performance criteria (say, the production of particular units of service or outputs), the organisation increases its output in accordance with those criteria, even though this behaviour might have limited or no social purpose (sometimes referred to as ‘gaming the numbers’). 2 Block innovation – when organisations seek to optimise the efficient production of outputs (and especially where performance measurement is linked to financial rewards) there will be strong incentives to think in terms of ‘cash cows’, these being products or services that are relatively easy to produce and for which rewards are certain. Organisations might focus on ‘cash cows’ at the expense of

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innovation – innovation entails risk-taking, which might be to the detriment of the organisation’s output. Performance measurement, therefore, encourages the continual reproduction of existing practices. 3 Block ambition – organisations often raise their performance by optimising their inputs. In other words, they seek to obtain the desired level of output for the lowest possible investment of resources or effort. This is also called ‘creaming’ or ‘cherry picking’. Organisations that optimise their inputs do so at the expense of ambition by being averse to taking on difficult problems. 4 Veil actual performance – large organisations often aggregate their reported performance data, resulting in performance information that may not accurately reflect performance, effort or causality at the actual site or level of production. For example, reporting aggregate data on performance in public schools might serve to veil observed performance at individual schools. Conversely, the greater the distance between the producer of outputs and external actors using performance information, the greater is the risk of misinterpretation. Using the schools example, a school in a socio-economically deprived area might exhibit high rates of school-leaving. Looked at from a distance, this might suggest poor performance. Although that same school might successfully retain a higher proportion of students than might be expected given the characteristics of the local population (thereby contributing to good outcomes for those students, their families and the community), external actors might not perceive or appreciate the school’s success. 5 Drive out professional attitudes – performance measures focus on definable and quantifiable phenomena. There is little tolerance of ambiguity and little capacity to accommodate trade-offs. Museums, for example, exist to deliver cultural, research or educational values for which it is difficult to devise reliable measures. Visitor numbers, on the other hand, are easy to measure and this may lead

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museums to organise their programs with the aim of increasing visitor numbers at the possible expense of integrity or cultural value of their collections, thus driving out the professional attitudes of curatorial staff by effectively supplanting professional values with more ‘commercial’ values. Performance measurement can also create disincentives for co-operation and information-sharing, particularly where good performance is rewarded and there is competition for resources, thus forcing out what de Bruijn calls ‘system responsibility’. 6 Lead to copying, not learning – benchmarking between organisations should ideally lead to the adoption of better practices, innovation and organisational learning. However, it can also ‘degenerate into silly copying’ in which practices are uncritically transplanted from one organisation to another, sometimes with suboptimal results. 7 Result in agencies being punished for performance improvement – although performance measurement ought to reward productivity and sanction poor productivity, the reverse can often be true. For example, organisations that invest in and demonstrate improved efficiency might either have their budgets cut by the amount of any savings generated, or have their workloads or targets increased. This has the effect of punishing well-performing organisations. Conversely, organisations not investing in efficiency will be rewarded by their budgets remaining the same and with no escalation in performance expectations (thereby rewarding poor performance). If this pattern becomes embedded, it can lead to other forms of perverting behaviours and effects (de Bruijn 2007: 17–33). Perverse effects can also arise if performance information is used in a punitive way – either through adverse commentary or the application of sanctions for perceived poor performance – as this can give rise to mistrust, defensiveness or risk-averse behaviours that might, over time, serve to compromise rather than enhance the achievement of organisation and policy goals.

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Towards performance ‘governance’ Bouckaert and Halligan (2008) suggest that ‘accountability’ has acquired ‘iconic’ significance and has served to transform both thinking and behaviour in public sectors worldwide. They go on to argue that performance and accountability for performance are often misaligned or poorly connected, thus giving rise to a variety of political and operational tensions, conflicts and dilemmas. Accountability might be owed to ‘many masters’ each with particular interests and concerns and, possibly, fundamentally different ideas about the dimensions of performance that are important to them. Bouckaert and Halligan also note the potential for ‘disconnects’ or incompatibilities in performance management across micro (single organisations), meso (substantive policy domains) and macro (government wide) levels. For example, some policy domains might span across a number of government agencies or even levels of government and are thereby subject to a variety of disconnected, poorly aligned or even contradictory performance management regimes. Accordingly, they argue that performance management ought to be replaced with a form of performance governance that is far wider in scope than traditional performance management disciplines. In addition to the traditional input and output metrics, performance governance ought to embrace the capacities to account for performance across four key sets of relationships. These are: 1 organisational relationships within and beyond the public sector, including collaborative networks, co-operative arrangements, partnerships and co-ordination mechanisms; 2 relations with the community – emphasising participation and citizen engagement; 3 the full gamut of relations between policy, implementation and delivery chains and their societal impacts; and 4 the vertical integration of performance across micro, meso and macro levels (Bouckaert & Halligan 2008: 182–85).

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Such a conception of performance governance would constitute a considerable widening of responsibilities not just to ministers and officials but to stakeholders, business and community bodies and citizens.

Conc l usion Over the past three decades public sector reforms in the OECD have wrought a complex and sometimes unpredictable nexus between ‘markets’ and traditional notions of public service delivery. Ideas about ‘performance’ have been in the ascendancy as a ‘dominant force in public management’ (Bouckaert & Halligan 2008: 1). Performance management is a ‘growth industry’, replete with buzzwords, grand rhetoric and – of course – self-proclaimed ‘experts’ willing, for a fee, to sell their secrets for organisational transformation. Yet, despite a burgeoning literature and a broad acceptance of its centrality, ambiguities and confusion about performance management persist (Bouckaert & Halligan 2008: 12–14). In this chapter we have canvassed the rationales, potential benefits and possible pitfalls of performance measurement. We have attempted to convey the complexity of performance measurement with regard to public services whose outputs tend to combine a number of attributes – some that are capable of measurement and many that are not. We have also seen that measuring performance is relatively straightforward while evaluating programs is far more complex, calling for analytical, judgmental and prudential qualities. In an ideal world, the first would naturally support and reinforce the other: data collected for the purposes of measuring the performance of programs and services would provide the basis for evaluating whether those same programs and services were achieving their stated objectives. Unfortunately, practice does not necessarily follow theory. As Thomas observes, performance measurement and management is subject to political forces:

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performance measurement can never – and should never – be completely divorced from ‘politics’ in the broadest sense of that term. By politics I mean the process for recognising and accommodating competing values, interests and demands to define the public interest. (Thomas 2006: 3)

This is the practical reality of the environments within which public sector managers and policy practitioners have to work. Theirs is not a purely ‘rational’ space, although it is possessed of its own rationalities, and operates in accordance with a complex set of formal and informal ‘rules of engagement’. Although policy purists might lament the cultural, political and attitudinal constraints frequently evidenced in the administration and management of service delivery, managers cannot be effective unless they understand those ‘rules of engagement’. This will be especially so if governments and the community seek to widen and share accountabilities within a new framework of performance governance.

