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
Dec 2013
Apr 2013
Oct-Dec 2012
2018
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
2013
Enabled early value
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Outcome
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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
Baseline
Business Case
People
Process
Technology
Mega
Category
Management
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Detailed functional design and implementation strategy
Strategic governance
Procurement performance measurement
Delegations
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Workforce strategy
Procurement capability strategy
Capability and capacity resourcing
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Source to contract process
Procurement process framework
Contract register
Unsolicited proposals policy
Contract management framework
Standard contracts and tender documents
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Procurement technology enablement
Contract Lifecycle Management system (e.g. QContracts)
RMS – ICT contingent labour
QTravel
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Progression to category-based whole-of-government procurement
One Government approach to procurement
6
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
7
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
8
Two models of market governance:
1) The control model governance chain
Shareholder
environment
Institutional
context
Reliance on
family, bank and
State finance
Under-developed
new issue
market
Capital market
liquidity
Source: McKinsey
Concentrated
ownership
‘Insider
boards’
OECD
Principles
Limited
takeover
market
Independence
and performance
Incentives
aligned with
core shareholders
Limited
disclosure
Inadequate
minority
protection
Corporate
context
Transparency and
accountability
Two models of market governance:
2) The market model governance chain
Shareholder
environment
Institutional
context
Sophisticated
institutional
investment
Active private
equity market
(incl. IPOs)
Capital market
liquidity
Source: McKinsey
Dispersed
ownership
Nonexecutive
majority
boards
Independence
and performance
Aligned incentives
OECD
Principles
Active
takeover
market
High
disclosure
Shareholder
equality
Corporate
context
Transparency and
accountability
What’s in it for Government and
Service Users?
Better value
for money
Stronger
market
Strategic
Clear, structured relationships
with providers
visibility of
Better
spend
understanding
Tap into industry
Coordinated ideas
client need
and
Competitive
integrated
solutions
approaches
to managing
investment
Better services
and outcomes
with available
resources
Government
and
community
confidence
that spend is
effectively
managed
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What’s in it for Providers?
Quicker and
easier to do
business
with
Government
Easier to find
contracting
opportunities
Transparency
of funding
approach
Simpler
contracting
More
meaningful
reporting
Improved
productivity
Value in
service
Sustainable,
client focussed delivery is
recognised
outcomes
Strategic
through
relationships
enabling
innovative
service delivery
models
Resources
are directed
to service
delivery
Outcomes
are
recognised
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and rewarded