Evolve or fail: What’s the role of government in new commissioning models?

Evolve or fail: What’s the role of government?

The role of government in human services is shifting away from service provider towards one of service visionary and market architect.

Global Lead for Human Services

KPMG Australia

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In a commissioning model of service delivery, the government’s role shifts from direct service deliverer, to being responsible for the delivery of outcomes. Services themselves are delivered by other organizations, whether private or public, to achieve the required outcomes.

This represents a considerable change in the role of government, far beyond traditional policy setting and service delivery. Getting it right requires government to develop new knowledge and capabilities to fulfil its new role, otherwise it will likely be unable to improve service outcomes.

Six roles of government

In the human services sector, government must focus on six central characteristics that are fundamental to the commissioning model:

  1. Service visionary: In shifting its role to commissioner, government must understand the needs of its communities for the service in question, and set a vision, outcomes and standards to be measured against. This involves looking at a service holistically, strategically and clinically, and setting a clear path for the future. The vision must incorporate the views and insights from a broad array of stakeholders, through a process of co-design.
  2. Market architect: As market architect, government analyses how its desired outcomes can be achieved, what kinds of organizations (both private and not-for-profit) it needs to work with, and what the market needs to look like to attract and support those organizations. In effect, government needs to start with the outcomes, then work backwards to identify what the market needs to look like to achieve those outcomes. This includes understanding how markets and services relate to key concepts of consumer choice, quality, geographical equity, service complexity and cultural appropriateness of services. It is also necessary to ensure that the market can respond to changing service demands.
  3. Market creator: Government must have a thorough understanding of how the market should operate, and the role that government can play in changing market structures to better support service outcomes. This involves understanding and reviewing the tools, incentives and levers available to create the desired market and attract service providers. Tools may include bundling contracts together to attract bigger players, or conversely, separating them into specific lots to attract more specialized organizations. Consortium and partnerships should also be considered as they can enable scale and geographic cover. Another possibility could be providing access to other government contracts, to entice organizations to invest long term in the area. The objective is a stable, equitable market that allows government to meet service requirements and correct any misalignment between existing market and required market structures.
  4. Performance and risk manager: While government may no longer be directly delivering services, it is essential for it to monitor and manage the performance of service providers and ensure targets are met. Risks also need to be identified and managed. Government’s role, therefore, becomes one of oversight, providing essential assurance to service users that service quality will be maintained.
  5. Market steward: By their very nature, markets are fluid. Consumers’ needs and attitudes change and the priorities of providers change. In some circumstances, it is likely there will be situations where outcomes are not being delivered, or performance standards are not met. In these situations, government needs to be prepared to intervene to get service delivery and outcomes back on track. At its most extreme, this may mean withdrawing or canceling contracts. Or it could mean providing additional support to enable the market to function more effectively, to help providers improve service delivery or to achieve better outcomes.
  6. Service provider: Although transitioning to a commissioning model could be seen as a radical evolution in the role of government, there will still be some situations where government will be required to continue the delivery of services. This may be because the market has failed, or because the government’s ‘duty of care’ means that some types of service are not appropriate for external provision.

Moving with the market

The extent and duration of the different roles of government will depend on the maturity of provider markets, the structure of contracting arrangements and the objectives of government.

Governments are likely to have long term responsibilities in three areas:

  • Setting services visions
  • Managing performance and risk
  • Service delivery (albeit as provider of last resort) given the nature of the service

Responsibility for designing, creating and stewarding the market, on the other hand, are likely to be more time-bound. This changing dynamic will require governments to take a flexible approach and remain agile to support continued change and a ‘safe to fail’ mentality.

New responsibilities require new skills

Adapting to its new roles and performing them successfully requires government to acquire an expanded set of skills. Even where new roles relate to existing responsibilities, such as service visionary or performance/risk manager, the depth of knowledge required to understand, develop and communicate a vision for a new market over a five-to-ten-year period is of a different magnitude.

Similarly, a performance and risk management approach based on outcomes, rather than a traditional input-based approach, will be a considerable departure for many governments. It can also mean adapting to a new perception of risk, in that while government will not be responsible for directly providing services, it will still be ultimately accountable if things go wrong.

Being market architects and market creators are entirely new roles for most government organizations. It is a considerable challenge to turn the vision into reality; to translate outcomes into market structures and understand where existing government strengths can be used to direct the market. It will require governments to be innovative, to engage in open and transparent conversations with providers, and to work collaboratively – characteristics that government is not traditionally recognized for.

Similarly, being an effective market steward means working flexibly with partners in non-government sectors, not often seen as a strength of the public sector.

Bridging the knowledge gap

Bridging the gap between the skills and knowledge required in the traditional government model, to the skills and knowledge essential for an effective commissioning model, should not be under-estimated.

The short-term solution is to bring in consultants, but this is a short-sighted, band-aid measure. Instead, governments need to go beyond the ‘quick fix’ and commit to investing in the time and resources required to embed these skills within their organizations, whether by changing their recruitment models to attract a wider set of candidates with different skills, or by training up their existing teams to perform these new roles.

Perhaps the biggest change required of government, however, is the least tangible one – the cultural change. By its nature, government tends to be risk averse and conservative. For new delivery models to succeed, government needs to embrace the concept of doing things differently, of creating new frameworks, new ways of working and new ways of delivering services. They need to adopt the concept of being prepared to fail, and if they do fail, to fail fast, fail cheaply and move on.

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