Improving Public Sector performance in Queensland (2005)

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Introduction +

A Service Delivery and Performance Commission (SDPC) has been established to search for, and eliminate, waste in Queensland state departments and commercialized agencies [1]. This arose from efforts to find ways to finance increased spending on public hospitals.

It was suggested that the SDPC would conduct reviews and identify any cost savings, waste or inefficiencies and eventually save $150m pa. It would start by considering whether a range of commercial business functions should be undertaken by the private sector [1].

This document will basically suggest that the SDPC proposal will prove an inefficient mechanism for eliminating inefficiency, and is in fact symptomatic of the inward-focused central-government obsession with cost saving and mechanical efficiency and the limited ability to provide wise advice about what government should actually be doing, that seem to be primary causes of ineffective resource usage in the public sector.

Qualification: The comments in this section are based on information available to the author from public sources, direct observation and informal reports from various others.  There does not appear to be any publicly accessible formal study of the effectiveness of governmental machinery.


Reactions to the proposal for an efficiency audit were that:

  • the Public Service is already very efficient (according to unions) [1];
  • the initiative was welcome - though it was overdue and the savings target was too small (according to Commerce Queensland) [1];
  • the SDPC was not truly independent, its conclusions would be obscured by FOI laws, the savings target was too small (given the large increase in size of bureaucracy [1]) and government lacked the will to achieve savings (according to the Opposition) [1];
  • establishment of SDPC suggests that Public Service will be hacked down to size. Many issues raised by  Queensland Commission of Audit in the 1990s remain relevant. SDPC is overdue because (a) temporary audit bodies achieve little (b) Fitzgerald reform process needs re-igniting (c) existing bodies such as OPSME and Auditor General need back-up (d) external reviews can achieve little due to lack of inside knowledge. As a permanent body SDPC can overcome these problems. Its location in Premier's Department shows a close connection to power. Its establishment reinforces trend towards centralization of power - which may allow needed reforms, but presents risks [1]

Evidence of a Problem

There is almost certainly waste and inefficiency in Queensland's Public Service, and thus potential for increased productivity and savings.

Poor resource usage seems likely because:

  • public administration seems dysfunctional and crisis ridden  as outlined in The Growing Case for a Professional Public Service. This refers to many areas where public functions show signs of failing. 'Candidates' for future crises have also been suggested (eg in: mental health [1]; guardianship [1, 2]; railways [1]; public works [1]; prisons [1, 2]; water [1, 2, 3, 4, 5]; education [1]; and social services [1]);
  • in areas where overt crises have already occurred (eg child protection and public hospitals) the adopted solution involved simply spending large amounts to increase the scale of operations when less expensive (but more technically challenging) alternatives seemed to be available [but institutionally impossible to action?]. Furthermore despite the very large increase in funding that were seen as the solution to the child protection crisis, by late 2005 the system was again seen  to be on the verge of being under-funded [1]. Throwing money at the problem was seen as an unsustainable option in relation to public hospitals [1];
  • policies options adopted in other areas also show signs of favouring substantial spending over more technically challenging options. For example:
    • in proposals for expansion of prison facilities in SE Queensland, it has been suggested (with unknown credibility) that alternative and cheaper policy options would be more effective [1];
    • 'mega project' solutions to infrastructure backlogs in SE Queensland are emerging which have been argued to be (probably) less effective and more costly than a series of smaller initiatives [1]. The latter would only be possible if many public agencies were effective and able to work together in an integrated way;
    • various major policies (eg the Smart State initiatives) seem to involve methods for achieving their presumably-desirable goals which are anything but compatible with Queensland's 'Smart State' rhetoric.
    • proposals for dealing with SEQ's water supply needs were seen to be biased towards concrete projects that could be announced, though other options appeared to be better [1]
  • cost blowouts have reportedly occurred in infrastructure investment. For example something like 30% blowouts are reportedly occurring in some projects in 2005 [1] because of construction capacity constraints and the combined effect of resources boom and huge increases in the rate of state infrastructure spending. An additional $2bn was committed to infrastructure in the 2005-06 mini-budget, on top of an earlier $8bn commitment for 2005-06 (which was a 30% increase on 2004-05; itself a 20% increase on 2003-04). There is no reason to expect that Queensland would avoid problems (eg rising costs, lengthening delays) which are suspected in Victoria due to trying to manage record infrastructure programs in the face of loss of specialist skills and intense competition for skills [1]. It has been suggested that, despite very large expenditures over 7 years Victoria has achieved little in terms of improving infrastructure / services because of bad management .[1];
  • despite large spending increases in recent years there seems to be a significant gap between spending needs and what is being achieved in many areas (see Underlying Pressure for Increased State Taxation) [This could reflect either (a) ineffective resource use or (b) legacy spending requirements that were greater than the actual spending increases]
  • research undertaken for Commerce Queensland suggests potential for savings [1, 2].

