CONTESTABILITY, POLICY ADVICE &
THE AUSTRALIAN STRATEGIC POLICY INSTITUTE

Celia Perkins

Discussion Paper No. 75
August 2000
ISBN: 0 7315 34182
ISSN: 10302190

This discussion paper is a revised version of a Policy Analysis Report written as part of the requirements for the Masters in Public Policy, Australian National University



ABSTRACT

As the public service is "thrown open to the cold winds of competition" (Hartigan, 2000), and the implementation of new public management advances past simple contracting-out, contestability of policy advice to government is receiving increased interest as new area of reform to pursue. The Government's commitment to establish an Australian Strategic Policy Institute (ASPI) is motivated by the potential for that institution to provide contestable advice on defence and security policy issues.

To understand how the creation of this Institute might assist the Government's desire for policy contestability, this paper will look more closely at the principles of contestability and consider how the experience of other similar ventures by Government have contributed to increased contestability in policy advice. This understanding should inform the establishment of the Australian Strategic Policy Institute.


CONTENTS
ABSTRACT
1. INTRODUCTION
2. WHY AN AUSTRALIAN STRATEGIC POLICY INSTITUTE?
3. CONTESTABLE POLICY ADVICE
4. EXPERIENCE IN AUSTRALIA: SOCIAL POLICY CONTESTABILITY
5. GOVERNMENT SUPPORTED RESEARCH INSTITUTES
5.1 Australian Institute of Family Studies
5.2 Australian Housing and Urban Research Institute
6 PERFORMANCE MANAGEMENT AND OTHER IMPORTANT LESSONS
6.1 Performance Management
6.2 Relationship to Government
6.3 Contestable policy advice or something else? Information vs advice
7. THE WAY FORWARD: CONSIDERATIONS FOR ESTABLISHING ASPI
BIBLIOGRAPHY



1. INTRODUCTION

Contestability is a concept at the heart of the Australian Government's embrace of the principles of new public management, and has been central to the Howard government's philosophy and practice of public administration. Contestability has achieved the status of buzzword, and the principles of contestability have been applied across an increasingly wide range of traditional government services in the more visible process of market testing and outsourcing. Policy advice has not to date figured significantly in the introduction of contestability in Australian Government.

The Commonwealth Government's plans to establish an Australian Strategic Policy Institute (ASPI) signal a new effort to pursue contestability in defence and strategic policy. In an announcement in February this year, the Minister for Defence John Moore hailed the establishment of the ASPI as a 'long overdue initiative that will complement existing policy making expertise by providing independent contestable advice on defence and security policy issues' (Moore, 2000). The ASPI is envisaged as a "…non-partisan centre of excellence that will provide research and analysis aimed at enhancing defence and security policy making in Australia…" (ibid).

By sponsoring the establishment of the ASPI the Commonwealth is embarking on a sizeable and ongoing investment in the name of contestable policy advice. It is important that a clear understanding exists of how its operation can introduce contestable advice, in order that the Institute and the Government derive the best return on that investment. This is not, however, a simple question. Despite a significant body of work on new public management generally, and wide experience in contestability's practical application in market testing and outsourcing, there is still limited working knowledge and a limited body of work on the concept of contestability in policy advice.

This paper will review the proposal to establish the ASPI in the context of the two main issues that will determine its role and effectiveness as a vehicle for contestability. The first and most obvious is to understand contestability in the performance of traditional government roles, like policy advice, and in that context to better understand the role ASPI might play in introducing contestability. The second is to examine government support to policy-related research activity operating at arms-length from the bureaucratic process, as a supplementary source of policy advice. Government support to, and establishment of, policy-related research organisations is by no means new. The potential for ASPI to provide contestable advice to the Government can be examined by investigating the Australian Government's experience of this model in other policy areas. Specifically, I will review the approach of the Commonwealth Family and Community Services Portfolio to policy-related research and evaluation and the specific experience of two portfolio-sponsored bodies, the Australian Institute of Family Studies and the Australian Housing and Urban Research Institute. By better understanding contestability and the social policy experience of supporting research institutes, some directions to assist the establishment of the ASPI might follow.


2. WHY AN AUSTRALIAN STRATEGIC POLICY INSTITUTE?

The intention of the Federal government to establish a body concerned with strategic policy research and analysis, an Institute of Strategic Policy, was first made public in a June 1998 announcement by the then Minister for Defence Ian McLachlan. This formed an election commitment in the Coalition Defence Policy, Building Combat Capability, prior to the 1998 general election. Specifically, that document stated that the Government would establish a new Institute of Strategic Policy as a way of promoting greater public debate and research on defence and security policy issues in Australia.

Moore's February statement outlined the intention to establish the ASPI as a "…non-partisan centre of excellence that will provide research and advice aimed at enhancing defence and security policy making in Australia…". "The institute will be … a stand-alone organisation governed by a Board of Directors who will comprise a cross section of eminent persons from defence, academia, business and politics. With an initial budget of at least $2m, the institute will be funded by defence but will not be precluded from seeking private support". (Moore, 2000) In other words, the ASPI is to operate as a government funded but independently operated 'think-tank'.

Public discussion on the proposal to establish the ASPI has been limited to little more than the background described above, with some limited press comment in February and March this year. Within the Department of Defence however, work on developing the proposal has been ongoing since 1997. The ASPI proposal stemmed from a desire to fill a gap in policy relevant research and analysis perceived to exist between departmental efforts and the limited policy community operating outside the Government on defence and strategic issues.

