THE ADVENT OF MANAGERIALISM IN SOCIAL WELFARE: THE …

Hong Kong Journal of Social WorkVol. 36, Nos. 1 & 2 (2002) 61– 81© Hong Kong Social Workers Association Limited

THE ADVENT OF MANAGERIALISM IN SOCIAL WELFARE:THE CASE OF HONG KONG

JOE C.B. LEUNGAssociate Professor

Department of Social Work and Social AdministrationThe University of Hong Kong

[email protected]

Abstract: Non-governmental organisations (NGOs) have been the major provider of socialwelfare services in Hong Kong. Facing an economic downturn, the Hong Kong governmentdecides to enhance cost-effectiveness and accountability in social service through theintroduction of market values and business management practices. Market-oriented practicesinclude contracting out, competitive bidding, performance monitoring and lump-sum grant.The appeal of these practices lies in the possibility of lowering costs, but their long-termeffect on quality and stability of services is largely uncertain. With the emergence ofcompetition and deregulation in social welfare, NGOs have to face formidable challenges tochange their traditional philosophies and mode of operations. The reform implicates theredefinition of the relationship between the government and NGOs, and between socialworkers and their NGO employers. This paper points out the need to adopt a cautious andconsensus approach to introduce welfare reforms.

Keywords: Managerialism; Contract Out of Service Market; Competitive Bidding;Performance Monitoring.

Introduction

With the slowdown of the economic growth and the globalisation of the economy,most welfare states have learned the painful lesson that it is increasingly difficult

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for the government to support the escalating costs of welfare. Since increasingrevenue through taxation is politically not possible, their most urgent priority iscost containment and service retrenchment (Mishra, 1999). Indeed, existing welfareservices are being criticised not only as inefficient, but also insensitive to theneeds of users. The problems can be attributed to the shortcomings of the basicsocial service structure and culture. In a worldwide prevailing reform movement,the welfare sector is undergoing profound transformation by incorporating themanagement practices, languages and values of the business sector. Governmentsin developed countries are enthusiastically introducing market/quasi-marketmechanism and discipline into publicly-financed or tax-based social services.Presumably, governments believe that cost-effectiveness and accountability insocial services can be achieved where there is a competition among providers forcustomers and resources.

This paper provides an overview of the concept and practice of managerialism.Then it explains the introduction of managerialism in social welfare in HongKong. The government-led and managerial-oriented welfare reform poses aformidable challenge to the traditional philosophies, structure and culture of non-governmental organisations (NGOs). In the end, it discusses the implications ofmanagerialism on the social welfare sector as a whole.

The Advent of Managerialism

There is a general dissatisfaction among government administrators and the generalpublic with regard to the local mode of public and social service delivery beforethe NGOs opted for the Lump Sum Grant. These services were costly andbureaucratic, as well as dominated by professionals and service providers (Smithand Lipsky, 1993; Butcher, 1995; Walsh, 1995; Farnham and Horton, 1996;Gibelman and Demone, 1998). “Managerialism” is a loose term referring to theapplication of management concepts, techniques and practice of commercialorganisations in private sector to public sector (Osborne and Gaebler, 1992;Harden, 1992; Pollitt, 1993; Dunleavy and Hood, 1994).1 Based on economicrationalism, managerialism emphasises the requirement of clear objectives andstrategies, performance measurement and indicators, and the evaluation ofoutcomes. More importantly, the service orientation has shifted from supply-led

1 New form of managerial-oriented approach to public sector reform has been described as“Contracting State” (Harden, 1992), “Reinvention of Government” (Osborne and Gaebler, 1992),“New Managerialism” (Pollitt, 1993), “New Public Management” (Dunleavy and Hood, 1994; Walsh,1995; Minogue et al., 1998), and “the Managerial State” (Clarke and Newman, 1997).

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and professional-dominated provisions to demand-led services impelled by theneeds of users. The driving force for public sector reforms is not that marketworks, but the belief that the private sector is more efficient than the publicsector. To be market-oriented, public officials should behave like businessentrepreneurs. The entrepreneurial model of public management expects thatcompetition for resources and customers can promote efficiency, responsiveness,quality improvement, accountability and performance, as well as empower serviceusers.2 A number of studies have discussed the processes and impacts ofgovernments adopting managerialism in social services (Taylor-Gooby and Lawson,1993; Smith and Lipsky, 1993; Cutler and Waine, 1994; Butcher, 1995; Walsh,1995; Walsh et al., 1997; Wistow et al., 1996; Clarke and Newman, 1997;Gibelman and Demone, 1998).

Managerialism has the following defined features.

Devolving Financial Control:

To create internal and external market within the public services, the servicedelivery system would be decentralised into independent service units, accountablespaces, or cost-centres with substantial financial and operational autonomy.Financial allocations would be based on performance, linking to service output.For example, the principle of “money following patients/students” should be putin practice. Each unit, in principle, has to earn its own income to cover costs, andpay for the purchase of services from other units or organisations. Within theinternal market, the unit can be both purchaser and provider of different services.For external market, outside providers are invited to compete for service contracts.Operating under the market environment based on internal and external pricingand charging mechanism, service managers, with extended financial andmanagement responsibilities, would have to be accountable not only for moneyspent but also for work done and therefore income received (Flynn, 1997: 125).