Source of Problems

Institutional Problems

Unfortunately ineffective and inefficient resource usage is built into the machinery of government that has evolved in Queensland. It can not be eliminated by mere cost-cutting initiatives.

In fact Queensland's Public Service already seems to be subjected to many processes intended to promote cost saving - presumably because the present state government has sought ways to fund its many new, but not always well conceived, programs.

For example:

  • there have at times been requirements for an annual 'efficiency dividend' such as has now been proposed again [1] as 'Public Sector Savings Targets' [1];

  • an Implementation Unit was established in the Premier's Department to force agencies to perform [1];

  • some functions have been commercialized to promote efficiency through exposing them to competition;

  • senior staff have been offered bonuses for finding savings;

  • one observer suggested that the state budget process involves strict controls over expenditures by Treasury and the Cabinet Budget Committee, and agencies have limited say in relation to funding the activities they undertake [1];

  • a 'shared services' initiative has sought to consolidate corporate services (ie human resources; finance; document and records management; property and facilities management; corporate systems) across all agencies to get economies of scale, improve cost transparency and consolidate information systems [1, 2]. This would presumably have already encompassed many of the function in which administrative 'fat' might have been expected to be found by the SDPC

However such methods to promote efficiency do not work well. In fact some can be counter-productive.

For example:

  • the Implementation Unit to strictly enforce centralized decisions presumably further impedes the staff initiative on which productivity improvement ultimately depends (see Queensland's Administrative Desperation Unit);
  • commercialization results in an at-times damaging obsession with cost cutting, because 'productivity' gains have to be demonstrated in financial terms even though there are political constraints on shifting to functions for which customers would be willing to pay more. A cost-cutting culture was seen to be part of the cause in serious operational failures in Queensland Health and Energex. In particular, an obsession with saving money was seen to have contributed to making Queensland's health system Australia's worst [1];
  • simple attempts to contain costs may be dysfunctional because increases may merely reflect the increased benefits associated with a function [1]. For example Australia now spends more on computers than it did 40 years ago, and a policy directed to containing spending on computers would not be constructive.
  • bonuses for savings allegedly encourage some senior public servants to propose spending cuts on activities required for long term viability whose consequences will not be obvious before they move on to higher positions elsewhere (personal communication);
  • the 'shared services' initiative (which has been underway since late 2003) has consolidated most corporate services functions of state agencies into the Premier's Department [1]. This: failed to prevent / or contributed to a situation in which Queensland Health's administrative machinery was seen in late 2005 to resemble a clump of spaghetti with dozens of disjointed strands [1]; failed in one area to produce envisaged savings [1]; and was seen to compromise the independence required by various entities whose role is to counterbalance the Executive within Queensland's system of government [1]. Moreover parallel efforts to develop integrated ICT services reportedly resulted in 'one size fits all' services that did not suit the requirements of specialized agencies (personal communication);
  • when a 'razor gang' imposed staff and budget ceilings in the federal government the outcome (as described by one experienced observer) was that:
    • junior staff would be sacked every time an appointment was made at a senior level - resulting eventually in organizations that were 'all chiefs and no indians'
    • travel and meetings would be eliminated so that staff actually did no work and got out of touch with everybody and everything.
Moreover, even if some waste is being identified and eliminated, there is nothing to stop overall resource usage from becoming more and more wasteful. This can happen because new policy initiatives will use resources inefficiently and ineffectively if the mainstream mechanisms for making decisions and implementing programs are seriously defective .

While the effectiveness of the latter machinery (eg mechanisms such as those related to cabinet, agency management and planning and the state budget) has not been systematically studied the 'clump of spaghetti' analogy that was applied to Queensland Health [1] seems applicable to administrative machinery as a whole. That machinery has been arranged to increase centralized accountability, even though attempts to enforce prescriptive central control of complex functions inevitably reduce scope for initiative and increase costs (just as regulatory 'red tape' does for business).

In the first place federal financial imbalances (under which the federal government gains most revenue and states have most spending responsibility) have encouraged increasing attempts at centralized control (especially since the 1970s). This has made it almost impossible for states to effectively act in their nominal areas of responsibility because of:

  • financial uncertainty;
  • an enforced emphasis on lobbying; and
  • the resulting shift of power from those with technical expertise to central agencies concerned mainly with 'finance'.

