No real competition: compulsory competitive tendering in Victorian Regional Library Corporations.

With the passing of the Local government (competitive tendering) act 1994 Victoria's public library sector became the first in the world to be exposed to compulsory competitive tendering (CCT). As a consequence, between 1996 and 1999, a large number of Victorian public library services were tendered out and subsequently managed on a contractual basis. The contract based model of governance was unique to Victoria and has not been replicated on the same scale anywhere else in the world. Competition for the contracts was almost nonexistent, with no interest from the public sector and little interest in existing library services bidding for contracts in neighbouring areas. The lack of a competitive market meant that the CCT process was ultimately ineffective in terms of financial criteria. However it left a profound and potentially lasting imprint on the structure and management of Victoria's public libraries. Edited and shortened version of a Monash University Bachelor of Information Management and Systems honours thesis `Managing public library operations in a contracted environment: reflections on the impact of compulsory competitive tendering in Victoria's regional library corporations 1994-1999'

Refereed article

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The local government reform initiatives introduced by the Victorian state government from 1993 left a profound and potentially lasting imprint upon Victoria's public library sector. First, the amalgamation process between October 1993 and December 1994 led to a two thirds reduction in the number of local government councils, from 210 to 78. As a result, many of the amalgamated councils had a number of library services falling within their boundaries. The

process of integrating these individual services, either as single municipality services or in combination with other councils as regional library corporations, had a significant impact on the overall structure of the state's public library system.

Secondly, the introduction of the Local government (competitive tendering) act 1994 meant that the Victorian public library sector became the first in the world to be exposed to compulsory competitive tendering (CCT).

Competitive tendering had been used by public libraries as an internal management strategy for many years. However, as a result of the CCT legislation, councils were using the tendering process for their public library services, calling for whole of service tender bids and then entering into a contractual relationship with the successful respondent.

This had a profound impact upon the internal structure and management of individual public library services, many of which had just been formed following the amalgamation process.

Study aims

This study was designed to develop a deeper understanding of the key issues associated with the introduction of compulsory competitive tendering in the public library sector, particularly in relation to regional library services ie services spanning two or more council municipalities. Such an evaluation is timely given that, upon entering office in 1999, the Victorian Labor government repealed the mandated targets for competitive tendering and replaced it with a noncompetitive approach to local government reform termed `best value'. As a consequence, the five year period between 1994 and 1999 may represent the only time in which the public library services are managed on a contractual basis.

In particular, the aim of the study was to document a detailed set of reflections from key respondents about the following broad questions

* what were the most significant changes resulting from the contract based approach to managing public library operations?

* what were the key challenges faced in managing public libraries on a contractual basis?

* what are some of the potential long term consequences for the way public library services will be managed in the future?

Local government (competitive tendering) act 1994

The process of putting services to tender and subsequently contracting out the particular service function is not a new phenomenon for local government in Victoria. Councils have a long history of using competitive tendering as a mechanism for selectively contracting out services, particularly those which are considered noncore, such as cleaning, gardening and maintenance. The decision to adopt a tendering strategy was a matter for the internal management of the council and was usually restricted to areas where a long established private sector market was present.

However the introduction of the Local government (competitive tendering) act 1994 dramatically changed this selective and discretionary approach. The act was designed to enhance use of competitive mechanisms within local government by setting a requirement that each council competitively tender fifty per cent or more of its total operating expenses for the year. Importantly, the legislation did not specify any particular local government services as being eligible for, or exempt from, the compulsory competitive tendering process. It merely identified the financial quota that each council needed to achieve. As a result, individual councils had the responsibility of selecting the projects or services to tender out in order to comply with the fifty per cent target.

The contractual model of public management

At the ideological heart of the CCT legislation was the notion that without the pressures of private sector competition, councils had little incentive to improve the productivity of the services they provided to their communities. The process of opening local government services up to competitive tendering, and thus forcing the current inhouse provider to compete with potential external suppliers for the service contract, was perceived as the most direct and efficient way of generating productivity improvements.

By encouraging the extensive contracting out of service functions, the CCT legislation also attempted to fundamentally restructure the way that councils operate. Under this new framework, a council's traditional focus on direct inhouse provision and administration of services is replaced by an emphasis on managing contractual relationships with either internal or external service providers. This has become known as the contractual model of public management.

There are two essential differences between the contractual approach and traditional inhouse provision of local government services. First, the contract forged through the competitive tendering process replaces internal budgetary control as the principal mechanism for governing the service. Secondly, a new management structure is required, one in which the person or section responsible for the tendering process and the management of the subsequent contract is organisationally separated from the actual providers of the service. This is known as the client/provider split.

CCT in public libraries: the UK experience

In many respects the major international predecessor to the Local government (competitive tendering) act 1994 was the CCT policy introduced by the Thatcher and Major governments in the UK. The general approach adopted was to introduce CCT according to a highly prescriptive formula in which local authorities were compelled to market test a certain range of predefined services. In the initial legislation, introduced in 1980, the CCT requirements were limited to a number of physical service areas, such as building construction and major roadwork projects. However, with the Local government act 1988 this original set of CCT eligible services was significantly expanded to include such things as grounds maintenance, refuse collection, street cleaning and sports and leisure management.

In 1995 the UK Department of Natural Heritage commissioned KPMG to examine the consequences of applying CCT to the public library sector. The general terms of reference for the report were to assess the feasibility and desirability of contracting out in the public library sector and to examine the potential private sector market for public library services. It concluded that, although it was technically feasible to contract out all or parts of a public library service, the desirability of the process was far less certain.

