The Social Contract Renegotiated:
Protecting Public Values in the Age of
Contracting
David de Carvalho
In some ways this paper can be seen as a response to the call to analytical action made by
Anna Yeatman in the most recent edition of the Australian Journal of Public
Administration.
Now is the time to discuss and debate different conceptions of
contracting out…If the economic model of contracting out is
now under sustained critical scrutiny, the more urgent task is to
work on institutional design for publicly oriented and
democratic contracting out. (2001: 73)
My purpose therefore is to suggest, tentatively, a conceptual framework for, and a
practical approach to, the development of a new type of contractual arrangement between
governments and civil society organisations, including religious and other value-based
bodies, involved in the delivery of publicly funded social services.
First I need to make a pedantic point. The term ‘contracting out’ is often used when
simply ’contracting’ is more accurate. It is not uncommon to read commentators
describing government contracts as ’legal agreement[s] to regulate the private provision of
government services‘ (Bridgman and Davis, 2000: 19). However, the contractualism that
characterises the new public management movement involves not only the contracting out
of services previously provided by government, but also the transformation of funding
arrangements for social services that had been previously and continuously provided by
the non-government sector, whereby grants to assist with input costs were transformed to
performance-based contracts through which governments purchased specified outputs.
In 1995, the then Secretary of the Victorian Department of Health and Community
Services, John Paterson, described this transformation in the department’s annual report.
He said,
In Victoria, we have moved from a situation in which
government funded providers to do what they want, to a
situation in which government funds them to do what
government wants. But this is still a long way from the ultimate
De Carvalho, D. (2002), ‘The social contract renegotiated: protecting public values in the age of
contracting’, in T. Eardley and B. Bradbury, eds, Competing Visions: Refereed Proceedings of National
Social Policy Conference 2001, SPRC Report 1/02, Social Policy Research Centre, University of New South
Wales, Sydney, 126-135.
DAVID de CARVALHO
goal, where providers will compete to do what consumers
want. (Paterson, 1995)
Thus the take-up of contracts by non-government (including church) agencies does not
necessarily represent any particular enthusiasm for market mechanisms, but simply
reflects the historical fact that non-government social service agencies previously funded
by grants must now be funded by contract or not at all.
Contract is a political term, and the term social contract is self-consciously political. In his
1651 work, Leviathan, Thomas Hobbes wrote that the life of the individual, without the
social order imposed by the state, is ’solitary, poor, nasty, brutish, and short’. He, along
with Locke and Rousseau, developed the basic idea of the social contract as an agreement
between individuals, by which they give to the state power to enforce the rule of law so
that they can, to the greatest extent possible, exercise their liberty in the pursuit of their
own interests, in particular through the operations of the free market.
In the twentieth century, the Keynesian Welfare State was adopted by most Western
democracies as a means of smoothing out the inequalities generated by the free market.
Marshall’s concept of social citizenship and social rights underpinned that model of state
welfare.
Figure 1: The Individual and Society
L eg a l F r a m e w o r k
Citizenship
State Power
Public
administrative
law
Indivi
dual
Private contract
law
Market Forces
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Social
Citizenship:
Social rights to
publicly
provided goods
and services
Market
Citizenship:
Consumer
rights and
market power
THE SOCIAL CONTRACT RENEGOTIATED: PROTECTING PUBLIC VALUES
The legal framework governing the relationship between individuals and the state is public
law, specifically administrative law, which aims to ensure fairness, accountability and
transparency in government decisions affecting individuals. The legal framework
governing the relationship of the individual with the market is private law, specifically the
law of contract. It is less concerned with fairness, accountability and transparency, than
with simply ensuring that market transactions are fulfilled according to the terms agreed
by the contracting parties.
In schema illustrated in Figure 1, the individual’s engagement with society is conceived as
a set of constant interactions with the market and the state. Something is missing from
this diagram: those non-state, non-market organisations to which individuals belong
voluntarily, such as unions, churches, co-operatives, sporting clubs, ethnic communities
and families, from which individuals derive their sense of personal identity. Figure 2
portrays this richer set of relationships.