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10:

Public sector   governance   and networked   delivery

Although we commonly refer to the ‘public sector’ it is not as uniform as many members of the public might think … governance arrangements have to accommodate the oversight of a range of functions, including policy development, regulation and the provision of services to citizens. Further, public service delivery is now characterised by increasingly complex inter-relationships between government agencies, different levels of government, and the private sector. The traditional distinction between the public and private sectors is increasingly being blurred, with the concept of ‘integrated government’ being applied to government service delivery and the achievement of ‘public’ outcomes. Privatisation, corporatisation and outsourcing have greatly added to the changes witnessed in the past 25 years or so. The more recent overlay of ‘whole of government’ approaches introduces additional relationships and increases the complexity. (McPhee 2008)

In this chapter we will introduce the central tenets of public sector governance. We will also discuss the practicalities and the potential challenges of exercising effective government in a policy and program environment that is increasingly shaped by and dependent upon networked service delivery. Public sector governance is about system oversight. It is primarily

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concerned with the overall integrity and performance of public sector bodies and their activities. But crucially, governance also extends to oversight functions over the non-government sector, service providers, and clients and consumers of government services including those to whom governments have responsibilities. Inside the public sector the concern with good governance involves the parliament, cabinet, ministers, senior executives, agency boards, internal integrity controls and internal and external advisors on matters of governance. It is about providing internal and external assurance that approved work is being undertaken, that it is being done in accordance with accepted best practice, that business risk is being effectively managed and that funds are expended and properly acquitted. Outside government, governance involves wider democratic and accountability functions including the processes by which governments are selected, monitored, held to account and, if necessary, changed over time. So, governance not only provides assurance to the executive and its internal stakeholders, but also to electors, taxpayers, firms and community associations. In this respect, it can also extend to the trust and respect citizens have for the major institutions in their society.

I mpo r tanc e o f go v e r nanc e in po l ic y d e l i v e r y The governance literature is now immense. It tends to stress three broad themes: • authority and control functions, the oversight of activities by those in positions of authority or power; • the identification of a strategy or authorised set of objectives and then establishing effective structures to manage the implementation of that strategy – including the capacity to deliver policy and service effectively; and • accountability, integrity and probity, the confidence the community

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can have in government and the public policy process. The World Bank has suggested two comprehensive and normative definitions of governance derived from its international experience. The first stresses institutional resilience, while the second focuses more on system assurance. In the mid-1990s the World Bank believed governance was: Epitomised by predictable, open and enlightened policy making; a bureaucracy imbued with a professional ethos; an executive arm of government accountable for its actions; a strong civil society participating in public affairs; and all behaving under the rule of law. (World Bank 1994: vii)

But later, by 2009, governance was seen to consist of: the traditions and institutions by which authority in a country is exercised for the common good. This includes (i) the processes by which those in authority are selected, monitored and replaced, (ii) the capacity of the government to effectively manage its resources and implement sound policies, and (iii) the respect of citizens and the state for the institutions that govern economic and social interactions among them. (World Bank 2009)

Governance aims to provide assurances that power and resources are used for their intended and sanctioned purposes. It should also provide powerful feedback mechanisms to enable corrective measures to be taken when things go wrong. Indeed, the core principles of governance are often espoused when systems break down or when failures in governance become apparent. Such operational principles were clearly enunciated in a recent speech by a senior Australian bureaucrat (from a department which was widely seen to have experienced major problems with its internal and external governance regime). This top executive reflected on the future challenges of public sector governance: A key task will be to determine how we respond to the demands from clients for a different quality of service from the [government] sector. Our clients’ expectations of a streamlined, flexible, efficient and responsive government sector will continue to grow, in line with the kinds of service

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delivery they experience elsewhere, such as through automatic teller machines or through the internet. I believe our clients will demand service that is seamless, secure, simple, accurate and accessible. Seamless servicing comes from whole-ofgovernment solutions. We need a ‘no wrong door’ approach, with on-line client-oriented portals serving up the right information and services to meet the client’s needs, so they are never shunted from one agency to another. Seamless servicing also includes a growing demand from clients to cut back on repetitive form filling by enabling their details to be provided once only for multiple purposes. Secure servicing is a required response to the natural desire of citizens to have the information they provide kept private and confidential to the legitimate purposes of government only … Agencies will have to become even more vigilant in safeguarding the privacy of the information that citizens communicate to them, instilling in employees and contracted third parties that this information is a valued asset, whose misuse is treated every bit as seriously as fraud. The negative impact on business and clients from ‘red tape’ is well-known. So the demand for genuinely simple services is not likely to go away and will increasingly require looking at how our rules and regulations are working as part of business process reviews. In my department we have learnt the hard way that the public has a low tolerance for poor quality service delivery. Agencies will have to deliver a stronger focus on accurate services by building in robust quality assurance measures at key stages of their business processes.1

The speaker concluded that ‘it is much easier to identify the failures in governance when they occur than to anticipate them. Complacency is the enemy of good governance and successful governance is not demonstrated by the apparent absence of a problem’.

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Co r e e l e m e nts o f p r og r am go v e r nanc e wit h in go v e r nm e nt Governments want their policies or interventions to have a positive impact on society as a whole as well as on the particular problems or issues they are seeking to address. To achieve this they need to rely on the capacity (knowledge, expertise and professionalism) and the capability (authority, culture, resourcing and technology) of their agencies to build and roll out the administrative and physical infrastructure that will support the delivery of the policy. This requires the mobilisation of a variety of complex and interlocking business systems and the application of robust governance processes at each stage of service planning (including the development of legislation and regulations), design, roll-out and operation and evaluation. In many policy sectors, it is also important to recognise and manage the risks of the entire service network including the capacity of non-government providers to produce or deliver services effectively. There are many dimensions around which policy and service delivery systems might be assessed and an array of strategies to ensure that objective assessment occurs, but assessments of overall performance only acquire meaning if they are reported and acted upon within the authorising framework. This is where governance comes in. The design and roll out of any policy delivery framework, no matter how it is constructed, requires a robust corporate governance framework. This is an essential element of the oversight function or authorising regime and underpins the effective management of business and political risk. Any corporate governance framework should at least provide clear advice in relation to the following matters: • authorisation and delegation for decision-making; • risk management (identification, ranking and strategies for the mitigation of risk, including the risk of business interruption); • planning cycles (including forward planning and contingency planning);

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• financial management and control; • the identification of inputs (costs, personnel, assets, business technologies); • the identification of outputs (units of service, however defined); • performance measurement (key performance indicators); • performance management (learning, adaptive and responsive systems); • operational systems; • reporting and review arrangements. Such frameworks translate in practice into organisational governance structures and practices. All public sector programs should have in place robust sight, establishing clear lines of accountability and offering assurance about the integrity of operations to stakeholders. Generally, they only involve internal stakeholders and executive members – but there is no fundamental reason why they cannot have broader representation even from outside the organisation. Conventional governance frameworks cascade downwards from a board and/or executive through to the business units responsible for delivering services. This framework involving only those internal to the organisation is illustrated in Exhibit 10.1 below. Organisational governance predominantly serves to provide assurance within the organisation that its mandated services are delivered in the most efficient, economical and effective way. It is also concerned to provide assurance that internal and external business risks are effectively managed. Three internal sources of information feed into such oversight frameworks – financial assurance, internal audit and program assurance.