   We are of the opinion that there are some considerable question marks over
   the desirability of contracting for the public library service: primarily
   these revolve around the lack of concrete evidence that the benefits
   delivered in other service areas which have been subject to contracting
   regimes could be achieved in the public library sector; it will be some
   time before this hard and fast evidence can be obtained and monitored. (1)

This conclusion was based primarily on what was seen as a number of fundamental differences between public libraries and other local government services. In particular, the researchers could not anticipate a private sector market emerging to bid for tendered library services.

   There is no natural market place for the provision of the service in the
   sense that the skills and experience required to deliver the service are
   not readily available in the outside marketplace. This is a significant
   consideration in comparison with other local authority services whether
   these are blue collar (cleaning, refuse collection) or white collar
   (leisure, finance, architects) (2)

On the basis of the findings of the report and a number of pilot test cases, the Conservative UK government at the time decided to exempt public libraries from its list of CCT eligible services. In 1996 the incoming Blair Labour government repealed the entire act and, in another precedent for what happened in Victoria, replaced the CCT model with a new noncompetitive approach to local government reform termed `best value'. (3)

CCT in Victorian public libraries

While driven by ostensibly the same ideological rationale, the approach used by the Kennett government in implementing compulsory competitive tendering differed from the model followed by the Conservative governments in the UK. Instead of defining specific local government service areas as being mandated targets for competitive tendering, the act required councils to competitively tender fifty per cent or more of total operating expenses for the year. This was a critical difference, as it made the scope of the Victorian CCT legislation much wider than in the UK where, even with progressive additions to the 1988 list of services, CCT was still focused primarily on the physical services functions of local government.

By framing the compulsory requirements in terms of an overall financial quota, the Victorian legislation seemed to allow local governments some discretion over the range of services they needed to expose to competitive tendering. However, this local decision making ability was illusory, due to the fact the definition of total expenditure used to calculate the fifty per cent financial target also included items that could not logically be tendered out, such as debt servicing expenses and depreciation. For many councils, once these nontenderable items were factored into the fifty per cent target, almost all of their remaining expenditure was CCT eligible. Consequentially, they were forced to tender out service areas that have been traditionally the exclusive province of local government service agencies and for which an equivalent market of private sector providers was almost nonexistent.

A primary example was public library services. Like other local government services, public libraries have used competitive tendering as an internal management strategy for many years, especially for contracting with such external suppliers as book supply companies, library automation vendors and cleaning and maintenance contractors. What changed as a result of the CCT legislation was that, for the first time anywhere in the world, whole public library services were themselves tendered out, rather than just noncore tasks or areas within the service. Only two councils (East Gippsland and Moreland) decided that library services were core council functions and did not expose them to the competitive tendering process.

While the competitive tendering process is based on an assumption that the traditional inhouse suppliers will not necessarily dominate, in reality this proved to be the case in tenders for public libraries. Competition for the tendered contracts was very limited, with no interest from the private sector and only minimal interest from existing library services bidding for contracts in other council areas. All but one of the contracts that were tendered went to the inhouse team. The exception was the Melton Shire Council which, due to a long standing arrangement with an adjoining council, had no inhouse team to bid for the contract. Consequently, the prediction made by KPMG in the UK that there was no natural market for the provision of public library services has been unequivocally confirmed.

Impact of CCT on regional library corporations

The introduction of compulsory competitive tendering led to a profound restructuring of local council operations. Before 1993, councils had dual senior management structures based around a split between the roles of the town clerk and city engineer. The responsibility of the engineer was to look after matters such as planning, engineering and waste management, and the town clerk was involved in the administration and finance of the council. As part of the council amalgamation process, these two roles became combined into one in the form of a chief executive officer.

However the introduction of compulsory competitive tendering introduced another split in the operations of the councils, that of client/provider. The tendering out of services previously provided by inhouse providers meant that, even in situations where the incumbent provider team was successful in winning the tender, there needed to be a clear organisational separation between those purchasing the service and those providing it. This led to various contract management departments being introduced within the operational structure of local government councils.

The introduction of this new client/provider management structure was particularly complicated in the public library sector owing to the existence of a large number of regional library services--services that span more than one council municipality. Under section 799(d) of the original local government act from 1958, regional library services were unincorporated bodies with no separate legal status from their member councils. However, a new local government act introduced in 1989 included a section (196) which allowed the formation of regional library corporations. These new regional library corporations were proclaimed autonomous legal entities in their own right and were not directly part of any individual council structure.

At the top of the organisational structure for regional library corporations was the regional library board, which ostensibly had the same role within the corporation as the elected councillors have in a council structure. As a corporate body, the section 196 corporations were also required to have their own chief executive officer who would manage the corporation on the behalf of the regional library board. While the board was not required to answer directly to its member councils, given the fact that the member councils were the major funding stakeholders in the corporation, they were strongly represented on most regional library boards. Nevertheless, on paper at least, regional library corporations were bodies autonomous from the member councils.

While the legislative framework for regional library corporations were introduced prior to the election of the Kennett government, in many respects they can be considered another product of the local government reform agenda. Before the council amalgamation process between October 1993 and December 1994, very few existing regional library services had formed into corporations under the section 196 legislation. However, with the process of amalgamation causing significant alterations in the overall municipal structure of the local government sector, many existing regional library services found that their regional boundaries and composition of member councils had completely changed, forcing a new regional agreement to be formed via the section 196 legislation.

The introduction of the CCT legislation further encouraged the formation of regional library corporations as all existing regional libraries needed to be incorporated in order for them to have the legal status to enter into the contractual process. It should be noted that while the Local government (competitive tendering) act 1994 did not specifically refer to regional library corporations, through the board member councils could decide to submit the corporation to the competitive process in order to gain points for the CCT targets. In such a case, the contract or inhouse agreement was between the CEO of the corporation (on behalf of the regional library board), and the service provider, not back to the councils directly.