Duplication, buck passing and complexity has been the major result.

At the state level, government machinery has gained an increasing tendency to generate ineffective and inefficient resource usage because of unbalanced 'reform' of Queensland's system of public administration over the past 15 years. For example:

  • the Fitzgerald commission advocated increasing political accountability - but took no account of the need to simultaneously increase scope for decentralized initiative in addressing complex real-world challenges (see Toward Good Government in Queensland). The assumption that Queensland's political system could be reformed without careful management of the impact which this would have on other aspects of public administration was extremely foolish (see 'Unjust laws an abuse of power');
  • a simultaneous desire to make the Public Service more politically 'responsive' resulted in legislative elimination of any requirement to seriously consider professional competence in making senior Public Service appointments (see Ombudsman's reasons), so people with at-times limited understanding of what they were dealing with were put in charge of government machinery and program implementation.

The highly centralized state machinery that has now emerged is quite different to traditional reliance on experienced professionals to know and generally do the 'right thing' and seems to suffer many practical defects.

For example:

  • the system of government established by the Goss Government  was described as the most complex in the Western world [1]. In 2003 this was seen to require scaling back because the resulting 'red tape' made government ineffective [1]. However arrangements set up under the Goss government remain the basis of Queensland's administrative machinery (see Queensland's Worst Government);
  • many operational arrangements within government seem to be defective. For example:
    • machinery for planning and development of infrastructure is unworkable (see also Middle Management from the Top);
    • cabinet processes are complex and time consuming, and prevent access to information that staff need to be aware of what is going on;  
    • central government agencies (whose emphasis should be on broad question of policy - ie where to go and how to get there) have taken on corporate services functions for government as a whole [1] and supported the Cabinet Budget Committee in exercising very detailed control over agency budgets [1];
    • centralized strategic planning procedures linked to the budget are almost guaranteed to produce unrealistic policy / program proposals;
    • some mechanisms that are intended to promote efficiency and effectiveness appear to have been misinterpreted and transformed into sources of administrative complexity and cost. For example:
      • quality management processes, which work well if they enable front-line staff to evaluate options for improvement, have apparently been implemented by centrally developing a set of criteria which are said to ensure 'quality' if they are met;
      • enterprise bargaining procedures / contract employment seem to place significant power over agency's strategic directions by default in the hands of HRM staffs who have no basis for making realistic judgments about such matters;
      • inappropriate methods to value Public Service positions may have forced substantial increases in staff numbers in general governance functions (see below);
      • attempts have been made to drive planning for SE Queensland through budget-linked machinery for regional planning in SE Queensland - an arrangement which is incompatible with effective functional management;
  • a culture of bullying and concealment (like that revealed by inquiries into Queensland Health) appears to be pervasive in many areas of government. This results in ineffective operations and reduced real control by the elected government. How such a culture can emerge from the politicisation of public agencies is explored in Intended Submission to Health System Royal Commission;

In addition to eroding the practical skill base and experience of the Public Service and making the process of administrative decision making too centralized to be realistic, attempts were made to make government agencies operate 'commercially' so as to achieve what was perceived to be business-like efficiency. This reflected a failure to appreciate that the functions of government are intrinsically unlike those business is involved in (see The Decay of Australian Public Administration).

Briefly: Commercial methods are useful for managing the 'production of things' that are coordinated through market mechanisms, but the primary role of government is to manage the 'relationship between things' that can't be properly coordinated through any market.

Example: The adverse effect on efficiency of business-like methods can be illustrated by the CED (Cullen, Eagen and Dell) scheme adopted for evaluating Public Service positions. If one assumed that 'production of things' is the key role of an organization, then the value of line positions will reasonably be assessed by the number of staff reporting to the position. However if the key role is coordinating the 'relationship between things' then one ideally has a small number of staff some of whom are highly expert. Under the CED scheme positions were (at least initially) evaluated giving most priority to numbers of reporting staff - which (while appropriate for functions mainly involving 'production of things') seriously undervalued functions connected with government's core responsibilities. The only way to pay staff enough to compensate them for the complex difficulty of their roles was to make them responsible for large numbers of staff - and the effect of this was to dramatically (a) increase the numbers employed in general governance and (b) reduce the effectiveness of those functions. [Note: This comment is based on advice from an experienced public servant which the author can not personally verify].

The overall effect has been the breakdown of government machinery as recorded above, and the transformation of the public sector into a 'cancer' eating away at the health of Queensland's society as a whole.