Financial assurance Financial assurance is usually the area of accountability upon which greatest emphasis is placed in public sector organisations. It is also an area of high risk and potential exposure. Opposition politicians, the media and other

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Board/Executive   Management Group

corporate governance structures for the purposes of providing executive over-

Exhibit 10.1

Public sector governance framework

Parliament

Cabinet

Minister

Board/Executive   Management Group

Chief Executive Officer

Deputy CEO Programs

Deputy CEO Corporate

Chief Information Officer

Business Unit

Chief Financial Officer

Business Unit

Human Resources Manager

Business Unit

Executive Program Manager(s)

Business Unit

Business Unit

‘watchdogs’ are constantly on the lookout for examples of government mismanagement, waste and the misuse of funds. It is, therefore, incumbent upon the managers of mandated services to provide strong assurance through their agency’s corporate governance framework about the use of financial resources. This involves regular and direct lines of reporting by finance staff, including updates, trends analysis, risk assessments, and diagnostic reviews. The provision of financial assurance also embraces sound budgeting processes, including

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the anticipation of real operating costs, the accurate costing of overheads and the realistic anticipation of possible future costs.

Internal audit Internal audit is an important element in the corporate governance framework of any public sector organisation. It should provide a repository of experience and knowledge about the identification and minimisation of risk. Internal audit will generally focus on resource usage, internal and external probity systems and cost efficiencies, but can also provide advice on organisational design, capacities and organisational performance. Program managers are usually advised to engage their agencies’ internal auditors in the early stages of the development of any new program and during the rollout of associated business systems.

Program delivery assurance and feedback It is also necessary to provide assurances that mandated services for which public resources have been allocated are in fact being delivered. The provision of such assurances needs to be based on reliable information from key performance indicators about impacts, outputs, take-up or utilisation rates, changes in performance standards, and anticipated difficulties or problematic clients. Program delivery assurance requires the establishment of an ongoing research and evaluation framework capable of collecting, synthesising and analysing operational and performance information. Feedback and satisfaction ratings will also provide valuable data. Moreover, such information needs to form part of the ‘policy loop’. In other words, there needs to be a capacity to make adjustments to the service delivery infrastructure in response to any assessed shortcomings.

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T r ansc e n d ing o r ganisationa l boun d a r i e s – mo v ing to n e two r k e d go v e r nanc e Organisational governance can be insular, silo-like and defensive in character. Traditional hierarchies tend to operate from a ‘command and control’ mentality, seeing the policy world through bureaucratic risk-averse eyes. The departments and organisations they administer tend to have regular, repetitive and standardised relations with end-users. However, in the present ‘age of pragmatism’ using business and market instruments, policy delivery does not occur or remain within silos such as a single department or agency (Hill & Hupe 2002). Rather, there is a much greater emphasis on partnership, collaboration and co-operation between public and private entities in the task of program and service delivery. There are now many more actors involved in carrying out the policy requirements of governments. Such relationships require a much more expansive understanding of governance. Hence, the notion of ‘networked governance’ is now much more important to the overall quality of service provision and civic value. Networked governance transcends the boundaries of a single organisation. It is premised on shared and collaborative responsibilities, common endeavours, synergies and various forms of co-production. Networked governance implies the exercise of oversight functions in environments where managers may exercise little or only indirect control over all parts of the value chain. Whereas the traditional service delivery model examined the risks to the organisation itself, networked governance considers the risks and performance of the whole system or policy area. Because networks are based on mutual dependencies, governance of the network is fraught with difficulties (Bevir & Rhodes 2003). Many networks are unmanageable, unsteerable, and impossible to control or command. Networks exist and grow because there is a need and a use for them. So what does networked governance look like? Inevitably in the exercise of governance functions, governance will be shared with the other participants.

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Of necessity, as Althaus et al. (2007: 91) have argued, networked governance is an ongoing process of building relations, working through configurations, sharing information and using the skills of diplomacy, developing trust and complementary capacities. It can also involve resource exchanges or the combining of resources to some shared endeavour. Governance of such networks is a process of engagement and dialogue, exploring risks to the system, conducting anticipatory diagnoses, assessments of capabilities, building capacities and identifying weak links. It may seek to mobilise resources across the network in ways that mitigate the potential for contradiction, disruption, irrationality or failure. It may also judge the potential for perverse outcomes contrary to the ostensible goals of the policy and program. Networked governance involves working with partners and managing outwards, that is, outside nominal organisational boundaries (managing relationships). All participants (not just government agencies) have to engage in collaborative relations, which, as Huxham and Vangen have observed, are ‘highly resource consuming and often painful’ (2008: 42). They go on to say that ‘unless the potential for real collaborative advantage is clear, it is generally best, if there is a choice, to avoid collaboration’ (Huxham & Vangen 2008). But often the choice is not there and participants have to collaborate. However, it has also been shown that many of the problems associated with partnering ‘can be minimised through active management of the collaboration’ (Huxham & Hibbert 2008: 50). Networked governance also implies that policy and operational accountabilities will be shared – perhaps not equally or evenly, but shared nevertheless. Conventional corporate governance frameworks usually assume direct lines of accountability within a single organisation in which accountability cascades upwards from the lower levels of the organisation to the executive leadership along defined pathways. Networks do not operate from such principles. Participants may come and go. In embryonic networks there may be no clear identification of business risks (shared or otherwise) or lines of accountability. Mature networks, by contrast, are likely to have clarified areas of responsibility and accepted the types of accountability borne by each of the respective participants. But how do we hold non-government actors to

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account? There are contractual obligations, agreements to deliver, requirements over the use of grants or funding schemes, protocols and understandings, even competitive pressures in some cases (the threat of sourcing service from another provider). But in the end accountability will be more about coaxing and coaching, and seeking to change behaviours, rather than blaming and shaming. Accountability to legislatures or to the public, on the other hand, cannot rely exclusively – or even primarily – on such behaviour approaches. There will always be a need for the formal codification of accountability frameworks in legislation and contracts. This might be accomplished, for example, by embedding in government contracts obligations on contractors or parties to public–private partnerships that are the same as those applying to the public sector or by expressly limiting the ability of government entities and private sector providers to invoke the ‘shield’ of commercial confidentiality in order to avoid scrutiny of contracted services.

Oversight and assurance in ‘joined-up’ systems Many OECD governments have sought to achieve more effective ways of coordinating policy delivery across agencies, jurisdictions and various non-government sectors. Sometimes referred to in Australia as ‘whole-of-government’ solutions, in the United Kingdom as ‘joined-up-government’ or in Canada as ‘horizontal management’, much political rhetoric (and political capital) has been expended in promoting the ideal of ‘seamless’ government while simultaneously trying to curb the cultural inertia of ‘departmentalism’ and path dependency. ‘Joined-up’, or ‘seamless’, government implies the establishment of a ‘user-friendly customer interface’ that is simple to understand, easy to navigate, and governed by clear rules and entitlements. This interface often involves the establishment of an actual or virtual ‘shopfront’ that relieves the customer (or client or beneficiary) of the necessity to understand the ‘back end’ systems and relationships established for the production of services. Although seamless government is a laudable ideal, in reality it is difficult

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to achieve, in part due to differences in organisational cultures, operational policies, governance systems and perceived mission. It is based on the premise that cross-government and cross-sector co-operation is an essential complement to whole-of-government or joined-up approaches. However, a study carried out in 2005 by Bev Johnson concluded: Despite the growth in popularity of joined up approaches the outcomes frequently fail to reflect the efforts and aspirations of participants. The failure of many joined up approaches is due to a lack of awareness of the need to create appropriate infrastructure to support the approach. (Johnson 2005: 61)

