CHAPTER 2

Disability Employment Services

Program Overview

2.1        The Disability Employment Services (DES) program was introduced on 1 March 2010 to increase the participation of people with a disability in the labour force. In 2009 the Australian Bureau of Statistics found that the workforce participation rate of people with disability was 54 per cent, compared with 83 per cent for people without a disability.[1] There are over 146 000 people with a disability receiving DES.[2]

2.2        DES replaced the former Disability Employment Network (DEN) and Vocational Rehabilitation Services (VRS). DES is made up of two streams:

(a) Disability Management Services (DES-DMS) for job seekers with disability, injury or health condition who require the assistance of a disability employment service but are not expected to need long-term support in the workplace; and

(b) Disability Employment Support Services (DES-ESS[3]) for job seekers with permanent disability and with an assessed need for more long-term, regular support in the workplace.[4]

2.3        DES differs from DEN and VRS in that it is demand driven and fully uncapped.[5]

2.4        The legislative basis for DES is the Disability Service Act 1986 (Act). The Act was amended following the passage of the Disability Discrimination Act 1992 to allow for the introduction of Disability Service Standards (Standards) which all DES providers must meet each year to retain their funding.

2.5        The Department of Education, Employment and Workplace Relations (Department) administers DES on behalf of the Australian Government.

A timeline of changes

2.6        Commencing in 2008, a review of disability employment services – VRS and DEN – was undertaken within the broader context of the Australian Government's social inclusion and skills agenda. The purpose of the review was to build on the strengths of the existing services and identify improvements; the results were to feed into the design of future services.[6]

2.7        On 1 March 2010 the Australian Government introduced DES. The aim of the new DES was to provide all eligible job seekers with assistance from an employment service provider to prepare for, find and keep a job.[7] 

2.8        Leading up to 1 March 2010, DES-DMS was subject to a market testing exercise in which 45 per cent of market share was put to open tender. The remaining 55 per cent of available business was quarantined for CRS Australia (part of the Australian Government Department of Human Services).[8] Successful tenderers were contracted to provide services for the period 1 March 2010 until 30 June 2012, with options for the Australian Government to extend contracts by up to six years. The Australian Government has determined to exercise its contractual rights and extend the DES-DMS contracts until 30 June 2015.

2.9        DES-ESS did not undergo an open competitive tender process in 2009. During 2009 existing providers were engaged to deliver DES-ESS through an Invitation to Treat (ITT) process. This process allowed providers, irrespective of performance, to continue delivering employment services without the need to tender. The successful providers were contracted to provide services for the period 1 March 2010 to 30 June 2012, with options for the Government to extend contracts by up to six years. Under this process there was no opportunity for new providers to enter the market, or for existing providers to increase their market share.[9]

2.10      To assist poor performing providers the Department established a Capacity Building Fund to assist them make a smooth transition to the new model and improve their performance in terms of employment outcomes for people with a disability.[10]

2.11      The ITT process was adopted in recognition of the changes to the service delivery model which would apply to DES-ESS providers from 2010.

Star-ratings and quality control

2.12      The DES Performance Framework (Framework), commonly referred to as the 'star-system', is used to rate DES providers to facilitate relative performance comparisons. As explained in one Department fact sheet: 'The framework has been designed to drive performance and continuous improvement in the delivery of quality services to all participants.'[11]

2.13      The Framework includes three Key Performance Indicators (KPIs):

(a) KPI 1: Efficiency – the proportion of referrals made to a provider that subsequently commence in the program; and the average time that the provider takes, compared to the time taken by other providers to assist participants into employment;

(b) KPI 2: Effectiveness – the proportion of participants for whom job placements and outcomes are achieved and the proportion of participants who are receiving ongoing support who remain in employment;

(c) KPI 3: Quality – This KPI measures the quality of services and stakeholder satisfaction. Compliance with the Disability Service Standards is the primary measure of quality for providers.[12]

2.14      A provider's star-rating is based on a measurement of their performance against KPIs 1 and 2. The star-rating measures the relative performance of a provider by comparing job seeker engagement and achievement of outcomes, to all other providers nationally using a regression analysis model. The star-ratings take into account the disability type, service requirements of participants, labour market conditions and other factors so a comparative assessment of providers can be made.[13]

2.15      Star-ratings are recorded for each site operated by a provider, and also at the Employment Service Area (ESA) Contract level. A provider may have a lower overall star-rating for their ESA contract than for their site(s).[14]

2.16      Quality is ensured through an annual audit of providers against the Standards. The Standards cover issues such as privacy, dignity, value and employment conditions of a person with disability, and the skills and training for staff working at a DES. All DES providers must be certified as meeting the Standards in order to receive funding to deliver DES on behalf of the Government. Independent auditors from accredited certification bodies certify each DES provider against the 12 Disability Services Standards and 26 associated Key Performance Indicators.[15]

Performance of Disability Employment Services

2.17      A key driving force behind the decision to tender is the belief that the program could perform to a higher standard after the introduction of new providers, the removal of poor performing providers, and the opportunity for existing high performers to increase their market share.

