Contract Governance Guidelines. April 2014

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1 Cotract Goverace Guidelies April

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3 Ackowledgemet The Departmet of Family ad Commuity Services (FACS) uder cotract with CPLI Pty Limited ad Terece Burke, ad usig The Burke Four Pillars Model of Cotract Goverace, has prepared these guidelies, tools ad resources to support District ad Cetral cotract maagers i their work to maage fuded service providers i the delivery of quality outcomes for our cliets. This work has bee udertake i collaboratio with Cetral ad District staff. We thak those members of the peak bodies ad o-govermet orgaisatios who participated i the cosultative forums to iform ad shape this work I particular, FACS would like to ackowledge the work of Terece Burke, the Pricipal of CPLI Pty Limited i the developmet of the framework ad supportig material. This material has bee edorsed for use with o-govermet orgaisatios fuded by FACS. Material licesed to FACS by CPLI Pty Limited ad Terece Burke is uder a o-exclusive, permaet licece. Uauthorised use of this material outside FACS is prohibited. 3

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5 Cotets Mai Page Itroductio 7 Backgroud 8 Legislative requiremets for cotractig service delivery 10 Creatig a sustaiable ad high-performig service system 10 The Cotract Goverace Framework 12 Pillar 1: Performace measuremet ad moitorig 15 Priciples of performace measuremet ad moitorig 16 The Performace Measuremet Cycle 22 Maagig service provider risk 30 Roles ad resposibilities of the cotracted parties 32 Caledar for performace measuremet activities 34 Cotract Olie Maagemet System (COMS) 34 Fiacial acquittal 34 Visits to service provider premises 35 Pillar 2: Achievig performace through uderstadig the cotract documets 37 Backgroud 38 Workig i partership with service providers 38 The Fudig Deed 39 Key areas of the Fudig Deed supportig performace results 39 The Program Level Agreemet (PLA) 45 The Program Guidelies 47 The Service Delivery Schedule 48 Improvemets i the admiistratio of cotracts for service providers 48 Maagig risk i the cotract 51 Pillar 3: Achievig performace through relatioship maagemet 55 Backgroud 56 The stregths-based approach to relatioship maagemet 56 The cotract maager ad relatioship maagemet 57 The six priciples of relatioship maagemet 57 Relatioship maagemet tools 64 Pillar 4: No-adversarial egotiatios i maagig cotracts 67 Backgroud 68 The stregths-based approach to egotiatio 68 Approaches to dealig with coflict 69 Positioal bargaiig 71 Iterest-based bargaiig 72 The egotiatio process 73 Workig with cultural diversity i the egotiatio process 76 What steps should be take whe egotiatio is usuccessful? 77 Appedices 79 Glossary of terms 123 Liks to other documets for Cotract Goverace 127 Idex 128 5

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7 Cotract Goverace Guidelies Itroductio 7

8 1 Backgroud The Departmet of Family ad Commuity Services (FACS) is egaged i a process of sigificat chage ad reform. This has led to a eed to rethik the way we work with the services we fud to esure both FACS ad service providers work together i partership to deliver high-performig services to some of the most disadvataged idividuals, families ad commuities i NSW. I its Strategic Pla , FACS s visio is that All people, icludig the most vulerable, live full lives ad achieve their potetial. FACS is udertakig a ambitious reform ageda which, at its foudatio, is puttig people, our cliets, at the cetre of everythig we do. Improvig the people s lives ad improvig services is the commo goal across all FACS reforms. A robust platform to support these reforms meas we will cotiue to build stroger parterships with o-govermet orgaisatios, philathropists, social ivestors ad busiess. FACS values the role of the o-govermet sector i helpig people to lead fuller, more rewardig lives; we wat to exted their ivolvemet ad that of the private sector ad the commuity. Oly by combiig our efforts ca we reach more people ad make a bigger differece. This will be achieved by: stregtheig ad growig the service system s capacity to deliver more services o behalf of the Govermet streamliig ad stregtheig service provider cotracts ad accoutability with improvemets to fudig cotracts ad coditios improvig service delivery etworks across NSW through the sigificat impact of localisatio to better place idividuals, families ad local commuities, ad esurig we focus o the eeds of idividuals, families ad local commuities. These chages brig together the curret local Ageig, Disability ad Home Care, Commuity Services ad Housig NSW cliet services ad operatios. 1.1 Stregtheig the o-govermet sector i service delivery Util recetly, FACS itself was the primary agecy deliverig services to childre, youg people, families ad commuities. However, the ature of our work has chaged. We o loger deliver most services. Istead we cotract other providers to udertake this importat work. I , FACS spet $4.897 billio deliverig services across NSW. The largest category of expediture was i the delivery of our major services ad programs icludig Disability services, Commowealth Home ad Commuity Care, Commuity Care Supports, Out-of-Home-Care, Prevetio ad Early Itervetio, ad Aborigial Commuities Developmet programs. May of these programs are delivered by NGOs o our behalf. This is evideced i the fact that, at the momet, more tha 50 per cet of FACS budget goes towards fudig programs delivered maily by NGOs. This is likely to icrease as we cotiue to icrease the umber ad capacity of service providers across program areas with a ivestmet over the ext few years Family ad Commuity Services, Aual report , Departmet of Family ad Commuity Services, Sydey, 2012, p. 20 ad Out-of-home care fudig aloe i totalled $773.5 millio. Family ad Commuity Services, Aual report , Departmet of Family ad Commuity Services, Sydey, 2012, p