Policy is thought by some to be naturally contestable on the basis that there is an established market of contributors to policy debate in the bureaucracy, ministerial staff, think tanks, interest and lobby groups etc (DoF 1995, Boston, 1994). While the validity of that claim will be considered in more detail later, it is interesting that defence policy does not have a wide range of alternative views available to inform policy directions. This is particularly obvious in comparison to other areas of public policy like economic, health, social and education policy. Policy making and policy expertise on strategic defence issues in Australia is almost entirely concentrated within the Defence bureaucracy. There are a small number of lobby groups, such as the Australian Defence Association and the Returned Services League, but the focus of these organisations is rarely on strategic policy issues , with more specific attention given to conditions of service and other personnel-related issues. In addition there are a small number of university based centers which cover strategic studies to varying degrees, notably, the Strategic and Defence Studies Centre (ANU) and the Australian Defence Studies Center (UNSW / ADFA). In both these cases, despite charters that specify a policy focus of these centres, the work undertaken is more typically academic in nature and not well focussed on current policy issues facing government.

The Australian Defence Studies Centre was established " … as a policy oriented research centre"(ADSC, 2000). The Strategic and Defence Studies Centre's aim is to be "the leading Australian research centre on strategic and defence studies". It's mission include a desire to "further the development of strategic studies both as an intellectual discipline and as a foundation for policy advice… with a view to providing a constructive input into policy developments and fostering a more informed academic debate" (SDSC, 1999). Nevertheless, a quick glance at the recent publication schedules of both these organisations reveals a predominantly academic and historical focus. While this is an important and considerable input to the broader understanding of defence issues, it does not assist the current policy preoccupation and decision making needs of the government. This problem has been documented elsewhere, Weiss (1992), for instance, claims that research centres within universities are "caught in a tension between the values of the policy world … and the values of the university that determine their standing…". Weiss outlines specific pressures to publish and the difficulties of interdisciplinary work in typically discipline-based university structures. Internal Defence reviews suggest that these pressures have flourished with limited management of the relationship between the department as sponsor and the university centres, marked by sporadic and poorly-defined performance management, and limited inputs from Defence in the development of research agendas.

Two issues then have driven the ASPI proposal. The first has been a desire to address the concentration of strategic expertise in Defence and the disadvantages of a limited policy community. This has given cause for concern that strategic policy advice in defence lacks the spur to improvement, or to seek efficiencies and effectiveness that is typically provided by competition and contestability. Alternative approaches are not freely developed or adequately examined, and with a paucity of external inputs, this is unlikely to improve (White, 2000). The second driver has been to increase alternative options, and to seek a more flexible and relevant policy input from the ASPI than is currently available in the established centres. Hence, the creation of the ASPI could be seen as developing the market of defence inputs.

3. CONTESTABLE POLICY ADVICE

The Department of Finance (now the Department of Finance and Administration) developed a body of work in 1995 Examining Contestability in the APS. This is perhaps the most comprehensive discussion of contestability in Australian Government, despite major shifts in the last decade to apply' new public management' and significant government moves to increased contestability, typically seen with the deregulation of government industries and the outsourcing of many government services. New public management describes the shift in recent years from the traditional bureaucratic public sector model to a system of public administration that borrows heavily from the management principles of the private sector. Hughes (1998) describes the shift as a 'transformation' of the public sector, undertaken as governments have increasingly questioned the efficacy of traditional administration. One of the main criticisms of new public management is that it has is no real definition, only lists of what it involves. Hood (1991 in Hughes, 1998) and Pollitt (1995) both present comprehensive outlines of the main elements of new public management, outlined at Figure 1 below. The similarities in their lists demonstrate that a fairly consistent view has emerged.



Figure 1: Key Elements of New Public Management
Hood 1991 Pollitt 1995
Hands-on professional management Decentralisation of management
Explicit standards and measures of performance Quality and customer focus
Greater emphasis on output controls Working to outputs and performance targets
Disaggregation of policy and service delivery Separating purchaser and provider
Greater competition, including market testing of contestable services Disaggregating traditional bureaucratic organisations into separate agencies
Private sector management styles Shifting from permanency to contracts
Discipline in resource use Local determination of pay and conditions
Cost cutting

Establishing contestability should be seen as central to both these lists, as a necessary precursor to the implementation of specific measures of new public management, the first step if you like to improved public administration.

Contestability is "… a way to increase and manage the available choices, particularly in terms of who will supply services to and on behalf of government." (DoF, 1995), and in the public service context this can mean "the real possibility of competition". As a working concept, contestability can serve to generate a culture where "nothing is sacred". The prospect of competition can provide the motivation to improve efficiency and effectiveness in internal operations on the basis that a more competitive environment will increase the choice available to government to seek services including outside the public service if a more effective option is available. Contestability should cause "…those operating in traditional bureaucratic modes to critically examine their activities with regard to how effectively they contribute to objectives…"(DoF, 1995).

Most government interest to date in pursuing contestability has been in market deregulation and the contestability necessary to facilitate outsourcing. Indeed Defence has been a strong participant in these moves with the introduction of the Commercial Support Program (CSP) in the early 1990's and the Defence Reform Program from 1997. Defence has recognised that within the delivery of a unique military output, there are many support functions that do exist and can be better performed outside government. These changes within Defence, notes Sturgess (1994) have been "one of the great surprises in the emergence of post-industrial government…" and have seen the introduction of contestability, and then the market testing and outsourcing of significant non-military functions including: base support functions (guarding, catering, ground and facility maintenance); clerical and administrative function; publishing and printing; logistics; avionics; explosive ordnance storage and maintenance; health services and most recently Defence Force recruiting. It is not surprising then that Defence is ready now to consider contestability in policy advice.

