GOVERNMENT SENATORS' MINORITY REPORT

Introduction

1.1        Through submissions and hearings the Inquiry was able to document a range of views about a number of issues. There were some clear and divided opinions reflecting different interests in this area. 

1.2        A number of DES employment service providers and their peak bodies expressed a preference not to have to go through a tender process at all or are seeking to limit the number of providers required to do so. 

1.3        Employment service providers largely or entirely excluded from delivery under DES, and their peak employment service bodies, on-the-whole supported the decision to go to tender.

1.4        It is the view of this Minority Report that the interests of people with disability should be paramount in determining these matters. 

1.5        The Federation of Australian Disability Organisations, and other disability consumer organisations such as MS Australia and the National Council on Intellectual Disability provided submissions supportive of the DES-ESS tender decision based on the interests of people with disability.

1.6        In addition the Department for Education Employment and Workplace Relations (Department) put the view that the DES-ESS tender decision serves the public interest, as well as those of people with disability and employers. 

1.7        In designing the new DES programs, it is relevant to note that there were extensive consultations. The Department indicated that this process began in 2008.[1] There were consultations undertaken in advance of the 2011–12 Budget decisions on DES procurement.

1.8        The Inquiry submissions and hearings largely reflected the positions know through those earlier consultative processes.

Timing of the Tender Process

1.9        Individual organisations providing employment services for people with disability have benefited from contracts, extensions to contracts and grants ensuring an extraordinary degree of continuing for significant levels of funding.   

1.10      The Department advises that the last occasion on which some employment service contracts were the subject of a partial competitive tender process was in 2005 for contracts covering 2006–09.  At that time 19 new providers entered delivery.  Further The Department notes:

Around 190 of the 207 organisations currently delivering DES-ESS services have had significant stability since 1986 without needing to tender for business.[2]

1.11      The Department's submission also notes that the 2006–09 contracts were extended to March 2010 as part of the transition from the Disability Employment Network (DEN) to DES-ESS.[3] That contract, to 30 June 2012, has been further extended by eight months to March 2013. This represents an unbroken extension of contracts for a period of more than six and a half years, based on a limited competitive tender process undertaken in 2005.

1.12      The decision to apply performance in the two years to March 2012 as the period for determining requirements to tender is reasonable. To that time all DES-ESS provider will have had continuous contracts for delivery since July 2006 regardless of performance.

1.13      Government senators do not support Recommendations 1 and 2 in the Majority Report.

Length of contracts

1.14      The Committee heard evidence from a wide range of providers and others supportive of increasing the length of contracts.

1.15      This Minority Report shares the views of the broader employment service and disability consumer sectors that the awarding of contracts should be primarily based on performance as assessed through a competitive tender process.

1.16      However, there should be no significant lengthening of the period of contracts until such time as a substantial tender process has been undertaken.

1.17      Government senators do not support recommendation 3 in the Majority Report.

Cost to providers

1.18      The Majority Report poses, and to some extent answers, the question of what costs providers would directly incur through a competitive tender process.  However, it is the view of this report that such costs should be weighed against the overall cost of programs and balanced with the anticipated benefit of a competitive tender process. 

1.19      Ms Kitchin, from EDGE Employment Solutions, through presentation at hearings, estimated that that agency might incur about $50,000 to prepare a tender. She estimated her agencies’ current funding to be about $8 million.[4]

1.20      Disability Employment Australia (DEA) estimated that the direct cost to providers of cost will total about $10 million.[5] Overall, these direct costs are modest for a multi-billion dollar program.

1.21      The Department and others have pointed to improved performance of providers resulting from competitive tendering primarily based on performance, in particular in respect of the competitive tendering under JSA and DES-DMS. 

Decision to extend contracts only to 4- and 5-Star providers

1.22      The Inquiry was presented with considerable evidence that a competitive tender process primarily based on performance will contribute to an improvement in service provision to the benefit from people with disability.