SDPC: A Non-solution Eliminating Waste Inefficiently

Unfortunately the establishment of the SDPC is likely to be an inefficient way to identify and eliminate waste and inefficiency.  It seems merely to be a continuation of an compulsive inward-focused obsession with corporate services and cost cutting that has been the substitute for realistic outward-focused policy leadership by Queensland's central government agencies.

In theory the SDPC could target the necessary fundamental changes to Queensland's machinery of government. However it seems extremely unlikely that it will be encouraged to take anything but a short-term 'cost-cutting' view given that:

Thus, noting that one observer expected that the SDPC might have a broader 'priorities review' role [1], a range of outcomes can be expected from the SDPC:

  • no matter what it does, SDPC must fail to achieve cost savings, because poor decisions by defective mainstream government machinery will continue to generate waste and inefficiency faster than the SDPC could cut it.

    • This would be similar to the situation facing the Savage Committee who, in the 1980s, tried to reduce 'red tape' by identifying specific regulations - rather than by looking at the way in which regulation is generated when problems are solved politically. The result was that the few old regulations that were eliminated were swamped by a tidal wave of new 'red tape'.

  • any attempt to play a 'priorities review' role similar to the Queensland Commission of Audit - a role which was broader than mere cost-cutting - would achieve no greater impact. Though the latter body lacked long term influence, there were real difficulties in its core recommendations. Moreover there are fundamental constraints on the ability of central priorities review staffs to generate alternative policy proposals that are consistently seen to be credible and effective, eg:

    • they depend on information from line agencies which will not be volunteered if there is any policy conflict;

    • their information processing / analytical resources must be less than the combined resources of line agencies;

    • being outside the mainstream chain of command, they lack the ability to motivate crucial supportive initiatives.   

  • to the extent that the SDPC duplicates existing mechanisms to promote savings / set priorities (eg those set up by Treasury), it must add to the overall complexity / cost of government;

  • significantly damage could be done to Queensland's public administration (similar to that done in the era of the Public Sector Management Commission) if radical changes based on under-informed guesses about potential savings are implemented in desperation.

Better Solution A Better Solution?

Real productivity gains are less likely to be achieved by short term spending cuts, than by institutional changes which provide more capable ongoing support to elected governments in determining and managing their policies and programs.

Thus in order to make a serious difference to the cost and effectiveness of government in Queensland it is probably necessary to:

  • reform the mainstream machinery for government decision making and program implementation. This is the only way to: eliminate dysfunctional organizational cultures; identify real priorities; and use resources effectively. This would require (for example):

    • restoring professional competence as a serious consideration in Public Service appointments eg as suggested in Renewal of Queensland's Public Service (2000) and Accountability of Queensland's senior public servants (2004). A Public Service which can complement elected government by providing a focus on the practical effectiveness of policy is also a vital part of Australia's democratic system of government (eg see Crushed Independence);

    • creating more realistic government machinery eg that related to: cabinet; agency management and planning; and the state budget. More effective machinery would be likely to build on responsible and experienced staff rather than seeking complex centralized accountability;

    • encouraging civil institutions to recognise the need to provide leadership to the community and more serious inputs for debate by their political representatives. In the absence of effective civil institutions, the electorate can easily be 'conned' by trendy populists;

    • adopting a 'build-on-what-works' change process similar to that used with reasonable success in Queensland's public sector in the 1970s (see Outline of Changing the Queensland Public Sector) rather than a 'tear-it-all-down-and-start-again' method like that used in the 1990s (see Queensland's Worst Government).
  • review policies to see whether goals might be achieved more effectively in different ways. Changing the nature of what government does (which requires leading-edge, substantive policy knowledge) is likely to result in the most useful savings.

Second-best Options Second-best Alternatives?

In the event that reform of mainstream government machinery proves impossible then winding-down direct state involvement in service delivery (and reliance on privately provided services) would be an alternative.

However in considering the option of 'demolishing' government service delivery operations, it needs to be recognized that they tend to be in functions that are subject to real market failures which do not correct themselves through natural development of the economy (ie to involve functions subject to large externalities; or be natural monopolies; or be affected by particular public policy priorities such equity issues in education).

Australia's democratic capitalist system of political economy is effective partly because the representative political process allows 'public' goods and services to be provided, and is also able to alter 'free market' outcomes that would otherwise result in politically-destabilizing social stresses.

Even though service delivery in a political environment creates difficulties, government service delivery was obviously felt at one stage to be the best option for some functions. It is understood that large scale private provision of 'public functions' led to serious abuses in Britain in the 19th century (eg patronage in licensing service providers) and that these abuses were the primary reason for the emergence of the Westminster system which emphasised administration of such functions by a professional civil service.

