Financial Contestability 31st Governance Institute of Australia National Conference Peter Lacey Executive Director, Social Services Procurement Transformation Department of Housing and Public Works December 2014
Why we are transforming procurement Renewal Procurement Review Apr 2013 Dec 2013 2018 Oct-Dec 2012 June 2013 March 2014 PTP Wave 1 PTP Wave 2 and beyond
Renewal means our services will be contestable The process of achieving contestability is: Reviewing the delivery of services to ensure the best possible solution is provided at the best possible price. Encouraging more efficient and more innovative service delivery, whether by the public, non-government organisation or private sector. An ongoing process to challenge the status quo. Ensuring service delivery outcomes remain contestable.
What we’re doing to make it happen 2014 – 2018 One Government transformation journey Organisation Detailed functional design and implementation strategy Strategic governance Procurement performance measurement Delegations Workforce strategy Procurement capability strategy Capability and capacity resourcing Source to contract process Procurement process framework Contract register Unsolicited proposals policy Contract management framework Standard contracts and tender documents Procurement technology enablement Contract Lifecycle Management system (e.g. QContracts) RMS – ICT contingent labour QTravel Progression to category-based whole-of-government procurement 2013 Enabled early value People Developed and launch new principles-based Queensland Procurement Policy Ran proof of concept: strategic sourcing Modelled and base-lined transformational initiatives Enabled $60-92m in benefits Developed benefits realisation framework Recommended: new way of working Business case: funding to change how we work Process Technology Mega Category Management Baseline Business Case One Government approach to procurement Outcome
Better managing investment for now and for the future Demand for social services is increasing Projected increase in spend to meet this need Significant implications – unsustainable Actions now for the future: More strategically managing our investment to maximise value and outcomes
Market Stewardship: choice and competition Co-creating markets that empower service users and incentivise outcomes Monitoring service quality and price (including access) Identifying and addressing supply gaps Reducing barriers to market entry and increasing entrant capability Reducing barriers to and impacts of market exits Avoiding crowding out (investment and supply) Fostering regional, small and medium enterprises, and hidden champions
Two models of market governance: 1) The control model governance chain Shareholder environment Independence and performance Capital market liquidity Corporate context Institutional context Transparency and accountability OECD Principles Concentrated ownership Reliance on family, bank and State finance ‘Insider boards’ Incentives aligned with core shareholders Limited takeover market Under-developed new issue Inadequate minority protection Limited disclosure Source: McKinsey 010913AHO020MW-P1
Two models of market governance: 2) The market model governance chain Shareholder environment Independence and performance Capital market liquidity Corporate context Institutional context Transparency and accountability OECD Principles Dispersed ownership Sophisticated institutional investment Non- executive majority boards Aligned incentives Active takeover market Active private equity market (incl. IPOs) Shareholder equality High disclosure Source: McKinsey 010913AHO020MW-P1
What’s in it for Government and Service Users? Better value for money Stronger market Government and community confidence that spend is effectively managed What’s in it for Government and Service Users? Coordinated and integrated approaches to managing investment Clear, structured visibility of spend Tap into industry ideas Strategic relationships with providers Better understanding client need Competitive solutions Better services and outcomes with available resources
What’s in it for Providers? Quicker and easier to do business with Government Resources are directed to service delivery Outcomes are recognised and rewarded Easier to find contracting opportunities Transparency of funding approach Simpler contracting More meaningful reporting Improved productivity Sustainable, client focussed outcomes through enabling innovative service delivery models Value in service delivery is recognised Strategic relationships