BCCM

Submission to the Independent Review of the Australian Public

Service

July 2018
Independent Review of the Australian Public Service

Submission from the Business Council of Co-operatives and Mutuals

Table of Contents

1 Introduction ....................................................................................................................................................... 2

2 Response to Terms of Reference ....................................................................................................................... 3

3 Local Delivery Options ....................................................................................................................................... 5

3.1 Procurement policy in Preston ................................................................................................. 5
3.2 Mutualisation of early childhood services in South Australia .................................................. 6
3.3 Increasing productivity while retaining community roots through the formation of the
Community Care and Transport Co-operative ......................................................................... 7

4 Government procurement and commissioning ................................................................................................ 7

5 Recommendations ............................................................................................................................................. 9

6 Appendix: Recommendations of the Senate Economics References Committee inquiry into cooperative,
mutual and member-owned firms .................................................................................................................. 10

About the BCCM

Formed in 2013 following the United Nations International Year of Co-operatives1, the Business

Council of Co-operatives and Mutuals (BCCM) is the peak body for Australian co-operatives,
mutuals and member-owned enterprises. The BCCM represents a diverse range of enterprises

operating in sectors including agriculture, finance and banking, insurance, motoring services,
health services, aged care, disability employment, education, indigenous services, social

housing and retail.
The BCCM advocates for recognition of the sector and for measures that create a level playing

field between co-operatives and other businesses, including implementation of the

recommendations of the Senate Economics References Committee report into Cooperative,
mutual and member-owned firms2, and implementation of the Hammond Review

recommendations to improve access to capital for co-operatives and mutuals.3

1 See https://social.un.org/coopsyear/
2
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Cooperatives/Report

3 https://treasury.gov.au/publication/p2017-t235882/

Business Council of Co-operatives and Mutuals PAGE 1
Independent Review of the Australian Public Service

Submission from the Business Council of Co-operatives and Mutuals

1 Introduction

The Australian Public Service (APS) has delivered excellent policy development and provision of

services to the Australian Government and citizens over decades. Medicare and compulsory

superannuation, for example, are widely regarded as two of the best examples of how to fund

and administer a world-class public health system, and how to provide adequate income post-
retirement.

It is crucial that the APS is supported to continue this work in the face of the global,
technological and public policy developments that are transforming our economy and society.
Innovation and Science Australia’s Australia 2030: Prosperity Through Innovation report shows

that Australia faces unprecedented challenges.

There is a broader social and economic context in which to review the APS. For example, the

CSIRO mega-trends report highlights the impact of technology along with other trends including

an ageing population, the depletion of our natural resources, increased demand for

experiences over products and the rising importance of social relationships.

This review creates an opportunity to harness ideas and evidence about how the APS will

remain fit for purpose in delivering high quality, reliable advice and policy development services

to government into the future. The BCCM submits that this outcome can in part be achieved by

ensuring that the APS is able to innovate its service delivery operating models and expand

capability through engaging citizens, the end users of public services, in local service delivery.

Lord Beveridge, in his ‘Report of the Inter-Departmental Committee on Social Insurance and

Allied Services’ published in 1942 said, “The state in organising security should not stifle

incentive, opportunity, responsibility... it should leave room and encouragement for each

individual to provide more than that minimum for himself and his family.” Known as ‘the

Beveridge Report’, it would become the blueprint of the UK’s post war social security consensus

and in time it would be adopted in Australia and New Zealand.

The BCCM strongly believes that a fit for purpose public service is one that engages

meaningfully, robustly and authentically with citizens, the key stakeholders of the public

service, and one that is able to unleash the latent entrepreneurialism of public servants without

diminishing or jeopardizing the public service ethos or accountability. A strong and

entrepreneurial public service can help build character in individuals, foster social cohesion in

communities, address community problems and provide positive role models for the next

generation.

The delivery of public services at the local level through public service mutuals may be one way

to drive this entrepreneurial spirit, ensuring a retention of public service ethos while delivering

high quality policy advice to government, and accountable services to the public at the local,
place-based, level. Public service mutuals are commonly known as groups of public sector

employees who 'spin out' of the public sector, form a mutual (an employee-owned co-
operative) and then contract back with the government to provide the service concerned.
However, they might also be organisations that are managed and governed by their user-
stakeholders, their provider-stakeholders or a combination of these.