As noted earlier, DoF (1995) and others suggest policy advice is naturally contestable given the numerous sources of policy inputs available outside government in the shape of think tanks, research groups, lobbyists, and academia. Boston (1994), confirms the range of inputs available to policy makers, who seek advice from many areas outside departments and outside government, including via commissions, committees of inquiry and task forces (Boston, 1994). While this suggests an external market exists, the extent to which the market has been drawn on to introduce contestability, or to provide the impetus to improve policy advice within the bureaucracy has not been explored.

Australia, despite the number of potential policy contributors available has been described as having a 'non-porous policy making system' (Oliver 1993), with policy processes at the Commonwealth level largely determined by the bureaucracy and Cabinet. Indeed, while Prime Minister John Howard's 1996 guide to the Key Elements of Ministerial Responsibility recognises the variety of policy inputs available, noting that " Minsters will obtain advice from a range of sources…" the centrality of bureaucracy and ministerial staff as natural source of advice to government holds as the Prime Minister concludes that advice will come "… primarily from their private office and from their departments". Australia's experience is not uncommon as policy advice to government has most typically remained located in departments or ministries across OECD countries despite the trend to contracting out that characterises the shift to new public management (Boston 1994). Boston (1991), refers to this as "Bureaucratic or provider capture" of policy but at the same time the proliferation of lobby groups and think tanks in recent years is also evidence of a society seeking new ways to influence political decision making processes (Oliver 1993).

This raises a number of questions as to the state of the 'market' of policy advice, and the role of 'purchaser' (the government) and 'providers' (the various potential contributors to the policy process outlined above). To what extent is the purchaser currently in a position to access the market available to it? Or indeed, in the case of policy advice, does the government even perceive a role as purchaser? The Australian government has tackled the purchaser-provider relationship in the area of service delivery (see particularly the establishment of Centerlink (Zanetti, 1998)) but has not yet done so in the policy arena. The establishment of the ASPI indicates a desire on the part of Government to access the market or to develop that market noting the limits to the Defence policy community. To do this effectively there will be some work required on defining the purchaser-provider relationship if the ASPI is to avoid the problems experienced with Defence sponsorship of the SDSC and the ADSC, and for the government to utilise the ASPI productively in policy making.

The experiences of other governments provide some insight here, notably New Zealand and Canada, both recognised to have made some inroad in contestable policy advice. Contestability in policy advice was tackled as part of the major reforms to the New Zealand Government in 1980's and 1990's. Early in this process machinery of government changes sought to address poor advice and coordination, and a lack of contestability of policy advice internally and externally (Boston, 1991). This led to creation of single purpose policy ministries, increasing the stream of policy inputs ostensibly increasing contestability (Boston, 1991). The State Services Commission's Policy Advice Initiative (1992) was part of a continuing response to a lack of confidence among ministers that they were getting value for public expenditure on policy advice, and it dealt mainly with quality and measurement (Hawke, 1993). The Policy Advice Initiative specifically framed the Government as a client purchasing policy advice from departments. In fact, New Zealand went so far as to cost the value of policy advice and implemented a transactional purchase arrangement by government from department, using benchmarks of quality and quantity. Guidelines on purchasing policy advice were developed as part of the financial control and budgeting process, seeking ultimately to demonstrate value for money in policy inputs.

In New Zealand however competitive tendering (of policy advice) was rejected as incompatible with good public sector management (Hawke, 1993), although a disaggregated State sector was aimed at providing a higher level of policy contestability by increasing the number of inputs from across government. A good example of this in practice is the separation within the Defence portfolio of the Ministry of Defence and the New Zealand Defence Force. This separation results in two sets of advice to government on defence issues, although the effectiveness of the operation of this split in terms of coordination and cost effectiveness is now being seriously reconsidered. Later work by the State Services Commission (1998) suggest that Ministers have typically not contracted for policy advice with agents other than their own departments, although Cabinet considerations seem to now involve more cross-government inputs or 'more fingers in the policy pie'.

This demonstrates an internal practice of contestability, using measurement tools and purchaser-provider arrangements between the bureaucracy and Ministers to increase the efficiency and effectiveness of policy development within the bureaucracy. Indeed, in terms of the earlier contention of inherent contestability available through a market, New Zealand seems to be somewhat behind Australia. New Zealand "lacks the external think tanks that in other jurisdictions germinate ideas and examine policy issues to inform government policy deliberations and become actual policy proposals" (SSC 1999). There are relatively few organisations outside the state sector that provide policy-related research that can be used by government, with limited contracted research produced by university and crown research institutes (SSC, 1999).

Like New Zealand, the Canadian Federal Government has done much work centrally on improving policy advice, although contestability as a specific issue has not received the same attention. Like New Zealand, the focus has rested on greater policy inputs to the federal process, and creating a 'collegial' environment to foster policy cohesion. Also like New Zealand, Canada notes it has a "less active, smaller and less diversified community of policy researchers and analysts outside government than does the US" (CCMD, 1996). Despite a strong tradition in the federal government (as in Australia) in assisting policy research outside government, the size of the external policy community is recognised as limiting important inputs to the policy process.

In Australia then, with a larger market of think tanks (see Ian Marsh,1992 and 1995), the government has the benefit of an established market, but it has not taken a pro-active position as purchaser, either from the bureaucracy or from the market in order to increase policy contestability. How then might Government effectively utilise the existing market to enhance contestability? Boston (1994) suggests a range of options that could be applied if policy makers wish to "rely less heavily on their advisers in the public service or at least expose them to greater competitive pressures" of contestability. They are:
1. Purchase more advice from non-departmental advisory bodies, commissions, special advisers, interest groups, party organisations etc.