9 I additio to ecouragig growth i existig service providers, this ivestmet has required ew orgaisatios to eter the sector. Across the sector, there may be fledglig orgaisatios eedig assistace i fidig their feet, as well as larger orgaisatios with larger cotracts eedig support i maagig their growth. FACS will cotiue to build ad grow relatioships with our parters i peak orgaisatios ad frot-lie service providers alike to esure the success of these reforms. The role of the cotract maager is key to supportig the successful growth of our service system, ad this role is supported by improvemets i cotractig ad the performace measuremet ad moitorig of services we fud. 1.2 Stregtheig provider accoutability FACS has further professioalised ad streamlied the work we do by eterig ito cotractual arragemets with most orgaisatios we work with. FACS s ew cotracts, the Fudig Deed ad Program Level Agreemet operate o the basis that fuds are provided for three years, with the opportuity for a extesio of a additioal two years. Oe-off fudig is provided o a occasioal basis. Give this, the chages to our work practices are ot oly about the operatioal aspects of trasitioig service delivery to the broader service sector, as the ature of our fudig arragemets with service providers has chaged as well. The legth of the cotract ad the requiremet for moitorig results mea that there is a requiremet for cotract maagers ad service providers to eter ito a relatioship i which cotract maagers are expected to use a collaborative approach, which appropriately ackowledges the partership betwee the two. This kid of fudig arragemet is referred to as beig a relatioal cotract. The Cotract Goverace Framework aims to provide the supports ecessary for cotract maagers to work withi this operatig model. 1.3 More localised decisio makig ad service delivery FACS has implemeted sigificat structural reforms that will impact o improvig service delivery etworks across NSW, to better place idividuals, families ad local commuities at the cetre of everythig that we do. These localised service systems brig together the portfolios of Housig NSW, Commuity Services, ad Ageig, Disability ad Home Care uder the leadership of a FACS District Director, which meas that relatioship buildig, commuicatio ad collaboratio at a local level has become part of the success of improved service delivery. Cotract maagers ad service providers alike eed to feel that there are processes i place to support operatioal cosistecy, i particular where service providers receive fuds from more tha oe FACS program area. The Cotract Goverace Framework is a relatioship-based model of cotract goverace that ca be applied 9

10 across agecies ad has bee used widely i maagig cotracts across the public ad private sectors. A high degree of collaboratio has take place across FACS to esure that the systems i place for maagig our cotractual arragemets with service providers are aliged ad support oe aother to achieve results. 2 Legislative requiremets for cotractig service delivery I additio to the imperatives related to chages i our orgaisatio, FACS is required to support the delivery of performace results i cotractig through aligmet with the Public Sector Employmet ad Maagemet Amedmet (Procuremet of Goods ad Services) Act 2012 (NSW). The key objectives of the Act are: drivig value for moey deliverig quality Govermet goods ad services aligig procuremet with busiess eeds. The objectives of the Act mea that FACS is expected to improve performace results i the services we fud through the better use of limited fiacial ad other resources. There are may ways that this occurs throughout the service system ad oe goal of the Cotract Goverace Framework is to brig these elemets together to esure better accoutability for public resources ad the delivery of better services to the childre, youg people, families ad commuities we support. 3 Creatig a sustaiable ad high-performig service system The icreasigly complex ature of our relatioships with all stakeholders withi the service sector demads that we re-thik the role of both cotract maagers ad service providers i the delivery of services to childre, youg people, families ad commuities. Key elemets i buildig a service system that is both high-performig ad stable iclude: buildig a stregths-based partership with service providers ecouragig ad supportig diversity ad iovatio developig a framework that supports performace improvemets as well as maagig risks to the delivery of services. 3.1 Buildig stregths-based parterships with service providers Buildig parterships etails esurig trasparecy i our behaviour, buildig trust ad maitaiig commuicatio. These actios uderpi a stregthsbased approach to maagig cotract relatioships, which ackowledges each orgaisatio s uique set of stregths ad challeges, ad egages each party as a parter i egotiatig, developig ad plaig. Give this, the ability to work with service providers from a stregths-based perspective ca have the followig beefits for both parties to the cotract: 10

11 iflueces ad icreases egagemet i the delivery of services iflueces ad icreases efficiecy ad idepedece i service providers ehaces the capacity to build relatioships ad support etworks improves cultural competecy ad the ability to support diversity i cotract maagers icreases collaboratio i which the cotract maager ad service provider are viewed as equal parters i the chage process. Supportig a stregths-based approach to cotract maagemet aims to build resiliece i service providers to develop robust systems of operatig. This meas that it is the cotract maager s role to mobilise service providers stregths through fidig opportuities to maximise idepedet fuctioig. As a orgaisatio s resiliece grows, it is expected that improvemets i performace will also grow. Key to the stregths-based approach is the ability of cotract maagers to be aware of gaps i service providers capabilities ad to commuicate this i a effort to support chage. Trasparecy i relatio to discussig risks to service provisio is therefore itegral to the partership approach. The ability to maage these complexities is critical to effective cotract goverace. 3.2 Ecouragig diversity ad iovatio The outsourcig of services to the commuity sector recogises that i order to be effective, our service system eeds to reflect the commuity it is supportig. I order for this to happe, we eed to icrease the umber ad rage of services to reflect our requiremets. 3 We eed to begi to view service providers idepedece from Govermet as beig a stregth from which we ca lear. We also eed to egage service providers as parters i which we have the capacity ad resposibility to liste to service providers eeds, wats ad also their expectatios about their relatioship with cotract maagers. Part of havig the capacity to liste to service providers eeds etails embracig opportuities for iovatio ad ew ways of thikig about how to support the childre, youg people, families ad commuities that we work with. This icludes the developmet of culturally appropriate, iovative ad visioary models of care across the spectrum of services. I takig a stregths-based approach to service providers, i which the relatioship is paramout, the Cotract Goverace Framework allows cotract maagers to look for ad illumiate talets withi the service sector, ad where possible to share ay kowledge gaied. 3 Family ad Commuity Services, Aual report , Departmet of Family ad Commuity Services, Sydey, 2013, p

