Compulsory Competitive Tendering

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Compulsory Competitive Tendering A view on the
Victorian Local Government Experience
Roma OCallaghan, Manager People Organisation
Development, Yarra City Council
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Abandoning the binary model of public and
private sectors the State Government of Victoria
introduced the compulsory competitive tendering
system under which local government bodies are
required to tender out their services to private
sector service providers.
The aim was to encourage local government bodies
to operate in contestable situations so that they
can increase efficiency, decrease operating
costs, develop clear programme goals and
objectives, become responsive to client goals,
and improve the quality of goods and services.
Quamrul Alam, John Pacher, La Trobe University
Bendigo
Prepared for Public Administration and
Development Jubilee Conference Oxford, April 1999
. . . . so, how did we go?
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Overview

• INTRODUCTION
• Why?
• BODY
• What happened ?
• How the legislative basis
• How the people experience
• CONCLUSION
• What were the outcomes?
• What are transferrable lessons?

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INTRODUCTION Why CCT?

• Local Government context the political agenda
• pre then post amalgamations
• value
• Best Value

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HOW the Legislative Basis

• CCT phased in over 3 years
• Fair Trading Act becomes a reality
• Next came Best Value

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HOW What Happened?

• 40 of Council expenditure salaries!
• Effect was a quick look at the big ticket items
• cooperative purchasing schemes
• Disputes over definitions

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HOW What Happened?

• Confusion
• KPIs and boundaries
• Fair Trading appeals
• Lots of training
• Celebrations
• Varying levels of support

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HOW The People Experience

• Changes to organisation structures
• New lexicon
• Opportunity lost or gained in organisational
  culture

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HOW The People Experience The negatives all
about the holy dollar?

• Devaluing of community, social justice,
  empowerment
• Returned to PC under Best Value
• HUGE amounts of energy and effort
• Colleagues/services were outsourced.
• Resentment
• Inequity in remuneration

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HOW The People Experience The negatives the
cultural experience

• Challenge for leadership
• Division within organisations
• Later, a large HR/OD challenge to undo
• Councillors were constrained

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HOW The People Experience The positives

• KPIs, outputs v/s outcomes and a systems view.
• Opportunities to build teams, and input into
  improve services and processes.
• Improved focus on customers
• Value of reviewing products and services
• Opportunity to reconsider why we always do it
• Improved metrics
• Opportunity to present each service to Council

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CONCLUSION The Outcomes

• Those Councils that outsourced high-end upfront
  capital services will never again deliver
  directly.
• Many early tenders/contracts were poorly
  specified.

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CONCLUSION The Outcomes

• Improved capabilities
• Better customer focus
• Elimination of legacy services/products
• Improved awareness of unit costs
• Contractors represent the Council
• Clear savings and efficiencies
• Some individual life changes

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CONCLUSION Transferrable Lessons

• Dont expect to understand the full future
  ramifications.
• Call for a phase in
• Plan to plan
• Learn from the bleeding edge.
• Understand what can be
• Be careful/smart how you fragment services
• Design in-house work and teams according to staff

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CONCLUSION Transferrable Lessons

• Additional interim costs.
• Additional ongoing costs
• Ensure you specify well
• Can you use this Threat as an Opportunity?

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. . . the practice of the compulsory competitive
tendering system has introduced major changes to
organizational cultures, attitudes of employees,
power and authority structures, systems of
decision making, delegation of financial and
managerial authority, and the nature of control
and accountability.
In addition, the article explains the degree of
competitiveness and efficiency that local
government bodies have achieved and describes how
the corporatized structure has helped to achieve
the financial objectives. The article also
discusses how the role of the elected councils is
diminishing under this new management structure
and . . . find it difficult to assert their role
as quality service deliverers. This has forced
the councils to comply with the requirements of
the competition laws which have reduced direct
accountability of government to the public.
Quamrul Alam, John Pacher, La Trobe University
Bendigo
Prepared for Public Administration and
Development Jubilee Conference Oxford, April 1999
. . . . so, how will you go?