2. Require departments and agencies to contract out a greater proportion of their policy work to non-government providers.

3. Establish or fund new policy units to provide advice in particular policy domains in competition with existing suppliers.

4. Create an internal market under which government departments and agencies could compete for contracts to supply advice in particular policy domains.

5. Create an external market under which any public agency or private firm could compete to supply advice in particular policy domains. (Boston 1994: 7-9)

Boston's option 3 best represents the Government's proposal to establish the ASPI, but places the onus of contestability on the Institute. While this is a reasonable requirement, it is almost 'back-the-front' in terms of the principles of contestability. Rather than in-house policy makers seeking to improve their efficiency and effectiveness in the face of potential competition, the establishment of the ASPI represents an external imposed contestability. If the government wishes to pursue contestability more broadly to the practice of strategic defence policy development additional steps would need to complement the ASPI's establishment, like those outlined by Boston, aimed at challenging the current policy making roles of the bureaucracy.

Boston's options address the structural requirements to introduce contestability but several other important issues have the potential to limit the ability of government to integrate these models into the policy process, notably expertise and trust, but also counteracting 'vested interests'. First, if a market is to develop outside the bureaucracy, achieving sufficient expertise in a specific area of policy will require an investment in skills development that will have limited application other than in advising government. This goes some way to explaining the current limitations to the defence policy community, while the market in policy areas like economics is better developed. To encourage the development of a market a reasonable level of support, either contractually or in terms of reasonably termed grants, will be necessary (Boston, 1994). Second, trust has been a key component of the Westminster system, and norms about 'secrecy' or confidentiality may be a barrier to outside organisations becoming effective participants in the policy process (Jarman and Kouzmin 1993 in Peters, 1996). Mutual trust is central in policy advice, but developing high levels of trust is likely to be difficult with organisation outside government. Some degree of longevity, or tight contractual arrangements might assist in fostering trust and confidentiality (Boston, 1995). Finally we cannot underestimate the influence of vested interests in maintaining the status quo of in-house policy advice, alluded to in Paul Hartigan's cartoon opening this paper. Boston (1994) questions if the "ubiquity of in house policy expertise in OECD countries is the product of sound economic or constitutional consideration or is it due mainly to rent seeking behaviour on the part of bureaucrats". Wiltshire (1992) for instance alludes to the "nobbling techniques" available to government and departments to constrain outside inputs, but unfortunately this is a harder challenge to define. Boston (1995) also notes that "the absence of a competitive market for policy advice limits the incentive for productive efficiency and enhances the opportunities for rent-seeking and slackness". This cuts to the heart of the concept of contestability. A closed market required to become more effective and efficient on the threat of competition will always experience resistance, particular in the government 'heartland' of central policy making, particular in those areas where significant outside expertise has not developed, like defence.

If these issues can be addressed, and pursuing an initiative like the ASPI suggest a desire to do so, the final challenge is implementing the policy inputs made available from contestability into the policy making process. Boston (1994) summarises the difficulties of coherence, as governments need more than to purchase individual outputs, wanting integrated and coordinated policy development. There is some evidence that increasing the volume of inputs has an adverse affect on policy cohesion. Weiss (1992) for instance refers to a 'rising cacophony' as the variety of perspective's represented diverge or fragment. Policy coherence is more likely to emerge in a collegial environment CCMD (1996), indicating the need for some degree of structure to coordinate policy inputs. This theme is picked up by PUMA (1999) recognising the challenges as the state "shifts from dominant actor to strategic enabler / coordinator" as the principles of new public management are embraced, bringing other sources into the policy process. "Increasing the number of actors involved in the governing process often means creating new mechanisms, or adapting existing ones, in order to give the new actors a voice, while maintaining the governments capacity to guide the process towards coherent results" (PUMA, 1999). An additional challenge to integration and cohesion is the poor record of success of think tanks translating their work to policy change (Marsh 1995). This is attributed in part to a lack of attention by think tanks to achieving a cross over of their work to the policy process. Mechanisms to achieve integration need to be two-way, with a greater emphasis from alternate policy advisers on "selling" their work to government.

If the ASPI is to become an established part of the market for defence and strategic policy inputs and contribute to contestability, the barriers and challenges discussed above can provide some guidelines for the Government and the ASPI to follow as the institute is established. Government should consider:

§ Defining its role as purchaser. This will require an understanding of the cost of policy advice including from the bureaucracy, an understanding of the policy inputs needed, and a commitment to access the work of the ASPI;
§ Guaranteeing some reasonable length of tenure in the ASPI's funding to allow development of expertise;
§ Developing and managing a relationship with the ASPI that builds trust;
§ Being involved in the direction setting of the ASPI and developing performance measurement and review mechanisms to monitor the ASPI's value as a provider; and
§ Developing mechanisms to assist the integration of the inputs ASPI can provide in the policy process.

ASPI should consider:
§ Developing, employing or contracting sufficient expertise in defence and strategic policy issues;
§ Engendering trust in its dealing with to government;
§ Maintaining policy relevance in its research agenda and inputs to government;
§ Demonstrating that relevance by actively seeking to demonstrate performance to its sponsors,
§ Involving government in the development of the Institutes agenda; and
§ Undertaking an outreach role in providing policy inputs and advice to the Government.