Similarly, a report prepared by the Victorian government State Services Authority (SSA 2007) observed that while the ‘traditional alignment of decision making, accountability and performance management’ within vertical organisational structures can ‘inhibit shared outcomes and responsibilities between organisations’, joined-up government brings added complexity to accountability and incentive mechanisms (SSA 2007: 7). It was observed that ‘incentives for achieving organisational aims can be stronger than the rewards for horizontal achievements’ and that a ‘strong focus on performance management’ can lead organisations to ‘ignore issues that require shared responsibility’. Joined-up government, the report argued, ‘needs shared performance indicators and these need to be aligned with incentives and reporting systems’. Clearly, greater attention needs to be given across government to support whole-of-government initiatives. It is not sufficient to rely on the organisational program governance structures of participating entities that are designed to provide assurance to their own senior management in relation to program elements under the organisation’s direct control. Instead, agencies should be looking to provide richer assurances about combined performance at the locus of delivery where results are likely to be the product of ‘many hands’. Policy-makers, program designers and managers need to give careful attention to the design of systems for oversight that transcend organisational boundaries. Too often, organisations engaged in collaborative efforts practise ‘boundary-riding’ – essentially patrolling and defending the administrative and operational boundaries, demarcating those matters for which they are

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directly accountable and, where they can, shifting blame to other parties. In part, this can reflect a lack of harmonisation between the governance and assurance regimes of different entities (or different levels of government). It can also be a consequence of a failure to establish effective joint governance regimes and inattention to effective relationship management.

P o l itica l r is k an d accountabi l it y We already make distinctions within the concept of accountability to disentangle operational accountabilities from political accountabilities. While ministers can be held accountable both politically and operationally, practitioners and other network participants usually are not held politically accountable for their actions/inactions. Although public officials are not politically answerable for the programs and services they administer, they should remain alert to the potential for ‘political risk’ resulting in embarrassment or distraction for the organisation, the minister and/or the government. Other members of the network – such as third-party providers – may also have to consider some of the dimensions of political risk in terms of the integrity of the program, threats to the program, safeguarding the public interest, their continued involvement, and their ability to work with government. This does not mean that thirdparty providers cannot criticise government, but it may mean that it matters how they do so. There are enormous political risks associated with any area of human services. Misdiagnosis, mistreatment, maladministration, service interruptions, and privacy issues can result in serious consequences and harm for end-users. The media is usually quick to pounce on instances of human suffering when individual episodes or system failures come to light. To the extent that these types of service failure result in questions or criticism being directed at senior management, ministers or the government, they entail a high degree of political risk. In such cases, although political accountability does not reside

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directly with public sector managers, it is nevertheless the responsibility of senior management to assess risks and advise ministers accordingly. It may even be necessary to take action to mitigate the impact of those risks should they eventuate. The assessment and management of political risk is likely to become an increasingly collaborative venture. All participants may become a little tarred. Dealing with political risks will best be achieved through managing relationships with stakeholders, and being honest and clear with end-users and clients. It is essential, therefore, that the design of programs and service delivery systems have built into them a capacity for the early identification and management of political risks, including the capacity to provide early warning to governments of real or perceived service failures, and the necessary monitoring and strategies for the mitigation or rectification of failures.

C onc l usion Good governance completes the virtuous circle of effective and accountable public sector management. It is an indispensable element of program design and service administration. Effective oversight and control reinforces good performance. Ineffective oversight accentuates risk, impairs accountability and contributes to sub-optimal results. As with performance management or evaluation (see chapter 9) governance structures can contribute to perverse outcomes. If boards or executive management groups do not avail themselves of the self-correcting potential of governance structures (for example, by failing to heed warnings about potential risks or failures), or if senior management uses governance systems to reinforce organisational rigidity (for example, using governance structures to impose rules and resist innovation) then the virtuous circle can be broken. On the other hand, boards and executive managers who use governance frameworks to facilitate a ‘conversation’ – both within the organisation, and with network partners – will find themselves better placed to anticipate and respond creatively to the emerging challenges of service delivery.

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Networked governance poses its own problems and challenges, many of which have not yet been fully realised across government. We have transformed many of the ways we deliver policy but have not yet transformed the ways in which we manage them, account for them and calculate the risks associated with their actual delivery. The outcomes of public policy will surely be improved to the extent that participants in policy networks take seriously the governance of networked delivery.

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11:

The future of   policy and   service delivery

The world is full of people whose notion of a satisfactory future is, in fact, a return to the idealized past. (Novelist Robertson Davies) The future is not a gift: it is an achievement. Every generation helps make its own future. This is the essential challenge of the present. (US politician Robert F Kennedy, 1962)

What does our study of policy in action suggest is the future of policy and service delivery systems? We suggest that a robust future for public policy lies ahead with much contention, deliberation, engagement and adaptation along the way. All policy is a work in progress and the future is a canvas of varying possibilities and challenges. Today’s preferred policy formulations will change, they will be succeeded or replaced, or morph into other, as yet unimagined forms. In reality, policy is never complete. In the 1980s and 1990s it was fashionable in some quarters to talk of a decline in government in terms of its size and responsibilities, its capacity to ‘solve’ problems and ability to deliver. It was a debate largely from the right about ‘rightsizing’ and a withering away of the state. In fact, the reverse seems to have happened. Government is larger today, has more powers, spends more, has greater responsibilities and ambitions. Its policy ambit has considerably widened and appears to be in no danger of being reduced in the

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future. As observed by Australian Prime Minister Kevin Rudd, the global financial crisis provided a catalyst for a reaffirmation of the potential for state intervention: In the early stages of the global financial collapse, the centrality of the state was reaffirmed by governments of both the classical Left and Right as they acted to guarantee the integrity of the banking system … Subsequently, governments have also demonstrated a willingness to undertake unprecedented interventions in private credit markets. Specifically, governments have involved themselves in the capitalisation of banks, the direct purchase of bank and corporate securities, the establishment of joint-purpose vehicles to share risk with private financial institutions, and in sovereign guarantees to underpin inter-bank lending. (Rudd 2009: 25–26)

The imperative to respond positively in the face of the crisis saw national governments pursuing policy formulations that would not have been countenanced at any time over the past 30 years, such as the nationalisation by the British government of the Northern Rock Bank in 2008 or the series of extraordinary policy and financial assistance measures rolled out by the Obama administration in 2008 and 2009 to support a floundering American automotive industry. Government is not suddenly back in the picture; it never left. Governments are still active in many traditional areas of public policy – industrial relations, taxation, education, health, income maintenance, immigration, energy and transportation. In addition, new pressures have added new responsibilities. More recent challenges such as climate change, environmental protection, social inclusion, ageing and national security have opened new mega-agendas for governments where ‘solutions’ may be still contested but the roles for government have greatly expanded. On these policy fronts governments are leading, facilitating, co-ordinating responses, providing policy frameworks and adjusting incentive structures for future generations. In one sense it can be argued that the increase in government responsibilities is turning governments into actors of last resort – where only government has the wherewithal to act or provide. Thus, governments were called