2.18      The Department and a number of stakeholders have argued that it is currently impossible to judge the performance of DES-ESS as it has never been subject to competitive tender. Following tender processes, other programs have demonstrated an improvement in performance which has been attributed to the positive impact of competition on performance.[16]

2.19      The success of DES-ESS, in terms of achieving 13-week employment outcomes, has not been significantly different from the DEN program which it superseded. In the same time, the DES-DMS program has achieved significant improvements over the VRS program which it replaced.[17] For example, the 13 week outcome rate for programs for people with a psychiatric disability was 26.1 per cent for DES-DMS, compared to 16.3 per cent for VRS (contrasted to 22.3 per cent for DES-ESS and 23.3 per cent for DEN).[18] The Department posits the reason for this discrepancy in performance is a direct result of DES-DMS having gone through a competitive tender process:

DMS is outperforming VRS for all five primary disability groups; it is reasonable to assume that this is a result of the competitive tender (DMS is not drastically different to VRS in a policy sense).[19]

2.20      The Australian Federation of Disability Organisations was critical of the performance of DES-ESS:

The measure of an employment assistance program is the extent to which such assistance helps people gain meaningful work. The national average performance outcome of the ESS to date has been poor...Less than two out of 10 people commencing in DES are getting a job that is retained for six months. More than eight out of 10 jobseekers commencing in DES are either not getting a job or are getting jobs that are lost before six months.[20]

Tendering of Disability Employment Services – Employment Support Services

2.21      As part of the 2011–12 Budget it was announced that DES-ESS would be subject to a competitive tender process. All one-, two- and three-star DES-ESS service providers in non-remote areas of Australia would be required to submit a tender if they seek to continue providing Australian Government funded DES-ESS. The Department argues that:

The purchasing arrangements for DES-ESS that were announced in the 2011-12 Budget are aimed at ensuring that people with disability have access to the highest quality services...these purchasing arrangements mean that, for the first time, average and poor performing DES-ESS providers will be required to demonstrate their capacity through a competitive tender.[21]

2.22      Providers with a performance rating of four- or five-stars for their ESA contract, as of 31 March 2012, would be offered a three-year contract extension until June 2015 rewarding their outstanding performance.[22]

2.23      All DES providers delivering services in remote areas will be offered an extension of their contracts for 12 months until 30 June 2013. Stakeholder feedback to the Australian Government indicated that DES in remote locations are less effective, due to the often limited labour markets, irregular servicing and the level of job seeker disadvantage. The Department has indicated that it will review the way employment services are delivered in remote locations. There are some areas within remote ESAs that are not considered remote due to their local labour market conditions, for example the town of Alice Springs within the Alice Springs ESA.[23]

2.24      The Australian Government has a longstanding practice of putting services to tender in order to allow market forces to meet demand. The Department posits:

[C]onsistent with the Commonwealth's legal and policy framework for funding programs, and because DES-ESS has never been subject to a fully competitive tender process or otherwise open to interest from other potential providers, the Government has determined to tender the business of current 1, 2 and 3 star providers.[24]

2.25      The committee heard that one-, two- and three-star providers make up approximately 80 per cent of DES-ESS service providers. All one-, two- and three-star providers will be required to submit tenders in order to continue providing Australian Government funding.

2.26      An Exposure Draft for the DES-ESS Request for Tender is expected to be released in late February 2012 to provide stakeholders with the opportunity to provide feedback to the Department regarding elements of the tender process such as selection criteria. The release of the Exposure Draft will be followed by face-to-face and online information sessions around Australia. The final request for tender is expected to be released in late May 2012.

2.27      The Department has indicated that clients will be helped transition over a four-month period to minimise any disruption caused by the tender process. For example, the Department will establish a customer service line to support job seekers and specific information for providers will be available on the Department's website.

2.28      In the next chapter the committee examines the proposed tendering process and the impact of the process on clients and employees of service providers.

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