Compare the market
Subjecting government agencies to the credible threat of competition can significantly improve service delivery and productivity. By Tony Shepherd.
The Covid-19 pandemic has reminded us that we expect far more from government than keeping spending within sensible limits, vital as that discipline may be.
We also want them to serve us efficiently and effectively with programs that deliver and meet our expectations. We all make mistakes and to err is human but quarantine breaches, the failure to run effective track and trace programs almost anywhere outside NSW and the delays in vaccine delivery are just some of the signs that governments must learn the lessons and work harder to lift its game.
A new report by the Menzies Research Centre, published in conjunction with the UK-based Serco Institute, is a reminder that government service delivery can be significantly improved by changing the thinking in the public sector. The report, “Competitive Tension: The value of contestable public services in a post-pandemic world”, finds that when government agencies are given clear benchmarks and focus on customer service standards, they are capable of lifting productivity and the level of service by up to 20 per cent.
The report recommends introducing competitive tension as the default position in the provision of all government services by introducing contestability to the procurement process.
Contestability is defined as the credible threat of competition or actual competition through outsourcing. This does not necessarily mean privatisation. As we have learned to our cost over the years, the customer can be as badly served by private monopolies as it is by public ones.
Recognising the benefits of markets was one of the principles of good government identified by the 2014 National Commission of Audit that I chaired. We recognised that customers not producers, take precedence in competitive markets. “Competition and contestability drive lower costs, improve quality and give people what they want,” we noted.
The adoption of contestability in the provision of public services has a track record of success around the world including in NSW where government reform has been patiently pursued since the election of Barry O’Farrell in 2011. It has led to a significant improvement in productivity and customer satisfaction in areas such as public transport.
The public have noticed. Dealing with the government on something as simple as renewing a driver’s licence was a task we dreaded. These days it is seamless and, like many other dealings with government, can usually be done online through Service NSW, a shining example of the application of contestability highlighted in this report.
As the report points out, Covid-19 has been a stress test for government service providers who have been called upon to perform unfamiliar tasks under significant time pressure in the full glare of the public spotlight. All governments have inevitably made mistakes, but some, notably NSW, have performed better than most. This is no accident. It is the reward for 10 years of investing in improving systems and rewarding innovation. NSW has become the most tech-savvy jurisdiction in the country. Platforms developed to deliver government services were quickly adapted for track and trace systems, COVID-19 testing and other essential pandemic services and are being adapted for a form of vaccination passport.
The report highlights the successful use of contestability to improve services in other states. They include SA Pathology, prison services in Victoria and successful private-public partnerships like the new Perth Stadium.
Contestability should be a bipartisan public policy priority. There are examples of successful collaborations between unions, government and business. Experience shows that far from threatening jobs, contestability frequently leads to more jobs and improved workplace engagement and job satisfaction.
As we emerge from a period of government expansion during the pandemic, the need for efficiency in government service delivery is pressing. Governments must innovate in ways that deliver more for less if there is to be any hope of rebalancing the budget and building our reserves for the next inevitable crisis. It can start by insisting that the performance of every task the government undertakes could be improved by introducing a competitive edge and incentivising government service providers to lift standards through contestability and benchmarking.
The Menzies Research Centre’s report is a timely reminder that this can be done with the right political leadership and bipartisan support. It does not happen overnight. However, it requires patience and commitment and while it rarely makes the headlines, the Liberal Party’s record stretch in office in NSW suggests that the results do not go unrecognised by the general public.
Tony Shepherd AO is a former president of the Business Council of Australia and currently sits on a number of boards.
