How we contract service providers

DCJ enters into a funding agreement with a service provider following a successful procurement process.

We both sign a contract or other agreement that sets out the terms and conditions of the funding arrangement; and how the contracted amount will be paid, received, managed and acquitted.

DCJ uses funding agreements that are enforceable as contracts, because:

• contracts protect the interests of both parties by clearly stating the obligations of each party
• the contract outlines DCJ payment and service provider reporting requirements which:
• supports clear accountability in line with public expectations about the administration of public money
• provides rigour required for payments in advance
• clearly details service levels and quality requirements.

The type of funding agreement used depends on the value of the contract, its length, the type of service being delivered, the nature of the contracted organisation, and the outcomes to be achieved.

Program specifications form part of the contract

Our funding agreements are supplemented by program guidelines or specifications. These explain the purpose, parameters and deliverables of a funded program, and provide an overview of how the services are to be implemented, so that service providers understand their obligations for:

• service delivery activities
• required outcomes and performance measures
• performance reporting.

The contract requires compliance with the guidelines or specifications, and service providers are assessed against the specified performance measures.

Sometimes, funding is allocated for a specified purpose, project or activity that does not fall within an existing program and is not subject to specific program guidelines or specifications. In these cases, the contract itself includes the required activities and outcomes.

Contract length

DCJ typically offers three or five year contracts for most of its funded human services programs, because:

• this supports the stability of service provision and better outcomes, allowing providers to engage in longer-term planning and embedding service provision models
• it aligns with NSW Government budget allocations
• it reduces the administrative burden for both us and our service providers.

We apply shorter or longer contract terms:

• where there are one-off, specific initiatives, with outcomes expected to be achieved within a short timeframe; for example, one year
• for trial and pilot programs and services, where outcomes will be reviewed within a shorter specified timeframe
• for complex programs and initiatives, where financial and social outcomes are expected to be achieved over a longer timeframe
• as part of reform implementation, where short-term contracts are entered into, to allow us to work in partnership with service providers to embed new initiatives.

Once a contract ends, the funding ends. If DCJ commits to further funding for a program or initiative, a procurement process and new contracts apply. In some circumstances, a contract may be extended, depending on the specific provisions in the contract.

Our payment process

DCJ pays funds to service providers quarterly in advance for most programs.

We do this because paying in advance:

• gives service providers surety of income within the funding cycle. This is particularly important for smaller organisations who may have tight margins and may be placed under financial pressure by payment in arrears
• costs less for government than it would cost for service providers to support their business cash flow through financing
• is straightforward for DCJ and service providers to administer and monitor.

Sometimes, we do not pay in advance. For example, when:

• there are very specific agreements, with complex commercial arrangements between parties
• funding arrangements are performance-based and  a component of funding is paid following achievement of agreed performance targets and/or client outcomes.

How we manage performance

DCJ monitors and evaluate the performance of service providers to ensure contracted services are delivered as agreed, risks to service delivery are managed and public funds are used appropriately.

In line with our Charter for working with contracted service providers, we use a strengths-based approach to performance management. This enables us to work in partnership with service providers to address service delivery issues and risks, strengthen the service system and improve outcomes for clients and communities.

We identify performance monitoring and reporting requirements in the program design process. These are specified in procurement, contract and program specification documents.

Our reporting requirements differ depending on the type and value of services being funded. At a minimum, service providers:

• provide data and/or reports to DCJ that demonstrate they have met agreed targets, deliverables or milestones
• acquit funding they have received, including providing corporate financial statements based on the organisation’s legal status, and an income and expenditure statement for contracts valued above $25,000.

Additionally, some contracts include reward and abatement provisions to drive good performance.