12 4 The Cotract Goverace Framework The Cotract Goverace Framework provides a set of systems, priciples ad processes by which a cotract relatioship is maaged. The framework is aimed at supportig parterships betwee cotract maagers ad service providers i the delivery of performace goals that support service providers i their idepedece. Cotract goverace is based o the priciples of itegrity, fairess ad trasparecy i relatio to all trasactios, ad a commitmet to coductig busiess i a ethical maer. Figure 1: The Cotract Goverace Framework 4 FACS PILLAR 2 Cotracts Fudig Deed PILLAR 1 Performace PILLAR 3 Relatioships Service providers PILLAR 4 Negotiatio 4.1 Elemets of the Cotract Goverace Framework There are four elemets or pillars to the Cotract Goverace Framework, each of which focuses o aspects of achievig performace i the cotract relatioship. These elemets are: Pillar 1: Performace measuremet ad moitorig Pillar 2: Achievig performace through uderstadig the cotract documets Pillar 3: Achievig performace through relatioship maagemet Pillar 4: No-adversarial egotiatios i maagig cotracts. 4 T Burke, The four pillars model, CPLI Pty Ltd, Sydey,

13 Effective cotract maagemet seeks to coordiate these elemets throughout the course of the cotract relatioship Performace moitorig ad measuremet All four pillars are focused o aspects of the achievemet of performace i the cotract relatioship. However, Pillar 1 is idetified as beig the cetral elemet i the framework as it describes strategies ad tools for moitorig ad measurig performace for the duratio of the cotract s life. Importatly, the pillar recogises that there are two performaces requirig support: that of the service provider ad the cotract maager. This elemet is supported ad bolstered by Pillars 2 to Achievig performace through uderstadig the cotract documets A ew system of cotractig has bee implemeted by FACS (Commuity Services) with the aim of improvig the performace of both service providers ad FACS i the provisio of services to the commuity, ad streamliig processes to support the eeds of both cotract maagers ad service providers alike. The ew cotract documets iclude the Fudig Deed, the Program Level Agreemet ad supportig documets icludig the Service Delivery Schedules ad Program Guidelies. Pillar 2 describes the role of these documets ad how both cotract maagers ad service providers ca use these to support quatitative ad qualitative performace improvemets Achievig performace through relatioship maagemet Relatioship maagemet is arguably the key compoet of cotract maagemet ad research has show that huma relatioships are the most sigificat factor i determiig cotract failure or success. Pillar 3 aims to reiforce the importace of relatioships i achievig positive results for the commuities we work with ad provides key skills for cotract maagers i developig workig relatioships with service providers No-adversarial egotiatios i maagig cotracts Havig differeces of opiio is commo to all relatioships ad is ot ecessarily a bad thig. As log as it is maaged effectively, coflict ca lead to both persoal ad professioal growth. I may cases, effective coflict resolutio ca make the differece betwee positive ad egative outcomes. Give the importace for cotract maagers, Pillar 4 shows the importat skills required to maage differeces both i the egotiatio of cotracts ad durig the course of the cotract relatioship. Where ecessary, it is also importat for cotract maagers to uderstad pathways for escalatig issues whe eeded. 13

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15 Cotract Goverace Guidelies Pillar 1: Performace measuremet ad moitorig 15

16 1 Priciples of performace moitorig ad measuremet 1 The Cotract Goverace Framework proposes that, to eable high performace, there eeds to be a reewed emphasis o performace measuremet as a core activity that is embedded i all maagemet fuctios. The four priciples of performace measuremet ad moitorig are: defiig quality performace measures aligmet betwee high-level strategies ad idividual goals achievig two performaces through the relatioal cotract adaptability of performace i a chagig eviromet 1.1 Defiig quality performace measures All parties to the cotract eed to be clear about what it is they wat the cotract to achieve ad what quality performace meas for their orgaisatio. All parties to the cotract eed to be clear about what it is they wat the cotract to achieve ad what quality performace meas for their orgaisatio. This, i tur, eeds to be reflected i the performace results agreed i the cotract. FACS s quality performace measures are defied primarily by our legislative framework, the cotracts ad supportig documets, ad performace measures idetified as key to reducig risk i the delivery of services Legislative framework FACS s work is guided by its legislative requiremets across the relevat program areas. Key pieces of legislatio goverig FACS work iclude: Child Protectio (Workig with Childre) Act 2012 Childre ad Youg Persos (Care ad Protectio) Act 1998 Commissio for Childre ad Youg People Act 1998 Commuity Services (Complaits, Reviews ad Moitorig) Act 1993 Commuity Welfare Act 1987 Housig Act 2001 Disability Services Act Australia Public Service Commissio, Stregtheig the Performace Framework: Towards a high performig Australia Public Service, Caberra, May