Because of the autonomous nature of regional library corporations, the introduction of the client/provider split required a different management structure than in single municipality services. The client for the corporation is the regional library board through the chief executive officer, who acts as both the head of the corporation and the contract manager. The provider is the library team, which is usually headed by a regional library manager/ director. While this client/provider split seemed relatively straightforward in theory, it was far less distinct in practice, especially in smaller rural corporations which quite often did not have a separate senior manager for the provider side of the organisation.

Literature review

The potential effects of applying CCT to public libraries were debated quite heavily in 1996, as it was around this time that the first two library services began go through the competitive tendering process. The major themes of this initial debate are provided below.

Initial case against competitive tendering

It was clear from a number of early articles that a philosophical dimension to the issue of CCT in public libraries existed that is not as evident in other council services. Public libraries are a symbol of democracy to many people and are guided by deeply entrenched principles of providing free and universal access to all community members. A number of commentators, including Garner, (4) Pryor and Lee (5) and Watson, (6) express strong philosophical objections to the CCT process, in the belief that the competitive, profit orientated principles of the private sector cannot be reconciled with the fundamental community service ethos of the public library.

On a more practical level Watson, and Pryor and Lee, cite the perceived lack of a competitive market as another reason why the CCT process should not be applied to public libraries at a whole of service level. According to Watson

   ... the tendering for supply of goods and services is often an advantageous
   way to get the best outcome where supply sources are operating under
   competitive conditions. However, the further removed from an environment of
   effective competition, the greater the responsibility to question whether
   competitive tendering with its contractual restrictions and costs is an
   appropriate means of achieving the desired outcomes for efficiency and
   effectiveness. (7)

Watson concludes with the suggestion that the CCT process in public libraries merely invents competition that does not really exist and is an expensive, disruptive and inherently futile exercise.

He also notes that for a contracting process to be effective, the specifications of the agreed contract need to be highly specific and accompanied by valid performance measures so that penalties for nonperformance can be applied in a consistent and cost effective manner. However, he suggests that the inherent intangibility and complexity of library operations preclude direct measurement and the measures that are taken are merely broad indicators of performance. Watson therefore questions whether it would be possible to manage a contract for library service provision without extensive and costly performance monitoring, something that would invalidate any claims that the process will realise cost savings. This claim is echoed by Harboe-Roe (8) who raises the possibility that if the performance measurements are not well defined the service provider may concentrate on the achievement of inappropriate statistical targets, to the detriment of the actual quality of the service itself.

Initial case for competitive tendering

A number of writers took a more positive view of applying CCT to the public library sector in the belief that it increased the motivation to review the internal operations of the library service and implement quality improvements. King (9) suggests that if the word compulsory is removed from the CCT terminology, then it is difficult to see how the process can be viewed as anything but good management practice. On the purchaser side, developing the tender specification provides the opportunity to reassess the quality and effectiveness of the services delivered and to set explicit performance targets and measures. For the inhouse bid team, the process of preparing a bid encourages a review of its own work practices and performance, promotes innovation, and leads to a greater understanding of client needs and the importance of accurately costed budgets.

Harris (10) acknowledges that many of the benefits claimed for competitive tendering relate to management issues and could conceivably be introduced without the trauma and problems associated with actually introducing the process. However, she claims that without the compulsion of CCT libraries were not actually introducing the necessary changes in quality management and benchmarking practices.

Assessment of the actual impact of competitive tendering

A more recent article by Carson outlines his assessment of the positive and negative outcomes during the first three years of competitive tendering, based on his experience as a library consultant. He notes that

   ... the introduction of CCT has presented Victorian public libraries with a
   unique opportunity for an intensive review and analysis of their services
   and direction on a scale unparalleled in the post war era anywhere in
   Australia. (11)

Consequently, internal planning and management processes of the library have been improved and sophisticated management systems in the areas of quality assurance, performance management and budgeting have been introduced.

He also suggests that the process has been beneficial in raising the profile of the public library within the council. The service review process has raised an awareness of the council's asset infrastructure responsibilities with the outcome that library refurbishment programs have been accelerated. There has been increased spending on IT and collection resources. The reporting and monitoring systems introduced to manage the contract have also had the effect of creating a keener awareness by council management of the role and challenges facing public libraries. Furthermore, the wide use of client satisfaction surveys as a key contract compliance mechanism has confirmed the high regard that the community holds for its library and this has been communicated to the council's management.

In his overall verdict Carson states that

   Despite its glaring simplicities, on balance the introduction of
   competitive processes has been beneficial in driving change. Management
   processes and staff skills have been transformed, an intensive focus on
   customer service, accountability and innovation are clearly evident, there
   is a greater understanding of role and mission and a clarity of purpose
   amongst staff. (12)

He also suggests that the lack of cost savings and a viable competitive market mean that the continued application of competitive tendering will become `increasingly farcical' and an `unnecessary distraction to library staff in their efforts to deliver the best possible quality of service to their communities'. He concludes that

   CCT is nowhere near as effective as good performance management in driving
   change. However, it may be true that Victorian local government, possibly
   similar to local government elsewhere, was only capable of change through
   such blunt and ultimately ineffective means. (13)

Purpose of the study

CCT in the public library sector was initially reported on quite widely in the literature and many predictions were made as to the impact of the process. However, with the exception of the article by Carson, there is currently little information about the actual impact the competitive tendering process had upon the management of public library services. In particular there has not been a systematic attempt at gathering the opinions of senior management staff who were actively involved in managing either a service contract (client side) or a contracted service (provider side) during the CCT period.

