The Productivity Commission draft report “More effective social services” was published on 28th April 2015. The report contains 8 questions, 81 findings and 47 recommendations.

Its findings on the current operating environment, including things like overly prescriptive contracts brought about by risk-adverse politicians and government department imposing high level of control on how funding should be used are supported by our own feedback and research. Other finding are more problematic, including a finding that existing social services are not well placed to deal with “multiple and inter-dependent problems … of New Zealand’s most vulnerable families”.


Positives in the report include it noting that current procurement practices were not effective and that a system of more subtle methods were needed to ensure the right mix of social services were available. This mix they called “commissioning”. They identified seven types of commissioning service models:

  • In-house provision – the government agency providing the service directly
  • Contracting out – when wanting specialist services or accessing difficult to reach groups
  • Managed markets – multiple providers competing for market share
  • Trust and shared goals – shared ownership of goals encouraging integrated problem solving
  • Client directed budgets and vouchers – when the client is best placed to decide what services are needed.

Key to commissioning is deciding which service model is most appropriate to the situation. This would seem superior to the put everything on GETS (Government Electronic Tendering Service) and may-the-best-tender-win approach taken at the moment.

This section sees commissioning occurring as close to the user and their communities as possible. It sees the Whānau Ora Commissioning Agencies as a model worth further exploring. In its first question it asks:

“What communities would like to be involved in commissioning of social services?”

Client Choice and Fully-Funded

The report goes on to emphasise the client-directed budget and vouchers as the preferable model whenever they can be used. They believe client choice will drive innovation and responsiveness to client need. This seems to speak to the ‘customer knows best’ philosophy – we know people in vulnerable situations and/or in crisis do not always know best. Nor is it likely that a choice of services will be available in all areas – severely limiting the concept of choice.

In order to ensure the system has healthy, capable and sustainable providers the Commission believes that Government should fully fund those services where it expects to fully control the service outcomes. This funding, “… should be set at a level that allows an efficient provider to make sustainable return on resources deployed, encouraging investment by existing providers and entry by new providers”.

This commissioning section saw the Productivity Commission identify the added value provided by community based social services as community development “spill-overs”. They explicitly state, “Fully funded contracts for the delivery of social services should not be awarded on the basis of claims of “community development” spill-overs.”

Lack of Innovation by Not-for-profits?

In the Innovation chapter, the report makes the claim that NFPs (not-for-profits) are less able than FPs (For-profits) to raise capital to fund innovation. Because NFPs have single buyer of their services (government) who prefers shorter term contracts and who may “shift the goal posts … NFPs are therefore less likely to take on the risk of innovation”. This contrasts with many other service industries such as banking and retail which “…have experienced disruptive business re-organisation over recent decades, facilitated by information and communications technology (ICT).”

There is a push in these parts of the report to fund social services at a level where FP are likely to come in, use their capital to develop mobile phone or other types of electronic systems so they can disrupt the current system and create a more innovative market.

Evaluation Evidence Lacking

The section on evaluation is also interesting. In this section the lack of a credible evidence base is identified. As is the unreliability of relying on overseas evidence to say a successful service programme can be transplanted into Aotearoa. This area also has the following statement,

“To the extent that evaluations can adversely affect the payment they receive for services or the opportunity to receive future contracts, some NFP providers may prefer weak or no evaluation”

No evidence was provided for this startling statement – yet to me it seemed to put into words an underlying attitude held by at least some of the report’s authors towards the community social services sector. Overall the perceptions they hold of the NFP sector tended towards the concept that some of the larger providers had the ability to be more productive, to innovate and to evaluate but generally NFP providers were not good at this type of activity.

In the Productivity Commission’s thinking, For Profits, however, were more likely to bring in the spirit of competition, innovation and higher productivity. They were likely to raise capital and take risks in using this capital to generate innovative new ways of achieving outcomes. NFPs and FPs will cost about the same to deliver a service – the NFP needs to make a surplus to be sustainable and the FP needs to generate a return on investment – from the Commission’s perspective it’s all about the same really.

‘Big Data’ is in fashion

The report also resonates with much of the thinking of Deputy Prime Minister and Finance Minister Bill English about using ‘big data’ more effectively and taking an investment approach to calculating the return on investment against the capital spent on fixing a person.

Overall the draft report is a mixed bag with some good points and some bad. It’s overall thrust of creating a commercial market for meeting the needs of vulnerable New Zealanders is troubling, both ethically and in terms of the impact this will have in communities and for those whose vulnerability is not profitable and therefore less likely to be addressed.

Read NZCCSS full comments on the draft report on our Publications page (under Submissions). The final report is due out on 31 August 2015.