What is Commissioning?

What is Commissioning

Given the complexity in government service delivery, especially via competitive forms of letting, we have asked our procurement and contracting expert Tony Butler to discuss what commissioning, outsourcing and procurement is and the differences.

This is not a question where there is a settled universally accepted answer, as there is an ongoing debate about precisely what commissioning is, or ought to be.

The short definition from the Successful Commissioning Toolkit published by the National Audit Office (NAO) in the UK is a helpful starting point:

The cyclical process by which public bodies assess the needs of people in an area, determine priorities, design and source appropriate services, and monitor and evaluate their performance.

Commissioning is an approach to deliver public services in ways that will best produce the targeted outcomes of related public policies. It focuses on service delivery:

  • through the most appropriate service providers, drawn from the public sector, the private sector, or “third sector” entities such as community organisations or other not-for-profit bodies;
  • at the level where the services are needed rather than according to how public sector resources may presently be deployed and organised;
  • making use of market mechanisms and disciplines, including exposing public sector providers to contestability tests;
  • to the demonstrable satisfaction of user needs; and,
  • providing public value commensurate with costs.

As commissioning has developed, there has been an ongoing use of the term “strategic commissioning”, for which also there is no settled definition. In this context, it connotes a rigorous focus on targeted policy outcomes and on ensuring that user needs and experiences are principal drivers in the planning, delivery and evaluation of services. But it also appears to be used in some cases to differentiate commissioning from procurement, which some authors represent as transactionally focused and process-bound.

The New South Wales Government, however, has unambiguously defined two categories of commissioning for the purposes of its Commissioning and Contestability Policy:

(a) Strategic commissioning – involves understanding outcomes and pathways, the services the community needs, and whether there is a role for government in providing these services within a service delivery system. It usually requires careful reconsideration of agency funding arrangements to deliver an integrated whole-of-government response.

(b) Service commissioning – involves applying the design and governance principles of commissioning to a service, group of services or activities to create better service integration and community outcomes.

 What is the difference between commissioning and outsourcing?

The short answer is that procurement is an important tool for delivering commissioning, as it is for the support of other government activities and the delivery of other government objectives.

Contracting with third-party suppliers under legally binding contractual terms for the delivery of services is public procurement. But it will also fall within the definition of commissioning if it takes place within a commissioning framework. On the other hand, for example, the outsourcing of business services, such as computing services will not per se fall within the definition of commissioning.

Where procurement occurs in a commissioning framework it will generally be subject to procurement rules.

In summary:

  • Commissioning and procurement are intersecting sets, because commissioning does not necessarily involve outsourcing through procurement, and may determine that in-house service delivery is the preferred course, or that the desired outcome may best be achieved through grants to third parties or subsidies to service providers.
  • Contractual outsourcing by government agencies is procurement, though there may be instances where it is not covered by procurement rules, e.g. because the rules may not apply where one government procures services from another, including from another tier of government.

Who is responsible for commissioning?

Commissioners are the people in public roles who have primary responsibility in commissioning, i.e. the senior office-holders responsible for planning, directing and overseeing the application of commissioning to particular service categories.  This includes managing decommissioning where it’s necessary. Commissioners work within whatever policy framework and rules governments have established for them.

In New South Wales Government Commissioning and Contestability Policy, the role of Commissioner is defined as :

Provides the system governance and stewardship for the commissioning system. The Commissioner is responsible for maintaining the integrity and performance of the system and its integration.

To meet their responsibilities and their objectives Commissioners:

  • oversee engagement with service providers through competitive procurement processes or selective grant programs;
  • create opportunities for service users to choose which providers they will deal with and where it is assessed to provide better outcomes; and,
  • connecting with user communities to focus on their experiences and satisfaction with services

To achieve its ends commissioners must create capabilities and processes for:

  • analysing, verifying and assessing community needs;
  • planning and designing services to meet those needs;
  • ensuring that those needing services have fair access to them;
  • contracting and collaboration with capable service providers to deliver what is needed;
  • fostering and encouraging collaboration and networking among providers where that can add value;
  • funding service delivery in the most appropriate way;
  • market and supplier development, where necessary for improved service delivery.
  • managing performance in the delivery of services and the achievement of the policy outcomes to which they are directed
  • ensuring transparency and accountability
  • governance and stewardship to monitor and adjust delivery for improvement
  • managing decommissioning, where that may become necessary

The creation and integration of elements culminate in the creation of systems for supply management, partly through public organisations and substantially through contracts or other agreements with external parties.

Commissioning in Australia

In Australia commissioning is now established in areas of Commonwealth and state services, notably in relation to health and human services, though not always identified by that name. With the exception of New South Wales, there appears to be no overarching policy defining commissioning’s essential elements or requiring its deployment at either Commonwealth or state and territory level.