Compulsory Competitive Bidding and Contracting Out

As a form of privatisation, contracting out of public services has been the drivingforce for reforms (Saltman and Otter, 1992; Ovretveit, 1995; Walsh et al., 1997;

2 Under the market mechanism, competition should be established between providers of services;service users are empowered through the provision of service information and the maximisation ofchoices; performance should be monitored and based on outcome; and the role of the governmentshould be minimal, limiting to financing, purchasing, monitoring and regulating services (Osborneand Gaebler, 1992; Flynn, 1997).

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Gilbelman and Demone, 1998).3 The prevailing belief is that it is better topurchase the service from the market than to provide it directly by the government.Not only is the fact that contracting out usually involves a lower cost, it canavoid the conflict of roles. The role of the purchaser should be separated fromthat of the provider so that the purchaser does not have a direct interest inproviding the service. In this way, the service purchaser (the government) can bemore objective in assessing needs and choosing providers. The purchaser wouldnow focus on determining the needs of the users, preparing contract documentation,inviting applications, evaluating and choosing the most appropriate serviceprovider, awarding the provider, and monitoring their performance.4 In addition,the purchaser has to prepare to face the problem of maintaining services aftercontractors have failed to perform effectively or gone into liquidation. As such,the role of the state is that of the “enabling state”, “steering not rowing” the boat(Walsh, 1995: 220).

The use of contracting out has been very widespread among more concreteand specific public services, such as refuse collection and disposal, catering,laundry, maintenance work and basic supply. The outcomes of these services aremore easy to define. It is extending rapidly to other professional services, suchas engineering, law, management, computer, social and health services. In somecases, contracting out can be found even in fire services and prison management.

After reviewing the literature on contracting out, Gibelman (1998: 17–18)summarised:

The advantages of contracting out include: cost savings, administrativeefficiency, quick programme startup and termination, programme flexibility,lack of bureaucratic “red tape”, enhanced quality of services, higher levelof professionalism, flexible use of personnel, partnership-building with the

3 The popularity of the use of contracting out by governments is described as the “contracting state”(Harden, 1992), the “contracting regime” (Smith and Lipsky, 1993) and the “contracting industry”(Gibelman, 1998). As a dominant and entrenched form of delivering social services, the United Stateshas a long history of contracting out services, and its boundaries continue to expand. Because ofthe differences in social policy among states, contracting in the United States has been developedon an ad hoc basis, while in other countries, such as the United Kingdom, Australia and New Zealand,it is a deliberate aim of the government policy.4 Purchasers have to specify the requirements in the contracts in terms of inputs, cost, methodsemployed, outputs and outcomes. Contracts can take a variety of forms. Some are fixed price orblock contract, while others can be paid according to volume of output. In general, purchasers lookfor maximum volume and quality of services at the lowest available cost. Providers would try tosecure the commitment of the purchasers at as good a price as possible. The arrangement wouldstructure incentives so as to achieve cost-effectiveness.

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private sector, promoting innovation and competition, political climate andcitizen preferences, and reducing the size and role of government. Theidentified disadvantages of contracting out include the loss of public controland accountability, the lack of mechanisms to ensure standards, the increasedcost of service, poorer quality services, the tendency of voluntary agenciesto “cream” the better clients5 and not service the most needy, the unreliabilityof contractors, and the difficulty of monitoring purchased programmes andservices.

There is no specific and conclusive evidence to show that contracting out leadto cost savings. There may be apparently savings in the short term in terms ofcutting some direct costs, such as staff salary. In the case of contracting outspecific and manual services, savings are more obvious, while the results are lessclear with professional, core and complex services (Smith and Lipsky, 1993: 194;Walsh, 1995: Chap. 9). Evaluating costs in welfare services and determining theimpact of contracting out is extremely difficult. In specific, it is not easy tomeasure the effect of contracting out on service quality and service outcomes,and to include the administrative, transactional and indirect costs to prepare,process, negotiate, monitor and evaluate contracted programmes. In addition,contracting out if poorly managed, can also lead to problems such as inefficiencies,bankruptcy, wastage, corruption and ineffective services (Gibelman, 1998; Walsh,1995: 123). A report in Australia claimed that marketisation of service deliveryto unemployed people would result in such undesirable outcomes as creaming,skimping on service delivery, over-emphasis on low quality short-term outcomes,and diversion of funds away from the unemployed to inducements to potentialemployees (ACOSS, 1997). Contracting out certainly is not a panacea for resolvingall the entrenched and long-standing service delivery problems.

