Microeconomic reform and the third sector - the Australian experience

Four key agendas have been identified in the changing relationship between government and the third sector as a consequence of microeconomic reform in Australia. These are: fiscal responsibility, performance monitoring and measurement, increased use of market type mechanisms and separation of program funding from service delivery. The objectives driving these are greater accountability, increased effectiveness, improved efficiency and preventing the capture of program funding by sectional interests. These agendas are creating a new relationship between government and the third sector which is based on mechanisms to separate funding and service provision. It is also increasingly contractual in nature and is subject to more frequent review with contestability and performance management requirements. The relationship is changing from one of collaboration to competition. As a consequence, there has been a shift in strategic control from third sector agencies to the funding agencies within government. A case study of the Department of Human Services in Victoria, where the state government has been at the forefront of market-based reforms since 1992, examines the implications of this shift for third sector agencies. As the major funder of community programs in the state, the Department has adopted a contractual model to restructure its relationships with both internal and external service providers. Consistent with this model, the Department is moving progressively towards output-based funding and competitive tendering of service delivery. It is argued that the case study reveals the future directions of government/third sector relations in Australia.