In 2016, New South Wales introduced its Government Commissioning and Contestability Policy “to establish a whole-of-government approach to delivering improved service outcomes for NSW citizens”. This includes a definition and set of principles to guide NSW Government agencies in commissioning and contesting services.

It provides for three key roles (in summary):

  • Policy-maker – to determine legislative and policy frameworks, responses required to achieve desired outcomes and commissioner’s funding for purchases/subsidies
  • Commissioner – to provide system governance and stewardship for service delivery.
  • Regulator – to enforce system rules

The policy is complemented by the NSW Government Commissioning and Contestability Practice Guide issued at the same time by the Treasury and the Department of Finance, Services and Innovation.

At the present, the Independent Review of the Australian Public Service (APS) chaired by David Thodey is considering proposing the Commonwealth adopt the New South Wales model. An important document in this context is an ANZOG paper entitled “2030 and beyond: getting the work of government done” prepared for the review panel by Professor Janine O’Flynn and Professor Gary Sturgess.

What are the differences between commissioning and procurement cycles?

The debate on this question may stem from different understandings of terminology. Procurement, as defined in the Australian public sector, comprises the whole cycle activity of acquisition from the definition of needs through to the decision to “make or buy”, sourcing and contract management, to completion and review. Government agencies manage it and are accountable for it within policy and operating frameworks. As in the private sector, there are now many cases where agencies have created the position of Chief Procurement Officers. This reflects the reality that procurement is a strategic enabling activity to facilitate the implementation of policy and effective management through good commercial practice.

Commissioning cycles, as portrayed in the literature, are phased in the same way as procurement cycles and cover much the same ground, even where some elements may not include procurement, e.g. where services are commissioned through government bodies or funded through grants. Commissioning through external parties has a sharp focus on managing contracts or other agreements and supply management, core elements of procurement, to create value for governments and service users through enduring systems.

The skills and practices associated with procurement, are important contributions, e.g. market analysis, requirements definition, sourcing management, category management, market development, supplier development, supplier relationship management, building collaborative relationships, and identifying and managing procurement risks.

Issues in implementation of commissioning

A major issue in the UK is ensuring that Commissioners and their support staff are adequately skilled to deal with the strategic issues such as whether service delivery should be retained within government or outsourced. This requires not only good knowledge of government policy and procurement rules but also business experience, skills and acumen.

One avenue through which the UK has addressed this is the creation of the Government Commercial Function which provides guidance and support to all departments. It is headed by the Government Chief Commercial Officer and operates as a distributed cross-government network.

The Outsourcing Playbook, published in February 2019, includes new rules relating to the following matters:

  1. Publication of Commercial Pipelines (Planned procurements)
  2. Market Health and Capability Assessments
  3. Project Validation Assurance Reviews (PVRs)
  4. Make versus Buy assessments
  5. “Should Cost” Modelling
  6. Requirement for Pilots (where services are being outsourced for the first time)
  7. Key Performance Indicators
  8. Risk Allocation
  9. Pricing and payment mechanisms
  10. Assessing the Economic and Financial Standing of Suppliers
  11. Resolution Planning (for continuity of service in the event of supplier insolvency).

The Playbook is directed to the needs of three categories of personnel that are responsible for the planning and delivery of outsourcing projects: Commercial, Finance and Project professionals.

In March the UK think tank Reform published a report Procure Responsibly, the state of public service commissioning presenting a detailed commentary on commissioning, including the Playbook. It paints an interesting picture from an outside perspective and commending Government initiatives, including the Outsourcing Playbook, but arguing that there is more to be done in the following cases:

  • The commissioning and commercial skills of local authorities and central government can vary greatly, resulting in contracts which fail to deliver value for money or improve outcomes.
  • Not enough attention is paid to the ‘make or buy’ element of the commissioning cycle, resulting in the outsourcing of public services which should not be contracted for.
  • Similarly, not enough emphasis is placed on contract management, increasing the risks that come with insufficient monitoring and evaluation.
  • Existing guidance can often be conflicting or confusing to commissioners. New considerations, such as social value or a shift to outcomes-based commissioning, only further add to the burdens on commissioning staff.
  • Most notable is the problem of upskilling commissioners and procurement teams with the necessary commercial skills and expertise to effectively design and acquire value-for-money services that work for the citizens.
  • A consistent approach to transparency and accountability is important. Commissioners should know exactly what they are required to publish around the commissioning process, and greater emphasis needs to be placed on ensuring their decision-making process and the effectiveness of their commissioning is made clear.

These documents are evidence of the sensitivity and complexity of the commissioning universe and the potential scope and scale of resources and effort that will be required as commissioning becomes a more salient feature in public service delivery in Australia at both Commonwealth and state levels.