Choice of respondents

The initial focus of the study was to assess the impact of CCT on the Victorian public library sector as a whole. However, one of the unexpected results emerging from the initial interviews was the potential for the CCT process to have had a different impact upon regional library corporations compared with single municipality services. It was decided to limit the respondents, and thus the overall focus of the study, to only those from regional library corporations.

Results

Respondent A

Respondent A is the library manager of a metropolitan based regional library corporation. The corporation was formed soon after the council amalgamation process, following a decision by the member councils to combine all the previously separate library services falling within their restructured municipal boundaries. However, before the actual integration of the individual services took place, the newly formed corporation was packaged as a single entity for competitive tendering. As a result the introduction of CCT was particularly complicated for the service, as it did not actually exist as a unified entity at the time that it was offered for tender.

The general approach taken towards the tendering process was characterised by a high degree of formalisation and a strong adherence to the general principles of the contractualist model. The specifications for the service were highly detailed and contained extensive requirements for performance measurement and reporting. There was also much emphasis placed on maintaining a clear organisational separation between client and provider sides of the service.

Most significant changes resulting from CCT

Increased evaluation and accountability of library services

The increased attention paid to specifying and documenting library services was perceived by Respondent A as being the most significant change arising from the CCT process. Previously, even in very effectively managed services, there was nothing like the level of analysis about what specifically a public library service is aiming to achieve for its community as well as how it will demonstrate that it is reaching these objectives. The arrangement of the service under a contractual framework led to a much greater emphasis being placed on such fundamental questions.

As an example of the sorts of changes that resulted from this increasingly structured approach to the specification and documentation of library services, the respondent noted that one of the individual services which eventually became part of the regional library corporation had a particular strength in gaining funding for external projects associated with the library service. While there was a process in place to ensure the general accountability of the service in relation to these projects, they did not have to be objectively described and quantified to the level imposed by the contractual framework. Many otherwise successful projects thus had to be discontinued or modified to fit into the contract structure.

Awareness of the community support for public libraries

The respondent also suggested that as a result of the CCT process the level of community support for public libraries became much clearer to the people who make the decisions about funding priorities within local government councils. Indeed, the top down imposed nature of the CCT process was itself an important contributor to mobilising community support for public libraries

   The thing that came out of the community angst about libraries was that
   there is now a much higher awareness in governing and funding bodies such
   as councils of how communities value libraries. I don't think that there is
   any council in Victoria that doesn't know that it can't afford to ignore
   the community concern and support for libraries, whereas ten years ago that
   wasn't the case.

Key challenges faced in managing under a contractual basis

Resources needed to comply with the reporting requirements

The general approach taken to contracting by the member councils was quite formalised and this was reflected in the highly structured nature of the competitive tendering process introduced for the regional library corporation.

The high degree of formalisation and the heavy measurement and reporting requirements placed a significant demand upon the resources of the library service team. Indeed, the respondent felt that it was impossible to actually do anything and keep up with the level of reporting, especially in the initial stages of the contractual period.

   By now, we actually have something that is much more rational, but early we
   were a really good example of where that stuff was really taken on board,
   very full on. That level of formality, of distance, needing to spell
   everything out because you couldn't possibly say `well I know that is,
   going okay, let's focus on the things that matter' whether it be the
   exceptions or whatever it might be.

The challenge of adapting to the contractual framework was particularly significant in the respondent's service. In addition to establishing the various information cycles and systems required in relation to the contract structure, the library team had the formidable task of establishing the new regional library service itself.

Staff resistance to the CCT process

The respondent also considered the human resource management aspects of introducing CCT to be a significant challenge, in terms of the people who work in public libraries, what their values are, and how they perceive something as structured and formal as a contractual arrangement.

Long term legacy for the future of public library management

The improved frameworks for planning and evaluating public library services were perceived by the respondent as the most significant long term legacy of the CCT period.

Now that the contract has expired, the experience gained through the process of rationalising and streamlining the original contract requirements has enabled the regional library corporation to introduce what the respondent believes is an effective and practicable framework for its post CCT agreement with the member councils. She also noted that the CCT experience enabled staff members to develop a significant level of competency in the planning and evaluating functions of the library service.

The respondent also believed a more client orientated focus existed in public libraries than was the case prior to CCT. In general there is a much greater level of attention paid to the users of public libraries in planning and developing services.

Respondent B

Background

Respondent B is the library manager of a metropolitan regional library corporation. In contrast to the previous respondent, the basic structure of the service was relatively stable when it was offered for competitive tendering. It was already a well established regional library service before the introduction of CCT and the council amalgamation process did not significantly change the boundaries of the region. The tendering process was not therefore accompanied by the degree of organisational instability evident in Respondent A's service.

The respondent also indicated that the effects of CCT on his library service might have been different from that experienced by others due to the fact that the CEO and the board took a quite positive position on maintaining the high standards of the service.

Most significant changes resulting from CCT

Changes to the internal management of the service

The respondent felt that the major impact of the CCT process was to focus the staff towards a more goal orientated and quantitative mode of thinking, as well as providing a catalyst for reviewing the internal operations of the library service.

Changes resulting from the client / provider split

By contrast, the respondent did not perceive the client/provider split to have had a particularly significant impact upon the management of the library service. Most of the outcome targets set by the client were generally attainable and were related to objectives that would have probably been pursued anyway. In addition, the CEO was relatively flexible with regard to the submission of performance reports, and so the client/provider structure did not really change the management reporting data and processes to any great extent.