The acceptance of contract services by NGOs in fact would lead to the lossof autonomy, subjecting them to more government control under the name ofimproving public accountability. In trying to fulfil contract specifications, NGOswould have little room for discretion in selecting users and service technology.They simply become “agents of the state”. Contracts can lock agencies into fixedways of working and stifle innovations (Richardson and Gutch, 1998: 165).Contracting out service does not remove their continuing dependency on thegovernment on financial support. Worse still, their vulnerability increases due tothe probability of termination of contracts or delay in contract renewal (Gibelman,1995). Meanwhile, NGOs themselves have to compete with themselves and the

5 NGOs may “cream” for “better” clients, those who are likely to achieve positive results from theservice and are thus easier to “treat” (Gibelman, 1981).

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private sector for contracts. Under the competitive climate, collaboration betweenNGOs would be reduced. Furthermore, contracting out, that emphasises onpunishment for failure, would undermine the mutual trust between the governmentand NGOs (Walsh, 1995: 225).

Monitoring Performance

To enhance accountability and ensure quality assurance, performance measurementis paramount. Besides the need to have measurable performance standards andindicators listed out explicitly in the service contracts, the mechanism of inspection,monitoring and auditing becomes essential. Performance indicators ideally shouldbe focused on outcome and impact of the programmes, rather than on input andoutput. Measurements would enable comparison of performance among providersand the allocation of resources according to performance. To facilitate the servicechoice of users, service providers are required to publish their performance publicly.Outcome measurements and evaluation, however, have always been controversialareas in social service. The experiences of other countries showed that the numberof performance indicators would proliferate, to an extent, that they turn out tobecome difficult to reflect service quality and performance (Walsh, 1995: 243).Besides, performance indicators are often decided authoritatively with littleinvolvement from service users. More importantly, it is believed that thedevelopment of trust between purchaser and providers is central to the effectivedelivery of social services. Without mutual and basic trust, the cost of monitoringperformance can become costly.6

Charging for Service

In the private sector, prices and charges are essential information of the market,reflecting real costs and users’ demand. Subsidised public services are ofteneither free of charge or charged below the actual costs. With the need to increaserevenue and reduce abuses, the use of charging and pricing becomes more popularand widespread. In addition, internal charges are used for an organisational unitpaying for the services it receives from other units. For those services wherecharges are not possible, the mechanism of voucher would be used. The system

6 According to Time (November 8, 1999), the second largest health insurer in the United Statesannounced that it would place more faith in its member doctors’ diagnoses rather than to spentUS$100 million in 1998 scrutinising doctors’ recommended treatments. (In the past, they approved99% of them.)

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operates by providing a public subsidy in the form of a voucher of a given value,which can be used to purchase a given service. Under such schemes, publicservice suppliers are obligated to compete with private or voluntary sectoralternatives, and voucher holders can choose the providers for their service (Culterand Waine, 1994: 15).

However, the calculation of actual costs in public services is often difficult.Public services involve cross-subsidies between departments and hidden costs.The major concern is that the level of charges should not discourage people inneed from using it (Walsh, 1995: Chap. 4).

From Clients and Citizens to Customers

One of the most important orientations learned from the business practice is tobe “close to the customer”. To be successful, social services are expected to meetor exceed the expectations of their users. To empower the users, social servicesshould seek their views and opinion, maximise their choice, provide them withinformation on service standards and performance, commit to improve servicequality, make performance pledges, survey their satisfaction, encourage theirparticipation in programme decisions, and make services more accessible. Inenhancing accountability, complaint procedures are strengthened through variouscomplaint mechanisms and ombudsman schemes. In the United Kingdom, theendorsement of the value of customer sovereignty was marked by the publicationof the “Citizen’s Charter” and other social services charters in the 1990s.7 TheseCharters cherished the practice of more privatisation, increased competition, furthercontracting out, publication of performance standards and service information,effective complaint procedures, and independent service audits. This consumerorientation has turned service users from citizens to customers. Citizenship isbased on entitlement, needs and rights while consumerism is modelled after themarket situation of consumer payment (Adams, 1996; Clarke and Newman, 1997:Chap. 6). As citizens, service users have the right to hold the governmentsaccountable for their policy and programmes. In reality, user involvement in thesetting of service contracts and the selection of providers is still restricted, notto mention the fact that some of them are involuntary users. Finally, the basic

7 The Citizen’s Charter has four main themes:• to improve the quality of public services;• to provide choice, whenever possible, between competing providers;• to tell citizens what service standards are and how to act where service is unacceptable; and• to give full value for money within a tax bill the nation can afford.

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contradiction between consumerism and increasingly limited resources in publicservice can become apparent. Users may in fact have to face strict eligibility,limited choices and poor service quality. The relationship between social servicesand their users is more complicated than that of a commercial transaction.

