Backgrounder to the Report

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In this issue ...

Focus Articles 1

Report No 42, The Contracting Out of Government Services 1

Backgrounder to the Report 1

Opening Speech at the Launch of the Report 3

The Contracting Out of Government Services - Final Report: A Salutation 6

Report No 43, Administrative Review of Patents Decisions 13

Backgrounder to the Report 13

Limitations on section 43 of the Administrative Appeals Tribunal Act 1975 15

The Decision-maker's Obligation to Provide a Statement of Reasons, Fact 19

and Evidence. The Law

Admin Law Watch 33

Administrative Law Developments in the Migration Area: The Trend Towards 33


'Needs to Know' - Own Motion Investigation into the Administration of the 36

Freedom of Information Act 1982 in Commonwealth Agencies by the Commonwealth Ombudsman

Superannuation Complaints Tribunal 37

Federal Magistrates Service 38

ALRC Discussion Paper on the Federal Civil Justice System 40

UK Standing Conference on the Resolution of Citizens' Grievances 40
Tribunal Watch 41

AAT New Jurisdictions 41

New Body for Merits Review of Migration Decisions 44

Amendments to Human Rights Legislation 45

ART Proposal Delayed 46
Important Decisions 47

Abebe v The Commonwealth 47

Attorney-General v Oates 48

Barratt v Howard and Moore-Wilton 49

Browne v Minister for Immigration and Multicultural Affairs 50

Minister for Immigration and Multicultural Affairs v Eshetu 50

R v Secretary of State for the Home Department; Ex parte Behuli 51

Secretary, Department of Social Security v Jordan; Secretary, 52

Department of Social Security v Jiang

Singh v Minister for Immigration and Multicultural Affairs 53

Sook Rye Son v Minister for Immigration and Multicultural Affairs 54

Tien and Others v Minister for Immigration and Multicultural Affairs 54

ARC Update 56

Submissions and Letters of Advice 56

Current Work Program 56

Government Response to Senate Committee Report on the Role and 57

Functions of the Council

Members' News 58
Recent Publications 61

Articles 61

Books and Reports 65
Focus Articles
Report No 42, The Contracting Out of Government Services

The next three articles deal with the Council's Report No 42, The Contracting Out of Government Services. The first article provides some background to the Report. The subsequent articles are edited texts of speeches presented at the launch of the Report, on 27 November 1998. Copies of the Report can be obtained by contacting the Council's Secretariat on tel (02) 6250 5800, or by visiting the Council's website at

Backgrounder to the Report

ARC Secretariat

Recent years have seen substantial developments in the way in which the Commonwealth Government carries out its business. In particular, the Government has expanded the role of contractors in the delivery of services that were previously the domain of government. This has generally been achieved by way of establishing a contractual relationship between the Government and a service provider.

However, by moving the delivery of services from the public to the private sector, the ability of the existing administrative law system to achieve administrative justice has been challenged.

For this reason, the Council undertook a comprehensive review of the administrative law implications of the contracting out of government services. The recommendations adopted by the subsequent report, Report No 42, The Contracting out of Government Services, were informed by two central principles:

  • first, the Council considered that the contracting out of government services should not result in a loss or diminution of government accountability, either to individuals or to the Parliament; and

  • second, contracting out should not negatively affect the ability of members of the public to seek redress where they have been affected by the actions of a contractor delivering a government service.

The Council also considered that the Government, rather than individual contractors, should normally be responsible for ensuring the accomplishment of these principles.

The Report found that the current administrative law system is incapable of dealing with the provision of services by a non-government entity.

Further, it was found that alternative avenues of redress, in lieu of traditional administrative law remedies (such as contract and tort law, consumer law, and industry complaints schemes), do not adequately fill the gap. The Report found that, as a consequence, there has been a substantial reduction in individual rights and government accountability associated with contracting out.

The Report then went on to make a number of recommendations on how the contracting-out phenomenon can be managed, to incorporate appropriate administrative law precepts. These included:

  • requirements for information management of the contracting out process, so that the process can be adequately monitored and reviewed;

  • a requirement that any contractor involved in the process has in place sufficient complaint-handling systems;

  • availability of the Commonwealth Ombudsman to investigate conduct of contract service providers;

  • extension of the Freedom of Information Act 1982 to cover all information held by contractors that relates to government contracts; and

  • extension of merits review procedures, and Administrative Decisions (Judicial Review) Act 1977 procedures, to decisions of contract service providers which are made under a delegated decision-making power.

At the launch of the report on 27 November 1998, Professor Marcia Neave AO, then President of the Administrative Review Council, and Ms Robin Creyke, a Reader in Law at the Australian National University, spoke to the new Report. Copies of these speeches are extracted below.
Opening Speech at the Launch of the Report

Professor Marcia Neave AO*

Distinguished guests, ladies and gentlemen, I am delighted to welcome you to this launch of the Administrative Review Council's Report on The Contracting Out of Government Services.

