• Funding and Contracting Definitions

    The Delivering Community Services in Partnership Policy ('the DCSP Policy') provides for funding and contracting arrangements for the delivery of community services.

    Funding is the provision of financial assistance. Under the DCSP Policy, funding is an arrangement where a Public Authority provides financial assistance to an Organisation, by way of a grant, to assist them to carry out their purpose or a specific program[1].Grants can be useful arrangements for pilot programs, innovative trials, one-off subsidies, seed funding, or funding for a discrete project. 

    Contracting is the technical process of establishing a contract. The resultant contract, known as a service agreement under the DCSP Policy, is an arrangement where a Public Authority pays a fee for service to an Organisation for the benefit of service users[2]. The process of establishing a service agreement is a procurement process. Requests,Expressions of Interest, Registrations of Interest and Preferred Service Provider processes are methods Public Authorities can use to procure community services to establish a service agreement (contract). See the Flow-Chart on page 4 of the Delivering Community Services in Partnership Policy .

    The main differences between funding and contracting arrangements under the DCSP Policy can be seen in the table below.

    Table comparing characteristics of funding and contracting arrangements
    Funding arrangements (Grants) Contracting arrangements (Service Agreements)
    A financial assistance arrangement. A fee for service arrangement.
    For a distinct program or project. To meet an ongoing community need.
    Not subject to indexation. Subject to indexation.
    Generally a short-term arrangement, not extending beyond one fiscal period. Longer-term arrangements, usually between three to five years.
    Less oversight, reporting and documentation than service agreements. More substantial reporting requirements, including reporting against outcomes, and reporting annually or every six months.
    May be paid as a lump sum, or through instalments. Payments often made quarterly or other frequency.
    To establish a grant, a documented application and approval process is required. To establish a service agreement (contract), a procurement process is required. The procurement process must consist of a Request issued by a Public Authority, followed by receipt of an Offer(s) from a Respondent(s), followed by the issue of a formal contract letter from the Public Authority accepting the successful Offer.
    Details of grant recipients are publically disclosed. Service agreement award details over $50,000 are published.

    Procurement is an all encompassing term for all activity from planning to service agreement management. It is a term used to describe the process for obtaining resources, whether those resources are human, goods, or services. The procurement process may include planning, financing, stakeholder engagement, standards determination, specification writing, preparation of request documentation, selection of service providers, service agreement administration, disposals and other related functions[3]. A procurement process can result in a service agreement or a grant agreement.

    The procurement process consists of a procurement planning phase, a service agreement formation phase and a service agreement management phase. 

    Commissioning is the meeting of a population's needs. It has been described as the 'process of indentifying needs within the population and of developing policy directions, service models and the market, to meet those needs in the most appropriate and cost effective way[4]. The concept of commissioning has been seen as a way to drive reform and to produce public services able to deliver innovative, efficient and quality outcomes for consumers and for populations[5].

    The term commissioning has recently been introduced by the New South Wales, Victorian and Queensland public sectors to describe strategic reform. It refers to the way the public sector can allocate available resources, through the right mix of government, private and not-for-profit investment to secure and deliver services that meet public policy objectives while also providing sustainable value for citizens and the economy. Procurement is only one of several possible outcomes from a commissioning process[6].

    There is no single, universal definition of commissioning or description of the activities it involves, and no single commissioning approach that can be referenced as the most effective however the model below, developed by the Institute of Public Care (U.K.)[7], is useful as it defines the relationship between the activities analyse, plan, do and review for the commissioning and procurement cycles.

    The commissioning cycle determines the procurement/contracting activities while the procurement/contracting experience informs the ongoing development of commissioning. Essentially, commissioning of services is the context within which purchasing and contracting takes place. A key principle of the model is that the commissioning process should be open to influence from all stakeholders via an on-going dialogue with patients/service users and providers7.

    The procurement of community services in Western Australia takes a very similar approach to that of the commissioning process. See the Commissioning Model, Institute of Public Care (U.K.) diagram on page 10 of the UK Public Sector concept of commissioning (PDF).

    It should be noted that the terms procurement, purchasing, funding, contracting and commissioning are often used interchangeably and therefore, in some circumstances, may not strictly follow their definition.


    Related Links

     PDF icon Community Services Frequently Used Terms [PDF]

    Footnotes:

    [1] Government of Western Australia, (2011). Delivering Community Services in Partnership Policy.

    [2] Government of Western Australia, (2011). Delivering Community Services in Partnership Policy.

    [3] Department of Finance, (2014). Community Services Procurement Practice Guide.

    [4] CIPS Australasia, (2010). The UK Public Sector concept of commissioning.

    [5] Dickson, H. (2015). Commissioning public services evidence review: Lessons for Australian public services.

    [6] New South Wales Social Innovation Council, (2015) Grants, commissioning and the procurement process.

    [7] CIPS Australasia, 2010. The UK Public Sector concept of commissioning.