RECENT AUSTRALIAN EXPERIENCE WITH THE PRIVATISATION OF GOVERNMENT SERVICES

Abstract

In the 1990s, the privatisation of government service provision has become increasingly common in Australia. The approach taken by Australian policy-makers to the privatisation of government services has been dominated by the ‘pure market’ model of competitive tendering, with little recognition that this model may be inappropriate under circumstances, such as severe performance specification and measurement difficulties, which are quite commonplace in the public sector. Competitive tendering for the delivery of outcomes rather than outputs enjoys some favour in this context. A case study of government service privatisation based upon contracting for outcomes is considered. This case study (of employment assistance) helps to clarify some of the problems of outcome-based contracting. Please note that this paper was prepared and presented in August 1998, and that the employment assistance case study represented a preliminary review of issues arising from a scheme which was at that stage very new. Since that time, the Government has made major changes to the system, in part along the lines suggested by the analysis in the paper. For example, a ‘floor’ or minimum bid price has been introduced, so as to prevent the lodging of unsustainably cheap bids. However, it is also the case that considerable further data on the performance of the new system has become available, and it should be noted that no attempt has been made here to analyse that data.