Finally, it should be noted that by definition the creation of the ASPI can only provide one alternative to government, rather than providing a market that gives the government real choice as a purchaser. It is an artificially contrived market, and while it should increase policy inputs, the element of contestability implied in a 'contest' will be missing. While this does not necessarily constitute a problem, it does suggest that the ASPI proposal is one element of a larger task for the Government to pursue if strategic defence policy is to be truly contestable.



4. EXPERIENCE IN AUSTRALIA: SOCIAL POLICY CONTESTABILITY

At the outset it was noted that government support to and establishment of bodies concerned with policy-related research and analysis was far from a new experience, and indeed that the market exists to make policy advice in government contestable. Marsh (1992 and 1995) and others in their work on think tanks, and 'independent public policy institutes' (Stone, 1992) (as well as the significant body of work on policy networks and communities not covered here) outline the extent to which government's support external organisations in developing policy relevant inputs, largely in research, analysis and evaluation.

Directly and indirectly, government funding has facilitated the proliferation of think tanks in Australia (Marsh 1992). Government departments have increasingly sponsored policy relevant research by creating or funding think tanks in universities, contracting research on specific policy issues or establishing quasi-government research institutions. The investment is substantial with approximately 82% of the $80 million in annual funding to Australian policy research bodies provided by Government. Generally this is recognised as a sound investment in better informing Government decision-making, with the rider that good analysis does not necessarily lead to better policy. Information is only one, albeit important, ingredient (Weiss, 1992), and the impact of government supported research is unlikely to have great impact unless policy making becomes more accessible to external influences (Marsh, 1980 in Stone, 1992), noting the problems of accessing the market outlined earlier. In addition, think tanks have the indirect benefit of stimulating broader and better informed policy debate, and if well focussed can and do undertake some of the ground work of policy formulation being uniquely place to float policy proposals in the public forum (Stone, 1992),

As the ASPI is envisaged as a government sponsored 'think tank', it is useful to consider other similar experiences in sponsoring policy-related research through independently operated research institution. In doing so lessons can be drawn on their experience to provide insights into the likely impacts of the operation of the ASPI for contestability in defence and strategic policy.

The Family and Community Services portfolio provides a good area of study. It is a significant area of public policy, and has a well-established role in supporting a range of external policy-related research bodies. FaCS sponsors both the institutes reviewed in more detail below, the Australian Institute of Family Studies and the Australian Housing and Urban Research Institute, and figure two (below) outlines diagrammatically the relationship of these bodies to the FaCS portfolio. FaCS is convenient to study as it has a committed Departmental approach to research bodies, with the noted limitation of considering only one portfolio's approach to research and evaluation of policy issues outside of the bureaucratic structure.

FaCS, in 1999, restructured its Strategic Policy and Analysis Branch to pursue, among other roles, development and maintenance of a strategic policy framework and a research and evaluation framework for the department, and to create an effective bridge between external policy research organisations and internal work groups in the department. (FaCS, 1999c). This has translated into a serious approach to sourcing a broad range of policy inputs, and publication of a research and evaluation framework (FaCS, 1999a), on the basis that "research and evaluation enable a shared and deeper understanding of the department's policy environment" and "the quality of its research and evaluation program plays an important role in ensuring the effectiveness of the …department's activities." This framework or research agenda is based on a desire to ensure fully informed policy outputs, and recognising both the market
Figure 2: Family and Community Services Portfolio, ( FacS 1999(a) Appendix A.)



available in social policy research and the benefits of the government taking on a role as a purchaser of these inputs.

In pursuing these aims, investment by FaCS totalled $15m dollars in 1999-2000, across internal (including Departmental directed consultancies), research partnerships, and the funding of research bodies. The Australian Housing and Urban Research Institute (AHURI) was one of four portfolio funded research bodies, the Australian Institute of Family Studies is separately funded by the portfolio, but also receives some contracted work under this scheme. The FaCS Research and Evaluation Digest (as the working compendium to the framework, describes the projects commissioned or undertaken by FaCS. (FaCS 1999b).

The focus of the FaCS program is squarely aimed at meeting information needs to serve as policy inputs rather than any expectation of receiving policy advice. The FaCS approach recognises the skills in universities and research bodies, and seeks "opportunities for more academic involvement include contestable and non-contestable contracts and collaborative ventures" (FaCS, 1999a), but at the same time the policy role in using that information is firmly held in the Department. In essence the Department is operating as a purchaser from the policy market of its own assembly of policy providers. The Department provides contestability to its inputs, and is not itself contested by Government as purchaser. While this is a step back from contestability as discussed above, this and its experience in practice by the Institutes discussed below nevertheless offers considerable insight to Defence sponsorship of the establishment of the ASPI.

5. GOVERNMENT SUPPORTED RESEARCH INSTITUTES

The Australian Institute of Family Studies and the Australian Housing and Urban Research Institute are reviewed here in more detail for the lessons that might hold for the establishment of the Australian Strategic Policy Institute. Both these institutes were established by government initiative and are accountable under the Commonwealth Authorities and Companies Act, 1997 as is envisaged for ASPI. While operating under different corporate structures (AIFS is a statutory authority and AHURI is a company limited by guarantee), they are of similar size in terms of government (financial) support, are managed by a Board of Directors, and provide research and analysis and 'outreach' related to a portfolio policy issues.

In order to understand better the role of these institutes and their relationship to FaCS the following issues were pursued with the Institutes:

§ How do you see the institute's role in relation to Government?
- specifically what role does the institute have in providing policy advice and inputs to the policymaking process?
§ Does this role introduce contestability to government policy making?
§ What mechanisms are used to measure performance?
- are specific measures used to demonstrate value to government?