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upon to bail out the banks in the global financial crisis of 2008–09 because no one else would have been prepared or able to do so. The same applies for governments’ increased role in national security in a post-9/11 world. However, some of the increased roles for government may have come from governments being more prepared to lead and assume additional responsibilities in contested areas. In this sense, governments may be a victim of their own success. In many areas of social policy, health policy, education and family care, governments have increased their presence and active involvement though various policy settings and different policy instruments. One reason for their increased involvement is that government interventions continue to make a real difference, so governments are prepared or obliged to maintain and augment their active policy roles. But the return to government does not necessarily imply a return to government services directly provided by the government itself. For instance, even in very sensitive areas of national protection, such as property and airport security, governments are requiring enhanced security measures be adopted, although the delivery of these services is contracted out and in the hands of non-government providers. This is a growing trend across policy sectors. Much of the social services received by the community are paid for or mandated by government but delivered by myriad providers. Many of these providers may have had some public sector involvement or experience in the past through their education, training, accreditation, careers, conditions of employment or contractual histories. Some, like doctors, nurses and carers may oscillate between public and private sector provision in the course of a day’s work. The expanding state constantly has to grapple with creating and magnifying dependencies – greater numbers of residents, families, industries or social groups are dependent on some form of government provision. This poses both political problems and policy dilemmas for government. When benefits or subsidies are given to particular groups, it can prove nigh on impossible to reduce or remove them and there may be imperatives to increase such support or extend its coverage. The politics of dismantling existing policy provisions are intense. This is why it has often been suggested that policy choices in the

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future will involve more co-production, co-payment, or co-funding models. Instead of governments providing services to recipients as passive consumers, they will increasingly engage recipients in more activist and co-contributory ways – mutual obligations, reciprocal responsibilities, shared agreements. In some cases this may involve greater co-payments (or income contingent loans), such as with co-payments for higher education or some health services; in others it may involve work-tests, activity diaries, attendance at courses. Alongside these trends, the decision-making processes of government have also come under increased scrutiny. The community and especially the media want to know how governments make decisions, on what basis, using what evidence, and to what effect. There are greater demands for transparency and integrity in government, not simply through freedom of information requirements but through broader expectations of the supporting evidence and rationales for policy choices. And in the process governments are expected to engage and consult to a much greater degree with the community in coming to their decisions. Engagement and consultation are more often passive and reactive than they are active and responsive processes. Stewart (2009: 77) observes that ‘The more important it is for governments to engage – in the sense that the issues involved are likely to be of concern to citizens – the less likely it is that they will do so’. It is possible, if not likely, however, that a better-educated citizenry, greater government transparency, an expanded use of non-governmental service delivery modalities and a growing reliance on collaborative policy and service delivery frameworks will combine to reshape the essential contract between governments and citizen-consumers. This might lead to more participative and genuinely collaborative strategies for involving government and non-government actors in public policy development and implementation. However, recent research finds little evidence that the collaboration era has ‘arrived’, suggesting instead collaboration as aspirational ideal rather than realistic expectation (for example O’Flynn & Wanna 2008). For future governments to perform across all these extended areas of responsibilities and future expectations they will need to invest in the renewal and development of their capacities and capabilities. Governments will have

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to recalibrate regularly to meet future challenges and contingencies. The main ways governments will need to recalibrate into the future are: • Governments will be required to find new ways to deal with policy complexities and the interconnectedness of problems, in more complicated environments, subject to the forces of globalisation, and the changing nature of problems (‘wicked problems’). • There will be greater need for governments to think and act internationally, in unison with other governments, guided by international strategies and agreements, with greater consistency and co-ordination, with greater co-operation and concerted action. • Governments will use and strengthen their policy capacities and capabilities to engage and empower the community, to build resilience in individuals, groups, the community and in government itself. • Governments will need to find new ways to work through others, with stakeholders, clients, providers and the community; they will need to embrace networked governance in ways they have not done so far, or may not have yet conceived. • Governments will become more judicious in their use of their relative powers; they will be more selective about where they seek to have impact and how they seek to ensure such impact. • Governments are going to have to invest in doing things in a smarter, more effective manner, searching for new productivity frontiers in administration and delivery, finding new ways to package and process information and records and new ways of self-administering. • Governments and parliaments will have to adapt and modify their notions of accountability to better reflect the prevalence of networked governance in most policy sectors; traditional accountability requirements will be less applicable and less effective, so new understandings and applications of shared accountabilities will be required; new ways to discharge accountabilities will be found and applied across networks. This does not mean that accountabilities

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will be weakened; rather, they will be made more appropriate to changing circumstances; new accountabilities will be enhanced by greater system transparency. Going into the future, government’s policy role will become much more important while service delivery will increasingly be delegated to a variety of agents, whether these are other levels of government, private enterprise or civil society organisations. The ambit of that policy role will expand and increasingly incorporate input from delivery agents and the community. A closer connection between policy and delivery (rather than a separation) will occur and inform decision-making. To date, the delegation and decentralisation of service delivery functions has not particularly been matched by an effective delegation and decentralisation of either decision-making or accountability. This will change. A degree of delegation and decentralisation of decision-making is necessary for operational efficiency – after all, service providers cannot be truly efficient or effective if they are unable to customise the program or continually have to seek authority from the centre for decisions about even mundane operational matters. There is nothing particularly new in this, of course, as ‘let the managers manage’ was for a time the catchcry of New Public Management inside government. Yet, devolved decision-making cultures will introduce a much wider frontier of risk; one in which governments and ministers will accept some degree of responsibility but not all. Over time this will necessitate a reframing of the very notion of ‘ministerial accountability’ – toward collective or community accountabilities. We will see greater attention to policy capacities inside government even while actual delivery is increasingly delegated. This is not a contradiction in terms – after all, the governance demands of devolved service delivery systems and an increased reliance on networked governance probably require a stronger, not weaker, state; one that is more interventionist, not less; more pro-active and anticipatory than passive or reactive.

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Notes

Chapter 1 1

2

3

4

5

These views were not purely scholarly or academic and were once part of a much broader discourse, an overview of which is provided by Esping-Andersen (1996: 1–4) and Castles (2004: 1–9). The term ‘industrial state’ captures the adoption by governments of the logics of industrialism and their application to administration and organisational behaviour. It suggests mass production and systems of administration rather than ad hoc or case-by-case administration. It was designed for universalist bureaucratic delivery and is often criticised as being unresponsive. In this governments followed the ‘Henry Ford model’ of choice (or no-choice). The car manufacturer Henry Ford was famous for saying that ‘Any customer can have a car painted any colour that he wants so long as it is black’. In similar terms, Hill and Hupe (2002) make a distinction between three phases in the implementation and administration of public policy, the first being the ‘era of great expectations’ from the 1950s through the 1970s (which they also refer to as the ‘age of interventionism’); the second being the ‘period of government retrenchment’ in the 1980s and 1990s, marked by ‘market and corporate government’; and the third, and current phase, marked by pragmatism and ‘mixed agendas’ (Hill & Hupe 2002: 85–99). .