On the whole, professionals including social workers, do not seem to welcomemanagerialism. According to their understanding, managerialism increases theirmanagement duties and erodes their professional autonomy. Instead of makingprofessional judgments, their practice would be preoccupied with meetingprocedural demands and working according to manuals, checklists and guidelines(Adams, 1998, Chap. 3; Exworthy and Halford, 1999). Yet, managerialism isnow a fact of life almost everywhere in the world. The primary objective of thegovernment introducing managerialism is to cut cost and do more for less. Indeed,no one, including the general public, would object to the values of efficiency,responsiveness and accountability cherished by managerialism. But driven moreby ideological enthusiasm rather than empirical evidence, the long-termeffectiveness of managerialism remains uncertain and controversial.

Existing Problems of the Welfare System in Hong Kong

Even though the Hong Kong government has all along championed the governingprinciple of “small government” and “positive non-intervention”, it has in factbeen actively involved in the financing and provision of a variety of public andsocial services. Facing the Asian economic crisis, the government has alreadyprovided a number of tax concessions to stimulate consumption. Coupled withthe appearance of budget deficits and declining revenue, the government has tolook for ways to promote efficiency and contain rising public expenditures. Toenhance productivity, performance and cost effectiveness, the government intendsto introduce competition and market mechanism into the civil service. Accordingto the government, the move towards privatisation and corporatisation wouldenable departments to operate in a manner closer to the market and free fromrigid government rules (Financial Secretary, March 3, 1999; South China MorningPost, April 1, 1999: 6). Examples of these reforms include contracting out themanagement responsibility of public housing to the private sector, privatisationof public utilities, increases in charges of public services,8 use of contract staff,

8 Facing continuous budget deficits, the Financial Secretary warned that fees and charges of publicservices would have to be increased ranging from water charges, school fees, license fees, to sewagecharges. Fees and charges accounted for about 20% of government spending ten years ago. Now itcontributed to a mere 8% (South China Morning Post, October 29, 1999: 3).

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voluntary retirement, and cuts in salary and welfare benefits of civil servants.According to the Financial Secretary, private sector participation in public servicedelivery “instilled greater cost consciousness and a market-oriented culture in theservice providers and allowed them greater operational flexibility outside thegovernment system” (Financial Secretary, March 3, 1999).

About 80% of the welfare expenses in Hong Kong are financed by publicfunds. Welfare expenses are rising substantially because of escalating demandsand costs. Government welfare expenditures soared from HK$7 billion in 1992/1993 to HK$16.8 billion in 1996/1997, and further to HK$29.1 billion in 1999/2000. In the 1999/2000 welfare allocation, 72% were for financial assistancewhile the rest were for direct welfare services. The government supports a totalof 186 NGOs in over 3,002 service units, involving 26,000 staff. The subventionamounted to HK$6.2 billion in 1999/2000, as compared to only HK$2.6 billionin 1994/1995, representing 77.5% of the total government expenditure on welfare,excluding social security expenses (SWD Website). To be sure, welfareexpenditures have grown at a rate much faster than the economy as a whole.

Prior to majority NGO’s option to the Lump Sum Grant, there were fivemodes of subvention, including the standard cost system, model system, lumpsum grant, subsidy scheme and 5% subsidy. About 80% of the service units arebased on the standard cost system and model system.9 In a sense, the Hong Konggovernment has the long tradition of purchasing services from NGOs. But thepurchase was not based on formal contracts with specified expectations andrequirements. Based on actual costs, the subvention was perceived as life-longand more or less guaranteed, with few strings attached. Each year, the governmentallocated subvention directly to NGOs through a budgetary process that routinelyrolled forward with minor incremental adjustments. The subvention system couldbe described as an “iron rice bowl”. While government control had been focusedon financial and personnel input, there was little review over the effectiveness ofthe services and the continuous relevance of needs. Variations of the amount ofsubvention existed for identical size and types of services. New projects had notbeen allocated according to performance and competition. Any savings or “unspent

9 The standard cost is based on personal emoluments calculated at midpoint salaries of the recognisedposts. But allocation is based on actual salary requirement. For those services not on standard cost,the model system is based on the recognised cost of the unit that is adjusted for inflation annually.Lump-sum grant is limited to a few experimental projects with no clawing back on surplus. Thesubsidy scheme for purchasing services is based on a fixed unit cost for a defined contract periodwith no topping up of deficit or clawing back of surplus. The 5% subsidy is mainly for child-carecentres. Information is obtained from the website of SWD.

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balance” had to return to the government. In so doing, NGOs, instead of makingany savings, were encouraged to use up all their allocations. This would becomethe basis for asking for more.

Both the Social Welfare Department (SWD) and the Hong Kong Council ofSocial Service (HKCSS) had agreed that the existing subvention system createdinflexibility in deploying resources, provided disincentives for efficiency, stifledinnovation, and was administratively cumbersome to operate (Director of SocialWelfare, 1999; HKCSS, Welfare Digest, 12, 1999: 1; Health and Welfare Bureauand SWD, February 2000). Simply put, the subvention system was neither cost-effective nor ensuring public accountability. To the government, welfare reformwas most urgent.