There have been dramatic changes in government administration over the past ten years. Both Australian and overseas governments are moving away from direct service provision, towards funding the provision of services by corporatised entities or by private contractors. At Commonwealth and State levels, the services provided by contractors to members of the public and paid for by government range from debt collection to the provision of utilities such as gas and electricity to the provision of human services - for example, job placement and rehabilitation services.

In Australia, the relationship between the Commonwealth Government and individual members of the community, is regulated by administrative law. Our package of reforms, which was introduced during the 1970s, is regarded as a model by many overseas commentators. Commonwealth administrative law has influenced law at the State level as well. Many elements of the Commonwealth administrative law system - for example, an independent Ombudsman to investigate claims of maladministration by government, and freedom of information legislation which gives the public broad rights of access to government documents - have been adopted by most State governments.

The administrative law system has three important objectives. First, it gives individuals redress if they are affected by incorrect decisions or wrongful government action. Secondly, by providing a means of correcting decisions it helps to improve the quality and effectiveness of government administration. Finally, it is an important means of ensuring the accountability of government to its citizens.

Although the 1970s reforms show that Australia takes administrative justice and government accountability seriously, they were not designed to deal with the new forms of administration which have begun to emerge today. Contracting out blurs the distinction between the public and the private sector, creating new relationships between government, citizen and private sector contractor. The existing administrative law package was not designed to deal with these relationships and cannot provide adequate remedies for citizens in this context. Similarly the private law remedies that have traditionally applied in the market place are inadequate to ensure the accountability of government and private sector providers in the contracting out situation, when the government pays for contractors to deliver services to the public.

Let me illustrate the problem. Suppose that, as a result of an administrative mistake, an individual is denied access to a service or a benefit to which he or she is entitled under the law. Generally, that person can have the decision reviewed by an independent tribunal. Similarly, if a person has a complaint about maladministration of a government program, they can obtain access to information held by the government department and can also complain to the Ombudsman. These remedies allow individuals to correct administrative mistakes and test the lawfulness and merits of decisions affecting them. They also enable the identification of systemic problems, thus improving the quality of administration.

By contrast, if the decision is made, or the service provided by a contractor under a purchaser/provider arrangement, none of these administrative law remedies may be available. An individual with a complaint about the quality of the service may have no private law remedies either, because normally there will be no contractual relationship between the individual and the service provider. The individual may not be able to take the matter to a small claims tribunal or an industry body, because the contractor's primary relationship is with the agency purchasing its services. In some cases the government department or agency may be prepared to help the individual solve the problem, but there is the possibility that both the contractor and the agency may deny responsibility for it and 'pass the buck' Thus, contracting out can result in service recipients falling into a gap between administrative law and private law, so that there may be no effective remedies available to them.

It is this problem that the report on The Contracting Out of Government Services attempts to address.

So far as I know, there has been no other report systematically examining these issues in any other common law country. For this reason, our project has generated great interest, both in Australia and from overseas.

The Report is based on two fundamental principles:

  • the government should retain accountability in relation to services it pays contractors to provide to third parties; and

  • contracting out should not reduce the rights of members of the public to seek redress if they have been affected by the actions of a contractor.

I will not speak in detail about how we give effect to these principles, but let me mention three important areas.

First, the Report looks at the agencies' obligation in relation to drafting, management and monitoring contracts. Getting the contract right is an important means of ensuring government accountability and giving remedies to individuals.

Secondly, the Report deals with the kinds of complaint handling procedures that need to be established and recommends that the Ombudsman should be able to investigate complaints about contractors.

Thirdly, the Report makes recommendations for changes to laws dealing with access to information. These are designed to ensure that information is not removed from the public domain simply because of contracting out.

Australians are renowned for our inventiveness. This extends beyond the invention of things, such as the stump-jump plough, to legal reforms like the Torrens system of land and the administrative law system. Contracting out provides new challenges for government and law. In this Report we seek to respond to that challenge, by providing a fair, efficient and cost-effective system for maintaining government accountability and providing justice to individuals.

The Contracting Out of Government Services - Final Report: A Salutation

Robin Creyke*

I was delighted to be asked to speak on the occasion of the launch of the Administrative Review Council's Report The Contracting Out of Government Servicesi- not least because I had had a small - and I emphasise small - part to play in its gestation.ii

That experience was sufficient to give me a healthy respect for the task that lay ahead of the Council. The Council was established to monitor the development of Australian administrative law.iii The contracting out reference entailed work in areas not usually covered in Council reports or opinions. Not only did the Council have to assess the strengths and weaknesses of major areas of private law,iv but it also had to take account, in a more direct sense than usual, of the current economic and policy objectives of government and, in particular, the devolution of government services.v

In congratulating the Council on its final Report let me say that I believe that the Council has managed to synthesise the disparate and unfamiliar sources into a workable document. The Report should ensure that private sector contractors adhere to those principles that the public has come to expect from government. In other words, as the President of the Council, Professor Marcia Neave, has said, the recommendations, if accepted, will mean that those high standards which we expect of the public sector - both as citizens and as taxpayers - will continue to be exhibited by the new private sector agents of government.

