You will recall that the service competition policy was announced in the June 1995 Financial Statement by the Treasurer, the Honourable Michael Egan. The Government is committed to pursuing the policy in order to deliver better value for money and better services.

The purpose of this memorandum is to summarise the key points of the policy. The Director-General of the Premier's Department is writing separately in greater detail to Chief Executive Officers.

The policy is directed particularly at budget-sector agencies. Other agencies should ensure that similar strategies are considered in their business planning.

In brief, service competition policy harnesses competitive forces to drive perfommance improvement and is one of a range of tools available to public sector managers. It involves identifying and market testing suitable activities currently performed in-house and, where there are clear benefits in doing so, contracting with other parties to provide the services.

Implementation

All Government agencies are to undertake market testing and contracting reviews as part of their formal business planning.

Contracting is not compulsory. However, as an incentive to pursue suitable opportunities, agencies making real savings through market testing and/or contracting will be allowed to retain those savings for core priority services.

Progress will be monitored by the Premier's Department through an annual survey and post implementation audits.

In-house providers will be given every opportunity to compete on an equal footing with external contractors. As well, preference amongst private sector proposals received will be given to proposals that provide employment opportunities for existing staff, subject to other requirements being met.

The Premier's Department will act as a research and information provider to assist agencies in planning their market testing and contracting initiatives.

The selection of activities for opening to competitive tender will be a matter for the CEO, Minister or Cabinet, as appropriate to the strategic implications in each case.

It is essential that processes be sound, particularly in relation to the rigour of analyses undertaken, timely consultation with staff, competitive neutrality and impartiality in tender processes and the application of well developed skills in specification development, contract negotiation and contract management.

Ministers are asked to ensure that the policy is applied appropriately within their portfolios.

Bob Carr
Premier