ACT Branch meetings

Outsourcing and market testing

Speakers

AFFA Market testing project
Bill Pahl, general manager, Corporate Governances

Preparing specifications for market testing
Kay Winter, library director, Environment Australia

Probity issues
Rosalind Webb, corporate legal, Parliamentary and Audit Services Group, Department of Employment, Workplace Relations and Small Business

Summary

While libraries have outsourced many services using the Period Contracts over the past 20 years, the adoption of government policies on market testing and outsourcing in 2000 have let to an increase in the number of libraries undergoing reviews or preparing for outsourcing.

What is outsourcing? The Public Service and Merit Protection Commission (http://www.psmpc.gov.au/publications96/outsourcingpart1.htm) defines it as follows:

Outsourcing refers to the arrangement where an agency decides to have an activity or function performed by a private sector provider, or by another public sector or APS organisation. Under such an arrangement, the agency retains overall responsibility for the activity. The main purpose of outsourcing is to allow an agency to concentrate on its core activities and to provide better value for money. It may also be pursued as part of an industry development policy.

Market testing in contracts enables the in house service to be specified and costed and then compared to bids from external companies.

In the Commonwealth outsourcing has been adopted through the Whole-of-Government Information Technology Infrastructure Consolidation and Outsourcing Initiative (IT Initiative) announced in the 1997/98 budget. This project was recently reviewed by the Australian National Audit Office (Audit Report No 9, tabled 06/09/2000). Corporate activities such as human resources and finance have been outsourced in a number of commonwealth agencies, with the Department of Finance and Administration the first Commonwealth Department to proceed with outsourcing all of its corporate operational activities in mid 1998.

Three excellent presentations were made at the seminar:

Bill Pahl, general manager, Corporate Governance, Agriculture, Fisheries and Forests Australia (AFFA) commenced with an overview of outsourcing and market testing which described the history of this policy and its implementation in AFFA. He described key issues of:

• Market maturity (of suppliers of various services, hr and finance are well developed others such as libraries less so)
• Capacity and maturity of business/legal/probity advisers in Canberra
• Costing existing internal services
• Maintenance of services while market testing
• The importance of communicating and involving all staff during the process
• Need to carefully develop Evaluation Plans
• Contract/relationship management skills are lacking in public sector
• Managing expectations of internal service receivers - direct/central/external
• Business court decisions - Mental Health Services, Telstra & St George

In conclusion Bill suggested that outsourcing is a ver complex and difficult task which requires top management support, excellent staff communication skills and able to provide significant benefits to organisations.

Kay Winter, library director, Environment Australia, then discussed preparing specifications. She took us through the stages of analysis of tasks and services, development of performance criteria and staff management issues. The business advisor is a very important player throughout the specification stage, and Kay discussed the need for specifications to be quite detailed to ensure that services are all described. The reduced any possibility that services will be missed on not delivered after outsourcing. Kay also offered to provide advice should any care to ask her more detailed questions later.

Rosalind Webb, corporate legal, Parliamentary and Audit Services Group, Department of Employment, Workplace Relations and Small Business, provided advice on probity issues. She described responsibilities under the Public Service Act and Financial Management Act, as well as outlining government policy on procurement and the impact of recent cases. She outlined key principles on probity:

• Integrity in all evaluation and selection processes.
• Respondents are assessed objectively and consistently in accordance with published documentation.
• Confidential information is secured.
• Conflicts of interest are addressed.
• The process is defensible.