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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