He suggested that one of the major reasons why the client / provider split did not result in the sorts of managerial changes anticipated by the legislation was that the inhouse team was not a separate legal entity from the regional library corporation. Consequently, the agreement between the client and provider sides of the organisation was not a truly enforceable contract, a factor that may have encouraged a more flexiblex approach towards the achievement of the specified outcome targets. He also noted that the introduction of the client/provider split did not result in a new approach to negotiating the budget for the service.

Key challenges faced in managing under a contractual basis

Obtaining a useful focus for the performance indicators

In terms of performance measurement, the respondent did not believe that developing performance indicators was a particularly difficult exercise, as public libraries have a long history of gathering numerical data and it was a quite easy to translate those raw statistics into performance goals. What was more difficult was gaining a useful focus for the indicators.

   To give you an example, one of our goals was that we would have a 5% growth
   per annum in new members joining ... it's new people that come into the
   library that tell us how much penetration that we are having. And we
   weren't making that target after the second year or so.

   So we really got staff geared up, and they got lots of new people to join
   the library, but then once we finished doing that there was an immediate
   drop off. The reason for that is if a couple walks into the library, they
   would have previously taken out only one card between them because why
   bother with two. So the staff joined two people up, and we got two new
   people on the database. But we didn't get any more usage and it didn't
   increase the value of the service to the community in any way whatsoever.
   But by golly we made those targets!

Long term legacy on the future of public library management

In summarising the potential long term legacy of the CCT period for public libraries, the respondent commented

   I gave a talk at Melbourne University just before CCT came in, and I said
   that it will neither be as good as people expect or as bad as people
   expect. And that's exactly what my impression still is. It did bring some
   benefits. I think that it has probably improved the focus of public
   libraries on efficiency and outputs. It's brought them into the real world
   in a sense. It's made staff, especially, realise that they have to do the
   same sorts of things that people on the outside are forced to do. And it
   enabled a lot of libraries to go through a fairly rigorous review process.
   So I think that there are some lasting benefits there.

Respondent C

Background

Respondent C is the CEO of a regional library corporation located in rural Victoria. Already well established within its regional boundaries, the service was incorporated following the council amalgamation process which, although having the significant impact of reducing the number of member councils by two thirds, did not change either the geographical area or population base of the regional library service.

   The role of the respondent as CEO during the CCT period provides an
   interesting contrast with the client/provider structures introduced in
   metropolitan regional library corporations.

   I was the CEO and I was representing the board, but given the size and the
   shape of our library I basically permanently straddled the equation. Much
   bigger libraries seemed to have a part time CEO and a fulltime regional
   library director, so the client/provider split was very straightforward.
   But the legislation under which we operated as regions said that I am the
   fulltime CEO and I don't have a deputy. Therefore, I was in effect both the
   manager and the CEO, and I had very few powers of delegation to someone who
   could sit in the office next to me representing the other side. So we had
   one person who wore a number of hats.

As a result, the client/provider split was much weaker than may have been the case in the larger metropolitan regional library corporations.

Most significant changes resulting from CCT

Focus on core competencies 

One of the most significant changes identified by the respondent was that the CCT process led to a reevaluation of the core competencies of public library services.

   We basically looked seriously at the three or four things that we were
   indisputably good at and if we were going to be competitively evaluated we
   would have to focus on these key areas. Because had we said we were very
   good at covering books then you would have a mothers club saying I will do
   it as a charity or I will do it at a dollar a book, and if you said that
   you were very good at driving book mobiles then you could find a truckie
   who could drive the truck faster than us. We said we were terrific at
   acquiring books, readers adviser at the front desk, and the dissemination
   of information and we would beat anybody, but there was no point in saying
   that we were great at running a meeting room because you could find
   somebody that could undercut you.

   So my role (as I say I was in two camps) was to say to the staff I think
   these are the three best things that we can't lose on and 90% of the tender
   document focused on three things. And we weren't going to pretend that we
   were better than the meals on wheels people in delivering to a housebound
   person. We didn't claim we were better at logging into the National Library
   or the Library of Congress, because it is probably not true. So we said we
   were very good at three things and beat us at that. So that was the way we
   approached it.

The respondent believed that this process of defining and demonstrating the core competencies of the library service had the beneficial effect of communicating these areas of expertise to the member councils. It had an additional benefit of giving the staff a greater appreciation of their own competence in these key service areas and gave many others a greater degree of confidence explaining their performance to others.

More influential performance measurements

By focusing more attention on performance measurement issues, the CCT process had a related benefit of more clearly defining the types of statistical indicators that were both appropriate and provided the most influence for the funding bodies.

   One of the things we found with all these KPIs, that in effect were foisted
   upon us, is that some of them don't make sense. One particular indicator is
   the number of internet terminals per thousand population. Now that is fine
   if you are a university and you are comparing Monash and La Trobe, but in
   our case a figure of 2.2 is an unusable figure.

   What we found was that we would start off everything that we would do by
   saying we provide a service to 60,000 registered borrowers, and councillors
   were just agog that that was a fact. We issue a million books a year, and
   they all come back in a fortnight. Big chunky figures really make sense.

   By keeping up in the big figures, councillors could go back and say with
   confidence--`that's what our ratepayers money is being spent on'. But to
   tell a ratepayer that their $150,000 is being spent trying to improve on
   2.2 is nonsense. So that was how we structured the expression of interest,
   to produce data that could make sense.

As a consequence the focus on the larger, more influential, statistics was felt to have influenced the traditional perception of library services held by councillors and other senior council officers.

Key challenges faced in managing under a contractual basis

Dealing with the newly amalgamated councils

One of the most significant challenges faced by the respondent was developing relationships with the new member councils, which had been seriously affected by the council amalgamation process.