Business Council of Co-operatives and Mutuals PAGE 2
Independent Review of the Australian Public Service
Submission from the Business Council of Co-operatives and Mutuals

Evidence from existing public service mutuals shows that they have been very successful,
generating high levels of user satisfaction, productivity, workforce retention and staff morale.

The BCCM looks forward to engaging further with the Review Panel as they chart a path for
good government with a strong public service, focused on entrepreneurialism, a user-centred
focus, and a commitment to public purpose.

2 Response to Terms of Reference
This submission responds primarily to the following aspects of the terms of reference, which
the Independent Panel is to make practical recommendations on, namely:
Ensure the APS is ready, over the coming decades to best serve Australia in:
• driving innovation and productivity in the economy
• delivering high quality policy advice, regulatory oversight, programs and services
• tackling complex, multi-sectoral challenges in collaboration with the community, business
and citizens

The BCCM supports the move towards a more user-centric culture in the APS as an effective
means of achieving the above goals (innovation, productivity, quality of programs and services,
addressing complex problems through collaboration).

Co-operatives and mutuals can play an important partner role in such a culture shift and
increase the social and economic value created by the APS, so it is important APS staff have the
capability to access information about, access to, and appropriate support to understand and
work with these organisations. Further, a thorough understanding of the elements that drive
the long-term success of co-operative and mutual businesses will assist the Review Panel in any
restructure of the APS, as it will assist ensuring a focus on delivery of clearly defined outcomes
to stakeholders.

Co-operatives and mutuals are organisations that are owned by the people or organisations
who contribute to or use their services. Mutual ownership places control with the members
and thereby ensures the purpose of an organisation is to serve its members rather than
external stakeholders such as shareholders or other individuals or organisations who do not use
the services of the organisation. Co-operatives and mutuals draw in community capital, both
economic and social, and share it across their communities.

As locally owned and operated entities, co-operatives and mutuals reduce the time that public
servants are required to spend reporting upstream, when the focus of the organisation is
responsive service delivery to constituents. Furthermore, their democratic governance requires
accountability of decision making to their local users. Other forms of enterprise such as
investor-owned businesses are incentivised to reduce the local footprint, in order to deliver
commercial return for shareholders.

Business Council of Co-operatives and Mutuals PAGE 3
Independent Review of the Australian Public Service

Submission from the Business Council of Co-operatives and Mutuals

Mutuality can have the following benefits in service delivery:

• For users and communities, mutualisation raises the quality of the services they receive;
  often at a reduced or static cost.
• For commissioners (funders), mutualisation increases both the value for money and the
  effectiveness of services they commission, as well as client satisfaction with those services.
• For workers, mutualisation improves their wellbeing, sense of autonomy, and the conditions
  under which they work.
• For service provider organisations, mutualisation can increase economies of scale and ability
  to tender while retaining local identity and community connection.

Mutualisation can deliver trust, accountability and confidence between institutions and the

people they serve. The inclusion of users and other stakeholders in ownership builds in ongoing

co-design, collaboration and consultation between stakeholders and sustainably apportions the

costs and benefits of collaboration and service delivery to all stakeholders.

We refer the Independent Panel to our submission to the Productivity Commission inquiry into

reforming human services, which provides more information on the characteristics and

advantages, especially in thin markets, of co-operatives and mutuals.

In its Final Report on reforming human services, the Productivity Commission recommended

that service delivery should be open to all types of organisation and should be evaluated on a

case-by-case basis based on attributes of organisations including governance and connection to

community (Final Report, 254). The BCCM agrees with this recommendation and notes that in

2016 the Senate Economics References Committee inquiry into cooperative, mutual and

member-owned firms made 17 recommendations on how co-operatives and mutuals could be

placed on a level playing field with other organisation types including “that co-operative and

mutuals sector be better represented in government policy discussions, and is actively

promoted as a possible option for service delivery particularly where community based

initiatives are being considered” (Recommendation 2).

The Harper Review of Competition Policy (24) and the McClure Welfare Review (34-5) both

recognised the benefits of a diversity of service providers, including co-operatives and mutuals.
Those reviews noted that co-operatives and mutuals, by way of their mutual, place-based

ownership structure, could increase productivity, local capacity and local employment, which

contributes to social and economic outcomes. The Productivity Commission’s report into

reforming human services acknowledges the potential for co-operatives and mutuals to deliver,
among other things, housing, family and community services and indigenous services (Final

Report at 97, 220 and 258).