Chapter 3 1

2

3 4

The term ‘dismal science’ was coined by Victorian historian Thomas Carlyle in the mid19th century as a response to the late 18th century writings of the Reverend Thomas Robert Malthus. In economics, the break even point is the level of provision at which a provider’s cost meets revenues so that there is no net loss or gain. Providing less than that level leads to losses, and providing more, to gains. Fixed costs (for example renting premises) do not vary with the level of provision, whereas variable costs (for example wages) do. Marginal analysis is the analysis of the effect of infinitesimal changes in specific variables. Optimality is obtained when marginal changes in specific variables (for example costs, benefits) cause the value of the dependent variable (for example profits) being maximised to the full.

Chapter 4 1

Through the 1960s and 1970s, however, non-government service providers were increasingly co-opted by both policy and funding as an adjunct of publicly-mandated services. Investment by governments in grant programs aimed at supporting the work of community-based nongovernment organisations in fact fuelled their proliferation during the 1970s, not to mention

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creating a situation of financial dependence upon government funding as a primary source of their income. See . It should be added that this situation arose as a consequence of a private provider aggressively expanding its operations in a competitive market characterised by generous government subsidies. The case of ABC Learning does, however, demonstrate the dangers of allowing private entities to gain a level of market dominance with respect to services wholly or partially underwritten by government. In such cases, corporate failure will almost inevitably lead to calls for government to step in. User-charging can be considered a form of privatisation, being the substitution of tax funding by private funding. More generally we accept that privatisation encompasses far more than the simple divestment of assets. However, the net benefit to end-users (in terms of affordability) can be compromised if increases in the level of government benefit are offset by increases in charges from private insurers – which in reality redirects the flow of benefits away from end-users to suppliers of eligible services. These kinds of unintended consequences need to be explicitly addressed in both the policy framework and in the basic design of the intervention. Policy instruments of this type tend to be the province of those levels of government with significant taxation responsibilities. In Australia, this is the Commonwealth government, although state and territory governments also operate rebate schemes in the form of the direct reimbursement of incurred expenses (for example rebates for the installation of water tanks or solar energy devices) and local governments offer rebates on rates and charges for specific purposes.

Chapter 5 1

2

3 4

5 6

The principal is assumed to know their interests best and, accordingly, will know what they want to buy. It is also assumed that the principal will consume the goods or services provided. If the principal is certain of their preferences, then the argument follows that providers will know definitively what they are expected to deliver. When governments are principals, these logics may not apply: governments may not be able to specify what their best interests are, may not know what they want to buy, may not consume the service, and may change their minds as circumstances change. In Australia, the Council of Australian Governments (COAG) – the peak intergovernmental forum in Australia – agreed in 1995 to implement a major micro-economic reform initiative, the National Competition Policy (NCP). A guiding principle of the NCP holds that ‘competitive markets will generally best serve the interests of consumers and the wider community’ . The NCP requires the ‘application of competitive neutrality principles so government businesses do not enjoy a competitive advantage over their private sector competitors simply as a result of public sector ownership’ . The National Competition Policy is succeeded by the National Reform Agenda. Matthew Thomas (2007: 27 op cit., citing Dockery & Stromback [2001]). Technical efficiency refers to improvements in input–output ratios (being able to do more with the same set of resources, for example through better technology; or being able to increase the stock of resources, for example by input cost reductions). Cost effectiveness addresses the extent to which technical efficiency gains result in changes in the quality of outputs (Bailey 1995). For a survey of this literature, see Domberger & Hall (1996). A monopsony is a market form in which a unique or majority consumer has buying power which he or she uses to bargain lower prices from suppliers for the purchased good or service. In quasi-market arrangements, government agencies almost always have monopsony power over providers.

Notes to pages 113–164

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Chapter 6 1

2

3

4 5

Centrelink’s client departments included: the Department of Families, Housing, Community Services and Indigenous Affairs, the Department of Education, Employment and Workplace Relations, the Department of Health and Ageing, the Department of Innovation, Industry, Science and Research, the Department of Agriculture, Fisheries and Forestry, as well as the Department of Finance and Deregulation. From 2005 it was placed under, and reports to, the new Department of Human Services (Halligan & Wills 2008). ‘Driver’s Licenses For Undocumented Aliens’, Institute of Governmental Studies, University of California, Berkeley: (accessed 12 May 2009). Adrienne Millbank (1996), Asian Immigration, Current Issues Brief 16 1996–97, Parliamentary Library, Department of Parliamentary Services: (accessed 13 May 2009). . .

Chapter 8 1

2

Sources: , , (accessed 16 May 2009). Source: (accessed 16 May 2009).

Chapter 9 1

For instance, see the Bureau of Consumer Affairs (BCA 1995), the Trade Practices Commission (TPC 1995) and the Australian Consumers’ Council (ACC 1995).

Chapter 10 1

Opening Address, ‘Corporate Governance in the Public Sector 2007’, by Mr Andrew Metcalfe, Secretary, Department of Immigration and Citizenship, 13 March 2007, delivered by Ms Carmel McGregor, Deputy Secretary, Client and Corporate Services Group. Accessed 17 February 2009, from .

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Index

Note: A capital ‘E’ following a page number refers to an Exhibit. ABC Learning 119 access to services 120–121 accountability financial assurance 286–288 of government networks 290–291 performance management 278–279 political 293–294 activity measures 185–186 advice provision, expert 130–131 agencies, influencing policy 69–70, 75E agents of service delivery 24 attitudes to policy and governance 187–190 Australian Council of Social Service 154E Australian Labor governments 73 Australian Red Cross 153E autarkic state 22 baby bonus scheme 159E Barrett, Pat 237E beliefs see ideologies Beveridge Report 24 Blair government 73 Britain see United Kingdom Brotherhood of St Laurence 153E budgets 83, 216–218 zero-based budgeting 198 bureaucrats, influencing policy 69–70, 74E bushfires 234 business costs 154E business resumption plans 246 buyer–seller relationships see principal–agent (purchaser–provider) relationships California Proposition 187 179E call centres 185, 232–233 Canada financial transfers 157 policy adoption, 1980s 26 capability 45–46, 47E

capacity building 44–46, 47E third-party service providers 246–247 capacity planning 213–218 capped services 238–240 Care Program Approach 226E Centrelink 28, 156, 235E, 259 change in policy and service delivery 30–32 child care services 133E, 159E citizen, definition 174–175 citizens’ rights 179–181 classical liberal state 19 client, definition 175 collaborative governance 35–37, 190–191, 290, 299 commercial confidentiality 243–245 commercial partnerships 37 Commonwealth Employment Service 161 communications management 247–248 communitarian society 58–60 Community Care Act (UK) 226E community empowerment 191 community needs, identifying 203–204 community partnerships 38 comparative need 207 competition policy 28–29, 257–258 confidentiality agreements 243–245 conflicts of interest 243 consumer behaviour, influencing see policy instruments consumer choice 24 consumer, definition 177–178 consumer rights 181–185 consumer satisfaction 185–187 contestability 27–28, 49 contingency planning 245–246 contingent decision-making 196–197 contingent valuation 97 contracting out see outsourcing contracts 139–142