17 Refer to the relevat FACS agecy website for further detail o relevat legislatio. Performace goals across each program area should clearly alig with FACS strategic directio ad the relevat legislatio. More detail about aligmet betwee each program area ad its legislative requiremets are provided i the Program Guidelies for each program area The cotracts ad supportig documets The cotract documets iclude the Fudig Deed ad the Program Level Agreemet. Documets supportig the cotract iclude the Program Guidelies ad the Service Delivery Schedule (if applicable). These documets have bee redesiged to support performace improvemets for all programs fuded by FACS. Compliace with FACS s Program Guidelies is ow cotractually required, stregtheig the expectatio that both cotract maagers ad service providers will focus o the achievemet of quality outcomes for childre, youg people, families ad commuities. Idetificatio of key idicators i the Program Guidelies forms the basis of discussio betwee cotract maagers ad service providers about performace requiremets. The three mai areas of performace assessed are Corporate Goverace, Fiacial Maagemet ad Service Delivery Performace measures to reduce risk i the delivery of services There are three mai areas of performace highlighted i the Cotract Goverace Guidelies ad supportig tools, icludig the Corporate ad Program Level Agreemet Ogoig Review Tools, the Corporate ad Program Level Agreemet Self Assessmet Tools ad the Corporate ad Program Level Agreemet Performace Improvemet Pla (PIP) Tools. These areas iclude: Corporate Goverace Fiacial Maagemet Service Delivery. 17

18 Corporate Goverace Corporate Goverace may be defied as the system of rules, practices ad processes by which a orgaisatio is directed ad cotrolled. Corporate goverace also provides the framework for attaiig a orgaisatio s objectives, ecompassig every sphere of maagemet of the orgaisatio. Give rapid growth i the ogovermet sector ad the eed for orgaisatios to build capacity, the eed for robust Corporate Goverace has bee idetified as a performace measure i the Cotract Goverace Guidelies. Fiacial Maagemet Fiacial Maagemet may be defied as the plaig, directig, moitorig, orgaisig ad cotrollig of the moetary resources of a orgaisatio. Robust orgaisatios should have policies ad procedures i place for the maagemet of fiaces, ad should be able to demostrate their ability to maage both their assets ad their liabilities. Cotract maagers eed to be able to uderstad ad aalyse fiacial documets to esure that service providers are maagig their fiaces appropriately. Service Delivery Service Delivery may be defied as the quatitative ad qualitative outcome measures service providers are required to fulfil to meet their cotractual requiremets. This may rage from meetig basic requiremets such as esurig that services are directed to the target cliet group ad are provided i the required geographic locatios, to esurig that the quality of services delivered are commesurate with requiremets stipulated i the Program Guidelies ad i accordace with FACS s policies ad legislative requiremets. 1.2 Aligmet betwee high-level strategies ad idividual goals Achievig aligmet betwee orgaisatioal strategy, ad group ad idividual goals is importat i allowig people to see how their idividual effort cotributes to FACS ad broader govermetal goals. Whe aligmet is achieved, clear goals ca be see at the top of the orgaisatio ad are commuicated at all levels. 18

19 Figure 1: FACS s fudig strategies ad idividual goals Our strategic directio is outlied i FACS Aual Report Pillar 1, Sectio 1.2 outlies the importace of aligmet with our orgaisatio s strategic goals. FACS s strategic directio The Commuity Services Pla provides the framework that shapes the services we provide ad the decisios we make. It sets objectives ad performace measures as well as the ratioale behid those measures. Commuity Services Pla Pillar 1,Sectio 1.2 refereces the Commuity Services Pla Pillar 1, Sectio 1 refers to the liks betwee legislatio, orgaisatioal directio ad program areas. Programs Pillar 1, Sectio 1 refers to the liks betwee legislatio, orgaisatioal directio ad program areas. Pillar 2, Sectio 6 refers to the Program Guidelies. Policy ad guidelies Program Guidelies Legislatio ad stadards Pillar 2, Sectio 3 refers to the Fudig Deed. Fudig Deed Pillar 2, Sectio 5 refers to the Program Level Agreemet. Program Level Agreemet Pillar 2, Sectio 7 refers to the Service Delivery Schedule. Service Delivery Schedule 19

20 Aligmet betwee FACS s goals ad the NSW Govermet s goals may be viewed i the NSW Govermet s pla, NSW 2021, a 10-year pla to rebuild the ecoomy, provide quality services, reovate ifrastructure, restore Govermet accoutability ad stregthe the local eviromet ad commuities. I deliverig quality services across the priority areas of child wellbeig, homelessess ad disabilities, the pla idetifies collaboratio with the service sector i the desig ad delivery of services as beig key to deliverig performace outcomes. 2 FACS s Commuity Services Pla provides further detail o how we may achieve performace i the delivery of services i idetifyig both the eed for us to develop as a capable orgaisatio, as well as supportig the broader service system to perform. 3 Aligmet with Govermet, orgaisatioal ad program goals should be a cosideratio whe defiig performace goals withi the cotractig eviromet. Cotract maagers ad fuded orgaisatios should aim to egage i ope ad frequet commuicatio through formal ad iformal mechaisms, the provisio of learig ad developmet opportuities, ad rewards ad recogitio for service providers performace achievemets. 1.3 Achievig two performaces through the relatioal cotract Traditioally, service providers may have perceived performace as somethig that is beig doe to them. This focus o compliace has led service providers to perceive performace measuremet as beig a reportig process that has bee used as a puitive tool. This is because Govermet systems are traditioally vertical i ature, with a hierarchical system i place to maage employees withi the orgaisatio. Withi this system of maagemet, much importace is give to systems of cotrol ad accoutability. However, whe i a workig relatioship with aother orgaisatio, this vertical maagemet model has ot proved to be effective. To effectively work with service providers, cotract maagers will eed to adopt a horizotal approach, which recogises the two parties to the cotract as beig equal i coordiatig activities to achieve outcomes agreed to i the cotract. To effectively work with service providers, cotract maagers will eed to adopt a horizotal approach, which recogises the two parties to the cotract as beig equal i coordiatig activities to achieve outcomes agreed to i the cotract. The process is a two-way partership where both FACS ad service providers provide 2 NSW Govermet, NSW 2021: A pla to make NSW umber oe, Departmet of Family ad Commuity Services, Commuity Services Pla : Improvig childre s lives every day, Sydey,

