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The Social-Industrial Complex

Who should deliver the services Albertans most count on?

By Carissa Halton

The first time I met someone convicted of first-degree murder, I was 19 and just starting my adult life in the city. He was 19 too but dreading his next two decades. I visited him at Edmonton’s maximum security prison as part of a government-contracted program facilitated by the Mustard Seed Edmonton. Every Wednesday evening, I drove out to the prison with the Seed’s chaplain, Myron Krause, and we talked about life, justice and inequality. The drive affected my world view as much as the thud of the locking gate at the prison’s entrance did.

I later joined the staff of the Mustard Seed and, over 10 years, experienced the tension of that organization’s growth. Its program budget had ballooned from $400,000 to $3-million by 2009, when I left my position as managing director in the midst of a merger with Mustard Seed Calgary. Last year, they together had annual revenues of $23-million, and a growing proportion of this was for government-contracted services. The prison visitation program was one of the Mustard Seed’s first such programs, meaning the agency used tax dollars to deliver support services to inmates. This arrangement is by no means unique in Alberta’s landscape of social service provision. Indeed, with increasing resolution over the past 20 years, the government has stepped back from delivering services itself in preference for the role of legislator and funder. Social programs deemed “contractable” are packaged and, like contracts for a new roof or facility repair, put out to tender to non-government organizations.

The procurement model has introduced to social services delivery a collaborative approach that presents some real opportunities—and some very significant challenges. Most alarming is that the benefits and challenges remain vaguely understood, due to a dearth of information. We don’t know much about Alberta’s evolving system of service delivery despite its scope and significance. “We have no hard measures to determine if NGOs are as flexible or innovative as we think they are,” says Robert Roach, senior research director at the Canada West Foundation. “In theory, we have a sector that is responsive and excellent with money, but we don’t have stacks of data; what we ‘know’ is all anecdotal.”

For instance, we don’t know what proportion of the $41-billion provincial budget is allocated to contracted social services (the department of Human Services estimates that it budgets 22 per cent for service providers). We don’t often know who wins tenders. We don’t know how efficient the social services industry is or how effective its systems are, or anything about the state of its relationship with government. Bob Wyatt, executive director of the Muttart Foundation, a support organization for non-profit agencies in Alberta, told me with frustration, “Stats Canada sends me reports on how much coal we have in Canada, on how many chickens there are, data on the retail trade. The [not-for-profit] sector is two times as large as agriculture. It’s bigger than retail trade in Canada, and the fact there are no studies is an embarrassment.”

Alberta’s social services industry is incredibly diverse. Its spectrum of services includes employment programs, counselling, financial management training, recreation drop-ins, school hot lunches and addiction services. The range of recipients is just as vast: newcomers, victims of assault, parolees, seniors, under-employed grads, school kids, stay-at-home parents. Me. You. Sometimes we don’t even realize when our needs are being met at arms-length by government. I was caught off guard while filing through old documents at the legislature, when I came upon a list of government-contracted programs from the mid-1990s. There, in typewriter font, was the youth drop-in I attended in Blairmore. Contracted organizations are almost as diverse as the programs they run. They may be non-profit or for-profit, publicly held companies or sole proprietorships, small or large. Sometimes these agencies specialize in one type of support. Sometimes they have a huge depth and breadth of services.

Wyatt’s concerns are valid, in my experience. I’ve come to think of Alberta’s social service system like a sprawling farmhouse. We found extra money this one time, so there’s a bay window here and a high ceiling there. Thanks to a fad for rooftop gardens, the farmhouse has a number of flat roofs—some of them lush green, others spiked with dead turf. One wing has no access to other parts of the house. A couple of bedrooms have no doors, just high windows. And that’s just what we can see. What about the foundation? The insulation? We can only assume.

Redford: “We wouldn’t always fund communities to help, but we would ask them to help. That was an abrogation of our responsibility.”

This year the Alberta government will spend over $2.5-billion on social services through the department of Human Services. Much of that will go to NGOs (both charitable and for-profit) to deliver services government is bound by legislation to provide. It is no secret that the government hopes to allocate more of this budget to contracted partners. When Alison Redford won the leadership of the Progressive Conservatives in 2011, she reiterated her commitment to partnering with NGOs in social services delivery. When the superministry of Human Services was formed weeks later (reportedly to increase cooperation and communication among programs), Redford directed its new minister, Dave Hancock, to review programs and contract as many as possible to the private sector.

