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Open up budget bids to NGOs, private sector for high impact projects, ProdCom says

Friday 17th August 2018

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The government should let community organisations and private firms bid directly to the Treasury to offer programmes likely to deliver a significant impact, the Productivity Commission says. 

Non-government providers, the private sector and customers are often a source of new ways to improve public service delivery but can find it difficult to influence Crown agencies, "especially when public service cultures are hostile or unreceptive", the commission says. To overcome that, it recommends a limited mechanism be set up for non-government entities to make budget bids for high-impact initiatives directly to the Treasury and minister. 

"These priority areas or outcomes could be set by Cabinet at the start of each budget round and communicated publicly," the report said. "The higher expectations regarding data use and evidence for new high-impact initiative proposals outlined above should help manage demand." 

The recommendation is among those put forward to encourage greater innovation and introduce more robust measurements as a means to lift state sector productivity. The inquiry's final report, tabled in Parliament today, said the budget rounds offer few incentives for the public sector to lift productivity due to the prevalence of volume- and input-based funding. 

The commission recommended agencies make greater use of data, analytics and investment models during the bidding round. They should also set aside a pool of funding "dedicated to agency proposals that have a high probability of making a significant impact on well-being", the commission said, citing the previous administration's social investment plans in the 2017 budget as an example. 

The Labour-led government is in the process of a national consultation on social wellbeing investment, overlaying a qualitative element to the data-driven investment framework. The previous administration's social investment programme used an actuarial approach to determine the long-term liability of various social problems to then target spending to reduce that cost. It drew criticism from social agencies because it linked funding to the sharing of data.

The Productivity Commission was asked to offer guidance and make recommendations on measuring and improving productivity in public services, especially education, health, justice and social services. Alongside the formal report it also published a guide for government agencies on how to measure productivity. 

Chair Murray Sherwin said in a statement many government agencies lack the culture, capability and encouragement to deliver better public services, and typically rely on "hiring more people" when faced with growing demand for services.

"That strategy is not sustainable,” Sherwin said. "The government’s budget system tends to reinforce ‘business-as-usual’ activities instead of new and innovative approaches."

The report comes as Statistics New Zealand and the Treasury have been tasked with developing new measurements to encompass how well-being is defined and measured. From next year, Finance Minister Grant Robertson will start matching government aspirations to a series of alternative measures capturing the environment, social outcomes, and human capital alongside the traditional fiscal and economic framework. 

The commission's other recommendations include the State Services Commission redesigning processes for expressing ministerial expectations as a means of improving productivity, and for the commissioner to make clear to public sector chiefs of the need to measure productivity. 

The Treasury was also recommended to publish spending on core public services to ensure regular reporting. Core public departments were also encouraged to review funding models and embrace output-based systems. 


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