In addition there was a great divergence of opinion between the new member councils as to whether the CCT process should be applied to the library corporation. While the majority voted to tender the service in order to pick up points for the mandated CCT targets, one of the largest member councils was not in favour, and felt that it was ridiculous putting a library out to CCT. As CEO of the regional library corporation, the respondent faced the difficult task of negotiating between these disparate member councils to ensure that the CCT process was introduced in a manner that would produce the best outcome for the library service.

Impact on staff

As mentioned earlier, the respondent noted that because of the CCT process some staff members became much more confident in asserting the value of the service they provided to the community.

However others were totally demoralised by the process and experienced a great deal of stress in adapting to the requirements of the new system.

Furthermore the increasing number of part time staff as a proportion of the total workforce made the task of effectively managing the CCT process even more difficult.

Long term legacy for the future of public library management

While the respondent noted that the CCT process had a significant negative effect on the morale of many staff members, he believed that the major beneficial outcome was the manner in which library staff were able to adapt and respond confidently to the new environment

   There is no doubt that library staff were totally unprepared to be
   challenged and quizzed in such a fundamental way. They really believed that
   the public understood what they were doing and therefore politicians
   understood. And it really showed that the politicians and the newly
   appointed councillors had no understanding of what a library did. It was
   only when libraries went back and started saying we are a core service in
   society that they regrouped and came back really strongly and they came
   back very confidently.

   The upshot is that libraries have been very solid in convincing the
   councils that they do deliver and they stayed within a charter, and I think
   that is a sort of summary of what the legacy will be.

Respondent D

Background

Respondent D is the CEO of a metropolitan regional library corporation. The corporation was established just after the council amalgamation process from two separate library services that existed within the region. The newly formed corporation was packaged for competitive tendering a year or so later.

In general terms the corporation was structured with a much stronger client/provider split than was the case in the previous service. Consequently the respondent had a more conventional CEO role of managing the overall strategic direction of the service, representing the board, and ensuring that the inhouse team was complying with the terms of the agreement. The inhouse team had its own general manager who was responsible for the day to day operational management of the service.

Most significant changes resulting from CCT

Improved evaluation and planning of library services

The most significant change identified by Respondent D was the way that the CCT process led to a more detailed examination of the outcomes that library services were aiming to achieve, as well as how the achievement of these outcomes could be demonstrated. Furthermore he noted that the ability to define the overall strategic direction of the service was improved, particularly in relation to the staffing aspects of the service.

Increased focus on the client

An additional change identified by the respondent has been the shift in focus towards a more client orientated approach to providing services.

As a consequence, the respondent suggested that one of the most beneficial outcomes of the CCT process was the way it encouraged library services to adopt a more market research based approach to planning how services should be provided to the community.

   The market research approach has been a useful one. A few of us decided a
   long time ago that there was benefit in us doing market research together.
   So we now have a research project that has been undertaken by six library
   corporations and that enables us to search comparative data for over a
   million people. So we can benchmark internally as well as being able to
   focus and shed the superfluous questions and only get the information that
   will help us deliver better services.

Key challenges faced in managing under a contractual basis

Conducting the tendering process

The respondent indicated that from a CEO perspective, the initial stage of developing and managing the tendering process was both a significant challenge and expense.

Defining services and measuring performance

One of the most difficult aspects of the tendering process was accurately defining the service and writing the tender specifications, particularly given the nature of library operations.

   It's not difficult to define in a quantitative sort of a way what a library
   service does, except that you can go on and on and on. And we did. We were
   trying to get it perfect--get the `i's dotted and the `t's crossed, not
   leave a stone unturned--it became too big and too complicated. And then of
   course, the real problem was people like me had to try and measure the
   extent to which the staff team had achieved the outputs and that was almost
   impossible.

Impact on library staff

While the direct management of staff in the inhouse team was not within the respondent's area of responsibility, he did make general comments about the difficulty some library staff faced in adapting to the new environment.

   Librarians, like any other professional group, are committed to their
   patrons and they are committed to the ideals, the underpinnings of
   librarianship. Public librarianship is fundamental in a democracy. If we
   don't continue to have unfettered access to uncensored information and
   don't have the opportunity to grow and change then the whole democratic
   process is at threat. I will certainly argue that, I think that it is very
   important.

   But no one in the public sector, let alone libraries, should think that the
   world is going to leave them alone because it won't. There is tremendous
   change out there and it is impacting on information services. Extraordinary
   opportunities as well as threats, and we need to respond to that. We can't
   just sit still and wait for it to wash over us. This organisation should be
   at the centre of change, not at the periphery.

Long term legacy for the future of public library management

The respondent suggested that the potential long term legacy of the CCT period on public libraries would be `being clearer and more careful about what you do'.

Respondent E

Background

Respondent E is the CEO of a regional library corporation located in rural Victoria. Similar to the other rural respondent, the service was reasonably well established within its regional boundaries before the introduction of CCT and was not significantly affected by the council amalgamation process.

However while the CCT process was introduced in a relatively stable external environment, the tendering process profoundly affected the internal structure of the service. In particular the regional librarian position, the head of the organisation in its pre CCT structure, was made redundant following the tendering process and the balance of the provider side management responsibilities was left to the team leaders below that position in the hierarchy.

On the client side of the organisation, a contract CEO was put in place to develop the tendering documentation and manage the initial process. The respondent was appointed to the CEO position a number of years into the contract.

Most significant changes resulting from CCT

Highlighting the level of resourcing for rural library services

In terms of a local issue, Respondent E commented that one of the significant outcomes of the CCT process in his region was that it highlighted the level of resourcing that had previously been assigned to library services.

