The Centre for Policy Development, has produced a new report entitled Grand Alibis, how declining public sector capability affects services for the disadvantaged, which asks whether "contracting out improved the public sector's capability to address persistent disadvantage and meet complex needs?"   The report argues that government’s role in designing and delivering integrated, flexible and holistic human services is more important than ever, but that the capabilities it needs to do so are under threat.  The report shows that outsourcing human services risks poorer outcomes for the most disadvantaged and argues that one of the lesser known impacts of outsourcing public services is the loss of capability within government to design and deliver integrated and holistic social services – outsourcing pushes government agencies into narrow contract-management roles, which leads to a loss of public sector experience, expertise, and a disconnection between policy makers and service delivery.  The report examines the experience of outsourced Commonwealth employment services, which has failed to deliver lasting social gains for the most disadvantaged job seekers. Outsourcing blurs the lines of accountability leading to a series of ‘grand alibis’ where no-one is held responsible for the failure to provide an effective service to job seekers.  It argues that the outsourcing of employment services are a cautionary tale for the outsourcing of other public services, such as corrective services, and disability services (as is currently happening in NSW and WA) and recommends that government:

1. Build public sector capability by resourcing government departments to act as effective, persistent policy entrepreneurs, with the skills and staff to develop the evidence and analytics on an ongoing basis.
2. Ensure outsourcing passes a Net Public Impact Test which examines the financial, economic, social and administrative impact, including reputational risks, loss of capability and public accountability.
3. Authorise the Australian National Audit Office and its state counterparts to review confidentiality clauses in outsourcing contracts before execution, and commence regular reviews of public sector capability, beginning with employment. 

The report has benefited from the insights of many organisations and individuals over the past several months, including at the CPD roundtable on government services in March 2015.