Until the 1990s, the Department of Veterans' Affairs was a direct health provider through the Repatriation General Hospitals. Today, in response to the challenge of a competitive environment, DVA has evolved to become one of the largest purchaser of health services in the country.

The pressures of competition and changing technologies on government have also seen the department outsource a range of non-core business activities such as information technology. DVA's corporate strategies in this field continue to reflect the Government's broader policy on public sector management and reform. Strategic partnerships and linkages with private and public sector organisations are used in a number of areas.

Contract Advisory Unit (CAU)

The CAU was set up to provide DVA with high-level advice and assistance to National and State office staff and other areas of the portfolio on all aspects of the procurement and contracting function. This includes the provision of appropriate contracting documentation such as tendering and contract management guidelines. The unit includes qualified legal staff who can provide advice or obtain external legal assistance when appropriate. The CAU also provides training, or access to training, for national staff involved in contracting.

Achievements for 1999-2000 include:

• the expansion of internal and external procurement communication networks through the Procurement Discussion Forum, including links with the Department of Finance and Administration's CTC Group, the Office of Asset Sales and IT Outsourcing and the Office for Government Online;
• the revision of the department's standard tender and contract documentation in a plain English style;
• the continued development of departmental procurement policies and procedures; and
• the development and delivery of CTC training courses for departmental staff.

The CAU has been a key participant in major policy and procurement projects including the documentary Australians at War, the World War II nominal roll and private hospital tendering under new veteran partnering arrangements.

Corporate services review

A review team was established early in 2000 to review DVA's corporate services, in line with the Government's decision requiring all agencies to market test corporate services. The objective of the team was to review all corporate services functions to determine the best strategy for improving efficiency and cost effectiveness of each function, including, where appropriate, market testing of functions, and make recommendations to achieve this objective. The review will also consider the appropriateness of corporate services functions.

The review team contracted Acumen Alliance to carry out a full costing of corporate services functions, including all IT and property costs attributable to each function. This process attributed actual costs for 1999-2000, which can be updated in subsequent years for use in any future market testing exercise.

The review team has determined a draft market testing strategy and has developed a communications plan, change management strategy, risk analysis and a probity plan, in preparation for a market testing exercise. Extensive consultation was also carried out to learn from the experience of other agencies that are more advanced in this process. In turn, DVA is now being consulted by other agencies examining this area.

No decision had been made by 30 June 2000 as to the market testing of any corporate service.

The draft market testing strategy takes into account:

• Department of Defence strategic considerations;
• e-commerce solutions that may now be available;
• reviewing the balance between a national approach to business processes and State specific requirements, consistent with increased efficiency; and
• maximising savings from increased efficiency.

Use of consultants

The department engages external consultants to support departmental activities where specialised expertise is not available in-house or an independent assessment or evaluation is required.

Before engaging external consultants the department determines whether the proposed assignment is feasible and essential to the efficient and effective operation of the department and whether use of the consultant will be cost-effective.

Once a need for external consultants is established, the department ensures that the selection process;

• observes government and departmental procurement policies;
• is publicly defensible, promoting fair competition and effective service;
• is based on pre-determined selection criteria; and
• satisfies best value for money.

Market testing occurs through public invitation or approaching a sufficiently representative number of potential consultants.

During 1999-2000, 91 consultants were engaged at a cost of $11.6m. A list of consultants engaged during 1999-2000 is at Appendix C.

Contracted services

DVA spends some $2.7 billion annually on veterans' health care through a variety of arrangements with the Australian health industry. These include contracts with State and Territory governments and standing offers with some 380 private hospitals, day surgery centres and other health providers. The arrangements potentially involve over 40 000 health care providers, including a significant number of individual practitioners. Some 16 million services are paid for annually through the Health Insurance Commission, acting as DVA's paying agent for most health service providers.

