web analytics

The perils of out-sourcing public services

Written By: - Date published: 9:00 am, December 8th, 2010 - 16 comments
Categories: public services - Tags:

One of the features of the neoliberal revolution has been the outsourcing of public service delivery, usually to not-for-profits, sometimes to profit-making entities like private hospitals. Whanau Ora is an extension of this. Two recent stories have exemplified the risk of this model.

First, there’s Hekia Parata’s mates, the Taeaomanino Trust. A family outfit with no track record and, seemingly, inadequate internal records keeping and spending checks, the Trust is typical of many organisations contracted by Social Development and Health. And it is the ideal breeding ground for corruption – all this money flowing in from the ministry, often nebulous performance goals, and a bunch of mates or family running the operation. It seems that $100,000 of our money has gone missing from the Trust’s coffers and the Police are investigating. Nonetheless, the Trust has just been handed a million dollar Whanau Ora contract. Whanau Ora is only going to see more of these organisations putting their hands out and more public money being spent on surprisingly large salaries and expense accounts for little practical outcome.

So, the first problem with the model is that small organisations that are prone to corruption are being handed public money. Within ministries and departments that risk of corruption is countered by the professional culture and the checks and balances that large, established institutions have, which small, new ones lack.

Second, there’s the Otaihape Health Trust in Taihape. Ruth Dyson has been doggedly asking questions in the House about this for months. Otaihape is contracted by the Whanganui District Health Board to provide a wide range of health services to the Taihape population: “its 24-hour access to PRIME-trained registered nurses, its medical beds, its in-patient palliative care, its respite care and day-care services, its maternity services, its meals on wheels, and its mortuary service”. Insufficient funding in the Budget has forced the DHB to make cuts, and its contracts for non-DHB providers has been a logical place to start. Initially, the Otaihape nurses were told they would have to take a 30% pay cut or the centre would close (it’s effectively a hospital, even the Minister called it that when denying any threat of closure). Now, the Trust is definitely going under and the people of Taihape stand to lose all those health services. Tony Ryall’s response: “The Ōtaihape Health Trust is not owned by the Government”. In other words, ‘not my problem if they can’t operate within their budget’. Never mind that his government sets the DHB’s budget, which contracts with Otaihape, so he directly set this chain of events in motion.

So, the second peril of outsourcing is it gives a government a means to cut services by stealth simply by reducing the pool of money for contracts to private providers.

The neoliberals claim this model is all about efficiency – competing outfits bidding for public contracts gets better value for money. As if there are multiple health providers sitting around in Taihape trying to outbid each other. I dare say the cost of the tendering and contracting processes outweighs any supposed efficiency gains.

But you can see why it’s attractive to a government, particularly a bad government, to get someone else to do the actual work. It removes the immediacy of responsibility for the government (much as the DHB system does) – the minister and the ministry can just throw up their hands and say ‘there’s nothing we can do, it was the private provider!’

What if instead, and I know this is a wild thought, we actually care about delivering good value for money services to those in need then we should want those services delivered by accountable, perpetual public institutions.

16 comments on “The perils of out-sourcing public services”

  1. ianmac 1

    I guess Tony Ryall can cause a squeeze which lead to the loss of small units as this will only affect a small number of people and get lost in the “greater efficiency” and “moving funding to frontline services”. Therefore not a biggie in the minds of the voting masses.
    Hang on the Taihape unit was very much frontline!

  2. smhead 2

    PHOs aren’t owned by the government either. So what’s the difference between whanau ora and PHOs? Oh that’s right, whanau ora are Maori organisations, so Marty says they’re more likely to be corrupt and it’s okay to bash them.

    Disgraceful.

    [lprent: You’ve just stated that an author said something that they did not. I do not like people trying to put words in the mouths of authors. In fact I find it disgraceful. Two week ban. ]

    • Bright Red 2.1

      Show me where Marty says it has anything to do with race. You can’t.

      You’re just being a scumbag, smhead, and refusing to engage in the issue.

    • Rosy 2.2

      hmm many community PHOs are operated by Maori providers as well. No-one is calling these corrupt. It’s not about race.

  3. tsmithfield 3

    OTOH, Rob has written a recent post about the crap job that WINZ ( a public body) is doing about administering payments. So going by this example, keeping things within the “public” house doesn’t make things better.

