Public Sector Contracting: An Australian Study of Changing Work Conditions**

By Ryan, Neal; Furneaux, Craig et al. | Management Revue, October 1, 2005 | Go to article overview

Public Sector Contracting: An Australian Study of Changing Work Conditions**


Ryan, Neal, Furneaux, Craig, Pink, Anthony, Brown, Kerry, Management Revue


Throughout the 1990s, government reports such as the Competitive Tendering and Contracting Export (Industry Commission 1996) and the Report of the Independent Commission to Review Public Sector Finances (McCarrey 1993), suggested that the contracting-out of government services would improve the delivery of public goods in Australia. This article reports on the findings of a case study of contracting-out of building maintenance services in the state of Western Australia in Australia. The study focuses on evaluating the impact of the contracting-out of these services on the wages and conditions of employees affected by moving from public sector to private sector employment. The study found differences in the employment conditions of white collar and blue collar workers. In general, the conditions of white collar workers improved but there was a marginal decline in the conditions of blue collar workers. The article concludes that while contracting-out created budgetary savings for government, these resulted partly from a reduction in wages and benefits of former blue collar staff, despite the best efforts of the Western Australian government to protect staff wages and benefits. The research makes an important theoretical contribution by arguing that the impact of contracting-out on staff wages, benefits and conditions is conditional upon the level of competition in the labor market for worker's expertise. In "thick markets", wages, benefits and conditions are likely to reduce, due to strong competition for expertise. However in "thin markets", wages, benefits and conditions are likely to increase, due to weak competition for expertise (Borland, 1994).

Key words: Contracting-out, Work Conditions, Wages, Work Intensity, Labor Market

Introduction

Contracting-out of government services has fundamentally changed the nature of service delivery for government agencies (Verspaandonk 2001). Proponents have argued that the contracting-out of government services will result in considerable cost savings to government, due to the market efficiencies of a competitive tendering system (Domberger 1994). Concerns have been raised, however, with the effectiveness and efficiency of contracting-out government services, as well as concerns about competition and quality (Prager 1994). Quiggin (1999) has also raised concerns about the redistribution of risk from government to private sectors, and the source of any efficiency gained, arguing that these cost savings are most likely to ensue from reductions in staff wages and benefits.

This article will extend the research into the contracting-out of government services by examining the effect of the policy of contracting-out of building maintenance sendees in Western Australia. Evaluation of both the intended and actual outcomes of the policy outcomes are a critical part of this process (Department of Finance 1994:8). When undertaking evaluating a government policy or regulation, good practice includes an assessment of the impacts of the policy, in terms of its direct and indirect costs on government, business and the community, as well as the economic, social and environmental impacts of the policy (Productivity Commission 2004; Regulatory Impact Statement Guidelines 1995).

This research project follows this approach when evaluating the effect of contracting-out policy in Western Australia, by firstly establishing the intended outcomes of contracting-out by reviewing main elements of the academic literature and government reports that guided the implementation of the policy. A specific research question will be developed from the academic literature concerning contracting-out, together with a methodology for undertaking the research. This research question will then be examined based on the actual outcomes of the contracting-out process of maintenance workers in Western Australia. While efficiency gains will be noted, the focus will be on the impact of contracting-out policy on employee wages and benefits - the economic and social costs of the policy. …

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Public Sector Contracting: An Australian Study of Changing Work Conditions**
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