The separation/specification dilemma in contracting: The local government experience in Victoria

This article draws on evidence from case studies of local government contracting in the Australian state of Victoria. It argues that one of the key elements of competitive tendering - the separation of purchasers from providers - undermines another of its essential mechanisms - the specification of services - at the point where previously in-house services are exposed to competition. The managers who are to become purchasers lack the requisite knowledge of services, which instead resides in the minds of the service delivery staff whose work is to be subjected to competitive processes. Separating purchasing from service-provision 'distances' the staff from the managers, impairing employees' willingness to share the relevant information. At the same time, the introduction of competition increases the probability that staff will withhold that knowledge, and makes it harder on probity grounds to maintain the type of collaborative relationship which might overcome their reluctance to share it.