The Two Faces of Competition: Which is Best for the Social Services Sector?

What impact does competition have on the social services sector? Does it help or hinder our ability to serve the needs of Australia's most vulnerable? Today’s contribution comes from Professor Robyn Keast, who is the Chair of Collaborative Research Network Policy and Planning for Regional Sustainability, and located at the Southern Cross University.


The proposed Productivity Commission review into competition and contestability in the human services arena follows a continued leaching of economic rationalist thinking into government policies, practices and mechanisms over the past thirty or so years. In 1993 the first competition policy review, (Hilmer Review) led to a shared national governmental goal for increased productivity and efficiency to be achieved through the adoption of market principles of competition, choice and contestability. Shaped by the economic rationalist language of the time, competition was presented as a battle ground, where rivals are to be crushed, and rewards aren’t to be shared (Dawkins, 1976). When success comes at the cost of others, it leads to low trust, and adversarial mentality, and defensive positions. Tennyson’s (1850) description of competition in nature as being ‘… red in tooth and claw’ fits well with this argy bargy, no holds barred approach. But in laying out this aggressive competitive view he also allowed that, under certain conditions, nature and humanity were inherently cooperative.

It is fair to say though that in some industries, competition has delivered some important and necessary gains, including a lowering of prices in some consumer and service markets as well providing a stimulus for innovation: both preconditions to increased productivity. Although initially exempt from the full effects of competition policy, the human and social services sector eventually succumbed. However, unlike the other sectors, generally the social services was not initially a conducive environment for market principles as there were few natural competitors, nor did it have an especially competitive ethos (House of Representatives Standing Committee on Family and Community Affairs, 1998). Indeed as has well often identified the sector mostly relied on cooperative relationships as the basis for its working and as the glue that bound organisations together when collective effort was needed (Lyons, 2003).  In view of this, most studies have shown that market principles and especially competition have had an adverse effect on this sector, with for example Davis and Rhodes (2000) notably arguing that market modes had the unintended effect of further fragmenting rather than improving the sector (see Merton 1936 on unintended or perverse consequences).


Several subsequent studies have also provided solid evidence of the perverse effects of competition on a sector bound by relationships. For example, Keast and colleagues (2012) attributed aggressive tendering and poor procurement processes as well as self-interested strategic manoeuvring by some sectoral actors, including newer for-profit actors, to the collapse of several longstanding service networks. McBratney and McGregor-Lowndes (2012) highlighted a shifting in the balance of power between government and the social services sector arising from stricter service agreements and a greater emphasis on performance reporting, which was also seen to be to the detriment of sectoral values (McDonald and Zetlin, 2004).  Along a similar line Hancock (2004) expressed concerns of reduced service diversity and access as a result of the policy agenda.  Competition in this format was neither a benign nor supportive concept. Instead, it works against the sectors’ underpinning values and missions to produce services that are for the public good not to generate profit (Keast, 2014). These problems notwithstanding, increased pressured on both government and the social services sector, including amplified growth in needs and decreased financial support, and therefore the need to find innovative ways to improve the efficiency and cost effectiveness of service provision, have brought competition back high on the reform agenda (Productivity Commission, 2010).  


The more recent experiments with competition aside, competition is hardly new to the human services sector in this country. Tierney (1975) and others (Brown and Keast, 2005) have shown that since their inception non-profits have been engaged in various competitive processes: for limited resources and clients, a bigger slice of the funding pie, for autonomy in direction as well as for the attention of decision-makers, sectoral influencers and funders. The difference is that, unlike the present forms, earlier approaches were more overtly embedded in reciprocity and interdependency, working for common-purposes, and the generation of win/win outcomes: all underpinned by a realisation of the need to retain relationships into longer-term. This understanding of competition is more subtle than the pure economic model. Two or more organisations might compete for the same resources, but the competition is undertaken with an integrative purpose: looking to expand rather than limit the pie. That is, to push individual organisational boundaries as well as the boundaries of the sector. It is this relational type of competition that best aligns with the equality important drive for the cross-agency and sector collaboration and innovation increasingly sought within and across both sectors. This is not to say that it has been all love, trust and fairy-dust. Inevitably there was conflict and occasional dust ups. For examples there were periodic ruptures between faith based organisations and contested perspectives between different elements of the sector (Lyons, 1998).  But these were largely contained by the cohesive nature of the sector, its smaller size and strong leadership.  Moreover, the competition was characteristically not personal, and tempered by realisations of the need for a longer term perspective.

Two almost opposing forms of competition currently hold centre ground in policy debates:  Both have merit. They can equally deliver the increased productivity, efficiencies and innovation demanded for contemporary society. Their differentiation is that, typically one is grounded in spontaneous, one-off or short-term exchanges, via transaction based-contracts that can lead to fragmented environments, while the other is more predisposed toward ongoing interpersonal relationships, reciprocity and common vision, that is, integration.

As competition is currently conceived and implemented there are inherent difficulties. It is important that policy-makers and others understand the different forms of competition can take, rather than privileging one over the other, or arguing for one while implementing policies that support another. Further, as it stands, there is a need for a more holistic or systems-wide mapping of policies, highlighting their layers of influence and points of overlap or disjuncture, to enable better management interfaces (Keast, 2014). As Ham (2012: 2) notes, under these conditions policy-makers need to “think two or three steps ahead”.

The social services sector is at crucial cross-road. There is no doubt that the sector should not be immune from review and reform, including examining the benefits of competition and contestability. However, it is instructive to remember that at the same time there is strongly voiced agenda for collaboration permeating Australian policy and practice (O’Flynn, 2009; Keast et al, 2007, Keast, 2011).  It is therefore imperative and timely that deeper thought is given to the type of competition most appropriate for its continued advancement and sustainability. Should it be progressed through the drive, contest and individual benefit of raw competition? Or through the principles of reciprocity and mutual reward? Or perhaps a combination of both? Either way, questions remain as to whether not-for-profit organisations can implement aspects of the competitive operating environment without compromising and still retain the qualities that distinguish them from government and the private sectors. And if government can set up the right policy, programmatic and funding infrastructures to facilitate the kind of competition to deliver the sector the foundation it needs to continue to be a viable partner in the delivery of services and support for vulnerable people.


This piece is part of the Power to Persuade Social Service Futures Dialogue 



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