The new world of service delivery

There is no going back to the days of government monopolies on delivering services

For too long, thinking about public services has been dominated by straitjacketed approaches that don't capture the complex reality of the day-to-day operations of government.

In our new book, Rethinking Public Service Delivery: Managing with External Providers, we challenge this ''one best way'' thinking to provide some guidance to those who need to make it work. We put forward a new way of understanding public service delivery that is broader than the conventional wisdom in a number of ways.

First, we consider a wider set of potential external providers. Beyond the usual suspects since the 1980s - private contractors, non-profits and volunteers - our book acknowledges the increasing recourse to other parties to contribute to public services. For a decade or two, we've seen public sector organisations call on other government agencies to work with them in joined-up or whole-of-government approaches, to connect services for clients or to seek efficiency gains.

But beyond that, we also canvass other possible external contributors, such as the clients of government agencies or even the people being regulated by them: for example, encouraging householders to sort their garbage to help in recycling, or fostering efforts by the unemployed to become job-ready and apply for work. In these and many other fields, such as health, education, environmental amenity or public housing, it's hard for the agency to achieve its mandated outcomes unless the client or the regulatee contributes some time and effort.

The second way the book is more elaborate is in its account of when to outsource (or ''externalise'') public services. We challenge the one-size-fits-all mentality that has dominated this issue, where the political right has said ''almost always'', while the left has said ''hardly ever''.

Our position is ''it all depends''. It's okay in some circumstances but not in others, depending on whether the benefits outweigh the costs. It's true that more pragmatic managers agree we should externalise when we can get ''value for money''; for example, through economies of scale or specialisation. But our book shows that ''value for money'' doesn't capture all of the relevant costs and benefits. It's an important part of the equation, which we call service costs and benefits, but two other types must also be weighed alongside it.


The second type is relationship benefits and costs - mostly costs. They're important because services don't just fall magically out of the sky. Someone needs to make them happen.

Because it involves an external provider, that can be a challenge, since it's at arm's length from the buying organisation and has different interests; for example, the buyer may want a good service at a low price, while the provider wants to cut corners on service and charge a higher price.

In this context, someone must choose who will do it, but also hold the provider to account for performance. That means clearly defining the service, monitoring performance and, if necessary, applying rewards and penalties.

Doing these things takes time and money, and can be substantial in some circumstances but less so in others. They're easier to handle with services like garbage collection. But they're substantial when the service is difficult to specify in advance - perhaps because it's unpredictable, like security services, or it's difficult to observe performance, like nursing homes, or it's just plain complex, like child protection.

The costs are also large where there's only one or even no potential supplier, requiring government effort in trying to develop a market of providers. They can also be substantial for collaborative partnerships; for instance, intricate deliberative meetings.

If it's difficult to hold providers to account through these techniques, then they might not only fail to deliver but also take advantage of the buyer's vulnerability, and provide a low-cost inferior service. And with private contractors, they're likely to do that precisely because they are profit-seekers, which is what we're relying on to motivate them.

The third type is what we call strategic costs and benefits, which are rarely mentioned. There can be reputational gains to be had by working with some external providers, and externalising can allow, in some cases (although fewer than we think), a transfer of some types of risk.

On the costs side are a range of potential traps. A major one is the potential to lose core competences through externalising; for instance, where IT providers take over not just applications but also system architecture, the buyer loses some of its capacity to understand and interrogate what the IT provider is doing.

It's also a problem to hand over to external parties the authority to exercise legal compulsion. There is much debate about private prisons or detention centres, but what is noteworthy is that the debate focuses not on the quality of the cells or the food, but on incidences of the misuse of legal authority.

None of these problems are reasons not to externalise services, but they are things to be considered in weighing up whether to do so. We propose a different way of making decisions about whether to externalise: to weigh up all of these costs and benefits together. If there are net positive benefits, then handing the work over makes more sense. But if there aren't, then the idea of externalising needs a rethink.

The third way in which the book is broader is its account of how we can get these external parties to contribute to our purposes. The conventional wisdom has been to apply ''carrots and sticks'' (money and penalties, or even the threat of losing the contract), but we show how this doesn't quite hit the mark.

For a start, providers' propensity to contribute effort to public services is not only a function of their willingness, but also of their ability to do so. A public agency can encourage providers by making it easier for them - changing the way we do things, or amending rules and regulations - or by helping them to build their competency to contribute; for instance, providing interview training for jobseekers so they can be more effective in carrying out their part in unemployment services.

It can foster greater willingness by recognising that humans are more motivationally complex than the homo economicus who has been the focus of many managerial reforms. For instance, external providers are more likely to contribute if they find the task intrinsically interesting, or if doing it avoids the disapproval of peers, or even because they support the purpose of the organisation or program. We spell out how different motivators affect willingness to contribute.

Rethinking these aspects of public service delivery obliges us to consider how we equip sector organisations to manage in this new world. Typically, organisations carry on with ''business as usual'', as though their sole task is to deliver the service themselves. But with externalisation, they acquire extra tasks in managing relationships with external providers. Thus their technical capabilities as engineers or social workers need to be augmented with skills in networking, influencing, negotiating and strategic thinking. And they may also need to re-examine the structure, culture and processes of the organisation.

The new world of public service delivery is already here. We are not advocating some ''nice to have'' ideas, but rather starting from the world as it is, in which the work of delivering public services in actual practice already involves multiple parties inside and outside government. Rather than acting as if these network arrangements didn't exist, we call for public services to acknowledge them and set out how they might work with them more effectively.

The one-size-fits-all approach is dead. There is no going back to the days of government monopoly over the provisions of public services, nor has wide-scale contracting been a panacea. We need to ''rethink'' public service delivery, accept that our public managers need to navigate and manage in this complexity, and give them some tools to do that more effectively.

John Alford is a professor of public sector management with the University of Melbourne and the Australia and New Zealand School of Government. Janine O'Flynn is an associate professor with the Crawford School of Public Policy at the Australian National University, adjunct faculty member at ANZSOG and deputy editor of the Australian Journal of Public Administration.

Rethinking Public Service Delivery: Managing with External Providers, by John Alford and Janine O'Flynn, Palgrave Macmillan, 2012.