Working Draft: Inquiry Into the Administration and Purchasing of Disability Employment

Working Draft: Inquiry into the administration and purchasing of Disability Employment Services in Australia

Submission to the Senate Education, Employment and Workplace Relations Committee by Disability Employment Australia

Submission to the Senate Education, Employment and Workplace Relations Committee by Disability Employment Australia

Working Draft: Inquiry into the administration and purchasing of Disability Employment Services in Australia

Contents

1Executive summary

2Summary of our proposed changes to ensure value for money outcomes

3About Disability Employment Australia

4Background

5Response to terms of reference

5.1Tendering more than 80 per cent of the current DES will negatively impact clients and employers

5.2Tendering 80 per cent of DES risks losing experienced staff

5.3Is tendering 80 per cent of DES the most effective way of achieving value for money?

5.4The DES Performance Framework needs to reflect the needs of DES clients

5.5Three year contracting periods are incompatible with the DES environment

5.6The proposed timing of the tender process will negatively impact on the Government’s reforms to the disability support pension

Appendix AAbout Disability employment Services in Australia

Disability Employment Australia Submission

Working Draft Enquiry into the administration and purchasing of Disability Employment Services in Australia

This document is a working draft provided to Disability Employment Australia’s members for their input

1Executive summary

Disability Employment Australiais concerned that the current policy to tender 80 per cent of disability employment services (DES) ESS contracts neither enhances DES service provision nor achieves valueformoney outcomes. It risks destabilising the sector, with no commensurate public benefit.

More effective procurement methods exists that will achieve the desired client outcomes, for example the licencing of operators and assessment of performance against a rigorous framework. This is consistent with giving clients purchasing power within a defined set of quality assured providers.

Within the scope of this inquiry we propose changes to mitigate the significant negative impacts of tendering 80% of current services.

Background

The subject of this Inquiry is critical to the level of social inclusion and quality of life of many Australians who live with a disability. In tough economic times, it is also important to recognise the significant economic benefits that accrue from an increase in the participation rate.

We are passionate about the provision of meaningfuland enduring employment for our clients. We also support the government policy objective of ensuring that DES represents value for money.

Conclusion

We believe it is too early in the life of the DES ESS program to tender such a high proportion of ESS contracts. This is underpinned by the fact that the DES Performance Framework does not take sufficient account of the specific requirement of DES clients and is therefore not an effective basis for evaluation of tenders. Specifically, the Performance Framework needs to have a longer term focus and include quality measures to ensure it accurately measures client outcomes and is a suitable input into the tender evaluation process.

This submission has three key themes:

1. The DES Performance Framework is an inappropriate measure of effectiveness of client outcomes.
2. Tendering 80 per cent of all DES contracts will destabilise the sector.
3. The threeyear tender period is too short, ignores the DES context, and represents an inefficient use of provider and government resources.

The benefits of a competitive tender will only be realised if the competitive tender framework and process is sound. The DES Performance Framework is neither aligned with the Disability Service Standards noran appropriate measure of effective client employment outcomes. The framework does not include any measure of the quality of client outcomes, focuses on shortterm throughput, and mirrors the performance framework used in JSA. Disability Employment Australiaconsiders that it is essential that the framework, including the tender evaluation criteria, includes meaningful quality measures that assess performance over the longer term.

The government’s decision to tender 80 per cent of DESESS contracts risks destabilising the sector. The DES program has only been operating for 18months. Viewed in the context of significant policy changes to the disability support pension (DSP) and the announcement of the NDIS, this decision represents too much, too soon. Werecognise the government’s desire to introduce competitive tendering. However, to reduce the destabilising effect, the amount of contracts put out to tender should be limited to lower performing DES providers—those ranked as one or twostar providers.

Continual threeyear contracting is incongruous with the relationshipbased nature the DES program services. Preparation and administration will prove costly in the longer term: financially and in sector productivity and performance. Threeyear minimum contract terms are not consistent with a value for money model. We recommend the minimum be increased to five years, and the tender commencement be pushed out to 2015.

2Summary of our proposed changes to ensure value for money outcomes

Our overarching message to the Inquiry (and to the Government) is that now is not an appropriate time to tender for 80 per cent of DES contracts. However, if the Government does proceed, the following changes need to be made prior to the tender process:

Only one and two star providers should be required to go to tender. This achieves the Government’s stated objectives of testing the market, allowing for competitive entry and removing underperformers. Importantly, it achieves this aim with a lower risk profile and chance of destabilising the sector and negatively impacting on client employment outcomes.