Figure 2: The Individual - in Community and Society
State Power
Burke’s ‘little
platoons’
Voluntary Associations
Unions
‘Social capital’
builders
‘Buffers’ between
the individual on
the one hand and
the state and the
market on the
other
Churches
I
I
I
I
I
Cooperatives
I
Families
I
Ethnic communities
Sporting Clubs
Market Forces
Edmund Burke referred to these organisations as little platoons. They play a key role in
the development of social capital. They can be seen as buffers between the individual on
the one hand and both the state and the market on the other. Individuals who are members
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DAVID de CARVALHO
of such community or civil society organisations can be seen as having multiple
citizenships and hence multiple accountabilities in addition to their national citizenship.
However, the nature and role of those community organisations that provide social
services have been contested as a result of pro-market reforms in the public sector over the
last fifteen years.
Figure 3: ‘New’ Public Management Economic Model of Contracting
Arms of the
State and/or
commercial
businesses
State Purchaser Power
Private
Non-state
provider
Contracts
Non-state
provider
Non-state
provider
Mediators of
state power
and market
forces
The State
(principal)
steers
while the
community
sector
(agent)
rows
Individual Consumer Power
Their traditional role and character has come under pressure from both the state and the
market as they have been squeezed to become more like government agents on the one
hand and more like commercial businesses on the other (Figure 3). Instead of acting as a
buffer between the individual and the power of the state or market forces, some of these
organisations are in danger of losing their character as they become mediators of that
power and those forces.
For example, the Job Network not only is regulated by legal contracts between the state
and non-state providers, but these legal contracts give expression to the current
government’s conservative communitarian notion of the social contract as mutual
obligation. This takes the form of a contract between the individual and the state whereby
the state provides income support in return for the individual fulfilling certain personal
responsibilities in respect of job search. The content of these responsibilities and the terms
of this social contract are defined by the government, acting on behalf of the community.
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THE SOCIAL CONTRACT RENEGOTIATED: PROTECTING PUBLIC VALUES
Through the Job Network, government attempts to enlist the credentials of community
organisations to its particular social agenda.
But these organisations do not always act out the role assigned to them. While their
contracts require them to report breaches of mutual obligation requirements, many nonprofit Job Network providers, including some auspiced by church-based organisations
with long histories of local involvement and a strong tradition of social justice advocacy,
have additional accountabilities. They have an accountability to their value-based mission,
which in many cases means they are willing to put more time into the 'hard cases' - those
who are seriously marginalised from the labour market.
In practice, this means that while their funding contract gives them no official discretion
about whether or not to report breaches or possible breaches, they do exercise a de facto
discretion of this kind. They may make decisions about whether to report breaches or not,
and in doing so, they are acting as a buffer between that individual and the power of the
state. Such agencies have to balance their different accountabilities – contractual
obligations to the government and moral obligations to their value-based mission. These
accountabilities do not always pull them in the same direction. Their contract may say
‘breach em’ but their value base may say ‘don’t’.
From the perspective of the public interest and the public sector, as opposed to the
community sector, the economic model of contracting out has additional difficulties.
Financial information that was and should be in the public domain becomes secret as the
result of ’commercial-in-confidence‘, and access to the remedies provided by public
administrative law for the citizen who is provided with services becomes more difficult.
As the Administrative Review Council noted in its 1998 report on contracting out
The delivery of government services by contractors, and the
consequent ‘privatising’ of the relationship between service
providers and members of the public, has the potential to result in a
loss of the benefits which the administrative law system provides
for individuals. In turn, this may affect the efficiency and quality
of government administration. Further, since a contractor’s
connection with government will be governed by contract, the
accountability mechanisms traditionally provided by ministerial
responsibility and Parliamentary oversight may no longer be as
effective. (ARC, 1998: vi)
First, there is a loss in the ability of individual citizens and the Parliament to hold
government accountable through administrative law for the implementation of public
policy. Secondly, there is a loss in the ability of community organisations to be responsive
and accountable to their own ethos.
Can we develop a form of contract that enhances both the ability of the public and
Parliament to hold governments accountable for contracted services and the ability of civil
society organisations to be faithful to their own ethos and accountable to their own
mission? Or are these two goals mutually exclusive?
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DAVID de CARVALHO
We need to re-conceptualise the nature of the contractual relationship between the state
and community organisations, from one based on private contract to one which recognises
the mixed nature of the activity as having both private and public elements, and which
recognises the dual accountabilities faced by the state’s community sector partners. I
Figure 4 shows how the economic contract regime has created a double barrier.