    • Bright Red 3.1

      I don’t see WINZ making 1% of payments in error as a huge problem. I bet it’s far better than you get from small private outfits. I don’t think r0b’s saying WINZ is doing a crap job, he’s just pointing out that it’s a far bigger issue than fraud.

      You can understand why overpayments happen at WINZ. The typical case will be that a person gets a job and doesn’t tell WINZ like they’re meant to, so WINZ keeps paying the benefit until it gets notification from IRD. Then, WINZ has to get the money back from the former beneficiary. Happens all the time. Happened with me in my younger days.

      • tsmithfield 3.1.1

        Two good things about outsourcing:

        1. There is a strong motivation for the private entity to perform or lose their funding.
        2. Its easy to terminate the program if its not viable. A lot harder to do that with government departments.

        • Rex Widerstrom 3.1.1.1

          Which, in a perfect little nutshell, is why I argue for private prisons. Yank their financial chain and they’ll do what you want… including increase genuine rehabilitative programs. They can even be paid a “commission” based on the number of prisoners who go through their programs and don’t reoffend after X years.

          Try reforming any country’s state-run corrective services, however… there’s no incentive to change because there’s no reward (other than praise from a Minister whom no one respects anyway) for doing so. And if you happen to have a Minister who quite likes the idea of prisoners being released through a revolving door, you’re doubly screwed.

          And that reminds me of another benefit – contract law. If a progressive government were, say, to sign a 10 year contract with a progessive corrections provider setting rehabilitation etc as goals then even if they lost office after one term the contract – and the goals – stand; long enough for the benefits to become apparent.

          That doesn’t mean I’m in favour of it for everything, by any means. But prison is one area in which I’ve seen it work brilliantly (and also, if we look to the US, fail abysmally, I admit – which is why you’re careful in choosing your provider and drafting your contract).

          • ak 3.1.1.1.1

            ….prison is one area in which I’ve seen it work brilliantly

            Aye, haven’t we all – the contracting into freezing works in the late 60’s doubled the pay of some – but now they do three times the work for less than originally. Ditto local govt contracting – lots now being taken back in house.

            Big prob is the market’s inherent race to the bottom: over time an overwhelming imperative to cut costs. i.e. staff and service. Which is what we find…..

            … if we look to the US, fail abysmally ….because they’ve been at it longer.

            • Rex Widerstrom 3.1.1.1.1.1

              The model I’m thinking of doesn’t send prisoners out to work for private industry at all*. Nor should any prison, IMO.

              The benefits I’m talking about arise because the contractor is paid on things like number of assaults on prisoners and guards, number of released prisoners who reoffend and so on (with less = more money, obviously).

              In fact the payments are so generous as to have incentivised the prison operator to invest in post-release support for things like housing and finding work as these are known to decrease recidivism and thus increase their income.

              * The exception being prisoners who are on day release to work for not-for-profits like food banks and secondhand furniture and clothing stores. They’re paid by the prison system, however, not the “business”.

      • Vicky32 3.1.2

        “The typical case will be that a person gets a job and doesn’t tell WINZ like they’re meant to, ”
        The problem lies, Bright Red, as you have probably experienced, that if while on UB, you get a job, and tell them “I will be starting work two weeks from now” then WINZ cut the benefit from the day you inform them! (Even if they’re not supposed to do that, and they’re not.)
        But you don’t start work for 2 weeks, and you’re not paid for another 2 weeks after that! So you do as I have done in the past, and tell WINZ only when you have the money in your hand, and they establish a debt even though every cent they paid you for those 4 weeks went in food, clothes and travel to the new job!
        Then the problems really start, when HCNZ accuse you a year later of not having informed them that you were working and want a year’s worth of income-related rent back! (That happened to me, but luckily I was able to prove that I had informed them, that my ‘tenancy manager’ was an incompetent who had lost my file etc.. )
        Starting work can be as big a nightmare as being on UB in the first place!

        • Lanthanide 3.1.2.1

          I am SO glad I have never had to deal with any of that shit. Long may it continue. Nothing aggravates me more than other people failing to do their job and me taking the consequences.

          • TightyRighty 3.1.2.1.1

            you got a typo in there,

            should read “Nothing aggravates me more than other people failing to do a job and me taking the consequences”

            • Colonial Viper 3.1.2.1.1.1

              rather, should read

              “Nothing aggravates me more than National failing to do their job and 170,000 unemployed New Zealanders taking the consequences”

Links to post

Recent Comments

Recent Posts

No feed items found.