In our view, it is important that government procurement and funding practices properly

account for the social value generated through, for example, connection to community or local

employment opportunities and capacity building. In the UK, recognition of the importance of

evaluating contractors on clear social criteria is increasing.4

4
The Public Services (Social Value) Act came into force on 31 January 2013. It requires people who commission public services to think about
how they can also secure wider social, economic and environmental benefits. See: https://www.gov.uk/government/publications/social-
value-act-information-and-resources/social-value-act-information-and-resources

Business Council of Co-operatives and Mutuals PAGE 4
Independent Review of the Australian Public Service

Submission from the Business Council of Co-operatives and Mutuals

Changes in funding or contracting practices that will drive productivity, quality of service and

collaboration with the community should extend beyond human services to government

procurement and funding practices generally. Globally, social procurement policies are being

adopted by governments of all levels as a means of maximising the social and economic value

created from taxpayer funds.

3 Local Delivery Options

At the interface between the citizen-user of the public service and the government

department, public service mutuals can be used to effectively deliver services and respond to

users. This drives job satisfaction, workforce retention, and ultimately better user satisfaction.
Devolving some of these services results in less time spent reporting upstream and more time

ensuring place-based responsiveness.

3.1 Procurement policy in Preston

Small changes to government procurement can facilitate a broader range of social and economic

benefits from that procurement.

In Preston in the aftermath of the GFC, the local council needed a new strategy to generate local

employment and prosperity. Their strategy revolved around shifting the procurement practices of

anchor institutions to favour local SMEs, co-operatives and social enterprises. Preston City Council

recognised that such a shift in procurement practices to favour these locally-owned service

providers kept more money in the local economy and therefore provided a boost to employment

and the community more broadly.

The experience in Preston provides practical examples of how to institutionalise placed-based

service delivery and of the broader benefits this can bring. The Council and anchor institution

partners also recognised the benefits placed-based businesses would bring in terms of increased

community engagement and participation in service design and delivery, local capacity building
(including of voluntary organisations) and in the promotion of equitable and environmentally

sustainable outcomes. To implement the shift in procurement practices the Council undertook the

following steps:

• Engagement with anchor institutions, including on commitment to share data so results
  could be measured
• Analysis of procurement spending
• Development of a Statement of Intent with anchor institutions
• Identification of gaps and ‘influencable spend’
• Formation of a Procurement Practitioners Working Group to share new approaches to
  procurement that achieve the strategic goals
• Agreement on a measurement framework based on key goals (employment, local
  participation and engagement, etc)

SMEs, co-operatives and social enterprises within the region were mapped and identified as

potential suppliers. A further aspect of mapping was identifying opportunities to develop local co-

Business Council of Co-operatives and Mutuals PAGE 5
Independent Review of the Australian Public Service

Submission from the Business Council of Co-operatives and Mutuals

operatives and social enterprises to deliver services where there is currently no local capacity to

deliver the service.

3.2 Mutualisation of early childhood services in South Australia

The South Australian Government has recently announced the formation of the first employee-led

mutual in Australia. Highly-skilled staff who currently deliver Early Childhood Early Intervention

services in the South Australian public sector will form a mutual to deliver these services in

partnership with the NDIA. The project has support across political parties and from both levels of

government, as well as the support of the relevant unions. Federal Minister for Social Services Dan

Tehan MP commented:
“The creation of the South Australian employee-led mutual is an example of the innovation
and creativity required to deliver the NDIS, a world-first, ground-breaking scheme.”5

The BCCM provided expert advice to the workforce, the NDIA and the South Australian Government

on the proposal to form an employee mutual.
Where similar employee mutuals have formed in the UK, they have mostly happened in health and

social care. Case studies and early research has demonstrated the critical success factors are where

staff (and their unions) have early “buy-in” and influence over the development of the mutual and

are active members and owners of the new enterprises during and after the various stages of

formation. Staff have reported that they value the increased flexibility to respond to participant’s

needs when operating outside of a large bureaucracy. This active engagement by staff is supported

in the UK in the form of a “Right to Request” where staff can nominate to form an employee

mutual. Those staff can also apply to use a mutual development advisory service funded by

government to support staff in developing a robust and realistic business model and in

understanding the cultural differences between being an employee as opposed to an owner and

employee of an enterprise.
In South Australia, the Commonwealth and South Australian governments have played the

supporting role as envisaged in the Harper Competition Policy Review. The role of these two levels

of government has been to provide the resources, time and support necessary for staff, including

through their trade union, to make a democratic, informed decision about forming an employee-
owned mutual. We believe this is an approach that should be emulated by all levels of government

in relation to their involvement as a stakeholder in the formation of any employee-led mutual.
The BCCM observes this approach to workforce (and market) development could be applied in a

range of situations, including start-ups and existing organisations as well as in the public sector. We

consider this is worthy of further consideration as part of a move to a user-centric culture in the

APS, including in how procurement and funding is undertaken.