   Because we are dealing with rural councils who have traditionally
   underfunded this area probably for decades, which is not unusual in country
   Victoria, the team had to take over an organisation that was poorly funded,
   and operate with it. One of the strengths that came out of CCT was that the
   library team were used to working without many resources, so they were able
   to continue a service to the community, without the community knowing that
   CCT had even occured. So there was a positive in that from the community's
   point of view that may not have been seen.

   But CCT meant that the local governments that were managing the provision
   of the service were wanting to impose on the library service the same sorts
   of cuts and restrictions that local government staff had to incur. We know
   that under the amalgamation stream that councils had to reduce their
   expenditure by 20%. Now fortunately some of the councils said `look if that
   happened to the library that's going to decimate it', so they actually
   increased the funding by 10% which wasn't a lot in money terms but it was
   certainly a significant signal that the library was pretty restricted and
   they didn't impose that 20% reduction.

Nevertheless he further noted that, with the regional librarian position being made redundant, it still left the balance of the management structure very much under resourced as far as managing CCT as well as a fairly thinly funded organisation. This posed some significant limitations for the library team in its ability to vary the level of service provided.

Potential for improved planning and accountability

The respondent noted that the competitive tendering process generally made provider side teams look more closely at what they were actually providing to the community, as well as the costs involved in delivering that level of service. However in his service, because the initial evaluation was produced by someone who was subsequently made redundant, he suggested that the benefits of this process were not realised to the extent that they may have in other services.

He also commented that from a client side perspective, the competitive tendering process had the potential to provide a very good strategic review of the services delivered to the public. But again, in his service this was not achieved to the level that it could have been due to the level of resources available to conduct the process.

Improved performance measurement

A beneficial effect of the CCT process noted by the respondent was that it encouraged a range of performance measures and processes to be introduced, which enabled the organisation to be managed more effectively.

Key challenges faced in managing under a contractual basis

Maintaining relationships with member councils

One of the most significant challenges faced by the respondent as CEO of the corporation was maintaining the relationships with the member councils.

   Because we were away from the council I think there was some perception
   that the corporation wasn't putting as critical eye over the services or
   being as hard on the contractor as maybe the situation where local
   government were developing very concrete skills in securing the best price
   etc, etc. In the library, the team won the bid, the services continued, but
   always people were saying `how come you haven't had the 20% cut'. So one of
   the challenges was the maintenance of relationships between our funding
   body, which to a large extent is local government, and the library
   corporation.

Managing two sets of financial accounts

In terms of the internal management of the library service, one of the major changes the respondent identified was the splitting of accountability for certain functions between the corporation and the library team, and the need to create a separate set of accounts. This added a significant degree of difficulty to the financial management of the service.

Long term legacy for the future of public library management

In terms of the long term legacy of the CCT process, the respondent noted the impact upon staff in terms of the security of employment

   I think that one of the long term legacies is that we didn't face a lot of
   competition because the competition wasn't there.... there was a
   significant impact in rural Victoria in local security of employment and
   probably an unsettling of the workforce in relation to their longevity. It
   really said that it wasn't a career anymore.

However he concluded with the suggestion that, even with the myriad problems associated with its introduction, CCT may have actually contributed to the revitalisation of the library service

   But libraries I think, from our experience, were consolidated and, I guess
   that you have got to almost die to be born again, and CCT was happening
   while this region was dying and it probably, put a few nails in the coffin.
   But out of it, we're alive and jumping because we have picked up some of
   those things that we learnt during CCT and we're applying them, such as
   better reporting and better financial management.

Conclusions

Changes resulting from CCT

The most significant theme emerging from the interviews was the belief that the competitive tendering process resulted in a much greater emphasis being placed on the evaluation of public library services. Each respondent made a reference to the idea that the tendering process has encouraged a more structured approach to specifying the objectives of a public library service as well as an increased emphasis on output targets and performance measurements. A number also noted that the general ability of library staff in relation to measuring and demonstrating their performance was greatly improved by the CCT process.

The interview results also suggest that the increased competence in defining and evaluating public library services has had two related outcomes. First, it seems to have led to an improvement in the reporting and monitoring systems between the service provider and the major funding bodies, which has had the effect of enhancing the profile of the public libraries within local government. Secondly, it seems to have enhanced the link between the service provider and the user, which has increased the level of attention paid to the users of public libraries when planning and developing services. Both beneficial outcomes can be attributed in some way to the imposition of the contractual framework.

Challenges faced managing under a contractual basis

However it is also clear from the interviews that the imposition of the contractual framework was a challenging and stressful process for both client side and provider side respondents. From a provider side perspective, a number of respondents suggested that coordinating and managing the human resources aspect of the change process was a significant challenge as library staff were forced to adapt quickly to a new set of requirements they were professionally unprepared for, as well as philosophically resistant towards. Dealing with the additional workload associated with the tendering process and the increased measurement and reporting requirements was also a significant challenge. This was especially for those organisations already experiencing a large degree of instability owing to the council amalgamation process.

From a client side perspective, the process of accurately defining and specifying public library services in measurable terms, and then actually measuring the extent to which the provider team achieved the desired outcomes, was perceived as a difficult exercise due the inherent complexity of public library operations. Maintaining relationships with the various member councils, which were themselves undergoing a significant process of reorganisation, was noted as an additional challenging task by the CEOs interviewed.

Degree of internal stability

One of the most significant patterns emerging from the interviews was that the impact of the competitive tendering process was strongly influenced by the degree of internal stability of the library service at the time it was put to tender.

For example, Respondents A and B, who were both provider side managers of metropolitan regional library corporations, expressed very different perceptions as to the difficulty of adapting to the contract based framework. For Respondent A, setting up the information cycles and systems in relation to the contract structure was a significantly difficult exercise as it was done concurrently with setting up the regional library service itself. This was perceived as a much less difficult process by Respondent B as his service was already fairly well established within its region before the tendering process.