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co-payments 134–135, 299 co-production 40–41, 135–136, 299 corrective services 176E corruption 188 cost-benefit analysis 99–102 cost effectiveness analysis 101 cost effectiveness of quasi-markets 163–166 Costello, Peter 159E cost feasibility analysis 101 cost pricing and markets 97–99 costs, controlling for service delivery 120 cost utility analysis 101 customer charters 181–184 customer, definition 175, 177 customer service, improving 181–185 Cyclone Larry 235E Cyclone Tracy 234 dark side of the government 168 data collection 130–131 decision-making models 194–197 decision-making processes 52, 299 decision trees 210, 211 decreed pricing 95–96 deductive approaches to implementation 223–224 demand management 133–136, 238–240 differentiated polities 32 direct costs 97 ‘dismal science’ see economics dispute resolution 249 Douglas, Roger, NZ Finance Minister 26 due diligence 154, 243 earthquakes 234, 236 economic analysis importance of 79–81, 102 macro-economic analysis 82–85, 102–103 meso-economic analysis 85–91, 103 micro-economic analysis 92–94, 103 public choice economics 141–142 economic efficiency 254 economic prosperity 22 economic rationalism 26, 27, 58 economics of perverse incentives 133E education 61 educational messages by government 131–132 efficiency of service 164–165 electoral systems 54–55 emergency management 233–236 employment and macro-economic environment 84–85

316

outsourcing 133E of returned servicemen and women 22 in social services 23E Employment National 161 ‘endowment effects’ 159E engagement of consumers in policy design 190–191, 299 entreprenuerialism 59 equity government responsibilities 53–54 society expectations 17 ‘evidence-based’ policy 58 expenditure 126–127 social 23E tax 128–130 zero-based budgeting 198 experts, influencing policy 68–69, 74E expressed need 206–207 Facebook 230 failures of policy 9–10, 159E faith-based political activism 58 fee setting 134–135 felt need 206 finance theory 61–62 financial assurance 286–288 financial resource capacities 216–218 financial transfers 156–157 First World War, governance following 21 fiscal policy 83 fixed costs 99 flexibility in service delivery 120–121 frameworks for robust governance 285–286, 287E ‘free-riding’ 62 global costing 98 global financial crisis 297, 298 goal setting 208–213 ‘go card’ 231E governance defined 281–283 financial assurance 286–288 frameworks 285–286, 287E future of 296–301 importance in service delivery 282–284 internal audit 288 networked 32–35, 289–291, 295 program delivery assurance 288 seamless 291–292 society expectations 17, 60–63

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government history, 1900–1980 19–24 history, 1980s–1990s 24–27 history, 1990s–present 27–30 keeping pace with change 16 roles of 10–12, 297–298 government purchasing 154–155E government structures centralised 12 federal 11 Great Depression 21 Great Planning Disasters 9 Hawke government 26, 27 health insurance, private 128, 238 health policy and politics 54E health services 89–90E, 133E, 162E, 178E hedonic pricing 96 hierarchy of human needs 60–61 history of service delivery 49–50 1900–1980 19–24 1980s–1990s 24–27 1990s–present 27–30 HIV-AIDS 54E housing policy 115–116E housing, rental 143E Howard government 26, 27, 73, 181, 238, 247 Howard, John, talkback radio talent 241 human resource capacities 214–215 human services provision 149 Hurricane Katrina 234, 236 ICT (information communication and technology) 229–233 ideologies 202E political 55 of program designers 201 shaping policy 57–60 immigrants, illegal 179E, 180 Implementation 221 implementation of programs see program implementation implementation theory 221–224 imputed willingness to pay 96–97 incentives, perverse 133E income support systems 60 income tax revenues 114 incrementalism 195–197, 198 indirect costs 97–98 induced demand 238 inductive approaches to implementation 223–224

industrial revolution 20 industrial state 20–21 industry appraising characteristics of 87–88 meso-economic analysis 85–86, 103 micro-economic analysis 92–94, 103 policy planning 86 public goods provision 88–91 information communication and technology (ICT) 229–233 infrastructure, public, private investment in 39E inputs of service delivery 157–158, 160, 259–260 institutional approaches to policy 5 institutional mechanisms 76 insurance schemes 18–19E inter-agency agreements 156 interest groups 65–66, 75E inter-governmental financial transfers 156–157 internal audit 288 internet services 229 inter-temporal trade-offs 165 investment, private, in public infrastructure 39E Job Network 161–163 ‘joined-up’ systems 291–292 Keating government 26, 27 Keynesian economics 21, 22 knowledge acquisition 204–205 labour market programs 84–85 Lange government 26 Lasswell, Harold 3–4 latent demand 238–239 league tables 263 legislative instruments 123–125 lobbying 65–66 macro-economic analysis 82–85, 102–103 Major government 178 managers and public value creation 41–44 ‘managing out/managing across’ 32–33 ‘marketplace of individuals’ 58–59 markets and service delivery 88–91, 143E, 144, 160–166 see also outsourcing market services, pricing 97–99 market testing 152 material (physical) resource capacities 216

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maternity benefits 18–19E means testing 27, 110 media management 240–242 Medicare 165 mental health policies 10, 84 meso-economic analysis 85–91, 103 micro-economic analysis 92–94, 103 middle class welfare 129–130 minimalist state 19 Mission Australia 153E mission, defined 208 modes of delivery 111–122 Moore, Mark 41–44 Muldoon government 26 mutual obligation 135–136 MySpace 230 National Competition Policy 257 National Purpose Payments 114 natural disasters 233–236 needs assessing 207–208 identifying 203–204 of stakeholders 205–206 types 206–207 networked governance 32–35, 289–291, 295 networks, policy-making 70–71, 75E New Public Management 140, 142, 150–151, 181, 256, 268–269 New Zealand Lange government 26 networked governance 33 nominal pricing 95–96 non-government organisations 66, 71–73, 75E service delivery 116–117, 119 non-market approximations 96–97 normative need 206 normative requirements for policy development 193–194 not-for-profit organisations 153–154E service delivery 149–150, 225E nursing care 226E objectives, defined 208, 210 organisational size 152–154 outcomes approaches to policy 4–5 outcomes, measuring 260–261 outcomes of service delivery 157–158, 160 outputs of service delivery 157–158, 160, 259–260 outsourcing 28–29, 91, 154–155E, 225E, 242, 298

318

capacity planning 215, 246–247 communications management 247–248 confidentiality agreements 243–245 conflicts of interest 243 contingency planning 245–246 dispute resolution 249 due diligence 243 information technology 230 protecting client interests 245 reasons for 120–121 relationships 248–249 rewards and sanctions 249–250 over-supplied services 89–90E partnerships 37–40 pension schemes 18–19E, 60, 137 perfect implementation 222–223 performance governance 278–279 performance management accountability 278–279 assessment of information 263–264 Australian context 257–259 contemporary environment 255–257 defined 252–253 limits 272–275 measurement 185–187, 253, 259–263 perverse effects 275–277 program evaluation 254–255, 264–272 reporting 253–254 perverse incentives 133E pilot programs 208 planning, industry policy 86 planning, rational 194–197, 198 planning, social 192 policy bites 77 policy development arbitrary approach (contingent) 3 and politics 52–53 rational approach (stepwise) 2–3 policy instruments 17, 122–123 advice and analysis 130–131 education, persuasion, promotion 131–132 expenditure 126–127 legislation and regulation 123–125 managing demand for services 133–136 other resource exchanges 128–130 taxation 126–127 use of 132–133, 136–137 policy networks 70–71, 75E political parties, modern context 66–67 political risk 293–294 politics