5.1 Australian Institute of Family Studies

The Australian Institute of Family Studies (AIFS) is a statutory authority established in 1980 under the Family Law Act, 1975. In its twenty-year history the AIFS has experienced some movement between portfolio's, residing from 1980-89 in the Commonwealth Attorney-General's Portfolio. The Institute moved to the Social Security portfolio in from 1989-93, and then resided from 1993-98 in Health, Housing, Local Government and Community Services (later Human Services and Health), before a shift in 1998 to the newly formed Family and Community Services Portfolio (AIFS 1999).

As a statutory authority the Institute is managed by a government-appointed Board of Directors and reports to the Minister for Family and Community Services, receiving Commonwealth budget appropriations currently at around $3.5m (FaCS, 2000). This translates to approximately 78% of the Institute's $4.5m annual budget, the remaining 32% being generated from sales of publications, consultancies etc. Full time staff numbers are between 35 and 40, split fairly evenly between research and business support (publishing, dissemination and administration).

Legislated functions of the Institute include:

(a) To conduct, encourage and coordinate research to further our understanding of the factors affecting family and marital stability in Australia, with the object of promoting the protection of the family as the natural and fundamental group unit in society

(b) To give advice and assistance to the Minister in relation to the making of grants and with the approval of the Minister to make grants out of monies made available under appropriations made by the parliament for purposes related to the functions of the Institute and the supervising of the employment of grants so made. (Family Law Act 1975 S.114, in AIFS, 1999)


In fulfilling these requirements the Institutes activities are structured around research, information, promotion and dissemination, and the Institute undertakes four types of research work. These are: core (in-house) research which is funded by the core income and is planned and undertaken by Institute staff; commissioned research (which is planned by the Institute but which is undertaken for the Institute by other research organisations); contracted research which is funded by specific contracts from government departments or other organisations; and collaborative research which may include collaborative ventures with government departments and agencies, universities or leading research organisations. AIFS also organises conferences, seminars and less formal small group meetings, and maintains links with family researchers overseas.

The current research plan of the AIFS (1999-01) sets out four principal objectives for the Institute's research activities. These include that research should be clearly related to current and emerging government family policies and departmental and ministerial research priorities, and that research should produce outcomes which will inform family and related policies (AIFS,1999).

David Stanton, Director of the AIFS notes that the Institute seeks to undertake research that informs the policy development process but does not see AIFS as "formally an alternate or contestable source of policy advice to Government". Nevertheless, there is clearly a policy context to AIFS research, and recognising the importance of policy relevance, AIFS endeavours to identify emerging issues of concern to Government in its research directions. Stanton recognises that there is always the potential for tension in research funding that requires careful measurement and has sought to manage this tension with transparency in research planning so that Government and FaCS have an input into the development of the research agenda and are fully aware of AIFS plans. As a statutory authority, however, the AIFS recognises the need to be non-partisan.

Similarly, governance is recognised by Stanton as "very important in any assessment of effectiveness". The main mechanisms of AIFS accountability are through the Board of Directors, and through reporting in line with the Commonwealth Authorities and Companies Act, 1997. The Agency Budget Statement (published as part of the FaCS Portfolio Budget Statement, 2000-01), defines the AIFS role "to promote identification and develop understanding of the factors affecting family and marital stability in Australia". In line with the Commonwealth Government's shift to output budgeting the AIFS has one output - Information and advice on factors that influence how families function, and one outcome - Inform Governments, policy makers and other stakeholders on factors influencing how families function. Performance indicators are used to assess the level of contributions the Institute makes to its output and outcome, as well as to measure its efficiency and effectiveness (as outlined in Figure 3 below).

While the analysis against these criteria is generally quantitative (the AIFS produces a commendably large body of work each year), the compelling measure of effectiveness is longevity, continued (and growing) budget support from Government, wide media reporting and debate of AIFS research findings, and the extent to which AIFS work has been taken up and implemented in policy outcomes. A good recent example of this is the work undertaken by the AIFS on the Australian Divorce Transition project, and the importance of superannuation as a family asset that has resulted in changed laws to allow spouse access to superannuation entitlements as part of divorce settlements.

Figure 3: AIFS Performance indicators 2000-01 ( FaCS 2000, PBS Table 2.2.1)
Effectiveness
Reference Indicator
Recognition of leadership in the provision of family related research and information Feedback form stakeholders and customers, including Commonwealth and State Government agencies and academic institutions
Press coverage relating to work conducted by the Australian Institute of Family Studies Number of reports in the media and

Diversity of media presentations

Extent to which AIFS' services are utilised by relevant Government agencies and service providers Demand for sale of Institute publications

Number and amount of contract research work and consulting assignments undertaken; and

Invitations to staff to perform speaking engagements and represent the Institute in external forums


Departmental Outputs
Output Group 1.1
Reference Indicator
Output 1.1.1: Information and advice on factors that influence how families function Publication and distribution of 3 issues of Family Matters magazine

Publication and distribution of other material comprising:

Monographs and books;

working papers;

briefing papers;

conference papers; and

articles in journals

Feedback on Institute conducted conferences, seminars and workshops

Contract research and other contract work completed according to contracted deliverables.



5.2 Australian Housing and Urban Research Institute

AHURI was established in 1993 under an agreement with the Commonwealth, State and Territory Governments and four partner institutions forming the institute - CSIRO, Monash University, Queensland University of Technology and the Royal Melbourne Institute of Technology - joined by the University of Queensland in 1998. Although named an Institute, in terms of governance in its early years AHURI largely operated as a research unit within the Health, Housing, Local Government and Community Service portfolio undertaking joint-venture style projects with consortium partners. This limited its usefulness in a number of ways. It was not sufficiently funded to produce much research, and as an unincorporated body, the Board had a limited role in directing the Institute and its outputs where not well utilised (Sales, 2000).