When I pressed Minister Hancock about the process his department uses to identify programs for tender, he answered, “It comes down to results. We ask: What do we need to achieve success? Then: Who is best positioned to achieve that result based on the kind of investment we have to make? This isn’t a philosophical or dogmatic process, but a question of what success looks like.”

I asked the same question of Rhonda Barraclough, executive director of the Alberta Association of Services for Children and Families. “Figuring out the government’s contract scheme is a dog’s breakfast,” she said. “There are 10 regions in Children’s Services and each one is different in how it develops contracts.” Inconsistencies abound in many of the departmental programs. For instance, In-home Family Supports is a program contracted in all Children and Youth Services regions—except Region 9 (encompassing Fort McMurray and other parts of northeastern Alberta). With other programs, such as services to foster families, half are provided by the government and half by contracted agencies.

While the current contracting model confounds industry people as much as casual observers, it is not new. NGOs have long played a role in Canada’s social service delivery. English Canada’s early social supports were based on England’s Elizabethan Poor Laws of 1601, passed in response to social unrest. These laws legislated the state’s responsibility to care for its poorest citizens and directed parishes to manage programs and raise funds. In Atlantic and Upper Canada, municipalities were charged with the care of “paupers,” and vastly different levels of care developed across regions and provinces. Through the early 1900s, almshouses, hospitals and orphanages were opened and managed by increasingly coordinated societies and organizations. With the Second World War, a cultural shift occurred in Canada, and comprehensive, government-run social programs were built incrementally over the next four decades.

Alberta’s government mirrored the national trend. In 1944 the Social Credit party introduced the Department of Public Welfare, then introduced maternity benefits, relief services for transient persons, seniors housing and services for people with disabilities. When the Conservatives gained power in 1971, they continued adding social supports, notably the Widow’s Allowance and Assured Income for the Severely Handicapped.

Then the 1980s arrived, bringing mortgage interest rates of up to 20 per cent, oil field pumps as still as the trees they’d replaced and an exodus of workers from Alberta. The recession humbled the province and many of its people. By the time Klein became premier, welfare beneficiary numbers were up 55 per cent—from 126,600 Albertans in 1986 to 196,000 by 1993. Klein won the 1993 election on a promise to eliminate Alberta’s debt, and he started by cutting social services. Between 1994 and 1996 government spending on social programs shrank by 20 per cent. Public sector workers were laid off, programs were eliminated and eligibility rules tightened.

At the time, the Mustard Seed Edmonton was a small charity meant to be a “place of belonging” for people who couldn’t find as much in their cramped rooming houses. By the mid-1990s, clients’ growing needs necessitated changes. With more stringent welfare rules in Alberta, many Mustard Seed “regulars” disappeared (they started working two jobs or hopped on one-way buses to BC), while others, exponentially more desperate, arrived at our doors. Staff and volunteers found their new role as “case managers of stuff” onerous. We suddenly had limited quantities of socks and so many tired, callused and cold feet. These feet injected their characteristics into our hearts: we had to say “no” to a second bar of soap or another helping of soup. The Mustard Seed’s rules grew with the lines of need. Meanwhile, our programs grew like plants in a cellar: leggy, with poor root systems and little fruit.

As 2000 approached and oil revenues rose, the provincial government began to increase funding to social programs—but they went at it differently than before. The procurement model began in earnest. Over the last decade, registered charities such as the Mustard Seed saw their revenue from government grow by 129 per cent. Many of Alberta’s largest social service agencies expanded: Catholic Social Services’ revenue doubled from 2001 to 2011, to $68-million, 76 per cent of it from the province. McMan Youth, Family & Community Services quadrupled in size from 2001 to 2011, finishing the year with revenue of $57-million, 96 per cent of it from the province. Between 2006 and 2010, “Health Care and Social Assistance” was the Capital Region’s largest sectoral employer. It was also the region’s fastest-growing industry.

Besides ideological motivations, three main reasons are touted for contracting out social services. First, it saves taxpayers money—at least in theory. According to Keith Seel, director of non-profit studies at Mount Royal University, “If government provided these services, there’d be a cost increase of 35 per cent.” He argues government can’t afford to have unionized government employees deliver the services. Differences in public and private sector employees’ pay scales are often significant. For instance, an Alberta Health Services social worker starts at about $30 an hour. The starting wage for social workers in the non-profit sector is just over $22 an hour. Lower pay has created major staff recruitment and retention challenges for the sector. This may change, however. Last summer, Hardisty Care Centre staff negotiated their first union contract with their private, BC-based employer, and in three years their salaries will be on par with government workers’. While there is no major trend towards unionization in the industry, if more staff were to achieve compensation parity, government cost savings through the procurement model could be significantly reduced.