  • Minister opens new ecosanctuary at Cape Farewell
    A new ecosanctuary with a predator proof fence on Golden Bay’s Cape Farewell, which will restore a safe home for sea birds, rare native plants, giant snails, and geckos, was officially opened today by the Minister of Conservation Eugenie Sage. “There has been a fantastic community effort supported by the ...
    BeehiveBy beehive.govt.nz
    4 hours ago
  • Pacific partners work together to provide additional support to Australia
    The NZDF continues to support the Australian Defence Force (ADF) as it battles fires in Victoria and New South Wales, including by transporting Republic of Fiji Military engineers from Nadi to Australia, announced Defence Minister Ron Mark. On Saturday morning a NZDF Boeing 757 will depart New Zealand to uplift ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Kaikōura $10.88 million boost in tourism & business
    The Provincial Growth Fund (PGF) is investing $10.88 million to boost business and tourism opportunities in Kaikōura, Parliamentary Undersecretary for Regional Economic Development, Fletcher Tabuteau announced today. As part of the Kaikōura Marina Development Programme, the following two projects will receive PGF funding: A $9.88 million investment to begin the ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Govt accounts in surplus, debt remains low
    The Government’s books are in good shape with the accounts in surplus and expenses close to forecast, Finance Minister Grant Robertson says. The Treasury today released the Crown accounts for the five months to November. The operating balance before gains and losses (OBEGAL) was above forecast by $0.7 billion resulting ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Auckland focus for first Police graduation of 2020
    The number of Police on the Auckland frontline is increasing with the graduation today of a special locally-trained wing of new constables. Police Minister Stuart Nash says the graduation of eighteen officers from Recruit Wing 333-5 means that more than 1900 new Police have been deployed since the Coalition Government ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Wairarapa gets $7.11m PGF water boost
    The Provincial Growth Fund is putting $7.11 million into creating a sustainable water supply for Wairarapa, Parliamentary Under-Secretary for Regional Economic Development Fletcher Tabuteau announced today. The following two projects will receive Provincial Growth Fund (PGF) funding: A $7 million investment in Wairarapa Water Limited for the pre-construction development of ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Progress with new Police station in Mahia
    Community safety and crime prevention in the East Coast community of Mahia has moved forward with the opening of a new Police station to serve the growing coastal settlement. Police Minister Stuart Nash has officially opened the new station, which was relocated almost 20 kilometres along the coast from the nearby ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Plans to protect the future of whitebaiting announced
    With several native whitebait species in decline the Minister of Conservation Eugenie Sage has today released proposals to standardise and improve management of whitebait across New Zealand. “The need for action for a healthy whitebait fishery has never been greater,” Eugenie Sage said.  “Four of the six whitebait species are ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • New resource for schools to increase awareness and understanding of climate change
    A new Ministry of Education resource available for schools in 2020 will increase awareness and understanding of climate change, Education Minister Chris Hipkins said today. “The resource, Climate Change – prepare today, live well tomorrow, will help students understand the effects of climate change at a local, national and global ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Getting more out of our most productive firms
    Finance Minister Grant Robertson has approved the terms of reference for an Inquiry into the economic contribution of New Zealand's frontier firms. Frontier firms are the most productive firms in the domestic economy within their own industry. “These firms are important as they diffuse new technologies and business practices into ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • NZDF sends more support to Australia
    The New Zealand Defence Force (NZDF) is sending an Environmental Health Team, a Primary Health Care Team and a Chaplain to Australia, boosting New Zealand support for the Australian Defence Force (ADF) as it battles bush fires in Victoria and New South Wales, Defence Minister Ron Mark announced today. The ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • New Zealand joins partners in calling for full investigation into air crash in Iran
    Acting Prime Minister and Minister of Foreign Affairs Rt Hon Winston Peters says that developments suggesting a surface-to-air missile is responsible for the downing of the Ukrainian International Airlines flight in Iran is disastrous news. “New Zealand offers its deepest sympathies to the families of the 176 victims. It is ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Staying connected to Australian agriculture
    Agriculture Minister, Damien O’Connor, says the Ministry for Primary Industries is continuing to stay connected to federal authorities in Australia as devastating fires affect the country.  “The Ministry is using an existing trans-Tasman forum for discussions on the agricultural impact of the fires and the future recovery phase,” says Damien ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Investment in schools – a commitment to communities