21 oe aother with ogoig, hoest, ope ad costructive feedback. Where mutuality is evidet, both parties are more likely to demostrate icreased commitmet ad willigess to perform. 1.4 Adaptability of performace i a chagig eviromet The service system i NSW is goig through a process of chage. The ability of cotract maagers ad service providers alike to aticipate, respod ad adapt to chagig circumstaces is a characteristic of high performace. To esure the ability of those workig i our service system to adapt, the workforce eeds to be provided with the kowledge ad skills to be flexible ad resposive to chagig priorities. This ca oly be achieved through the mechaism of ogoig dialogue betwee cotract maagers ad the services we fud. Liked to the ability to adapt is the otio that both we ad the orgaisatios we fud eed to be focused o cotiuous improvemet. Cotiuous improvemet recogises that there are future aspiratios ad goals worth achievig. Agai, dialogue betwee cotract maagers ad fuded orgaisatios should cotiually moitor progress agaist performace goals, ot oly as a mechaism for moitorig risk, but also as a meas of achievig cotiuous improvemet. 1.5 Foudatio elemets uderpiig the priciples The key foudatio elemets uderpiig the priciples are: evidece ad data collectio realistic goal settig. These elemets are discussed below Evidece ad data collectio I 2010, the Productivity Commissio reported o the cotributio of the ot-forprofit sector. 4 I discussig productivity, the report oted that it is importat to distiguish betwee efficiecy i productio (how well outputs are produced) ad efficiecy i allocatio (how well resources have bee used to deliver outcomes for the commuity). It was oted that while both are importat, it is the latter which matters most for improved commuity wellbeig. Quality performace is reliat upo there beig a strategic approach to collectig data, which is relevat to goal attaimet ad focuses o both qualitative ad quatitative measures of achievemet. FACS is reliat upo service providers to collect reliable data o Service Delivery for the purposes of assessig performace. Head Office is workig towards improvig systems for the extractio of quality data. It is expected that as our ability to extract quality data from the system grows, our requiremets for reportig o activities will also icrease. It is also aticipated that the availability of quality data will improve the ability of cotract maagers to drive performace improvemets i the sector. 4 Productivity Commissio, Cotributio of the ot-for-profit sector, Research Report, Caberra, Jauary

22 1.5.2 Realistic goal settig While FACS s aim is to improve ad support quality performace i the delivery of services to vulerable idividuals, childre, youg people ad families, it is recogised that plaig for the achievemet of performace goals should be realistic ad fit for purpose. This meas that we eed to cosider our ow orgaisatioal cotext ad also that of the service. Give rapid growth i the sector, some service providers will eed support to achieve quality performace ad may eed time to develop systems to support these achievemets. 2 The Performace Measuremet Cycle The Performace Measuremet Cycle focuses o activities udertake by cotract maagers ad service providers staff i moitorig ad recordig progress towards performace goals agreed i the cotract ad i the course of the ogoig cotract relatioship. The Performace Measuremet Cycle focuses o activities udertake by cotract maagers ad service providers staff i moitorig ad recordig progress towards performace goals agreed i the cotract ad i the course of the ogoig cotract relatioship. The Performace Measuremet Cycle cosists of two compoets: Busiess as Usual (Figure 2) ad Whe Performace Issues are Idetified (Figure 3). The busiess as usual compoet cosists of five key activities: Ogoig Review to be completed by both service providers ad cotract maagers Self Assessmet ad fiacial reports to be completed by service providers Aual Desktop Review to be completed by cotract maagers Risk assessmet (udertake as part of the Aual Desktop Review process) the decisio to cotiue fudig a service. 22

23 Figure 2: Busiess as usual Ogoig Review Decisio to Keep Fudig Performace Measuremet Cycle Self Assessmet 31 October Aual Desktop Review November/December The Whe performace issues are idetified compoet cosists of two additioal activities: Moitorig ad Review Meetig Performace Improvemet Pla. Figure 3: Whe performace issues are idetified Ogoig Review Self Assessmet October Decisio to keep fudig Performace Measuremet Cycle Aual Desktop Review November/ December Performace Improvemet Pla Moitorig ad Review Meetig Risk Assessmet If ay issue is idetified, the cotract maager would udertake a Desktop Review to idetify if further issues eed to be revised i the discussio with the provider. 23

24 2.1 Ogoig Review FACS cotract maagemet staff are resposible for measurig performace ad supportig performace improvemets i service provisio, ad moitorig their ow performace. Amog other thigs, this ivolves year-roud, ogoig iteractio with service providers staff. Every documet received ad each site visit ad telephoe cotact cotributes to the stock of iformatio that FACS holds about a orgaisatio ad its performace. The Ogoig Review process is a key plaig ad relatioship-buildig process to determie each party s expectatios ad resposibilities i a ope ad trasparet maer, ad drive performace. The Ogoig Review process is a key plaig ad relatioship-buildig process to determie each party s expectatios ad resposibilities i a ope ad trasparet maer ad to drive performace. The opportuities for discussio about issues ad cocers esure that service providers remai o track to achieve their performace goals. The process ivolves collaboratio betwee both FACS ad service providers i achievig performace goals i the areas of Corporate Goverace, Fiacial Maagemet ad Service Delivery. Research suggests that high-performig orgaisatios are characterised by a focus o cotiuous improvemet ad cotiual progress agaist agreed goals. 5 Cotract maagers ad service providers will meet as frequetly as is ecessary to allow for cocers to be raised ad resolved, ad to esure that performace goals agreed to i the cotract or i the course of ogoig work are met. Depedet upo a assessmet of risk ad eed, this may be as frequetly as oce a moth or less frequetly, for example aually. Determiatio of risk is based o factors assessed i the suite of risk maagemet tools detailed i Sectio Tools for the Ogoig Review process The aim of the plaig tools is to esure there is trasparecy betwee the parties ad clear directio for tasks that eed to be udertake so service providers are able to meet FACS s expectatios. The tools also provide trasparecy i relatio to the tasks FACS eeds to complete so cotract maagers effectively support service providers i achievig these aims. Two tools have bee developed to support the Ogoig Review process: the Ogoig Review Corporate ad the Ogoig Review Program Level Agreemet. The Corporate tool is desiged to support cotract maagers measurig orgaisatioal performace agaist the Fudig Deed, i particular i the areas of Corporate 5 Australia Public Service Commissio, Stregtheig the Performace Framework: Towards a high performig Australia Public Service, Caberra, May

