Changing the culture of contracting: funding for outcomes.

• Author: Pomeroy, Ann
• Position: Company overview

Abstract

Funding for Outcomes (FfO) is a new approach to contracting that enables holistic services funded by several government agencies to be specified in one contract. Whereas traditional contracts reward providers' effort, integrated contracts focus on achievement--the impact of service delivery and how services contribute to improving outcomes for clients. The project has, in the words of providers interviewed for the FfO project evaluation, "changed the culture of contracting" in New Zealand. The evaluation showed a general belief amongst participants that integrated contracts have introduced a range of improvements, including providers spending more time on service development and having an improved capacity to provide high-quality holistic services, meet client needs and operate more effectively. Reports are more relevant and can be used to examine the effectiveness of policy underlying government investment in services. The new approach is involving funders and providers, often for the first time, in collective contract negotiation and requires the building of strong relationships with all the parties. This gives providers a better understanding of funders' requirements and funders a better understanding of the complete service being undertaken by the provider.

INTRODUCTION

The Funding for Outcomes (FfO) project arose as one response to the findings of the Community and Voluntary Sector Working Party in 2001. The Working Party identified major issues that needed to be addressed to improve the way that the government funds and enters into contracts with community, iwi and Maori organisations. These issues included the complex reporting requirements set by government agencies, the "siloed" approach to contracting taken by these agencies, and the inability of providers to influence contract terms.

FfO was established in 2003 as a mechanism for government agencies to collaborate in contracting with community organisations and, as a consequence, to reduce contract compliance costs for providers. It is changing the culture of government contracting with not-for-profit social service providers in New Zealand.

BACKGROUND

Interdepartmental work on contracting with non-government organisations (NGOs) that began in 1997 had noted that government's segregated approach to contracting was counterproductive in delivering services to clients with complex and multiple needs. An interdepartmental committee tackling this problem in 1999 developed a programme Best Practices in Funding. This aimed to improve interdepartmental collaboration and reduce compliance costs for providers by:

* standardising and simplifying contract and grant application documentation

* sharing capability assessments and information between funders, and

* adopting a "lead funder" approach.

Grant application forms were standardised and made available via the internet.

A first attempt was made at developing an integrated contract in 1999 with a provider delivering a wraparound (holistic) service (2) to clients with complex and multiple needs. Unfortunately, as the evaluation (Ministry of Social Policy 2001) of this pioneering attempt reveals, the contract that emerged was a compendium of the existing siloed contracts, was not simplified, and did not reflect the integrated service being delivered by the provider.

The "lead funder" approach (where one funder managed the contract on behalf of all other funders) was trialled in 1999-2001 and proved unworkable as no one government agency had the technical expertise and knowledge to advise the provider on all aspects of another government agency's business, and accountability needed to stay with the funding source.

Intermittent attempts were made to share capability assessments and information between funders during the same period, but there was no structure in place to normalise and embed this approach and so enable the available funding to be used as effectively and efficiently as possible.

In April 2003 the State Services Commission and Ministry of Social Development (MSD) jointly released a report on their integrated service delivery programme called Progress Report on Integrated Service Delivery Programme (Mosaics). The programme was part of a set of initiatives under the Review of the Centre that began in 2000 as a comprehensive analysis of the strengths and weaknesses of the public sector and included ongoing work to lift the performance of the public service. The Review of the Centre focused on "circuit breaker" problems--finding new ways of working to resolve specific problems in service delivery, regional coordination including removing barriers to collaboration, and enhancing evaluation of public service performance to assist in achieving desired results.

Also in 2003, Treasury released its Guidelines for Contracting with Non-Government Organisations for Services Sought by the Crown. This document brought more uniformity to contracting practices and dispelled common myths about what was allowable in social service contracts between government and service providers (for example, contracts could be made for three or more years not just one year as many government officials then thought).

Against this background, MSD was asked to lead a "whole of government" approach to address the Government's concerns about the way government departments and agencies were contracting with non-government organisations for services sought by the Crown.

THE FUNDING FOR OUTCOMES PROJECT

In late 2003, the FfO project was established to:

* speed up progress in developing and implementing a more integrated approach to government contracting with NGOs

* reduce compliance costs for service providers

* identify success factors in achieving improved funding practices between multiple government funders and providers beyond the life of the project.

In brief, the FfO project responded to the Ministers' directive by, first, formalising a collaborative approach through the legally mandated platform of an integrated contract. Second, the project shifted the focus of these contracts from outputs to outcomes. Because all government agencies seek the same high-level, long-term outcome for clients, multiple government agencies can use the mechanism of a single integrated contract to collectively fund each provider. Likewise, each provider can use the integrated contract to describe, deliver and report on either a holistic wraparound service for...