Commissioning: the New Privatisation
The Western Australian government has recently concluded an inquiry into prisons and the recommendations point to an alarming new trend in the management of public prisons called commissioning. The inquiry was conducted by the Economic Regulation Authority (ERA), which was charged with looking into options to improve the efficiency and performance of WA prisons. The scope of the inquiry was narrow, with the ERA to provide recommendations based on economic, market, and regulatory principles while ignoring the big challenges in the prison system such as indigenous incarceration rates, overcrowding, resourcing, and safety. The inquiry was conducted over the course of 2014-15, and the Treasurer tabled the final report in Parliament on 4 November 2015.
A key finding of the final report was the need to ensure that public prisons have ‘incentives’ for better performance. The ERA’s recommendation to achieve this is the introduction of a ‘commissioning model’.
Commissioning involves putting prison services out for tender. The Department would determine the outcomes that it wants from a specific prison or prison service, then invite public, private, and not-for-profit providers to tender for the opportunity to provide these services.
The aspect of commissioning that differs from traditional privatisation or outsourcing is that the public sector also has the opportunity to bid for the service. The ERA has proposed that a ‘commissioning division’ be established within the department, and a ‘service delivery division’ within the department would compile their own tender documents, and compete directly with other providers. This approach necessitates what is likely to be a costly restructuring of the department in order to separate the service delivery division from the commissioning division.
The ERA have recommended commissioning because they believe that ”greater competition in the delivery of services will encourage better overall performance in the prison system through a wider choice, better quality service offerings, higher levels of innovation, and potentially lower costs.”
But how do these claims stack up? The ERA has provided little evidence to support their recommendation of commissioning.
Whilst commissioning has been widely used by the UK government there is no research to suggest that commissioning leads to improved outcomes. Indeed, there have been a number of problems with commissioning in the UK, including systemic overcharging for electronic tagging of prisoners, allegations of sexual abuse of detainees by prison staff, and the mistreatment of pregnant women. A study on commissioning in health services across multiple countries, including the US, Britain, Sweden, the Netherlands, Germany and New Zealand, found that commissioning failed in reducing costs, did not improve the quality of service and failed to improve the transparency of service providers. If the failed attempts at commissioning in other countries are anything to go by, commissioning is unlikely to deliver benefits, will do nothing to improve the performance of WA prisons and will instead end up costing taxpayers greatly..
Advocates of commissioning point to the lower costs of running private prisons compared to public, but this is misleading. There is difficulty in comparing private versus public prisons in WA as only two of the 16 facilities in WA are privately operated: Acacia and Wandoo Reintegration Facility are both operated by Serco. These prisons are significantly different from most prisons in the state – neither prison holds maximum-security prisoners, nor do they take prisoners who are still within the remand period. Both of these factors contribute greatly to a higher cost for public prisons. Indeed, private operators are likely to cherry-pick the most profitable prisons and prison services to run – low cost and medium-security men’s prisons. The public sector is left with the more difficult and costly prisons and services – remand prisoners, prisoners who require more rehabilitation, prisoners with drug dependency, etc. Therefore it is ineffective and misleading to compare the low cost services provided by private prisons with the high cost services provided by public prisons through simple comparisons.
The costs of introducing commissioning have not been fully explored by the ERA, however there is no doubt that restructuring the Department of Corrective Services to create a ‘commissioning division’ and a ‘service delivery division’ would be costly – with no guarantee this approach will deliver outcomes. Like other forms of privatisation, commissioning could end up costing taxpayers more if private operators fail in their duties and the government has to step in and take back control of the service – as recently occurred at Serco’s Mount Eden prison in New Zealand.
The ERA argues that “commissioning is the best approach for introducing greater competition to the WA prison system because it increases the choice of potential service providers, and requires Superintendents to take a more commercial approach, generating system-wide improvements.” Even if contestability in the prison system was to drive better performance – and there is no evidence that is the case - it is doubtful that a commissioning approach will achieve increased contestability in the prison system. There is limited competition in the sector, with a few main private companies dominating. For example, Serco was the only bidder for the contract to run Wandoo Reintegration Facility. Rather than increase contestability, commissioning is more likely to lead to a driving-down of public sector pay and conditions and a reduction in staff to prisoner ratios as the public sector competes against the private sector for contracts.
There is not sufficient evidence to make the case for commissioning. The ERA’s support for commissioning appears to be based on ideology, rather than facts. Commissioning is just a new buzzword to replace the more unseemly ‘privatisation’ as the outcomes appear to be the same: a contracting-out of the government’s responsibility, less transparency and accountability, and the driving down of public sector wages and conditions.
The ERA inquiry in WA should be of concern to public sector unions in the rest of the country as it is likely the snake oil salespeople that peddle the (unsubstantiated) benefits of commissioning and other forms of privatisation will seek an audience with other State governments. It is important public sector unions around Australia are on the front-foot in opposing these measures by being armed with the information and evidence that shows commissioning is a bad deal for Australian workers and the community.
This is why CPSU is supporting research by Associate Professor Jane Andrew and Dr Max Baker from the University of Sydney into prison privatisation.
The research project, entitled The Costs, Performance, Efficiency and Accountability of Australian Private Prisons will examine the effects of prison privatisation in different states within Australia, and evaluates the types of arguments made for and against further privatisation of the prison system. Stay tuned for updates on this research project in future editions of Public Perspective.
 ‘Inquiry into the Efficiency and Performance of Western Australian Prisons: Final Report’, Economic Regulation Authority WA. October 2015, p. 232.
 ‘Private prisons carry risk of hidden costs’, Jane Andrew and Max Baker, opinion piece, The West Australian. 21/8/2015 p. 88.
 Inquiry into the Efficiency and Performance of Western Australian Prisons: Final Report’, p. 257.