1.23      It is the view of this report that this evidence strongly posits the case for a broader, rather than a narrower scope for tendering as doing so will mean that more, rather than fewer people will disability will benefit.

1.24      There was wide-spread agreement with the decision to extend contracts to 4- and 5-star providers.

1.25      Some providers and peak bodies have sought a lower performance level for determining the requirement to tender and this is reflected in the Majority Report.

1.26      The evidence previously discussed in this Minority Report – of extraordinary continuity in contracts for existing providers and the improvement that a competitive process primarily based of performance can bring about – suggests that it serves the public interest, and those of people with disability for a wider rather than narrower tender to be conducted.

1.27      Government senators do not support Recommendation 4 in the Majority Report.

Impact of the proposed purchasing process on clients

1.28      This report is in agreement with the Majority Report that early, transparent transition arrangements would be appropriate. The experience of the Department in managing such processes is noted.

1.29      Government senators support Recommendation 5 in the Majority Report.

Impact of the proposed purchasing on employees

1.30      As a result of the uncapping of the DES program and other increases in funding, there has been, and in the future will likely be, strong growth in employment through DES.  Uncertainty in employment is a difficult circumstance for any worker and Government senators are sympathetic to these concerns, which nevertheless must be balanced with other considerations.

The performance framework

1.31      In principle, transparency in the regression model used for the performance framework is supported for the reasons outlined in the Majority Report.  However, as allegations made to the Inquiry suggest, in complex systems information can be misrepresented and misused with unintended consequences.

1.32      Government senators support Recommendations 6, 7 and 8 in the majority report.

Manipulation of the Performance Framework

1.33      There were a number of claims made regarding provider behaviour assumed to influence measured performance. The Majority Report rightly notes that many allegations were not evidenced.

1.34      The Australian Federation of Disability Organisations, in answers to Questions on Notice, stated that:

Service representatives supported, and services signed up to, the performance rating system and star rating framework. The system, good and bad, is applied to all services. Criticism of the star rating system has only emerged from services when the Minister announced the tender parameters.[6]

1.35      Some allegations, such as statements that placement and payments were made for Australian Disability Enterprises positions have been responded to clearly by the Department.[7] Such behaviour is in breach of the Deed and actionable by the Department.

1.36      The Department responded in detail to many of the allegations presented through submissions and hearings, including details of the auditing, monitoring and contract compliance mechanisms available to manage these.

1.37      In many cases forming a judgement about whether examples of ‘scheming’ are (or could potentially be) in breach of the Deed or in other ways inappropriate, depends on the specific situation.  For example, provider engagement with an employer to convert an unfilled full time vacancy into several part time jobs for people with disability who are only able to work part time, may be a laudable strategy that might be usefully replicated. However, if in this example the result was a enclave of people with disability working in a segregated work environment, a different judgement may be formed.

1.38      In the absence of substantive evidence to the contrary, it is clear that the existing mechanisms detailed by the Department are adequate to response where there are grounds to do so.

1.39      Government senators do not support Recommendations 9, 10 or 11 of the Majority Report.

Conclusion

1.40      While Government senators concede that the Majority Report has sought to strike compromises between competing service provider interests, they conclude that in doing so it has given insufficient weight to the public interest and the interests of people with disability.

1.41      A competitive tender process primarily based on performance is the most promising mechanism for bringing about improvements in employment service provision. 

1.42      The Majority Report gives some credence to allegations of scheming by some providers.  However it proposes to both extend contracts for existing providers and lower the performance benchmark for determining which providers are required to go to tender.

1.43      Further those providers whom it is alleged are ‘gaming’ to secure a 4- rather than 3-star performance rating would be rewarded by being exempted from having to tender at all. 

1.44      This would also allow more time for even poorer performing providers to engage in the claimed inappropriate practices, seeking to shift above the new proposed lower benchmark of median 3-star performance. Such an outcome would not be in the interests of people with disability or good public administration.

 

Senator Gavin Marshall

Deputy Chair

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