The likelihood of cost savings can be challenged for more immediate reasons. Roach says no studies have conclusively shown the procurement model to be cheaper. In fact, a 2010 audit of Alberta’s Persons with Developmental Disabilities program (PDD) by KPMG revealed significant inefficiencies in the system, which contracts to 257 service providers across the province. For every $100 spent on direct supports to individuals, $32 was spent on administration (as compared to jurisdictions in BC and Australia, whose administration costs for similar programs ranged from $6 to $20). The audit concluded: “The duplication that exists in the system is far reaching.” Redundancy is particularly pronounced in corporate functions such as finance, human resource management and communications systems. For the system to be efficient, KPMG wrote, the provider network has to become smaller and government management more centralized.

Anecdotal evidence also suggests that government allocates less than the true cost of services, with the shortfall to be made up through charitable donations. “Lots of standards are imposed and we regularly must do more with less,” said Germaine Dechant, chief executive officer of Child, Adolescent and Family Mental Health, a northern Alberta mental health service provider. “In my proposals, I build in 10 per cent for administrative supports because we know the government won’t fund us with more. But that doesn’t cover all our costs in IT, staff development, outcomes measures or full human resource management costs.” While it’s difficult to know just how underfunded Alberta’s programs and providers are, Wyatt pegs the shortfall at 15–25 per cent. “The government doesn’t walk into Staples and say they’ll only pay 75 cents for a pen that’s marked $1,” he says. “So why does it think it can do that with its social services?”

The tendering process may, in part, act to push funding levels down. For too long, contracted agencies, particularly not-for-profit organizations, have accepted this arrangement, subsidizing government programming with private fundraising. The problem isn’t unique to Alberta. In Australia, seven of that country’s largest NGOs recently said “not anymore.” Together, they agreed not to bid on contracts that did not offer full cost recovery. The Australian government was forced to rewrite its Request for Proposal document and offer the full cost of programming.
Alberta’s premier has shown interest in resolving these funding discrepancies. Her government’s 2012–2013 budget included wage increases for contracted agency staff working with people with developmental disabilities and with vulnerable children and families. And at the Edmonton Chamber of Voluntary Organizations’ 2012 AGM, Redford criticized past administrations: “For some time in government, there seems to [have been] an approach that if we were going to be cost-effective, we would ask communities to help,” she told a room packed with social services providers, administrators and activists. “We wouldn’t always fund communities to help, but we would ask them to help. I think that was an abrogation of our responsibility.”

The Alberta government’s contract scheme is a dog’s breakfast. Each region is different in how it develops contracts.

Changes to the tendering and contract process are also something to watch. Child & Family Services is piloting an approach called Outcomes Based Service Delivery (OBSD), which focuses on contracting outcomes (what government wants agencies to achieve) rather than outputs (how agencies provide services). And this year, PDD introduced new contract reviews. Seel explains, “For 30 years, standing contracts have been renewed every year. This will likely end; these are no longer ‘relationship contracts.’ The government might now assess ‘we need 7,000 hours of job training.’ And instead of many small contracts, they might pay someone to do it all.”

Some fear the tendering process will lead to programs (and clients’ needs) being downloaded to the lowest bidder. We don’t know what criteria department staff use to award contracts. On the positive side, Rhonda Barraclough points out, “The tendering process can help governments strategically think about what they need in terms of care. Planning is built into the process of assessing purchasing agreements.”

The second reason offered in favour of the procurement model is it allows everyone to do what they do best: government makes and enforces the rules, while community partners respond to need with specialized knowledge (their services theoretically enhanced by their small size, nimbleness and closeness to communities). My experience has been that many industry NGOs and government staff are working incredibly hard to serve the needs of Albertans. Significant work remains, however, in developing not only the funding relationship but the basic infrastructure systems critical to a successful collaboration.

A key challenge is communication. On a macro level, “We don’t have good systems in place to take advantage of what NGOs could bring to policy making and other levels of government,” says Roach. “There’s a tremendous amount of expertise and on-the-ground knowledge that doesn’t get sent up the system.” Also, no one organization speaks for the various needs of the social services industry, so government must synthesize the views of hundreds of sector partners on its own. Since contracted partners worry that public critique of the system will lead to funding repercussions, the real problems in the system are rarely publicized.