In the beginning of the year 2000, the Chief Secretary for Administrationsummarised the key objectives of the welfare reform (Chan, January 21, 2000).They are:

1) Ensuring that community needs are met in the most cost-effective manner.This means regularly reviewing the services provided on the ground, re-setting priorities and re-deploying resources from one service area to another;

2) Improving productivity so that more can be achieved with existing resourcesand new resources; and

3) Raising standards of transparency and accountability for the money that isspent.

The Reforms

In 1995, SWD contracted a management consultant firm to make recommendationsto streamline and simplify the current welfare system; to introduce performance-based funding and service agreements; to develop performance measurementstandards — both quantitative and qualitative; and to suggest appropriate incentivesand sanctions. The consultant recommended that (Coopers & Lybrand, April1996):

a) Clearer sets of performance measurement should be introduced to makeNGOs more accountable for their service quality;

b) The input-based funding system should be changed so as to provide moreflexibility to NGOs to manage their resources; and

c) A cultural change should be initiated to arouse the Sector’s awareness ofthe need to deliver services in a responsive, cost-effectiveness andcompetitive manner.

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Based on these recommendations, SWD proposed the following changes:

1) Unit Grant Subvention: In this model, subvention was based on the averageactual salary cost of respective ranks applied throughout the sector. NGOscould have the flexibility to deploy the allocations.

2) The Service and Funding Agreement, Service Quality Standards, and ServicePerformance Monitoring System: These arrangements would improve thequality and quantity of services.

With the objection from NGOs over the adverse effect on job security andprofessional standards, the Unit Grant mode was replaced by another proposal —the fixed funding mode. The revised mode was based on midpoint salary of staffstructure of each service unit with 2% deduction of natural vacancy and providentfund contribution based on the sector average of 6.1% of midpoint salary (SWD,October 1997). Of the 179 NGOs consulted, only six had indicated the initialinterest to join. In short, NGOs regarded that the proposal had given inadequateresource allocation for welfare agencies to exercise the flexibility it proposed andit would create heavy burden in administration and management it required(HKCSS, Press Release, September 26, 1997). The rejection of NGOs to theproposed subvention mode reflects their sense of insecurity for dismantling thetraditional iron rice bowl.

By the end of 1999, the issue of subvention reform has re-emerged. In February2000, the government proposed the lump sum grant mode that is again benchmarkedon the basis of the midpoint salaries and 6.8% of the midpoint salaries for providentfund contribution. Accordingly, NGOs with subvention under the existing mode(snapshots) above the benchmark will receive the snapshot amount, but thesubvention will be reduced annually to reach the benchmark in steps of 2% perannum starting from 2003/2004. For those with the snapshot below the benchmark,they can receive the benchmark amount and keep the surplus. On top of thisarrangement, there is a “Tide-Over Grant” to assist NGOs to address any possibleproblems arising from meeting contractual obligations to serving staff for salarycreep and provident fund contributions. NGOs are given a two-year period to jointhe Scheme starting from 2000 to 2002. Given these arrangements, no NGOs wouldbe in real financial trouble in the short-term. In implementing the lump sum grantmode, SWD estimated that out of the 186 subvented NGOs, 111 would receivehigher allocations in 2000/2001, and the government is expected to pay HK$150million to cover the additional subvention required (Health and Welfare Bureauand SWD, February 2000). This new package represents an improved version overthe previous proposals. Seemingly, the government proposal is irrevocable, andNGOs may possibly negotiate on minor technical modifications only.

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SWD introduced the Service Performance Monitoring System in 1999. Thesystem consists of Funding and Service Agreements and Service Quality Standards.The Funding and Service Agreement has delineated clearly the respective rolesand responsibilities of the government as a funder and NGOs as service providers.Of the 103 subvented services, agreements have been developed for 34 types ofservices. Before 2002, all subvented services will have the agreementsimplemented. These agreements consist of the generic sections (obligations ofSWD, performance monitoring, SWD’s role in overseeing the performance ofservice operators) and service-specific sections (service definition and performancestandards in terms of service output). With the introduction of formalisedagreements, both SWD and NGOs have to find out what this contractualrelationship means in actual practice.

According to the government paper submitted to the Welfare Panel of theLegislative Council, all service units have to include in their Funding and ServiceAgreements, a medium-term plan on programme areas with clearly definedobjectives, key result areas and priorities. In addition, there is an annual programmeplan of each service unit to assess performance according to those objectives inthe medium plan. The performance of the service units based on the programmeplan will lead to adjustments in allocations. Needs in a particular locality haveto be reviewed from time to time (Health and Welfare Bureau, November 1999).In the Social Welfare Subvention Reform Proposal, the government reiterated theneed for a medium-term plan of three- to five-year duration for each programmearea and annual plan by each service unit (Health and Welfare Bureau and SWD,February 2000).