In order to address these issues, the Institute has recently undergone a significant restructure following a review in 1999 of its roles and functions. AHURI has been described by Executive Director Owen Donald as strange hybrid organisation, operating not unlike Cooperative Research Centres, but with a greater degree of government involvement. At its centre is an incorporated management company, AHURI Limited, a company limited by guarantee managed by a Board of Directors. From the management company, a range of agreements govern the involvement of consortium members (universities) and government funding sponsors, currently encompassing the Commonwealth and all State and Territory Governments in line with the Commonwealth /State Housing agreement.

AHURI conducts research and policy analysis in housing and urban development and management. Specifically, this includes policy analysis in housing; project appraisal and evaluation including social cost-benefit; modelling strategic planning for sustainable urban and regional economic social and environmental development (AHURI, 1998). AHURI's priorities include assisting governments and housing providers in addressing the processes and failures in the housing markets, and a willingness to respond to government, industry and community needs by undertaking applied research in important policy and decision making areas. As with AIFS, the Institute's focus is to undertaking policy-related research and facilitating research inputs to Government. AHURI does not perceive its role as a mechanism for contestability

AHURI's broad aims are to:
§ Link quality research and the development of idea with policy development, program evaluation and project development in public and private sectors
§ Be a leader in its field assisting policy makers at all levels in identifying trends, establishing possible solutions and drawing together the best information and understanding within Australia whilst drawing upon international experience (AHURI, 1998)

The bulk of AHURI's funding comes from Government with $1.5m from the Commonwealth guaranteed annually for the next four years, and $1m annually in total from State and Territory Governments. Financial contributions are also made by the university consortium partners.

The Commonwealth relationship with AHURI (as the largest single funder) is managed through a very detailed funding agreements that specifies a range of issues including the terms of funding, the nature of research to be undertaken, constitution of the Board; intellectual property and the right to publish, exploit and distribute; mechanisms for dispute resolution; and performance reporting requirements. The Board structure reflects funding influence with eight positions allocated to government representatives and two board positions for university members. Board representation is seen as a legitimate mechanism to represent the issues and concerns of consortium members, and to provide the vehicle for constituents to influence the direction of the Institute.

AHURI's research agenda is set by a research panel, which include the relevant minister from partner governments, or their representative, as well as interested non-government parties, providing policy focus to the research agenda. AHURI demonstrates a very different operating structure to AIFS, acting as a 'clearing house' or broker, contracting relevant research in line with Institute research agenda, undertaking a competitive process for the allocation of funds for research.

As noted above, the Commonwealth funding agreement outlines a reporting requirement. Under this agreement, AHURI is required to report to FaCS every three months on a range of process and expenditures issues including progress of research programs, and monitoring the performance of research center. In addition to these quarterly reports, the Commonwealth has instituted a major review cycle to occur every two years. Donald however admits that AHURI has not as yet developed qualitative performance measures but is in the process of developing a set of measures that focus on outcomes and outputs. In Donald's view, performance measures that have most value are those specific and meaningful to stakeholders, and the real test of performance is continued support and funding.

6. PERFORMANCE MANAGEMENT AND OTHER IMPORTANT LESSONS

There are a range of common themes that emerge by reviewing the operation of AIFS and AHURI and their relationship to FaCS. These themes suggest some guidelines to assist in establishing a new institute like ASPI to maximise its effectiveness as a tool for policy contestability, that align closely with the guidelines addressed earlier. Of course, these institutes and others like them provide a range of practical lessons for establishing a policy-research centre that should be followed up as ASPI is developed, but that won't be drawn on here.

6.1 Performance Management

One of the most important issues for the Institutes is demonstrating relevance and value to government through measuring and managing performance. Performance management is important to demonstrate accountability in expenditure of government funding, and to understand the value of the work of the Institute particularly in relation to its inputs and value to government. This is an important aspect of AIFS and AHURI operations. AIFS demonstrates an established approach to quantitative and qualitative review that seeks to determine efficiency and effectiveness, while AHURI conforms to procedural reporting and pragmatic measures like ongoing operation, but recognises that it needs to tackle qualitative measure of performance. In addition to these models, there is merit in considering different approaches that can provide insight into the way an institute like ASPI might demonstrate its value as a provider of policy relevant inputs. A very good recent example is the approach of the Administrative Review Council (ARC).

The ARC was established under the Administrative Appeals Tribunal Act 1975 to provide advice to the Attorney-General on strategic and operational matters relating to the Commonwealth system of administrative law. In addition to the advising role to the Attorney-General, the council has taken on broader advising functions, due to its "expertise in providing policy advice on administrative law matter" (ARC 1999). The ARC has a comparable role to that envisaged for ASPI making it a useful comparison. The ARC's priorities include providing policy advice to people involved in making government decisions.

The ARC has sought to measure and report performance against a set of qualitative and quantitative performance indicators, specifically deriving the following six criteria to measure performance:

§ Improving the quality of administrative decision making
§ Reports as catalysts of change
§ Reports and advice as compendiums of law and practice
§ Policy inputs into government proposals
§ Implementation of advice
§ Wider activities of the council (ARC, 1999)

These criteria provide a framework for the council to review not just its outputs, but the outcomes of that work for the effect it has had on the Government's administrative review policy, providing a qualitative understanding of the value of their work. This kind of qualitative understanding can, in line with Owen Donald's philosophy, demonstrate to Government as sponsor and purchaser, the benefits of its ongoing investment.