Figure 4: The Economic Contract as a Double Barrier
G overnm ent
C o m m u n ity
agency
P u b l i c a c c o u n t a b i l ity
P r iv a t e a c c o u n t a b i lit y
C
O
N
T
R
A
C
T
C itiz e n s a n d
P a r lia m e n t
V a lu e s a n d
m is s io n
suggest that we should conceive of these contracts as social contracts. These social
contracts would incorporate a higher degree of public accountability than currently exists
in many government contracts, but also more flexibility to allow the contracted
organisation freedom to be itself in the contract, that is, to be faithful to its own value
base.
This is consistent with developments in social policy theory and in particular the emerging
discourse of governance as opposed to the discourse of new public management, and it is
also consistent with new understandings of citizenship and shared sovereignty.
Anna Yeatman (2000: 63) has written about shared sovereignty in the following way:
The conception of modern democratic citizenship in terms of
the one and indivisible nation has increasingly lost legitimacy
for a number of reasons. First, the claim of indigenous people
to self-determination usually has to be made in a context where
it is a question of how an established state accommodates this
claim. The only way of working with both indigenous selfdetermination and state authority is to suggest that sovereignty
can be divisible. Second, there have been a number of social
movements that have insisted on the heterogeneity as distinct
from the ‘oneness’ of the nation. Multicultural movements, for
example, have demonstrated the many differences of ethnicity,
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THE SOCIAL CONTRACT RENEGOTIATED: PROTECTING PUBLIC VALUES
culture and history that are caught up within the jurisdiction of
any particular state.
I would add that differences in religious tradition and heritage are another example of the
way in which communal citizenships overlap with national citizenship and invite
consideration of what shared sovereignty means.
This notion of shared sovereignty helps us distinguish between new public managerialism
and governance. New public management is about making things happen through state
power via tightly specified contracts, whereas governance is about managing relationships
and a diversity of approaches to a common problem. The distinction can be stated another
way – it is the difference between power and influence. Rhodes (1997: 43) argues that in
governance-style relationships, ’although the state does not occupy a privileged, sovereign
position, it can indirectly and imperfectly steer networks.’
Taking the steering/rowing metaphor a step further, we should shed the model in which in
which the state steers while the community sector rows, and adopt a model in which the
state acts like a flagship in a sea-battle, this is shown in Figure 5.
Figure 5: Democratic Communitarianism – A Social Model of Contracting
Democratic Communitarianism – A Social Model of Contracting
Voluntary
agencies
participate
in policy
development and
coordination;
collaborate
rather than
compete with
one another
Empowering State
(Flagship)
Social
Contracts
C
Governments
influence
heterogeneous
agencies through
engagement and
empowerment,
rather than
control
through
contract
Governments, Voluntary agencies and their clients co -produce improved social outcomes
Agreed Social Goals / Diversity of Approach
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DAVID de CARVALHO
The flagship communicates direction to and coordinates the activities of a fleet of ships as
best it can, while recognising that each individual ship has its own capabilities and each
captain has their own particular personality, character, attitudes and approaches. Each ship
has the freedom to move around its section of the battle area in order to meet the particular
circumstances it is confronting. That is, civil society organisations, each with their own
sets of values and interests work with government to achieve commonly agreed social
outcomes. In acting as a flagship rather than a steerer, governments recognise that their
social partners have other accountabilities in addition to their role as a government
contractor.
Is the legal contract the appropriate form for governance-style, sovereignty-sharing
relationships? Yeatman argues that it can be.
Contract, like all terms of political discourse is a contestable
concept and it can be reframed to become a dialogic
contractualism where the contractual partnership between
government and non-government service-providers is open, as
appropriate, to constitutional conversation with key
stakeholders. (Yeatman, 2000: 69)
So rather than private economic contracts that reduce both accountability to the public
interest and accountability to an organisation’s value-based mission, we need a new kind
of contract and a new kind of law to regulate it. Social contracts would share sovereignty
and acknowledge both public and private accountabilities. Social contracts would see the
’state engaging and supporting heterogeneous associations in a way that is closer to
democratic and identity politics’ (Butcher and Mullard, 1993). To return to Anna
Yeatman’s call to focus our attention on institutional design for publicly oriented and
democratic contracting out, an initial practical step could be taken in this direction by any
Australian government that has contracts with community sector providers. That would be
to initiate a consultation with a view to establishing a social compact or an accord
between the government and the community sector on how they will collaborate in the
development of social policy and the delivery of social outcomes.