The 19 Service Quality Standards are to be implemented over a period ofthree years (1999–2001). All NGO and SWD service units have to undergo anannual self-assessment conducted by the service unit itself and an externalassessment once every three years by the Service Performance Section of SWD.Service units have to satisfy the prescribed performance standards including theService Quality Standards, essential service requirements and performance output.Those service units that do not comply with all the standards will be asked toprepare action plans and take steps to make improvement. According to theService Performance Monitoring System: Performance Assessment Methodologyof the SWD, a service unit which “demonstrates extremely poor performance inthe external assessment, and is unable to make acceptable progress to improveperformance, SWD may consider the total withdrawal of subvention”. (SWD,July 1999: 25). Withdrawal of subvention represents the ultimate sanction ofSWD on non-performance of NGOs. But in the event of non-performance of anSWD unit, the sanction has not been specified.

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With most expansion in welfare service largely frozen, there are little resourcesfor new programmes. Resources for service improvements, such as school socialwork, have to be re-deployed from cutting resources in other services, notablychildren and youth centres. Now even existing programmes have to be reviewedand justified in their cost-effectiveness and value for money in order to receivecontinuous government support. One after another, the government reviewed theNeighbourhood Level Community Development Projects in Old Urban Areas,the Comprehensive Social Security Assistance, the youth services (FundamentalEfficiency/Expenditure Review), the school social work, and elderly day services.The terms such as “re-prioritisation”, “re-focusing”, “integrating”, “re-engineering”, and “targeting” in fact mean the re-allocation of resources.

In recent years, NGOs have to submit proposals to bid for new experimentalprojects based on a standardised price. The practice of competitive bidding fornew welfare services has been put to test in the case of meal delivery service andhome care service. SWD commissioned a consultancy firm to draw up tenderspecifications, mapping out an implementation plan and devising a comprehensivecontrol mechanism for contracting out meal service. The allocation of the nineunits of home care service, contracted out for a period of 40 months, was basedon open tender procedures. Meanwhile, SWD has also established a ContractManagement Unit to oversee the development of the contracting out mechanism.SWD received a total of 50 bids, and six operators have been awarded with thecontracts. While the bidding price has not been standardised, successful bidderswould have the flexibility in the deployment of resources.

Based on the initial experiences of the bidding process of the home careservices, HKCSS showed that improvements had to be made in the design of thetender documents, composition of the vetting committee and appeal procedures.These contract allocations were solely determined by government officials, andno explanation had been given why some succeeded while others failed.Furthermore, these contract agreements were too restrictive with unnecessarycontrol over the input (HKCSS, November 8, 1999). Simply put, there are stilltechnical issues involved to improve the transparency and objectivity of thecompetitive bidding process.

On the surface, SWD is satisfied with the outcome of the home care and mealservice bidding exercises, and is determined to further extend the use of competitivebidding in the allocation of new projects. It is difficult to estimate the financialsavings due to the use of competitive bidding mode. Obvious savings come from

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the lowering of the staff salaries.10 According to the estimate from HKCSS, thebidding prices for home care teams ranged from HK$0.6 million to HK$1.2million per team per year. With such a significant difference in allocations, whatare the implications for the service quality? Moreover, there is no idea what willhappen to these contracts after the contract period expires. In the meal services,the bidding was not too enthusiastic, and no private business company wasawarded with the contract.

Two study tours had been organised by the Health and Welfare Bureau in1999 to New Zealand and Australia to study welfare reforms. Although contractingout of welfare services has been widely used in both New Zealand and Australia,New Zealand is cautious in the use of competitive bidding in the allocation ofservice contracts, and the reactions of NGOs in Australia toward competitivebidding were largely negative (Health and Welfare Bureau and Social WelfareDepartment, 1999; Social Welfare Advisory Committee, 2000). The New ZealandReport concluded that a “cautious and step-by-step approach should be adoptedin taking the contracting/competitive bidding process forward”. The AustraliaReport recommended that competitive bidding could be used for allocating newand innovative services, as this can help to develop benchmarking practices andcosts. But competitive bidding is associated with a number of problems such ashindering mutual cooperation between providers, disrupting service continuity,increasing the administrative costs, using price rather than quality to determinethe choice of provider, and discriminating small NGOs with limited resources.

In December 1999, the Health and Welfare Bureau set up the Working Groupon the Implementation of the 1999 Subvention Review Exercise Proposals. TheGroup, with membership from the government and NGO representatives wouldreview the competitive bidding process, the lump-sum funding arrangements, andthe allocation of new welfare service units. On competitive bidding procedures,improvements suggested by the Group included the disclosure of the respectiveweighting to be given to service quality and cost in the assessment of bids; theorganisation of debriefing sessions for unsuccessful bidders; the introduction ofan appeal mechanism separate from the vetting system; and the provision of amore user-friendly bilingual invitation-to-bid document (Social Welfare AdvisoryCommittee, December 6, 1999).

It was the original intention of the government to convert all existing serviceprovision into time-limited contracts. Upon the expiration of these contracts, new

10 It was reported that some NGOs which had successfully obtained the SWD contracts on homecare paid a much lower salary for home care staff, cutting their salary entry point from the presentHK$9000 a month to only HK$5500 a month (MingPao, November 8, 1999: 10).

