Compulsory Competitive Tendering A view on the Victorian Local Government Experience

1. Compulsory Competitive Tendering A view on the Victorian Local Government Experience Roma O’Callaghan, Manager People & Organisation Development, Yarra City Council

2. “Abandoning the binary model of public and private sectors the State Government of Victoria introduced the compulsory competitive tendering system under which local government bodies are required to tender out their services to private sector service providers. The aim was to encourage local government bodies to operate in contestable situations so that they can increase efficiency, decrease operating costs, develop clear programme goals and objectives, become responsive to client goals, and improve the quality of goods and services.” Quamrul Alam, John Pacher, La Trobe University Bendigo Prepared for Public Administration and Development Jubilee Conference Oxford, April 1999 . . . . so, how did we go?

3. Overview • INTRODUCTION: • Why? • BODY: • What happened ? • How – the legislative basis • How – the people experience • CONCLUSION: • What were the outcomes? • What are transferrable lessons?

4. INTRODUCTION – Why CCT? • Local Government context & the political agenda • pre then post amalgamations • $ value • Best Value www.geoffhook.comused with permission. May not be reproduced without permission.

5. HOW – the Legislative Basis • CCT phased in over 3 years • Fair Trading Act becomes a reality • Next came Best Value

6. HOW – What Happened? • 40% of Council expenditure = salaries! • Effect was a quick look at the big ticket items • cooperative purchasing schemes • Disputes over definitions

7. HOW – What Happened? • Confusion • KPI’s and boundaries • Fair Trading appeals • Lots of training • Celebrations • Varying levels of support

8. HOW – The People Experience • Changes to organisation structures: • New lexicon • Opportunity lost or gained in organisational culture

9. HOW – The People Experience: The negatives – all about the holy dollar? • Devaluing of “community”, “social justice”, “empowerment” • Returned to PC under Best Value • HUGE amounts of energy and effort • Colleagues/services were “outsourced”. • Resentment • Inequity in remuneration

10. HOW – The People Experience: The negatives – the cultural experience • Challenge for leadership • Division within organisations • Later, a large HR/OD challenge to undo • Councillors were constrained

11. HOW – The People Experience: The positives • KPI’s, outputs v/s outcomes and a systems view. • Opportunities to build teams, and input into improve services and processes. • Improved focus on customers • Value of reviewing products and services • Opportunity to reconsider why we always do it • Improved metrics • Opportunity to present each service to Council

12. CONCLUSION – The Outcomes • Those Councils that outsourced high-end upfront capital services will never again deliver directly. • Many early tenders/contracts were poorly specified.

13. CONCLUSION – The Outcomes • Improved capabilities • Better customer focus • Elimination of legacy services/products • Improved awareness of unit costs • Contractors represent the Council • Clear savings and efficiencies • Some individual life changes

14. CONCLUSION – Transferrable Lessons • Don’t expect to understand the full future ramifications. • Call for a phase in • Plan to plan • Learn from the “bleeding edge”. • Understand what can be • Be careful/smart how you fragment services • Design in-house work and teams according to staff

15. CONCLUSION – Transferrable Lessons • Additional interim costs. • Additional ongoing costs • Ensure you specify well • Can you use this “Threat” as an “Opportunity”?

16. “. . . the practice of the compulsory competitive tendering system has introduced major changes to organizational cultures, attitudes of employees, power and authority structures, systems of decision making, delegation of financial and managerial authority, and the nature of control and accountability. In addition, the article explains the degree of competitiveness and efficiency that local government bodies have achieved and describes how the corporatized structure has helped to achieve the financial objectives. The article also discusses how the role of the elected councils is diminishing under this new management structure and . . . find it difficult to assert their role as quality service deliverers. This has forced the councils to comply with the requirements of the competition laws which have reduced direct accountability of government to the public.” Quamrul Alam, John Pacher, La Trobe University Bendigo Prepared for Public Administration and Development Jubilee Conference Oxford, April 1999 . . . . so, how will you go?