We do not have to reinvent the wheel here. In Canada, the government and the sector are
working towards the development of an Accord and in Britain there is the Compact on
Relations between Government and the Voluntary and Community Sector in England
which provides an example of the kind of thinking that is required. Presented to
Parliament in November 1998, the Compact
provides a framework which will help guide our relationship at
every level. It recognises that Government and the sector fulfil
complementary roles in the development and delivery of public
policy and services, and that the Government has a role in
promoting voluntary and community activity in all areas of our
national life. (Blair, 1998)
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THE SOCIAL CONTRACT RENEGOTIATED: PROTECTING PUBLIC VALUES
The Compact applies to government departments and to the range of organisations in the
voluntary and community sector, and sets out a number of principles and undertakings on
both sides. While it is not a legally binding document, it does provide the basis from
which a legal framework might evolve.
The next steps in that evolution could be the passage of legislation, (say, a Social
Contracts Act), that confers special legal status on contracts between government and
community sector providers of publicly funded social services. These contracts would
have the status of social contracts. Such contracts might have at least the following
characteristics:
•
the state could not avoid vicarious liability, by virtue of privity of contract, for
failure of service-delivery by the contractor;
•
‘commercial in confidence‘ could not be invoked to exempt social contracts from
Freedom of Information requests;
•
social contractors would not be constrained from making public comment on any
aspect of government policy;
•
non-government contractors would be required to have high standards of
governance and conduct.1
If this proposal or something like it was implemented, a jurisprudential tradition would
develop over time which would recognise and value the special nature of such social
partnerships.
The regulation of social contracts through the Social Contracts Act would require a Social
Tribunal to provide a forum for the adjudication, at first instance, with a right of judicial
review, of disputes about the non-fulfilment of social contracts.
So the elements of legal institutional design for publicly oriented and democratic
contracting might be as follows:
•
a Compact between Government and Community Sector;Social Contracts Act
which confers special legal status on contracts between government and non-state
organisations delivering publicly funded social services; a Social Tribunal which
adjudicates disputes about non-fulfillment of social contracts, at which serviceusers would have ’standing‘; and aJudicial Review of tribunal decisions’
To conclude, the rapid multiplication and diversification of private-public partnerships in
recent years has seriously tested the ability of the traditional public-private legal
dichotomy to balance issues of public accountability on the one hand and the
organisational autonomy of social partners on the other. The recognition that there is a
public element about such partnerships is not enough to justify the full scrutiny of public
1
This list is not exhaustive. The British Compact document provides a list of 'undertakings' by both
parties, which might be incorporated into such contracts.
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DAVID de CARVALHO
administrative law to the decisions and actions taken by community organisations; but
neither is the recognition that there is also a private, non-public element to these
partnerships enough to justify the complete removal of public law scrutiny. Replacing the
economic model of contracting with a social model of contracting would enhance both
public accountability and the ability of community organisations to make their distinctive
contribution to a democratic, pluralist society.
References
Administrative Review Council (1998), The Contracting Out of Government Services,
Report No.42, ARC, Canberra.
Blair, A (1998), 'A message from the Prime Minister', Compact: Getting it Right Together
– Compact on Relations between Government and the Voluntary and Community
Sector in England, National Council of Voluntary Organisations, London,
http://www.ncvo-vol.org.uk/main/gateway/compact.html
Bridgman, P. and G. Davis (2000), ’Implementation‘, The Australian Policy Handbook,
Allen and Unwin, Sydney.
Butcher, H. and M. Mullard (1993), ’Community policy, citizenship and democracy‘, in
Butcher, H. et al., eds, Community and Public Policy, Pluto Press, London, cited
by Paul Smyth and Michael Wearing (2001) in ’After the welfare state: state and
civil society in the delivery of social services‘, unpublished paper presented at
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Paterson, J. (1995), ’Foreword to the 1994-95 Annual Report of the Victorian Department
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Journal of Public Administration, 56 (2), 40-54.
Yeatman, A. (2000), ’Social policy and the global economy‘, in I. O’Connor et al, eds,
Contemporary Perspectives on Social Work and the Human Services, Longman,
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Administration, 60 (2), 71-73.
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