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Submission from the Business Council of Co-operatives and Mutuals

3.3 Increasing productivity while retaining community roots through
the formation of the Community Care and Transport Co-operative

Mutualisation can involve users, workers, organisations or a combination thereof and can be

used as a means of building sustainable collaboration between stakeholders. The formation of

co-operatives of service provider organisations that tender for government services (‘enterprise

co-operatives’) could help to drive productivity and increase the quality of government-funded

services while retaining the benefit of local community connections.

Community Care and Transport Co-operative is a practical example of how an enterprise co-
operative (a co-operative of businesses or organisations) can increase the ability of community

organisations to deliver government-funded services, in particular where there are challenging

policy setting reforms, such as the move from block funding to competitive, open market tendering.

CCAT was formed in 2015 by three community transport organisations in Sydney in response to

policy shifts in how funding was to be allocated from the existing setting of provider block funding

to transport users (through personalised NDIS funded budgets). The co-operative structure allows

them to increase productivity and reduce costs through sharing back office services, invest more in

services, improve benchmarking and build marketing and advocacy capability. At the same time,
each member organisation is able to retain its local autonomy and connection to community, with

the social value this can bring.

4 Government procurement and commissioning

APS procurement should ensure that all business models have access to even-handed treatment in

relation to government procurement. The APS should also ensure that a clear set of social value

criteria is accounted for in any procurement and funding practices. For example, APS procurement

guidelines should require that procurement and commissioning be from companies that are:
• Domestically owned and operated
• Taxed domestically
• Have demonstrable local workforce participation

Government should actively consider mutual businesses as service providers when procurement is

undertaken or when services are externalised.
Co-operatives and mutuals are an excellent choice for providing high trust and sensitive public

services in aged care and in disability because of their focus on users and dedicated professionals.
Where services users’ needs are complex or where markets are thin, such as in remote and regional

areas, it is the view of the sector that co-operatives and mutuals can be a better option than

providing profit maximizing firms with access to vulnerable people.6

6
As noted in Professor Sir Julian Le Grand’s opinion editorial to the Canberra Times on 6 December 2017,
https://www.smh.com.au/opinion/public-private-or-inbetween-staffled-mutuals-may-be-future-of-aged-and-disability-care-20171206-
gzzrqw.html

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Submission from the Business Council of Co-operatives and Mutuals

Other areas in which this policy could be adopted are:
• Provision of workers’ compensation schemes or other government insurance services
provided by mutual insurers which reinvest surplus in getting people back to work and/or
reinvesting surplus in workplace injury prevention.
• Provision of health education by or sponsored by not-for-profit health organisations (health
funds or co-operatives such as the National Health Co-operative7).
• Support for nutrition programs provided by agricultural co-operatives (e.g. where milk is
provided in schools, this should be sourced from a dairy co-operative where possible
thereby combining nutritional outcomes with support for local employment, regional
economic development and food security).
• Driver education provided in partnership with motorist’s mutuals.
• Service offerings provided to new migrants include a member-owned option (bank
accounts, health insurance etc.).

7
The NHC is based in the ACT and serves more than 12 per cent of the population with bulk billed primary health care. See: www.nhc.coop

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Independent Review of the Australian Public Service

Submission from the Business Council of Co-operatives and Mutuals

5 Recommendations

The Senate Economics References Committee identified recognition, education and regulation

as the three areas where the co-operative and mutual sector faces barriers to growth and free

competition. The APS has an important role to play in the reduction of these barriers.
APS staff should be even-handed in their treatment of all business models by plugging any

knowledge gaps in understanding what co-operatives and mutuals are and the characteristics

of mutual ownership that can deliver benefits to public service users at the local level.
As part of a user-centric culture, APS staff should especially understand how co-operatives can

deliver member-focused services, build local capacity, and ongoing collaboration and co-design

between a diverse range of stakeholders including government, service providers and service

users.
APS staff should be able to provide business support to co-operatives and mutuals on an equal

basis as for any other type of organisation.
APS procurement and funding practices should place all entities on a level playing field based

on a clear set of social and economic value criteria.
As part of a move to a user-centric culture in the APS, the BCCM recommends that:

1. The recommendations of the Senate Economics References Committee inquiry into
   cooperative, mutual and member-owned firms are implemented in full as they apply to
   the APS directly (including Recommendations 1, 2, 3, 7, 11).
2. The procurement and funding practices of the APS place all potential service providers
   and suppliers including co-operatives and mutuals on a level playing field and adequately
   take into account social value creation of service providers and suppliers.
3. Co-operation, utilizing co-operative and mutual legal structures, among service providers
   and suppliers tendering for contracts or funding is understood, encouraged and supported
   across the APS as a means of increasing productivity and quality of service delivery for
   service users.

