One survey participant noted: 'A bit of a narrative has developed that the only way the private sector makes savings is by cutting terms and conditions.' This is a longstanding problem for the industry: the author can remember senior civil servants and union officials making the same comment more than a decade ago. Another survey participant thought that 'Contracting is seen as a zero-sum game - industry needs to demonstrate that it can be win-win'. Another suggested that 'Government doesn't understand management'.
The industry could make a contribution to the understanding of the public service economy, in government and in the wider community, by using real-world case studies to explain the difference that good management makes in delivering more efficient and effective services.
One of the best examples of this was a study undertaken some years ago by a team of economists, of a vehicle maintenance and warehousing contract at a New Zealand Army base. The research began while the contract was still being phased-in, and the authors were allowed unprecedented access to management information and decision-making processes, including (for example) tender documentation, monthly contract reports and detailed information on labour costs.
In the workshop, for example, they discovered that while staffing levels fell, the number of full-time equivalents actually rose, since the uniformed personnel previously employed had also had military duties. Capital equipment was reduced, because of milling machines and lathes that had been under-utilised. There were a number of process innovations, with a new operational layout developed for the workshop floor which reduced coordination inefficiencies. As a result, the contractor increased output in the workshop by 28%.119
Providers do not regard these results as exceptional - they are the kind of reforms which they routinely undertake when they assume responsibility for a service that has not been market-tested before. But they will come as a surprise to many in government, particularly those who work in policy, who have no real idea of the difference that good management can make. The New Zealand study was unusual largely because of the access that the academics were granted, and thus its explanatory power.
The industry might organise a number of such studies. This kind of research would provide clear evidence of the magnitude of cost savings (a worthy outcome by itself), but more importantly, it would demonstrate how they were delivered. Consideration should also be given to studies which document the differences that competition and contracting made. One of the survey participants, who worked in the public sector for a time, observed that government often finds it incredibly difficult to change delivery. It was suggested that the industry needs to demonstrate how contracting can be used by government to assist in the process of change.
Finally, the industry should consider commissioning studies which demonstrate the ways in which contractors have helped departments and agencies to solve a range of problems, not just saving money. As one of the survey participants described it: 'We need to show that we are not just an ugly sister, where people can save a few bob'.