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service contracts would be re-allocated based on competitive bidding (Law, October25, 1999). The proposal, if put into practice, will definitely turn the welfaresector upside down. With resounding opposition from the welfare sector, thegovernment has dropped the idea. But the government is determined to furtherextend the use of competitive bidding in the allocation of new services.

In the 1998 Policy Address, the Chief Executive announced the introductionof the Enhanced Productivity Programme across the public sector, including thesubvented welfare services. Under the Programme, all government and subventedunits have to achieve a 5% savings between 2000 and 2002. Savings are includedin the Enhanced Productivity Programme only if there are permanent reductionin the entitled subvention allocation. NGOs are still struggling with how toachieve the target of productivity gains without sacrificing the service quality(HKCSS, Welfare Digest, March 1999: 1–2). Both SWD and NGOs understandthat financial flexibility is pivotal to achieve the target (Health and WelfareBureau, November 1999; HKCSS, Committee on Agency Finance andAdministration, January 25, 2000).

One of the means of involving the private sector in welfare provision isthrough the Enhanced Bought Place Scheme. Introduced in 1998, the Schemewas designed to purchase beds from homes for the aged operated by the privatesector. To upgrade and monitor the standards of the private sector participatingin the Scheme, a system of service quality standards, such as space and staffingratio on health and care staff has been introduced. By December 1999, SWD hassecured 1552 and 940 places in private residential care homes for the elderlyrespectively under the Enhanced Bought Place Scheme and the Bought PlaceScheme. Another 1150 places would be included in the year 2000 to 2001.However, the existing standards of the private residential care homes for theelderly are not satisfactory at all. By December 1999, some 35% of the homesfor the aged, mainly privately-operated, had failed to obtain licenses from SWD,declining from 60% in May 1999 (Director of Social Welfare, 1999).

HKCSS supports the Enhanced Productivity Programme and in principle, thelump-sum grant mode of subvention, provided that no NGOs would be worse offthan the provisions of the existing system. With regards to competitive bidding,it expressed grave reservations, and called for a halt to its further implementation(HKCSS, Welfare Digest, 12, 1999: 1; December 6, 1999). The Social Workers’Association claimed that the whole reform process had sought little consultationfrom NGOs, and there was a lack of clear long-term goal to guide social welfaredevelopment (Hong Kong Social Workers Association, December 6, 1999). TheLegislative Council Panel on Welfare Service strongly objected to furthercontracting out of welfare services through competitive bidding, and urged more

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consultation before the implementation of lump-sum grant (HKCSS, Committeeon Agency Finance and Administration, January 25, 2000). The most tenaciousand resounding opposition to the whole welfare reform package comes from the“Fighting for Social Welfare Alliance”, sponsored by the Hong Kong SocialWorkers’ General Union. It has organised several mass protest actions to expresstheir discontent toward the alleged withdrawal of government commitment towardwelfare (Hong Kong Social Workers General Union, October 28, 1999).Meanwhile, the government reiterated that the primary objective of welfare reformis not to reduce overall welfare allocations. Even though welfare expenditureswould most likely continue to show moderate increases in the coming years,welfare reforms have evidently delimited government commitment and wouldslow down further welfare expenditure increases.

Implications for Social Welfare

As Hong Kong enters into the next millennium, gone are the days of staggeringwelfare programme growth, automatic subvention increases, and expanded benefitsfor service users. In recent years, we can witness a proliferation of changes alongthe line of managerialism. The government has on the one hand intended toenable NGOs to have more flexibility and responsibility in the use of fundsthrough the introduction of lump-sum grant mode of subvention. Thereafter,NGOs are expected to shoulder up the full responsibility of managing the financialcost of their service operations. On the other hand, the government is exertingmore programme control through centralising the monitoring system based onperformance indicators, quality standards, and periodical review of programmeplans. For those NGOs with poor performance, they will face the risk of havingtheir subvention terminated. Under continual review, welfare programmes can bemore responsive to changing needs, and resources can be re-directed to newneeds. For new projects, competitive bidding would be used to ensure that thereis competition among providers for price and quality. In so doing, the governmentis convinced that cost efficiency, consumer responsiveness and providercompetition would be achieved.

With the gradual introduction of these managerial changes, implications forthe welfare sector are far-reaching. The reforms represent a basic transformationof the whole welfare system rather, or just some tinkering with the presentsystem. The government may fully endorse the market and managerialphilosophies, but it still, apparently, does not have a blueprint or master plan forwholesale reform. Many of these reforms will face adamant resistance fromNGOs and social workers, as well as from some service users. So far, the degree

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of competition introduced is still limited. In the foreseeable future, changes willstill be incremental, mainly for “market-testing”.