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Independent Review of the Australian Public Service

Submission from the Business Council of Co-operatives and Mutuals

6 Appendix: Recommendations of the Senate Economics
References Committee inquiry into cooperative,
mutual and member-owned firms

Recommendation 1

The committee recommends that the Commonwealth Government ensures that a national

collection of statistics and data is undertaken to provide an accurate picture of the scale and extent

of the co-operative and mutual sector.

Recommendation 2

The committee recommends that co-operative and mutuals sector be better represented in

government policy discussions, and is actively promoted as a possible option for service delivery

particularly where community based initiatives are being considered.

Recommendation 3

The committee recommends the Commonwealth Government work with states and territories to

develop a program of supports to encourage the establishment of new co-operatives and mutual

enterprises.

Recommendation 4

The committee recommends that a mutual enterprise is explicitly defined in the Corporations Act

2001, and its associated regulations.

Recommendation 5

The committee recommends that the role of directors in mutual enterprises is defined in the

Corporations Regulations to align with the proposed definition of a mutual enterprise in the

Corporations Act.

Recommendation 6

The committee recommends the Commonwealth Government work with states and territories to

ensure the continual improvement to advice, guidance and information provided at all stages in the

establishment, governance and regulation of co-operatives.

Recommendation 7

The committee recommends that the Commonwealth Government to work with all relevant

stakeholders to undertake a program of education and training to inform them about the role of co-
operatives and mutuals.
Recommendation 8

The committee recommends that the Commonwealth Government examine ways in which it can

improve the recognition and understanding of the co-operative and mutual sector in the national

secondary school curriculum and that tertiary institutions consider the inclusion of co-operative and

mutuals in accounting, business, commerce, economics and law degrees.

Business Council of Co-operatives and Mutuals PAGE 10
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Submission from the Business Council of Co-operatives and Mutuals

Recommendation 9

The Committee recommends that professional accreditation bodies, such as the Law Society and

Institute of Chartered Accountants, require a demonstrated knowledge of the co-operatives and

mutual structure before it will licence its members to practice accounting or law.
Recommendation 10

The committee recommends that the Commonwealth Government amend the Indigenous

Advancement Strategy to allow registered co-operatives the same access to allow levels of grant

funding as other entities.
Recommendation 11

The committee recommends that the Commonwealth Government review, and where necessary

amend the eligibility criteria for grants and funds across all of government grants and program

guidelines to ensure that co-operatives and mutual enterprises are not excluded on the basis of

their business structure.
Recommendation 12

The committee recommends that the co-operative and mutual sector be considered when the

government is preparing a Regulatory Impact Statement that accompanies new regulatory policies.
Recommendation 13

The committee recommends that the Commonwealth Government liaise with its state and territory

counterparts to ensure that the regulatory burden for small and medium sized co-operative and

mutual enterprise aligns with the needs of these organisations and ensures they are not

disadvantaged relative to companies of a similar size.
Recommendation 14

The committee recommends that the Commonwealth Government closely monitor the progress of

the International Accounting Standards Board in developing solutions to bring co-operative shares

under the definition of capital under AASB 132, and, where possible, facilitate equivalent

amendments as expeditiously as possible.
Recommendation 15

The committee recommends that Commonwealth and State Governments support the

formalisation of some of innovative market-based approaches to raising capital for small and

medium sized co-operative and mutual enterprises, in the form of advice and information, as they

become available.
Recommendation 16

The committee recommends that APRA set a target date for the outcome of discussions with the

co-operative and mutuals sector on issues of capital raising and bring those discussions to a timely

conclusion.
Recommendation 17

The committee recommends that the Commonwealth Government examine proposals to amend

the Corporations Act 2001 to provide co-operative and mutual enterprises with a mechanism to

enable them access to a broader range of capital raising and investment opportunities.

Business Council of Co-operatives and Mutuals PAGE 11