The term of a social services contract should reflect a realistic timeframe to achieve client outcomes, recognising that some longer term client outcomes may not be achieved in the contract life.
Longer term contracts support good relationships and a continuous improvement approach. Short term contracts cause problems and cost for social service providers to government and can also impose unnecessary costs on agencies.
Longer term contracts (three to five years)
Longer term contracts should be used wherever possible. There are ways to manage longer term contracts to give reasonable security to the provider and protect the Crown from risk, eg:
- a multi-year agreement, with periodic review of outcomes or services and funding
- the Streamlined Contracting framework templates provide for termination of the contract on 90 days’ notice. This can be used where there is a change in funding or government policy at short notice, but is only for worst case scenarios.
Short-term contracts (one to three years)
Short-term agreements have significant disadvantages, including:
- identifying the provider and negotiating a new contract imposes significant costs on all parties
- attention is taken away from service delivery and devoted to negotiating and signing the contract
- they can be more expensive, eg to cover establishment costs
- they may cause the provider financial uncertainty
- they may undermine the ability of the provider to perform the services, eg if a lack of job security limits their ability to employ or retain the right staff
- they discourage planning, investment and innovation
- they undermine relationship-building objectives.
Short term contracts are suitable when:
- the service or activity is truly of limited duration
- the Government has announced a change of policy
- there is uncertainty about the ability of the supplier to deliver.