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Competitive Tendering and Contracting by Public Sector Agencies

Industry Commission inquiry report

This report was signed on 24 January 1996 and subsequently released by the Commonwealth Goverment. The report contains the findings of the Industry Commission public inquiry on contracting out the supply of goods and services by public sector agencies.

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Contents

Preliminaries
Cover, Copyright, Signing Page, Contents, Abbreviations, Glossary, Terms of Reference, Overview, Recommendations

Part A BACKGROUND TO THE INQUIRY

A1 The inquiry in context
A1.1 The broad context
A1.2 Scope of the inquiry
A1.3 The Commission's approach
A1.4 Structure of the report

A2 The extent of competitive tendering and contracting of services
A2.1 Introduction
A2.2 What is the extent of contracting?
A2.3 What services are contracted?
A2.4 General trends in contracting
A2.5 Who are the contractors?
A2.6 Conclusion

Part B THE BENEFITS AND COSTS OF CTC

B1 Accountability
B1.1 Introduction
B1.2 The concept of accountability
B1.3 CTC and the impact on accountability
B1.4 Privacy of personal information
B1.5 Conclusion

B2 Service quality
B2.1 Introduction
B2.2 The concept of quality
B2.3 The evidence
B2.4 The key factors influencing the impact of CTC on quality
B2.5 Conclusion

B3 The costs of service provision
B3.1 Introduction
B3.2 A basis for assessing the effect on costs
B3.3 Cost impacts
B3.4 The nature and sources of savings
B3.5 Economy-wide effects
B3.6 The underlying causes
B3.7 Conclusion

B4 Employment, wages and conditions
B4.1 Introduction
B4.2 Employment
B4.3 Wages and conditions of employment
B4.4 Other employment impacts
B4.5 Which employees are most affected?
B4.6 Conclusion

B5 Social and distributional impacts
B5.1 Introduction
B5.2 The major stakeholders
B5.3 The distributional impact of CTC
B5.4 Government social policies
B5.5 Occupational health and safety
B5.6 The environment
B5.7 Conclusion

B6 Industry and regional development
B6.1 Introduction
B6.2 The impact of CTC on industry and regions
B6.3 Using government purchasing to foster industry and regional development
B6.4 Conclusion

Part C IMPROVING THE COST-EFFECTIVENESS OF CTC

C1 Potential barriers to effective competitive tendering and contracting
C1.1 Introduction
C1.2 Public service and community attitudes
C1.3 Industrial relations
C1.4 Accountability, caution and the lack of incentives in the public sector
C1.5 Inadequate information systems
C1.6 Lack of effective competition
C1.7 Lack of competitive neutrality
C1.8 Lack of skills
C1.9 Funding arrangements
C1.10 Other legal and administrative impediments
C1.11 Conclusion

C2 The broad policy framework
C2.1 Introduction
C2.2 Broad policies affecting CTC
C2.3 CTC-specific policies
C2.4 Conclusion

C3 Assessing the scope for CTC
C3.1 Introduction
C3.2 The CTC context
C3.3 Identifying the constraints
C3.4 Identifying the suitability for CTC
C3.5 Conclusion

C4 Promoting fair and effective competition
C4.1 Introduction
C4.2 Contract size and length
C4.3 The importance of confidence
C4.4 Conclusion

C5 In-house bids
C5.1 Introduction
C5.2 The in-house option
C5.3 A framework for in-house bids
C5.4 Conclusion

C6 The tender process
C6.1 Introduction
C6.2 Contract design and service specification
C6.3 The form of tender process
C6.4 Tender evaluation
C6.5 Keeping participants informed
C6.6 A framework for service tendering
C6.7 Conclusion

C7 Quality assurance and performance monitoring
C7.1 Introduction
C7.2 Ensuring ongoing performance
C7.3 The risk and cost of contract failure
C7.4 Quality assurance strategies
C7.5 Performance monitoring regimes
C7.6 Conclusion

C8 Human resource management
C8.1 Introduction
C8.2 Managing cultural change
C8.3 Getting the right skills
C8.4 Managing staff transfers and excess staff
C8.5 Conclusion

C9 The way ahead
C9.1 Introduction
C9.2 Components of transition
C9.3 What influences the components of transition?
C9.4 Mechanisms to facilitate transition
C9.5 Beyond the inquiry

APPENDICES

A Inquiry participation and procedures
Attachment A1 Visits
Attachment A2 Initial public hearings - participants
Attachment A3 Draft report public hearings - participants
Attachment A4 Submissions received
Attachment A5 Workshop on cost effects of competitive tendering and contracting out

B Government policies on CTC
B.1 Australian CTC policies
B.2 CTC policies in other countries

C Household refuse collection case study
C.1 Introduction
C.2 Contracting of refuse collection
C.3 Experience with CTC
C.4 Conclusion

D Survey of Commonwealth budget-funded agencies
Executive Summary
D.1 Introduction
D.2 Survey methodology
D.3 Results
D.4 Comparisons with other jurisdictions
D.5 Conclusion
Attachment A List of agencies and codes
Attachment B Service categories
Attachment C Supplementary Information Provided by Agencies
Attachment D Core and Non-Core Services

E A review of empirical studies into the cost effects of contracting
E.1 Introduction
E.2 Methodologies
E.3 Estimates of the effect of contracting on the costs of service provision
E.4 Criticism of the studies
E.5 Sources of the reported cost savings
E.6 Conclusion
Attachment E1 Identifying and measuring the costs of internal provision and contracting

F Cost case study - Amberley RAAF base
F.1 Introduction
F.2 Background
F.3 Estimated cost savings
F.4 Sources of cost savings
F.5 Sources of productivity improvements
F.6 Possible problems resulting from the changes
F.7 Conclusion

G Quantifying the economy-wide impacts of CTC
Attachment G1 Estimating the current use and the potential for further use of CTC
Attachment G2 The analyses in The Growth and Revenue Implications of Hilmer and Related Reforms and this report compared
Summary

References

Index

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