    Thousands of school-age children, their teachers and wider communities are benefiting from the Government’s multi-million dollar investment upgrading and renewing schools, Education Minister Chris Hipkins said today. “We want New Zealand to be the best place to be a child and that means learning in warm, comfortable and modern classrooms,” ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • New Zealand Defence Force sends support to Australia
    Minister of Defence Ron Mark today announced New Zealand is sending three Royal New Zealand Air Force NH90 helicopters and crew, and two NZ Army Combat Engineer Sections as well as a command element to support the Australian Defence Force efforts in tackling the Australian fires.  The New Zealand Defence Force ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Better access to books for blind and low vision citizens on World Braille Day
    "Today is World Braille Day and I am delighted to announce that an international treaty giving blind and low vision New Zealanders access to books and literary works comes into force today,” Minister for Disability Issues Carmel Sepuloni announced today. “Today the Marrakesh Treaty and the associated amendments to the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand to send further firefighter support to Australia
    The New Zealand Government is sending a further 22 firefighters to help fight the Australian fires. “The devastation caused by these fires is taking a substantial toll on our Australian neighbours and we will continue to do what we can to assist as they deal with this extremely dynamic, dangerous ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Reducing the cost of education
    Twenty-two more schools have opted into the Government’s policy of providing $150 per child to schools who don’t ask parents for donations– bringing the total number of schools in the policy to 1,585. The Ministry of Education has accepted late opt ins past the November 14 deadline from schools that ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Road deaths lower in 2019, but still more work to do
    “As we enter the new decade, my thoughts are with the families, friends and communities of the 353 people who lost their lives in road crashes last year. While the number of deaths is lower than in 2018 (377), this is still a staggering loss of life,” Duty Minister Iain ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • PM congratulates New Year 2020 Honours recipients
    Prime Minister Jacinda Ardern has congratulated the diverse group of New Zealanders recognised for their contributions to the country and their communities in the New Year 2020 Honours List.   The list of 180 honours recipients includes three Dames and three Knights Companion of the New Zealand Order of Merit, ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Justice Minister congratulates first Māori Supreme Court judge on New Year’s Honour
    Justice Minister Andrew Little has congratulated The Honourable Justice Joe Williams for receiving a knighthood for services to the state. Sir Joe Williams has been appointed as a Knight Companion of the New Zealand Order of Merit in the New Year 2020 Honours List. “Sir Joe Williams has made an ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • New Year honours for top sportspeople
    Twenty-one of New Zealand’s top sportspeople, coaches and leaders in the sporting community have been recognised in the New Year 2020 Honours List. The Silver Ferns coach Noeline Taurua has been made a Dame Companion and the former All Blacks Steve Hansen has been made a Knight Companion of the ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Leading architect of Zero Carbon Bill honoured
    It’s great to see ordinary New Zealanders doing extraordinary things, Minister for Climate Change James Shaw today said in response to the news that Lisa McLaren is included in the New Year 2020 Honours List for her exceptional work leading the campaign for the Zero Carbon Bill. Lisa McLaren was ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Social entrepreneurs and innovation leads Pacific contribution
    Minister for Pacific Peoples Aupito William Sio says the New Year 2020 Honours List highlights the valuable contribution Pacific social entrepreneurs and innovators make to New Zealand, the Pacific region and the world. “The standout common factor that underlines their contribution to Aotearoa is the value they place in their ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Service to birds and bush recognised in New Year Honours
    Decades of dedication to Aotearoa’s unique birds, landscapes, and native eels is recognised in the New Year 2020 Honours List said Minister of Conservation Eugenie Sage. “I’m delighted that the decades of dedication to conservation, and fantastic leadership in giving nature a helping hand is being acknowledged,” said Eugenie Sage. ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Closer Economic Partnership with Singapore comes into force on 1 January
    New Zealanders will start to see the benefits of the upgraded Closer Economic Partnership (CEP) with Singapore from 1 January 2020, when the agreement comes into force. Minister for Trade and Export Growth David Parker said the agreement would open more opportunities for New Zealand companies looking to do business with ...
    BeehiveBy beehive.govt.nz
    3 weeks ago