The DES Performance Framework (including the tender evaluation criteria) needs to include ‘quality’ measures to ensure effective client outcomes are rewarded, not just short term throughput measures which are ill suited to DES and ripe for manipulation. This will ensure that an accurate value for money assessment is possible and those providers best able to meet the needs of clients win contracts.

The minimum contract term be increased from three to five years. This represents a more efficient use of provider and Government resources; reduces the destabilising effect of continuous three year tenders; and achieves the Government’s objectives.Our view is that DEEWR should be contract managing in a transparent and timely manner and reallocating business once there is demonstrated poor performance that is not redressed in an agreed period. Again, this would better achieve the Government’s objectives.

3About Disability Employment Australia

Disability Employment Australia[1] is the peak industry body for Australia's Disability Employment Services (DES).

Disability Employment Australia exists to represent the interests of our members at a national level to government and other stakeholders. We have a range of functions designed to support our members to achieve best practice service provision in their role to find employment outcomes for people with disability. We advise, advocate, train, inform, as well as undertaking events to promote the sector.

We have a particular focus on:

government policy relevant to disability employment

issues impacting on the viability of the industry

removing barriers to workforce participation for people with disability

promoting best practice and innovative ways to get people with disability real jobs.

Working from a social inclusion perspective, Disability Employment Australia approaches its work from a society wide perspective and is committed to identifying opportunities to get a “better deal” for people with disability participating in the workforce and educate the public about issues related to disability employment.

Disability Employment Australia has played an active role over many years in providing advice on increasing workforce participation rates for people with disability and has worked hard to establish itself as the peak organisation in relation to Disability and Open Employment.

Over the past three years as the Australian Government has done much consultation and review in the area of Disability and Employment and Disability Employment Australia has worked closely with Ministers and departments involved in this area over this period.

Additionally, Disability Employment Australia enjoyed many opportunities to work with DEEWR on gathering industry views and feeding into the policy and procedure making process, particularly during the lead up to the implementation to the new DES structure and post transition, including through its representation on a number of key government advisory groups;

DES Reference Group (Convened by the Minister)

Employment Partnership Committee

DES Operational working Group

DES Evaluation Strategy Working Group

IT Advisory Group (responsible for new ESS IT System covering both JSA and DES)

DES Transition Reference Group

DES Technical Advisory Group

Contract Management and Quality Servicing Working Group

DES Transition Reference Group

4Background

Key points:

Context of this Inquiry and this submission

The changing nature of DES: client profile/segmentation

Potential impact of other policy changes: DSP, NDIS

Star ratings

5Response to terms of reference

The following section is structured to align with the Inquiry’s terms of reference. Many of our key points are relevant to more than one term of reference, and where possible we have sought to cross reference, rather than repeat our submission.The executive summary provides a thematic overview of our key points. In preparing this submission, Disability Employment Australia has sought the input of and feedback from its members.

5.1Tendering more than 80 per cent of the current DES will negatively impact clients and employers

Terms of references (a):the impact of tendering more than 80 per cent of the current DES on the clients with disability and employers they support under the current contracts

Disability Employment Australia shares the Government’s aim of ensuring that employment services for people with disability are of the highest standard and provide value for money. However, we do not believe that theproposed competitive tendering of 80percent of contracts will promote best practice service delivery and achieve value for money. We submit that tendering 80 per cent of all contracts at this stage in the lifecycle of the DES program risks destabilising the sector and may jeopardise the quality of client outcomes. We submit that only tendering the contracts of one or two star providers now would better meet the Government’s objectives.

The DES program was introduced in 2010 following the combination of the Disability Employment Network and Vocational Rehabilitation Services. After only 18 months of existence, it is now proposed that more than 80percent of DES contracts are competitively tendered. The proposed timing does not allow for an appropriate period of time on which to assess performance for tender appraisal purposes, not to mention the inadequacies of the current DES performance framework (discussed at Section 5.4). Disability Employment Australiasubmits that this level of competitive tender represents an unacceptable risk to continuity of service delivery within the sector.

Ourprevious communications to the Hon Kate Ellis, Minister for Employment Participation and Child Care, and the Department of Education, Employment and Workplace Relations (DEEWR) has been to oppose competitive tendering. This remains our position. However, if the Government is committed to tendering, we consider that tenders should only be run for one and two Star rated DES providers now. We submit that this would better achieve the Government’s objectives of ‘testing the market’ and allowing competitive entry and exit with a lower risk of destabilising the sector. Notwithstanding our concerns regarding the accuracy and appropriateness of the DES Performance Framework (see Section 5.4), tendering contracts for providers with a one or two Star ranking would achieve the Government’s aim of removing poor performers from the market and give new providers the chance to enter the market.