If the shambles in public administration can not be corrected and major government service delivery roles have to be terminated, it needs to be recognized that alternatives are not problem free.

For example:

  • the concept of private sector production of publicly purchased services (which was suggested by the Queensland Commission of Audit in the 1990s) would be anything but a panacea. For example:
    • this shifts the problem from achieving efficiency within a politically influenced organization to the perhaps harder problem of external contract management in a (potentially) 'snouts in the trough' political environment. Distortions of political systems have arisen from such schemes, eg
      • US military industrial complex - which seems currently to be contributing to the dominance of ineffective / militaristic tactics in the 'war against terror'.  Re-establishing credibility / competence in the US federal government probably now requires a reform similar to the Westminster system.
      • Japan's 'construction state';
      • a risk to the whole financial system that is feared through two private (but government sponsored) companies in the US which provide mortgage insurance, whose lobbying prevented regulators exposing dubious accounting practices to benefit management [1]);
      • the control which major pharmaceutical companies seem to have gained over the process of defining diseases, which is manipulated for their own profits - eg by 'creating' new disease conditions or changing the numbers at which diseases are considered [1].
    • it appears to be very difficult to define requirements for very complex services sufficiently clearly under purchaser-provider models to (a) avoid expensive claims for extras and (b) deal with changing needs and technologies;
    • divorcing public officials from the need to deal with practical aspects of programs could make them more likely to propose less realistic options for dealing with the core functions of government

  • Public-Private Partnerships have been regarded as a way of resolving some problems - but this mechanism also is subject to severe limitations (see Public-Private Partnerships for Infrastructure).

    For example: market failures create complexities in managing assets that translate into large overhead costs on PPP contract management; government's ability to operate effectively may be undermined (eg by loss of competencies; corruption); and it may become impossible to manage infrastructure systems as a whole.

  • there seem to be areas where problems are now arising from trivializing market failures, such as:
    • transport systems need to be managed in an integrated way and the creation of privately owned components (eg toll roads / tunnels) can distort the system as a whole - as is being discovered in Sydney and Melbourne. Email interchange with members of the Brisbane City Council who are proposing the development of privately funded tunnels in Brisbane, strongly suggest that those involved are doing this with a narrow (single project) focus and without any evaluation of the broader effect of what they are doing;
    • electricity generation has been described as a function which needs to be a government responsibility because it is not in any private investor's interest to provide peak-load / spare generating capacity. It is more profitable (for an essential service that customers demand no matter what) for such investors to plan for black-out / brown-outs during peak load periods because this escalates wholesale electricity prices. This has apparently caused serious problems in the US, and in Adelaide [1]. It is an issue that is also impacting on Queensland's electricity industry;
    • natural monopolies (eg ownership of a port) provide opportunities for monopoly profits at the expense of users. Thus price regulation is needed, and there is no satisfactory method for regulatory price fixing - as shown by the problems at Dalrymple Bay (where the state government privatized a monopoly asset);
    • Telstra (which is in the process of privatisation) appears likely to move away from pricing the telecommunication networks it controls as common user utilities towards exploiting its monopoly position [1]

    • there seem to be problems related to Telstra's ownership of common-user communication assets (eg Telstra's concern about adequate returns; others' concerns about overcharging; and regulation to achieve 'balance' and other goals which has impeded the apparently desirable expansion of broadband services);

    • It is difficult to meet demand for broadband as those who provide infrastructure may not be able to capture a return. This did not arise when telecommunications was a public monopoly and infrastructure could be developed in the public interest [1];

    • there is concern about private airport owners exploiting their monopoly positions [1]

  • because of increased real-world complexity (ie interconnection of issues) areas of market failures are likely to be increasing rather than decreasing. Environmental issues are one obvious source on increased failure by pure 'free markets';
    • difficulties appear likely to emerge from privatizing assets subject to market failures such as NSW Government's attempt to sell its share of Snowy Hydro has been seen as likely to sabotage 10 year environmental plan to restore river flows [1]
  • equity issues are also significant. One of the corollaries of market liberalization reforms in Australia in recent years has been a substantial growth in government transfer payments to those who have not prospered in order to 'buy' political support for the reforms. Free markets do not necessarily ensure equity - because much economic success / failure reflects not only effort but also initial advantages / disadvantages and environmental circumstances.  Equity clearly is significant in relation to health and education services - which will thus remain major areas of public sector spending.

The overall conclusion from the above is that large scale private involvement in the delivery of 'public' goods and services will inevitably lead to difficulties in achieving desirable public policy outcomes, and may not even yield cost savings because of complex parallel arrangements needed to meet those policy goals in other ways.