Formalisation of the process

A related contributory influence seems to be the timing of the tendering process. Given that public library services had never been submitted to a competitive process before the introduction of the CCT legislation, there was no real understanding of the most appropriate way of structuring the process to produce the best outcome. As a result it seems valid to make the assumption that the earlier the library service was submitted to the tendering process, the greater the likelihood a more highly formal process would be introduced, based on the model applied to other services with a longer history of being provided on a contractual basis.

However as the difficulties of applying a highly formalised contracting structure upon public library services became more apparent after the initial few services went through the CCT process, a degree of flexibility seemed to be introduced into the structuring of the contractual relationship.

This is evidenced by the fact that the degree of reporting requirements and strong client/provider split introduced in Respondent A's service, one of the first public library services to go through the process, seems to have been much greater than in the other respondents' services.

Differences between rural and metropolitan regions

A final pattern emerging from the interviews was that the impact of CCT in rural based regional library corporations may have differed from those in metropolitan areas. Respondents C and E both indicated that the client/provider split in their organisation was much weaker than may have been the case in the larger metropolitan regions. In fact Respondent C indicated that it was very difficult to define his role within the corporation according to the client/provider structure, as the size of the organisation did not enable the introduction of a clearly separated duel management structure.

The comments of Respondent E also suggest that the level of resources available to conduct the competitive tendering process, and thus the ability to review the service and introduce changes and improvements, may have been much smaller in rural areas than in the metropolitan areas. He did not therefore perceive the same level of benefit arising from the specification process as Respondent D, a metropolitan CEO, who had more funding available to conduct the process.

Overall assessment

What overall conclusions can be drawn about the introduction of compulsory competitive tendering in Victoria's public library sector between 1994 and 1999? Perhaps the most fundamental conclusion is that the near total absence of competition to bid for the tendered contracts provides a strong indication that the process has been ultimately ineffective in terms of economic criteria. While the full financial details are unavailable, the tender cost reductions have been suggested to be in the vicinity of 0% to 8%. (14) This is clearly marginal or negative when the entire costs of the tendering process are considered.

Nevertheless, as the results of this study have suggested, the introduction of competitive tendering has left a profound and potentially lasting imprint upon the way that Victorian public library services are structured and managed. While it is clear that the process placed unprecedented stress on public library staff and caused a significant amount of organisational instability seemingly for no economic benefit, it is equally clear that there were beneficial results from the process in terms of driving internal management changes. As a consequence, it is very difficult to come to an overall assessment as to whether the benefits achieved in internal management practices and processes outweigh the significant costs in both financial and emotional terms.

However given that the requirements for competitive tendering have been removed and the CCT period is for all intents and purposes over, perhaps a more important question is what will be its long term legacy. If the results expressed by the respondents provide an accurate guide, it will be that public library services will be much more capable of defining and demonstrating what exactly it is that they provide to the community. While the relative effectiveness of competitive tendering as a catalyst for introducing this change is highly debatable, it is hard to argue against the inherent benefits of applying such a structured planning and evaluation approach to the provision of public library services.

Recommendations for future research

The depth of this study would have been enhanced by the inclusion of respondents from single municipality services and/or from different levels in the organisational hierarchy. A possible avenue for future research may thus be to replicate this study with other sets of respondents.

A more valuable project would be to more closely investigate the specific managerial initiatives introduced in response to the contractual framework. Over the last five years the Victorian public library sector has been somewhat of a laboratory for the development of innovative and practicable approaches to planning and measuring public library services. Public libraries have never been required to undergo such a critical and deep examination of the specific services they aim to provide to the community. They have never paid as much attention to measuring and evaluating their performance.

Consequently, the Victorian public library sector has become a rich source of carefully refined structures and processes. If investigated collectively in a systematic manner, this may provide the basis for developing a world class framework for planning and measuring public library services. Such a framework would be a valuable contribution to the management of public libraries around the world.

References

(1) KPMG Executive summary: contracting out in public libraries Aplis 8(4) 1995 p185

(2) Anderson, C Contracting out in public libraries: the DNH study Aplis 9(1) 1996 p61

(3) Burnell, M Best value--a replacement for CCT Management services 41(12) 1997 p20-24

(4) Garner, B CCT - Neither a borrower, nor lender be Aplis 8(4) 1995 p173-177

(5) Pryor, C and Lee, T Compulsory competitive tendering: the issues Aplis 9(1) 1996 p52-53

(6) Watson, C Competitive tendering--will it produce a better library? in J King ed Compulsory competitive tendering and public libraries Canberra, Australian Library and Information Association 1996 p51-56

(7) ibid

(8) Harboe-Roe, C Coming ready or not!--compulsory competitive tendering and public libraries in J King ed Compulsory competitive tendering and public libraries Canberra, Australian Library and Information Association 1996

(9) King, J Specifying a library service for CCT Aplis 9(1) 1996 p39-51

(10) Harris, P My positive view of CCT in J King ed Compulsory competitive tendering and public libraries Canberra, Australian Library and Information Association 1996 p51-56

(11) Carson, G Compulsory competitive tendering in Victoria's public libraries: beatific vision or blunder? Aplis 11(2) 1998 p93

(12) ibid p94

(13) ibid p95

(14) ibid p90-95

Robert Rochester BCom BIMS(Hons) is currently working for the Whitehorse Manningham Regional Library Corporation and the School of Information Management and Systems at Monash University. Address: 8 Waterloo Road Northcote Vic 3070 [e-mail]