Contracts

The Auditor-General advises agencies to determine the purpose of a funding arrangement, decide if they are getting value for money and assess potential risks.

Treasury has published guidelines for better contracting practices by government agencies involved in funding NGOs.

A contract is the preferred option when government has a strong interest in the reliable delivery of a precisely defined service.Contracts should reflect the needs of the users or recipients of the service, provide accountability for public money and represent value for money.

Funding guidelines that set out clear procedures ensure good practice and fair treatment of funders. A standard contract ensures that key terms and conditions are uniform in all contracts and can save time and money.

NGOs contracted by several government agencies can be faced with a maze of reporting requirements, processes and systems.

Integrated Contracts, a project led by the Ministry of Social Development, is designed to simplify the contracting process and improve the provision of services delivered by social service providers funded by two or more government agencies.

The approach allows services to be integrated, and providers report to government agencies on their complete service delivery, not just the part paid for by each funder. To help funders and providers develop integrated contracts, a step-by-step procedures manual has been created containing the legal documents, templates and guidelines.

During the last decade, NGOs have emphasised the need for government agencies to adopt multi-year funding arrangements. Few NGOs have substantial reserves or sufficiently diverse revenue sources to sustain themselves long term. Strong reliance on a major government funder is common especially in health, social services and sport. Treasury's contracting guidelines make it clear that multi-year arrangements are often appropriate.

The resources here provide more information and guidance on multi-year contracts.

Contracts can provide a unique opportunity to use innovative service redesign and create new funding models to improve service continuity, co-ordination and effectiveness within available resources.

These two case studies illustrate how this can work in reality.

The first examines the funding of palliative care providers in the Bay of Plenty to show how strategic funding through contracting was the key to changing provider behaviour.

The second outlines how an approach was developed to fund and contract services for non-mandated clients and children who had witnessed family violence.

Contracting principles  –  The Ministry of Health bases its contracting practices with NGOs on these principles to ensure value for money, fairness and accountability.

Tendering – Tender documents legally define the service that is being purchased. They must be clear and enforceable. See the lessons drawn from a dispute between Onyx Group Ltd and Auckland City Council.

Pre-contract information helps organisations determine whether they are in tune with the goals of the funder and have the capability to operate within the contractual conditions and available funding. See this example from the Ministry of Youth Development.

National contracts can allow for building the capacity of NGOs to deliver quality services. The Ministry of Social Development’s relationship with the OSCAR Foundation is a good example.

Devolved funding – a ‘hands-off’ approach can sometimes be the best way to achieve results in a funded project. This case study discusses how the Ministry of Health devolved funding to Haura Hokianga and the Whirinaki Maori Committee to restore damaged marae drinking water supplies after floods in 1999.