ASPI should consider developing a performance management regime that draws on these experiences. At a minimum it would address accountability, and measure outputs and the outcomes of its work, building to a more detailed examination of quality. A performance regime will also benefit from being developed in consultation with its government sponsor, to address the needs of the purchaser in its performance management regime.

6.2 Relationship to Government

For both AIFS and AHURI, the Institute's role and relationship to Government is clearly defined and well understood. In AIFS's case it is legislated and for AHURI the relationship is tightly codified through funding and governing agreements that specify role, responsibility and expectations. Notably, these roles have been tightened through AHURI's recent restructure. Both of these institutes undertake 'independent' policy research but rely on government for funding support, and it is through a prescribed relationship that tensions can be managed and outcomes pursued. In both cases, for instance, the relationship includes mechanisms for input by the government sponsor to the research agenda aimed at ensuring policy relevance and usefulness of the institutes work. The defined relationship provides guidance for managing their interactions and from this understanding performance management can be derived with a contextual basis for demonstrating value and benefit.
It will be important for the government and the ASPI to clearly define their relationship and relative responsibilities as the institute is established. Mechanisms to manage the relationship should also be developed. Interestingly, a defined relationship and a mutually agreed performance evaluation mechanism were the two issues noted as absent in the Defence relationship with the Strategic and Defence Studies Centre and the Australian Defence Studies Centre. The poor results of these centres in meeting policy needs reaffirm the importance of getting these aspects right for ASPI.

6.3 Contestable Policy Advice or something else? Information vs advice.

I suggested earlier that FaCS represents a step-back from the contestability of policy advice discussed earlier, as it is the Department, rather than the Government, that acts as a purchaser of policy inputs from an assembled market. FaCS is itself not contested as the provider of policy advice by this framework, and so it was not surprising that neither Institute perceives a role in introducing contestability in social policy advice.

The provision of policy-related research and analysis should be recognised as something different to policy advice - an input into the policy development process, but not constituting advice to government. This is nevertheless a practice of contestability, providing a market of choice to the government in the analysis of social policy issues. Moreover the extent to which FaCS fosters this level of involvement by external bodies indicates its own willingness to introduce contestability into its policy-advising role.

It was noted earlier that the establishment of ASPI alone could only be seen as one element of a larger task for the Government to pursue if strategic defence policy is to be truly contestable, as Contestability at its core is about improving internal effectiveness. If AHURI and AIFS are providing inputs not advice, it is unlikely that their participation in the process will improve the efficacy of FaCS policy advice to Government.

A key issue to consider in the investment in establishing ASPI is to decide if its work is to provide research and information inputs or policy advice. If ASPI operates in the same manner as the Institutes reviewed here, it will provide the Government with contestable policy research and information, not contestable policy advice. Noting the barriers to contestability outlined earlier, this might be an easier form of contestability to achieve, and in a positive sense it would increase the inputs to the bureaucracy's policy development role. However, it will necessarily have implications for the type of relationship Government would want to develop with the ASPI, and the outcomes of the ASPI's operation. If this path where to be taken, Defence would also need to do considerable work in defining a strategic research framework in support of its policy objectives, in order to guide the inputs sought from the ASPI.

7. THE WAY FORWARD: CONSIDERATIONS FOR ESTABLISHING ASPI

The Government is pursuing the establishment of the Australian Strategic Policy Institute with the expectation of introducing contestability to an untested market in strategic and defence policy advice. In order that the ASPI might assist the government's requirement for contestable policy advice, throughout this paper guidelines have been identified to assist the establishment of the ASPI. It is worthwhile summarising them in conclusion, in order to determine a way forward for the ASPI's development.

As the ASPI is established, Government needs to:
§ Define its role as purchaser, understanding the cost of policy advice, and considering the policy inputs and directions needed for strategic and defence policy;
§ Guarantee tenure for the ASPI such that sufficient expertise can be developed;
§ Develop and manage a relationship with the ASPI that builds trust, and is clearly defined in terms of roles and responsibilities;
§ Be involved in the direction setting of the ASPI and develop performance measurement and review mechanisms to monitor the ASPI's value as a provider; and
§ Develop mechanisms to assist the integration of the inputs ASPI can provide in the policy process.

ASPI should:
§ Develop, employ or contract sufficient expertise in defence and strategic policy issues;
§ Engender trust in its dealing with to government;
§ Maintain policy relevance in its research agenda and inputs to government;
§ Demonstrate that relevance by actively seeking to demonstrate performance to its sponsors by implementing a performance management scheme that addresses accountability, and measures the outputs and the outcomes of its work;
§ Involve government in the development of its agenda; and
§ Undertake an outreach role in providing policy inputs and advice to the Government.

If these issues are addressed as the ASPI is established and begins to operate, the government will have taken a positive step toward introducing contestability to Defence policy from an external source, and the ASPI will be well placed to contribute to strategic and defence policy-making. If the ASPI's establishment is to translate to real contestability of defence policy advice aimed at improving the efficacy of advice to government, significant additional work will still be needed to develop the market to represent real purchasing choice; and to improve the internal practice of policy advice to Government.
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Interviews and inputs: May, June 2000.
Owen Donald, Executive Director, Australian Housing and Urban Research Institute Tuesday 3 June 2000.
Leanne Sales, Department of Family and Community Services. Tuesday 1 Feb 2000
David Stanton, Director, Australian Institute of Family Studies. Monday 29 May 2000
Hugh White, Deputy Secretary Strategy, Department of Defence.