25 Goverace ad Fiacial Maagemet. The Program Level Agreemet tool is desiged to assist cotract maagers measurig orgaisatioal performace agaist the Program Level Agreemet, i particular i the areas of Fiacial Maagemet ad Service Delivery. For larger service providers, it may ot be the same cotract maager moitorig these processes. Where this is the case, it is the resposibility of Program Maagers to coordiate the flow of iformatio to esure that service provider performace is comprehesively captured ad reflected i the Aual Desktop Review. The process of Ogoig Review will esure that ay risk to a fuded service provider ot meetig its cotractual agreemet is idetified early o. Ogoig Review also esures that there is comprehesive, documeted iformatio to iform the Desktop Review Relatioship buildig as the basis for Ogoig Review Cotract maagers use several meas to gather ad record iformatio about joit progress towards agreed goals. However, the backboe of the Ogoig Review process is relatioship buildig through regular meetigs with service providers, attedace at iteragecy meetigs ad aual geeral meetigs, ad phoe cotact ad site visits to observe operatioal activities o the groud What evidece of performace is gathered ad recorded? Cotract maagers obtai regular service data reports from service providers depedet o the program s performace goals those set out i the Program Level Agreemet, ad the Service Delivery Schedule if applicable. Iformatio is also gathered from observatios throughout the ogoig cotract relatioship. For example, i out-of-home care (OOHC) services this icludes iformatio o the cotracted umber of beds, umber of referrals ad actual placemets, as well as data o progress towards cotracted quality outcomes defied i the Program Guidelies or elsewhere. Cotract maagers also have access to Head Office data reports o the service provider s performace. Data reports are assessed agaist agreed performace goals ad form the basis of discussio whe determiig if strategies for achievig goals eed to be adjusted or refied, whether actio eeds to be take to reduce a idetified risk, ad importatly to esure that good service provisio is recogised ad rewarded. Corporate Ogoig Review Tool Program Level Agreemet Review Tool How evidece is commuicated Key to the success of the Cotract Goverace Framework is effective commuicatio ad sharig of iformatio betwee the various stakeholders to a cotract. It is the role of the Program Maager to facilitate commuicatio betwee Districts ad betwee agecies to esure that cotract maagers ca effectively assess both the performace of a service provider ad ay risks to the delivery of services. For 25

26 example, whe assessig whether or ot there have bee complaits agaist a orgaisatio, cotract maagers are required to commuicate with other Districts ad, where Head Office is ivolved, with Head Office staff to esure that all the ecessary iformatio has bee captured. Where more tha oe agecy holds a cotract with a orgaisatio, cotract maagemet staff are required to commuicate with other agecies to determie if there are ay sigificat performace issues or risks that may affect their aalysis of a service provider. If cotract maagers are usure if aother agecy holds a cotract with a particular orgaisatio, they are required to fid out. Self Assessmet provides a opportuity for service providers to reflect o their performace ad preset FACS with evidece that they have fulfilled their cotractual requiremets. 2.2 Self assessmet process for service providers Each year, service providers udertake a Self Assessmet of their performace agaist the expectatios outlied i their cotract. It provides a opportuity for service providers to reflect o their performace ad preset FACS with evidece that they have fulfilled their cotractual requiremets. The process is completed olie through the Cotract Olie Maagemet System (COMS) portal. The process is udertake usig either the Self Assessmet Corporate or the Self Assessmet Program Level Agreemet. The Self Assessmet Corporate aims to assess service providers agaist high-level Corporate Goverace ad Fiacial Maagemet performace measures, ad the service provider is primarily assessed agaist the requiremets of the Fudig Deed. The Self Assessmet Program Level Agreemet aims to assess service providers agaist the requiremets of each Program Level Agreemet ad should be completed for each Program Level Agreemet. The Self Assessmet process may vary betwee programs. It may also vary from year to year for a particular program. The Self Assessmet process is a practical recogitio by FACS that the service provider is a parter i the delivery of services ad that resposibility for performace is shared. Service providers have access to FACS cotract maagemet staff for advice ad assistace durig the process of completig the Self Assessmet as well as the portal support service provided by the Head Office Fudig ad Cotractig team, ad may choose to have FACS staff commet o a draft before the fialised Self Assessmet is formally submitted. I additio, to the Self Assessmet completed by the service providers, aual fiacial accoutability reports are submitted for both corporate ad Program Level 26