On a micro level, there are legal limits to what information the partners can share. Sharing software and databases can’t always happen, so partner agencies redundantly build their own files. Also, they can only access information that government provides. This may have proven fatal on February 12, 2011, when Valerie Wolski, a Canadian Mental Health Association worker, was killed by her client Terrance Saddleback. PDD knew him to present an “extreme” and “catastrophic” risk to lone female staff, but this information was not passed on to the CMHA. Occupational Health & Safety concluded that significant systemic problems exist in contract relationships.

Generally, reporting expectations on NGOs have increased, yet they have not led to greater transparency. “There is lots of accountability,” Keith Seel says. “NGOs are scrutinized up, down and every which way. The challenge is how much government chooses to share. Often, NGOs’ details get lost in government reports.”
But collaboration may yet work. The introduction of Outcomes Based Service Delivery and other changes to the tendering process may allow NGOs more freedom to use their expertise. For instance, The Family Centre, a leading OBSD agency in Edmonton, has developed and offered innovative services never contracted before (recall that they’re now contracted to meet outcomes such as “fewer kids in government care,” versus the old model of specific outputs, such as “drive Johnny to visit with mom”). TFC has reduced the proportion of its children entering foster care from 38 per cent to 8 per cent. Their kinship rates—when children are placed with family, not in foster homes—have nearly doubled.

It is too soon to tell whether the entire system will be able to adapt similarly. Government must not micromanage the details, and agencies require professional staff and adequate infrastructure, which require adequate and stable funding. If the OBSD model works, however, it may point the way to how all partners in this complex relationship can work to their strengths.

The final and perhaps most socially significant reason for contracting out social services is that it offers Albertans opportunities to come together from different walks of life. Many NGOs are community based, hiring staff from the community to support clients in the community. NGOs can use volunteers and leverage donations that broaden the networks of people directly invested in their clients and services. As volunteers and donors connect with clients, they gain awareness. This awareness, paired with their power to advocate, has the potential to lead to broader social change.

In theory, the province’s non-profit sector is responsive and excellent with money, but what we know is all anecdotal.

Well-resourced social agencies that provide care in the community (as opposed to in institutions) can also help clients find a sense of belonging, purpose and support. In this way, ideally anyway, clients are greater “collaborators” in their own outcomes. Done right, the arrangement could enhance social democracy, empower clients and inspire more diverse, more caring communities.

The full, true cost of government social services must be determined and insufficient funding addressed. Underfunded service facilities lead to dangerous work environments, and inadequate security leads to harm of staff or clients. Lower pay in the private sector can lead to an endless cycle of hiring and training, or worse, to inadequately trained staff who can’t respond to increasingly complex caseloads. Heavy reporting requirements (often, different funders require different data) means rising administrative costs for NGOs.

Infrastructure to sustain this system also must be strategically built. Communication between service funder and provider must improve. Contract systems must be more streamlined to reduce redundancy and utilize partner strengths.

Albertans need more information to fully assess the consequences of the procurement model, and we need it before the government marches further down this path. The tendering process can lead to competitive, not collaborative, industry relationships and to larger organizations monopolizing the sector. The system may also cost more money as redundancies lead to higher costs. As private capital projects are paid for with public money, citizens relinquish ownership over capital investments made in the system.

And short-term funding cycles might encourage agencies to “follow the honey pot,” which threatens to encourage the growth of a backwards system, one in which programs are determined by funders, not by client need or agency strength. Finally, NGOs (ironically) dependent on government lose much of their ability to advocate politically and socially. At what point do NGOs become simply a poorer arm of government? If the sector is citizens’ eyes and ears to the social issues of the day, there must be a mechanism for its voice to be heard and responded to by the highest levels of government.

Anecdotal evidence alone should not shape our public mechanisms for caring for each other. If Alberta’s social services system is like a farmhouse, then it needs an architect, and government has to play this role. It also needs residents who can step back, assess the blueprint and vigorously debate—with each other, with the architect—how they can best live and work in the house. And all parties to the conversation need access to extensive, objective research. We are redesigning a structure that has a profound impact on us all. Let’s get it right. #

Carissa Halton is a former administrator at Edmonton’s Mustard Seed.

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