In 1999-2000, the Repatriation Commission introduced new veteran partnering arrangements with contracted private hospitals, enabling doctors to refer entitled veterans and war widows/widowers for hospital treatment without prior approval from DVA. By June 2000, veteran partnering had been implemented in Victoria (36 hospitals), Tasmania (five hospitals) and South Australia (eight hospitals). Similar negotiations are under way with hospitals in New South Wales and the ACT and in Queensland for hospitals in non-metropolitan areas. It is estimated that more than $500m was spent Australia-wide on private hospital services for the veteran community over the period.

In addition to the contracting out of health services, a range of administrative and corporate services is currently under contract.

Information technology

The department's mainframe equipment and National Computer Centre were transferred to the Ferntree Computer Corporation in February 1992. During 1996-97, after deciding to extend outsourcing to include desktop services, DVA became the first Commonwealth department to outsource its computing infrastructure. A competitive tendering process resulted in the contract being awarded to IBM Global Services Australia (IBM GSA). Payments to IBM GSA in 1999-2000 were $23.5m. During the year, $6.3m was paid to contract programmers.

Internal audits

After an review of internal auditing in 1998, the department entered into a partnering arrangement with Ernst & Young in June 1999 for the provision of internal review and services. This allows DVA to combine private sector and in-house expertise. Ernst & Young has for some time also provided IT audit services to the department.

The Statistics Needs Analysis Project was undertaken in 1998 to identify requirements for statistical services. As a result it was decided to contract out some aspects of the function. The department entered into an arrangement with the Australian Institute of Health and Welfare in late 1999 to provide the services of an officer to take over management of the team.

Legal services

The Legal Services Group's objectives are to ensure that legislative priorities on veterans' entitlements are undertaken and that departmental programs are developed and administered according to law. It also provides general legal advice to the department. These functions are carried out using a mix of purchased and in-house services. These arrangements have been under review in 2000.

War graves

The Office of Australian War Graves (OAWG) has outsourced the horticultural maintenance of war cemeteries for several decades, particularly in smaller country areas. More recently, the OAWG has moved towards outsourcing civil maintenance of official memorials in general cemeteries. In war cemeteries there is a mix of in-house and contracted services.

Participation of Australian and New Zealand Enterprises

The department is consistent with the Commonwealth Procurement Guidelines in its dealings with Australian and New Zealand enterprises.

Refurbishment of accommodation

National office

The department negotiated new lease terms and conditions for its National office lease at 13 Keltie Street, Woden, ACT following a test of the local market. The new lease commenced on 1 July 1999 for seven years ending on 30 June 2006.

During the negotiation process, the department and the lessor agreed to conduct a refurbishment of the office fit-out and base building services respectively. Following extensive employee consultation, the refurbishment project commenced during March 1999 and was completed during December 1999, at an overall cost of $7.895 million to the department. The fast-tracked project resulted in minimal inconvenience to employees and client service. It also addressed previous inadequacies by taking into account the needs of management and employees as well as trends in information technology and ergonomic issues.

A new lease was negotiated for the NSW State office at its existing site at 280 Elizabeth Street, Surry Hills, after seven properties were considered during market testing. The lease runs from 1 November 1999 to 31 October 2006, with an option to extend for a further three years.

The use of contemporary office furniture and an open plan layout generated space savings that enabled the department to reduce its office space by 8 000 square metres. The project has also created an environment that is more flexible, to meet changing work requirements, and provides improved facilities for counter visits by members of the veteran community. The project was marked by a high level of consultation with staff and the minimal disruption caused to the State office and therefore to services provided to the veteran community.

SA office

Negotiations were completed for an extension of the existing lease over tenancy areas occupied by the South Australian State office in Blackburn House, 199 Grenfell Street, Adelaide, effective from 1 November 1999.

Refurbishment of the DVA tenancy area will be undertaken during 2000-01, including the replacement of carpeting throughout work areas, the painting of all internal walls and the replacement of outdated furnishings and fittings. The major focus will be on enhancing the working environment, including improved service delivery areas.