A central tenant of this submission is to voice the concern of many DES providers that tendering 80percent of contracts will destabilise the sector and lead to a decrease in client outcomes.

The following section sets outseveral ways that the proposed 80 per cent tendering will destabilise the disability employment services sector:

Loss of continuity through the sheer volume of contracts out to tender, and the potential for widespread loss of client and employer relationships where providers change

Exit of well trained staff (see Section 5.2for a full explanation of the impact this will have on service delivery)

Productivity loss due to diversion of resources from service provision to tender process

5.1.1Loss of continuity in relationships

Building effective and enduring relationships with clients with a disability and employers is central to achieving successful DES client outcomes. The dynamics of DES can be contrasted to JSA in this regard. People with disability face some of the highest barriers to employment in Australia. Working with Australian employers to break down myths and educate them on the benefits of employing people with a disability is a time consuming and costly process compared to JSA. Likewise, it is well known that a quality relationship between a DES provider and client will lead to more successful outcomes including enduring and meaningful employment. DEEWR recognise the importance of ongoing relationships in DES:

A key distinguishing feature of Disability Employment Services is their capacity to support and manage a participant’s condition in the workplace, along with providing ongoing support in the workplace for as long as it is required.[2]

If the proposed tendering of 80 per cent of all DES ESS contracts goes ahead in XX 2013, around 518contracts will be up for tender on the open market. These contracts relate to 76,000 clients and a similar number of employers. Of these employers, around 10,500 are in the ‘post placement’ or ‘ongoing support’ phase. That means they currently have a client placed in their organisation. The loss of an established relationship with their DES provider will be detrimental to both the employer and the client involved. Many DES employment placements have complex service requirements that will be put at risk if the relationship is severed and replaced with unfamiliar people, processes and systems. Disability Employment Australia submits that the potential for widespread loss of relationships between DES providers and their clients and employers will have a destabilising effect on the DES sector.

5.1.2Exit of well trained staff

General employment services providers and DES providers both experience high levels of turnover relative to most employers. High rates of turnover are undesirable on many fronts, and based on previous experience, we anticipate that the 80 per cent tender process will increase staff attrition rates. Please refer to see Section 5.2below where we explore the potential impact of losing experienced staff on client outcomes.

5.1.3Loss of productivity due to the tender process

The 80 per cent tendering will result in an increase in already high DES administrative costs. Requiring providers of 80 per cent of DES contracts to go to competitive tender will result in an unnecessary amount of providers diverting resources and efforts away from core service provision to focus on the tender application process. As many of the three Star providers who will have to tender are currently assessed as providing adequate or above adequate service this represents an inefficient use of resources.

Further, DES providers will not be as savvy as the JSA providers with regards to the competitive tender process. JSA providers have been exposed to competitive tendering for x years. This uneven playing field may result in the successful organisations being those that produce the best tender applications, rather than those that can best meet the needs of those with a disability who seek employment. DES providers will not receive an advantage of incumbency as the current DES Performance Framework (against which it is assumed tenders will be assessed) is the same as for JSA. The Framework is focused on throughput measures that are better suited to the JSA environment, and ignores quality and long-term relationships critical to DES outcomes.

We submit that this loss of productivity from the proposed tender process will not be offset by an increase in the quality of client outcomes, nor will it achieve the Government’s value for money objectives.

In conclusion, we submit that competitive tendering is not an appropriate procurement process for disability employment services, and that tendering 80 per cent of contracts will have an unacceptable destabilising effect on the sector and now is not an effective procurement method to achieve the Government’s objectives as it tenders too many contracts, too soon. Disability Employment Australia but considers that the proposed tender policy will not enhance the provision of DES services in Australia, nor does it represent a value for money outcome. We submit a more appropriate policy response would be to tender the contracts of one and two Star rated DES providers, or to tender those providers who are ranked below the mean. Regardless of the volume of contracts tendered, we further submit that it is essential that the assessment framework is robust, accurate and focuses on quality of client outcomes (see Section X).

5.2Tendering 80 per cent of DES risks losing experienced staff

Terms of reference (b): the potential impact of losing experienced staff

The proposed 80 per cent tender is already having a destabilising effect on the DES sector’s dedicated staff. With the tender process approaching, staff are uncertain of their professional futures, and find it increasingly difficult to plan their careers in the sector with a reasonable degree of certainty. The three year tender cycle embeds this employment uncertainty within the sector. We risk losing a significant amount of industry expertise if we continue on the current course of action which will negatively affect the quality of client outcomes. We submit that this risk can be minimised by moving to five year contracts and reducing the number of contracts simultaneously put to tender. This situation would still test the market and provide ample opportunity for new providers to enter the market and require poorer performers to face competitive pressures.