With the traditional dependency of NGOs on the government, their fundraising capacity has been limited. The introduction of fixed amount of fundingwould mean that NGOs have to explore ways to contain costs. Since 80–90% oftheir expenditures are on personal emolument, the major area of savings wouldcome from changing the human resource policy, including salary scale, providentfunds, fringe benefits, increments, qualifications, etc. With the deregulation ofthe restrictive yet somewhat unified human resource policy after theimplementation of the lump-sum grant, NGOs will have the responsibility andpower to formulate their own human resource policy. Under a competitive andperformance-driven atmosphere, NGOs have to formulate a viable policy, withmaximum participation from the staff, to retain and attract capable staff, developstaff career, and remove incompetent staff. All these changes would mark thedeclining bargaining power of social workers in relation to their NGO employers.On the one hand, senior staff would find it increasingly difficult to seekemployment in other NGOs. On the other hand, NGO administrators can dismissany social workers considered as to be “troublemakers”. Social work wouldbecome a more compliant, if not exactly conformist, profession. As the power ofcollective bargaining is diminishing, social workers, similar to other professionals,have to rely on individual merits and abilities to establish their influence withinagencies. With the manageralisation of social welfare, social workers would beoverloaded with managerial responsibilities, possibly at the expense of servicequality. Career advancement is more linked to the possession of managementskills and capacity rather than professional skills. Taken together, these managerialchanges would instill tensions and erode the traditional mutual trust relationshipbetween social workers and their employers.

One of the inevitable consequences of welfare reforms is shifting the powerbalance away from NGOs toward the government. The government is the onlypurchaser available while NGOs have to compete with one another as providers.As further expansion of welfare services would depend on competitive bidding,NGOs would naturally think that their autonomy and advocacy role would befurther curtailed. In fact, advocacy activities of NGOs have been limited. Theyhave been more vocal in defending their own service interests than in advocatingthe rights and benefits of their service users.

With the introduction of competition into the welfare sector, NGOs have tocompete with one another for public image, resources, service users and capablestaff. NGO administrators are expected to become more entrepreneurial andbusiness-like. They have to equip themselves with more sophisticated management

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skills in financial and personnel management, marketing services, lobbying forsupport, contract writing and public relations. Fortunately, the private sector’sinterest in the delivery of welfare service, except in residential care, is stilllimited. With growing competition, quality and performance of NGOs will becomediversified and varied rather than uniform. Coordination and collaboration betweenNGOs would become more difficult. Under market competition, there will bewinners and losers. Progressive and adaptive NGOs would thrive and outperformothers, while those poorly managed and inefficient NGOs may have to closedown or merge with others.

Government-led reforms apparently focused more on NGOs rather than SWDitself. With no sign of privatising the existing services, SWD would remain asignificant service provider. But NGO reforms inevitably have to re-shape theboundaries, responsibilities and structure of SWD. According to market principle,SWD has to eventually contract out its existing services to NGOs, and its traditionalrole as a major service provider should decline. Meanwhile, its roles inpolicymaking, need assessment, service planning, performance monitoring andprogramme evaluation have to be strengthened. Perhaps, the next target of welfarereform should focus on SWD itself.

So far, the impact of managerialism on service users has been indirect andmodest. Facing the threat of more stringent service eligibility and possible loweringof service quality, their opportunity to participate in service decisions and makeservice choices is still restricted. Different from customers in the commercialsector, they have neither the power to bargain over price and service quality northe chance of switching their purchase. It is in fact the government, as the servicepurchaser, has the choice of providers, not the users.

Under the present climate of uncertainty and insecurity in the midst of market-driven changes, the relationship between the SWD and NGOs, and between NGOadministrators and social workers become inevitably tense and conflict-ridden.NGO administrators and social workers are anxious about what will happen next,and unsure about how to cope with the recent changes. In effect, the climateposes a profound threat to the morale of the welfare staff. A strong sense ofinsecurity, resentment and anxiety among welfare staff including administratorshas buttressed. To be sure, quality improvements cannot take place under aclimate of mutual suspicions and tensions. Under this climate, qualityimprovements would simply mean the rigid application of rules and procedures,where professional accountability would be replaced by managerial accountability.To be effective, NGOs have to re-examine their management structure and makelong-term strategic plan. More importantly, they have to sustain the mutual trustamong NGOs and between administrators and social workers.

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The appearance of managerialism in Hong Kong is only a recent phenomenon,it is too early to conclude what are the impacts on the welfare sector in the short-term and in the long-term. Yet, based on the international experiences, there willbe invariably no clear-cut and decisive answer to the question whethermanagerialism would empower NGOs by turning them into entrepreneurialenterprises producing quality and innovative services, or make irreparable damagesto the welfare sector as a whole. The primary intention of the governmentunderpinning the reforms is to contain the ever-increasing welfare costs. Eventhough there may be apparent efficiency savings, it would be achieved at theexpense of declining staff morale, growing tension between NGOs and thegovernment, and possible deterioration of service quality. First and foremost,social workers have to demonstrate that there is a limit in directly applying theprofit-making business culture in a need-oriented welfare sector. Finally, effectivereforms have to be gradual, maintaining basic consensus, mutual trust and stability.

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