It has been common to hear administrative lawyers say that contracting out marks the end of the administrative law industry. Such doomsaying is premature and this Report indicates why. This Report will, I believe, make a significant mark on the debate - and it deserves to do so because it is a strategic document - in the best sense of those words.

When faced with the question - how is administrative law to respond to the program for contracting out government services, that is, how are these new, private sector providers of government services to be made accountable, the Council had at least three options:

  • to rely on those remedies already existing in the marketplace - contract, consumer complaints mechanisms, or damages actions;

  • to impose on contractors all the panoply of the existing administrative law remedies - access to merits review by tribunals, to the Commonwealth's privacy protection regime, to information disclosure under the Freedom of Information Act 1982 ('FOI Act'), to grievance handling by the Ombudsman, and to the public law remedies offered by the Courts; or

  • to draw on aspects of both private and public sector remedies to construct a new accountability regime, always bearing in mind that certain minimum standards must be attained.

The first of the Council's strategic decisions was to choose the third option. In doing so, the Council has acknowledged four things:

  • the increasing overlap between the public and the private sectors;

  • that there are valuable aspects of the remedial machinery which exists in both regimes;

  • that private sector contractors are more likely to accept accountability measures with which they feel familiar; and

  • that the Council's focus should principally be on those who stand to lose most from changes to the modes of service-provision - ordinary citizens, not wealthy individuals or corporations.

That is not to say that others of the options are not useful in particular contexts. For example, governments generally have accepted that the welfare arm of government must remain a primary government responsibility. Hence, the second option - to impose the panoply of administrative law measures on private contractors as full agents of government - has already been adopted for the contracting out of decisions in income support matters by deeming those decisions to be made by public sector That is, therefore, not a major issue in this paper. The Report, for the most part, deals with services other than those in the employment and welfare sectors.

The second strategic decision was to emphasise the use of machinery from the 'lower end of town'. In other words, the Report recommends that citizens complaining about actions or decisions by private sector agents performing government functions should have access to the cheaper, quicker and most accessible of the remedies available in both the public and private sectors. Courts are to be used only as a last resort. That represents a considerable change from traditional public sector thinking about accountability measures. It is no accident that Chapter 6, which deals with review of decisions by courts and tribunals, occurs three-quarters of the way through the Report.


The focus of the Report is on complaint-handling. The Report recognises that what is at stake for consumers in contracting out is shoddy or non-existent service - the garbage which isn't collected; the meters which aren't mended; the fences which fall down; the land which subsides. The individual who is affected wants something done to rectify the situation and/or compensation.

In line with its dual public/private sector choice-of-remedies model, the Report recommends that citizens should avail themselves of the services of both government and industry specific ombudsmen. These private sector ombudsman have expertise and some, like the Telecom Ombudsman, are able to award compensation for damage.vii

Alternatively, the Report suggests that a complainant could rely on the contractor's own complaint handling procedure - assuming one is in place - or on complaints-machinery within the agency which has contracted out the service. Complaint-handling measures of the kind promoted by Standards Australia are no stranger to the private sector. They have been embraced as industry best practice and are benchmarked accordingly. Behind this recommendation is an appreciation that accepting the obligation to make provision for complaints should not be onerous for contractors wishing to do business with and on behalf of government.

Use of the Commonwealth Ombudsman as a safety-net

The third strategic decision was to offer expansion of the existing official Ombudsman's role as a fall-back remedy. Although willing to advocate use of appropriate private sector mechanisms, the Council has, wisely, been cautious. Many firms, just like many government agencies, do not yet have in place service charters, much less machinery for responding to consumer complaints. In those circumstances to recommend, as the Report has done, that for the present the public sector body, the Commonwealth Ombudsman, should be retained as the principal complaint management body, is unquestionably appropriate.

The Commonwealth and Defence Force Ombudsman is probably the best known and best accepted of the administrative law agencies. Evidence of the popularity of the model is that there are equivalent government positions in every State and Territory.viii Ombudsmen are proactive, have the experience and expertise to handle large volumes of complaints, and are best able to assist complainants who have little or no funds to pursue other avenues. The Ombudsman can also recommend damages since the Office monitors the scheme for payment by agencies for minor damage up to $10,000.ix
Access to information

Where the private sector has less to offer than the public is in access to information. Competitiveness does not encourage information sharing and the culture of secrecy is alive and well in the marketplace. By contrast a right to access information held by government is now well established in this country. Freedom of information legislation applies in the Commonwealth and in every State and Territory except the Northern Territory.x

What does this mean in the context of contracting out? In seeking to complain about services not provided by a contractor, the citizen will be handicapped by an inability to obtain information about what the contractor has promised to provide or to have access to records which evidence poor service.