27 Agreemet Levels. Each year, i terms of the Fudig Deed, FACS requires fuds that have bee paid to service providers be acquitted. Service providers are required to complete the package icludig Self Assessmet ad retur it to the FACS for aalysis. Self Assessmet Corporate Self Assessmet Program Level Agreemet For iformatio o Fiacial Reportig requiremets, please refer to the Fudig Deed, relevat Program Level Agreemet ad Program Guidelies. 2.3 The Aual Desktop Review Each year, FACS formally reviews the iformatio it holds about the service provider it fuds i order to form a overall view about the service provider s performace over the course of the year ad future fudig. This is a desktop review i that it relies o iformatio gathered throughout the course of the year by FACS durig the Ogoig Review process, ad from the service provider s Self Assessmet ad acquittals processes. The Desktop Review comprises a short series of questios desiged to aalyse service provider performace over the last aual period, as well as a assessmet of risk The Desktop Review comprises a short series of questios desiged to aalyse service provider performace over the last aual period, as well as a assessmet of risk agaist the suite of risk maagemet tools outlied i Sectio 3. The assessed level of risk determies the frequecy of cotact betwee the cotract maager ad service provider. For example, if a service provider is still developig its Goverace ad Fiacial Maagemet structures, it will be cosidered a higher risk tha a service provider with well-established systems i place. The cotract maager completes the Desktop Review o a aual basis at a corporate level, ad agaist each of the Program Level Agreemets held by a orgaisatio. The process is itegrated with the Self Assessmet Tool o the COMS portal, to streamlie the process. This meas that as a cotract maager reviews a service provider s Self Assessmet olie, they are able to aalyse this agaist the requiremets of the Desktop Review. The outcome of the Desktop Review is shared with all who cotributed, ad with the service provider. Where agreed performace goals have bee met, the service provider receives writte cofirmatio from FACS that discussed expectatios have bee met. Where it is determied that a service provider is ot meetig its agreed performace goals, the service provider is asked to atted a formal discussio about the issues 27

28 (Moitorig ad Review Meetig). The Ogoig Review ad risk assessmet processes ca provide advace warig of ay difficulties to eable both parties to pla ad work costructively i movig forward. FACS may also visit some service providers to cofirm iformatio provided i their Self Assessmet (see Sectio 8). Site visits should be viewed as beig a usual part of the cotract maager/service provider relatioship, that is, part of the Ogoig Review. Desktop Review Process Map 2.4 Moitorig ad Review Meetig The Moitorig ad Review Meetig is the forum where FACS formally discusses ay issues it has idetified i relatio to the service provider s compliace with, or performace agaist, the cotract. The Moitorig ad Review Meetig is the forum where FACS formally discusses ay issues it has idetified i relatio to the service provider s compliace with, or performace agaist, the cotract. It may be ecessary to hold a series of meetigs to resolve the issues to both parties satisfactio. Give the Moitorig ad Review Meetig is a formal process, service providers ca expect at least two weeks otice of this meetig. Service providers should prepare for the meetig by locatig relevat papers ad esurig that there is evidece to support the claims described i their Self Assessmet. Iterviews may be arraged with Board members, maagemet, staff ad service users as part of this process. Where sigificat cotiuig performace issues are idetified by FACS, the service provider is asked to develop proposals for improvig performace. These are described i a Performace Improvemet Pla (see Sectio 2.5). The miutes from Moitorig ad Review Meetigs, ad other relevat papers form part of FACS permaet record about the service provider. Whe FACS is satisfied that the service provider has addressed the issues idetified for discussio, the service provider is iformed i writig. Maagemet Review Meetig Letter 1 Maagemet Review Meetig Letter 2 Moitorig ad Review Meetig Ageda 28

29 2.5 The Performace Improvemet Pla The Performace Improvemet Pla (PIP) is a agreemet betwee the service provider ad FACS about actios the service provider will take to improve performace. A PIP is egotiated where cotract maagers idetify a sigificat cotractual or performace issue for the service provider to address. A PIP is egotiated where cotract maagers idetify a sigificat cotractual or performace issue for the service provider to address. A service provider should ot draft a PIP o its ow iitiative ad submit it to FACS for edorsemet. PIPs are developed at either the Corporate level or Program Level Agreemet level. There are two separate templates to reflect this. To determie which level PIP to use, cotract maagers eed to determie at which level the issues lie. While FACS idetifies the eed for a PIP, the cotets of the PIP are to be egotiated betwee FACS staff ad represetatives of the service provider. Negotiatio cotiues util FACS is satisfied that the PIP: accurately describes the issues describes solutios that are specific, measurable ad achievable. PIP actios must have timeframes. If there is o agreemet betwee FACS ad the service provider about PIP actios, the egotiatio process outlied i Pillar 4 of the Cotract Goverace Guidelies would be followed. Failig this, the dispute resolutio process outlied i the Fudig Deed is used. It may be ecessary to prioritise the actios described i a PIP; priority is determied by the relative impact ad urgecy associated with the actio. FACS advises the service provider about the relative urgecy of PIP actios. A copy of the agreed PIP is attached to, ad forms part of the Fudig Deed the service provider has etered ito with FACS. Because of this status, the PIP has the same sig-off criteria as the Fudig Deed at a District level, ad for the service provider, a duly authorised represetative coutersigs the PIP. As part of their day-to-day fuctios, FACS s staff actively moitor the progress that service providers make i implemetig actios listed i the PIP. A PIP remais curret util all the actios have bee achieved or it is replaced by a ew PIP. Some PIP actios will exted beyod 12 moths. These are reviewed, ad 29

