The Efficiency through Contestability Programme

This fact sheet provides an overview of the Australian Government’s Efficiency through Contestability Programme.

In the 2014-15 Budget, the Australian Government introduced a Commonwealth-wide Contestability Framework to be applied by way of the Efficiency through Contestability Programme (the Programme) led by the Department of Finance.

The Contestability Framework will be used to assess whether a government function should be open to competition and to determine the appropriate means for this to occur. By applying the Contestability Framework to guide its planning and operations, the Commonwealth public sector is expected to constantly improve its performance and efficiency so it achieves better outcomes for the Australian community.

The Contestability Programme

The Contestability Programme aims to ensure Commonwealth Government functions are undertaken by the organisations able to do so most efficiently, and that the performance of these organisations continues to improve. By exposing public sector functions to the prospect of competition over time, the government expects to see better outcomes for citizens and greater value for public money.

While government entities may have initially been delivering their functions both efficiently and effectively, over time with new Budget measures and a constantly evolving environment, this may no longer be the case for functions,or elements of functions provided. Looking at functions with contestability in mind provides an opportunity to consider:

  • what role should the government have
  • how functions align to government priorities
  • how to best achieve a function’s intended effect
  • who is best placed to undertake a function
  • how to encourage entities to continue to improve the efficiency and delivery of the function, through the possibility of competition.

Through the programme, entities will benchmark their performance against market best practice and explore alternative approaches to improvetheir efficiency. In most cases, there will be arange of alternative approaches to consider – from improving current processes,to partnering with, or outsourcing functions to other organisations.

What is Contestability?

The prospect of competition in public sector activities to motivate efficiency and performance improvements in policy, programme and service delivery.

The Spectrum of Contestability

Many people incorrectly presume that contestability and competition equates with outsourcing. However, contestability is based on research and experience whichshows that even the credible threatof competitionfrom potential providersis sufficient to motivate public sector providers to perform better – atpotentially alower cost.

Within contestability there are a range of alternative approaches, including cooperative and competitive arrangements, to consider and pursue. Contestability approachesrange from improving internal processes; partnering with, ortransferring functions to other organisations inside or outside of government; through to fundamentally restructuring how the function is achieved.

The Evolving Role of Government

The role of government is changing from a time when a government entity was solely responsible for the design and delivery of the services it was responsible for.

Increasingly, governments are adopting ‘hybrid’ delivery models with greater involvement from other service providers drawn from other levels of government (including state and local government) and the private and not-for-profit sectors.

Adapting to the new service delivery models available requires a shift in the government’s traditional role of funder and provider (or procurer) of services, to anew role asco-designer and regulator of a transaction environment between clients, government, and service providers. It is recognised that changing to new models involving cross-sector arrangements may require new regulatory and policy structures.

Spectrum of Contestability Approaches

System Improvement

  • Improve structures e.g. flatter, less hierarchical structures, shared service arrangements
  • Improve processes e.g. streamline reporting requirements, joined up government
  • Improve requirements e.g. reduce unnecessary red tape/regulations
  • Improve products or services e.g. adopt user-centric design, move to digital solutions available 24/7

Engagement Improvement

  • Improved government relations e.g. shared footprint, integrated services
  • Improved contractual practices e.g. payment by outcomes
  • Innovative public investment strategies e.g. social investment bonds
  • Develop behavioural and policy incentives to promote higher compliance or take-up of government initiatives

Market Improvement

  • Build a market
  • Partner with others e.g. Public Private Partnerships, cross-sectoral alliances
  • Government Business Enterprise
  • Mutualise
  • Privatise
  • Outsource

For more information about the Contestability Programme

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