The Government has - in part - already conceded this deficiency. During its last term it had announced that amendments to the Privacy Act 1988 would permit access to personal information on citizens held by contractors.xi It had even accepted that a citizen could use the FOI Act to obtain information about a privately offered service provided the contract with the government agency permitted.xii Tying that right to the contract is, however, a deficiency in the proposal since it depends on the parties choosing to include the term in the contract. Despite the warning in 1992 by Mr Alan Rose, (immediate past) President of the Australian Law Reform Commission, that public lawyers had better brush up on their contract law,xiii six years later, that lesson is still being learnt.

For these reasons, the Report has gone further than the Government's proposed legislative changes. It has recommended that the FOI Act should apply to any information held by the contractor which is directly related to the contract, whether or not it is referred to in the contract. If that recommendation is implemented, it will mark a major breakthrough towards making contractors truly accountable.

At the same time, there are deficiencies even in the Council's proposal. The FOI Act presently permits sensitive commercial information to be exempt from disclosure.xiv These provisions are designed to prevent commercial competitors obtaining information about their trade rivals. The 'commercial in confidence' exemptions can be used to evade the access provisions. That means as one commentator has put it that:

contractors' obligations in relation to service quality standards, handling of complaints, employment and training of staff and many other matters of public interest may be removed from public scrutiny. Secondly, the internal operations of the contractor are not subject to FOI, unless government and public access to information by the contracting agency is specified in the contract. This diminishes ... Ministerial and public access to information ...xv

The exemption also has the potential to close off large areas of services from public scrutiny and accountability.

The Senate Finance and Public Administration Reference Committee in its Second Report into contracting out had a solution.xvi The Committee recommendations would require the contractor to establish that the material is commercially sensitive. In other words, the onus of proof would be taken off the citizen.xvii A sizeable minority of the Council also advocated modifying the FOI Act to prevent these problems arising. It is unfortunate that these suggestions were not heeded.

The second problem relates to the keeping of records. There is no point in having access to information in the hands of the contractor, if that information does not exist. Contractors need to be encouraged to keep good records. That process will require their training and support, factors which have enhanced public sector performance because administrators have been exposed to them over many years. Formal processes and possibly institutions need to be established to achieve this outcome for private sector agents. A similar approach has been essayed in relation to the implementation of voluntary privacy guidelines by the Privacy Commissioner. The Report recommends that a Freedom of Information Commissioner should take on this task for private sector bodies in the records-maintenance area. If no monitoring body is appointed, the value of applying the access provisions of the FOI Act would be lost.

Lessons for administrative law

The Report has identified key areas in which best practice can be found in both public and private sector complaint-handling mechanisms. However, a perhaps unintended consequence of its production has been to expose the outdatedness of key elements of the administrative law package.

If the recommendations about expanding the Ombudsman's role to encompass private sector agents are accepted, the Ombudsman's legislation will need to be changed to embrace this new task. The Report also highlights the inability of complainants to use the existing laws permitting access to the Federal Court under the Administrative Decisions (Judicial Review) Act 1977 ('AD(JR) Act'), or to the Administrative Appeals Tribunal. The rules which presently govern access to these bodies reflect the former, much clearer distinction between the public and private sectors. The advent of contracting out cuts across those divisions. Already we have seen in Hughes Aircraft Systems International v Airservices Australiaxviii that the Federal Court is 'chafing at the bit' over the restrictions in the tendering field. If it has not already been manifest, I predict that the same attitude will prevail in relation to contracting out. In my view, a profitable new reference for the Council would be to rethink the jurisdictional limitations presently embedded in the AD(JR) Act and the Administrative Appeals Tribunal Act 1975. Indeed, the ideal reference would also cover suggested changes to the Constitution section 75.


Many of the recommendations in this Report are tentative in tone. I believe that is appropriate. What is being recommended is the consummation of a marriage of public and private sector remedies. That relationship - as in the early stage of all marriages - is untested. Behind this union is a belief that the culture of service can match the culture of accountability. That belief needs to be tested, and there will be many, this writer included, who will monitor the developments over the next few years with considerable interest. At this stage, however, the marriage has the Council's blessing and good wishes. It also has mine. Let us hope that in time, it will receive the final legal blessing - the imprimatur of the Government's certificate of approval in its implementation of the recommendations in this Report.

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