30 if foud to be still ecessary, icluded i the ext PIP. Corporate Performace Improvemet Pla Program Level Agreemet Performace Improvemet Pla 2.6 Cotiuatio of fudig A Program Level Agreemet may refer to two types of fudig aual fudig ad oe-off fudig. Aual fudig is a amout applied to a Program Level Agreemet for a particular fiacial year. This fudig may be applied over a multi-year Program Level Agreemet with a amout for each fiacial year, or it may be provided for a sigle year. Oe-off fudig is a amout of fudig paid oce oly. It may be applied to a Program Level Agreemet of ay legth of time. Where a service provider has failed to meet performace requiremets, FACS cosiders ay circumstaces outside the service provider s cotrol that may have affected its ability to achieve the specified performace requiremets, icludig ay delays or omissios by FACS. Progress towards implemetig actios agreed i a PIP iflueces the decisio to reew fudig or chage the coditios uder which fudig is offered. Progress towards implemetig actios agreed i a PIP iflueces the decisio to reew fudig or chage the coditios uder which fudig is offered. The basis o which fudig is allocated must be cosistet with Govermet priorities. If the Govermet s priorities chage, FACS s must egotiate with service providers to chage the purpose of fudig. The provisio of fudig is also more broadly predicated o the availability of fuds from Treasury, which may be a factor i the decisio to cotiue fudig. 3 Maagig service provider risk I 2010, the Productivity Commissio recommeded that Govermet agecies put i place a specific risk maagemet framework with service providers to assess ad maage risk. 6 Followig this, as part of FACS Iteral Audit Pla for , KPMG carried out a iteral audit of FACS cotract maagemet arragemets. 7 It was foud that, while FACS staff were, to some degree, supported i maagig performace issues, there were o cosistet policies, processes or tools to support 6 Productivity Commissio, Cotributio of the ot-for-profit sector, Jauary KPMG, Goverace ad Assurace iteral audit report: Commuity Services goverace arragemets iteral audit, October 2013, p

31 staff i moitorig service provider risks. 3.1 The risk maagemet process Risk maagemet is a cotiuous process supportig improvemets i Service Delivery. Risk maagemet does ot aim to focus o poor performace per se, but rather it eables gaps to be idetified ad supported. Risk maagemet is a cotiuous process supportig improvemets i Service Delivery. Risk maagemet does ot aim to focus o poor performace per se, but rather it eables gaps to be idetified ad supported. It is clear that the icrease i the umber ad the capacity of services i all the program areas has resulted i the establishmet of ew orgaisatios which will take some time to develop their systems, for example Goverace or Fiacial Maagemet systems. At the same time, existig orgaisatios are experiecig growth ad eed time to maage these chages. The risk assessmet process should be udertake, as a miimum, o a aual basis with each service provider as part of the Desktop Review process. However, it ca be udertake at ay poit i the Performace Measuremet Cycle if there is a idetified eed. The FACS Risk Maagemet Guidelies were adapted from the iteratioal stadard AS/NZS ISO 31000:2009 Risk Maagemet Priciples ad Guidelies. The Cotract Goverace Framework has take this guidace ad has developed a suite of risk maagemet tools aimed at supportig cotract maagers i idetifyig, assessig ad maagig risks to the provisio of services. The tools, discussed below, provide a stadardised approach to determiig which service providers require higher levels of support, ad therefore the frequecy of the Ogoig Review process. For those service providers where we have idetified a higher risk or exposure, cotract maagers may elect to meet for Ogoig Review as frequetly as oce a moth. For those providers where there is less risk or exposure, cotract maagers may elect to meet as ifrequetly as aually or less. The risk assessmet process cosists of four elemets: idetifyig risk, aalysig risk, evaluatig risk ad treatig risk Idetifyig risk Service provider risks are best idetified usig a variety of stakeholders with experiece ad differet views. Commuicatio betwee Districts, betwee Districts ad Head Office, as well as commuicatio betwee FACS agecies is critical to 31

32 accurately assessig the risk of a orgaisatio. Risk is idetified usig the Risk Idetificatio Matrix Guide for Assessmet Tool ad Risk Assessmet Ratig Tool. The Risk Idetificatio Matrix Guide for Assessmet Tool ad Risk Assessmet Ratig Tool icludes key questios ad risk idicators for cotract maagers to cosider i idetifyig service provider risks i the areas of Goverace, Fiacial Maagemet, ad Service Delivery. The tool also lists data ad iformatio sources that cotract maagers ca use to idetify risk factors Aalysig risk Oce risks have bee idetified, a aalysis eeds to be udertake to determie the severity of the risk ad the likely impact o Service Delivery. There are two tools available for aalysig risk at Corporate ad Program Level Agreemet levels. These iclude the Risk Assessmet ad Ratig Tool Corporate ad the Risk Assessmet ad Ratig Tool Program Level Agreemet. Based o the ratig provided for each risk elemet, the tool calculates a overall score ad assigs a level of risk. Guidelies have also bee produced to assist cotract maagers i aalysig risk whe completig the tools, called the Risk Idetificatio Matrix guide for assessmet tool (for both Corporate ad PLA levels) Evaluatig risk Followig aalysis ad ratig of the risk, the risk is evaluated to determie optios for treatmet ad the level of support required. The Risk Categorisatio Guide is the istrumet used to assist cotract maagers i determiig the frequecy of Ogoig Review ad supports required Treatig risk Treatmet of the idetified risk is udertake usig the Risk Moitorig ad Performace Measuremet Pla. This is a template that allows staff to effectively documet risk ad performace issues, re-assess risk based o commuicatio with the service provider, ad develop actio plas for the treatmet of ay issues. The documet is iteded to be dyamic, ad should be updated as risks ad issues are idetified. Treatmet of some risks may result i the developmet of residual risk, which should also be assessed ad treated durig the regular moitorig process. 4 Roles ad resposibilities of the cotracted parties 4.1 Head Office uits FACS Head Office uits for each program area are resposible for developig cotract ad performace measuremet policy; desigig ad implemetig the associated 32

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