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defined 51–53 influencing policy 74–75E, 270–271 and policy conflicts 77 and policy process 53–56 shaping society expectations 60–63 portfolio departments, 1903–2001 20E pricing services 94–99 principal–agent (purchaser–provider) relationships 138, 144–146, 162E in quasi-markets 163–166 principal–agent theory, defined 139–140 principal (purchaser), identifying 144–146 prisoners as clients 172, 176E private for-profit organisations 150–152 private investment in public infrastructure 39E private practitioners 155–156 private sector see markets privatisation 28–29 problems, understanding causes of 207–208 process approaches to policy 5–6 professionals, influencing policy 68–69, 74E program delivery assurance 288 program design 192–194 budgetary and financial capacities 216–218 decision-making models 194–197 human resource capacities 214–215 identifying needs 203–204 implementation 212–213 iterative nature 219 knowledge acquisition 204–205 material (physical) resource capacities 216 problem causes 207–208 program selection 210–212 roles of practitioners 200–203 selection criteria for practitioners 199 stakeholders 205–206 program designers 198–203 program evaluation 7–8 defined 254–255, 264 design and implementation 266–268 ideals 269–270 methods available 271–272 reasons for 265 program implementation 7, 220–221 consultation with stakeholders 212–213 contract management 242–250 demand management 238–240 emergency management 233–236 information communication and technology (ICT) 229–233 logistics 227–228

media management 240–242 reflexive implementation 224–227 risk management 236–237 theory 221–224 program selection 210–212 promotional messages by government 131–132 Proposition 187 179E provider–client relationships 175 public choice economics 141–142 public finance theory 61–62 public goods 88–91 public infrastructure, private investment in 39E public officials, influencing policy 69–70, 74E public policy advice and analysis 130–131 agencies’ influence 69–70, 74–75E approach in this book 6–13 bureaucrats’ influence 69–70, 74E conflicts 77 decision-making models 194–197 delivery choices 105–106 delivery modes 111–122 design see program design dynamism 12–13 evaluation see program evaluation failures 9–10, 159E future of 296–301 ideology-based influences 57–60 implementation see program implementation instruments 122–136 intent 107 managing demand 133–136 meanings/interpretations 6–7 multi-dimensional character 8–9 perverse incentives 133E planning for industry 86 political influences 53–56, 66–67, 74–75E, 270–271 professionals’ influence 68–69, 74E recipients’ views 187–190 roles of practitioners 200–203 scope/intended recipients 108 selection criteria for practitioners 199 society expectations 17, 60–63 successes 9–10 targeted provision 110–111, 112E universal provision 108–110, 112E ‘who gets what, when and how’ 3–4 public–private partnerships 38–39 public servants, as purchasers 145–146

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public service 55–56 functions of 17 operational changes 143E perceptions of 142 public services, recipients of see recipients of public services public value 41–44, 171–172 purchaser–provider arrangemements see principal–agent (purchaser–provider) relationships purchasers, identifying 144–146 purchasing inputs and outputs 154–155E, 157–160 purchasing models 147–148 quality of services 144, 164–165 measuring 186–187 quasi-markets cost effectiveness 163–166 defined 161–163 Queensland Government Q2 initiative 209E rational actor models 69, 74E rational planning 194–197, 198 Reagan government 25 rebates 128–130 recipients of public services 168, 179–181 defined 169–172 perceptions of governance 187–190 terminology 172–178 reciprocity 135–136 recurrent spending 127 reflexive implementation 224–227 regional areas, delivering services to 227–228 regulated services 113–114 regulatory instruments 123–125 Reinventing Government 28 relational partnerships 37–38 relationships collaborative 35–37 co-production 41 in networks 32–35, 289–291, 294 not-for-profit organisations 225E partnerships 37–40 political 56 principals–agents (purchasers–providers) 138, 144–146, 162E providers–clients 175 with third-party service providers 248–249 religious beliefs and policy 58 rental housing 143E retirement income 137

320

rights of citizens 179–181 rights of consumers 181–185 risk management 236–237, 245–246 risk, political 293–295 Roemer’s Law 238 roles of government 10–12, 297–298 Rudd government 238, 297 rural areas, delivering services to 227–228 schools, change over time 61 seamless governance 291–292 Second World War, governance following 21–22 service delivery assurance 288 commissioning 170–172 consumer rights 181–185 cost-benefit analysis 99–102 delivery modes 111–122 direct and indirect costs 97–98 directly, by government 113–114, 121–122 directly, intergovernmentally 114–116 economic analysis 79–81 efficiency 164–165 future of 296–301 history of 19–24 housing policy 115–116E, 143E hybrid delivery systems 116–117 implementation see program implementation importance of good governance 282–284 improving 181–185 indirectly, by third parties 117–119 inputs 157–158, 160, 259–260 managing 220–221 by markets 88–91, 143E, 144, 160–166 micro-economic analysis 92–94 models of 2 moral test 1 outcomes 157–158, 160 outputs 157–158, 160, 259–260 pricing services 94–99 providers, choosing 148–156 public goods 88–91 quality 164–165 recipients 169–172, 179–181 to regional and rural areas 227–228 standards expected 245 service state 1940s–1970s 24–25 history 19–24, 49–50 late 1970s – present 25–27

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transformation of 30–32 shadow pricing 101 skills, assessing 214–215 ‘social benefits’ 100 social capital 46–49 social expenditure 23E socialism 59–60 social media 230 social planning 192 social problems 63–64, 105 social security legislation, history of 18–19E social services, provision of 60–61, 91 social support strategies 209E social welfare programs 108–110 society as community 58–60 society expectations of government 17, 60–63 sole traders 155–156 Special Purpose Payments 114, 184E, 258 ‘spin’, importance of 67 stakeholders, consultation with 205–206, 212–213, 266–268 statutory instruments 123–125 structure of book 13–15 subordinate legislation 125 subsidies 128–129 superannuation 137

transport systems 231E travel cost pricing 97 trust in government 188–189 tsunamis 236 Twitter 230 tyranny of distance 227–228

targeted provision of policy 110–111, 112E, 137 taxation 126–127 ‘tax-benefit trade off ’ 52 tax expenditures 128–130 teamwork in program design 202–203 technical efficiency 254 Thatcher government 25, 26, 178 The Salvation Army 73, 153E The Smith Family 153E third-party service providers 117–119, 141– 142, 298 see also outsourcing third sector organisations see non-government organisations; not-for-profit organisations transformation in policy and service delivery 30–32

‘wedge’ tactics 67 ‘welfare lobby’ 62 welfare state late 1990s – present 27–30 predicted demise of 16–17 Westminster system 76, 108 ‘whole of government’ approach 34–35, 291–292 wicked problems 63, 105, 196, 300 workers compensation 18–19E world wars, governance following 21–22

uncapped services 238 unemployment benefits 18–19E, 135, 161– 163, 171 United Kingdom Blair government 73 Major government 178 National Health Service 178E networked governance 34 policy changes 1980s–1990s 29–30 Thatcher government 25, 26, 178 welfare state development 24–25 universal provision of policy 108–110, 112E, 136–137 user charges 128, 129, 134–135 variable costs 99 volunteerism 40–41, 209E, 215 social capital 46–49 vouchers 128

Yes Minister 78–79, 259–260 YouTube 230 zero-based budgeting 198

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