International Journal of Public Sector Management

New modes of service delivery in the public sector – Commercialising government

services
Kerry Brown, Neal Ryan, Rachel Parker,
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IJPSM
13,3
206
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The International Journal of Public
Sector Management,
Vol. 13 No. 3, 2000, pp. 206-221.
# MCB University Press, 0951-3558
The current issue and full text archive of this journal is available at
http://www.emerald-library.com
New modes of service delivery
in the public sector
Commercialising government services
Kerry Brown and Neal Ryan
Queensland University of Technology, Brisbane, Australia, and
Rachel Parker
University of Queensland, Brisbane, Australia
Keywords Public sector, Market orientation, Services marketing, Service systems
Abstract There is an international trend to contestability and marketisation in the delivery of
public services. The underlying foundation of these trends is that competition results in improved
outcomes such as greater efficiency, higher quality of service, a clearer focus on customers and
better value for money. This paper examines an approach to the reform agenda that avoids the
more dramatic responses of privatisation, corporatisation and large-scale contracting out while
still focusing on achieving commercial principles in public sector service delivery.
Commercialisation, in this context, provides a way of developing commercial arrangements yet
maintains service delivery within the public sector and offers the possibility of retaining important
social objectives.
Introduction
This paper examines the problems and possibilities of reorienting public sector
service provision from a traditional administrative approach to delivering
services on a commercial or quasi-commercial basis. The focus of this paper is
the implementation of a programme of commercialisation in public sector
service delivery. The effect of adopting commercial principles in relation to
internal agency operations and outcomes is mapped through case studies of
public sector agencies. This paper presents and analyses four case studies of
public sector commercialisation. These cases comprise one local government
and three Queensland state public sector agencies and include Brisbane
Transport, responsible for operating bus and ferry services throughout
Brisbane city, Queensland Property Management (QPM), and two cases within
the Department of Natural Resources, namely, Valuations and State Water
Projects.
The way in which agencies have grappled with the notion of
commercialisation is investigated and analysed. Evidence from these case
studies indicates that aspects of ``in-house'' commercialisation may present a
compelling alternative to adopting the more dramatic approach of privatisation
or large scale contracting out of government services. In the case studies,
commercialisation has been implemented in a partial, incremental manner.
This approach has opened the opportunity to develop new modes of public
sector operation, but also provided for retention and consolidation of positive
aspects of the traditional model. While commercialisation usually implies a
 focus on greater cost efficiency, this paper argues that its success will Service delivery
ultimately depend on the capacity of process and structure design to include a in the public
range of important public service values. sector
Commercialisation
At a national level, the Australian Public Service (APS) has driven the
commercialisation agenda since the 1980s (Dixon and Kouzmin, 1994; Mellors, 207
1993). Commercialisation is defined as a ``process where markets are
established for selected public sector goods and services in order to increase
competitive pressures on suppliers'' (Australian MAB-MIAC, 1992a, p. 1).
Introducing commercial principles into the public sector was argued to have
stemmed from a desire to ``enhance the revenue base for government'' (Wanna
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et al., 1992, p. 70). In this way, commercialisation may be concerned both with
delivering services on a commercial basis to increase efficiency through
competitive mechanisms and with reorienting budgetary processes and
funding regimes to a more commercial focus to achieve cost savings.
However, in arguing for utilising ``market'' principles in the public sector,
there appears to be an assumption that the market is an efficient and
appropriate allocative mechanism for distributing public sector goods and
services. Wanna et al. (1992, p. 71) argue that government services and
resources have become ``commodified and merchandised'' in order to develop a
notion of market price for providing products and services. In effect, there is an
assumption that a ``price'' can be fixed for all public goods and services. The
notion of a ``public good'' and the ``public interest'' remains problematic in
adopting market solutions to service provision (Mellors, 1993; Australian
MAB-MIAC, 1992b). There is some recognition of the difficulty in tying service
delivery entirely to market principles with the retention of community service
obligations (CSO) although the process of identifying and calculating CSOs is
argued to be ill-defined and imprecise (Martin, 1996).
Overall, using a strategy of commercialisation is expected to develop private
sector management techniques and processes to create a more efficient and
effective public sector (Braddon and Foster, 1996). The term commercialisation
is argued to cover a wide range of commercial transactions from the adoption
of user-pays though to privatisation of government assets (Spicer et al., 1996).
In other work, commercialisation is conceptualised as establishing a
framework falling between the traditional notion of public service and
principles of contestability (Johnson, 1995; Moss, 1997). These broad
conceptualisations of commercialisation obscure particular emphasis on
measures to recover full costs of services. In this paper, the focus is on public
sector agencies that have introduced processes to identify the full cost price of
delivering public services. Under a regime of commercialisation, mechanisms
are instituted enabling agencies to determine the true costs of services and
implementing user-pays to reclaim those costs (O'Fairchealaigh et al., 1999,
p. 67). In this way, commercialisation signals a shift in orientation from relying
 IJPSM predominantly on annual funding allocations from central funding bodies to
13,3 determining and recovering the actual cost of programmes and service
delivery.
However, there is much debate about the ethics of particular forms of
commercialisation and concerns are raised in relation to the appropriate forms
of accountability in the new commercial approach and the applicability of
208 commercial principles in areas of service provision that are not clearly
contestable (Johnson, 1995; Moss, 1997). Furthermore, Wanna et al. (1992, p. 74)
argue that commercialisation of public sector operations has the potential to
create problems of accountability where the existence of alternative resourcing
arrangements divide attention and policy decisions between satisfying
government and paying customers.
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An evaluation of public sector reforms in the Australian public service cited

enhanced client focus, improved responsiveness of suppliers and increased
flexibility in relation to service provision as positive outcomes of
commercialisation programs (Australian MAB-MIAC, 1992b, p. 274). The
report also identified problems of contradictory policy prescriptions to protect
the public interest at the same time as pursuing commercial principles
(Australian MAB-MIAC, 1992b, p. 274). Another early study of
commercialisation found that positive aspects included improved staff
performance and client satisfaction, better accountability and transparency
regarding financial management and service delivery and a clearer notion of
costs and return on assets (Mellors, 1993, p. 334). Several problem areas were
also identified in the study. It found that commercial pressures were managed
by downsizing, trading results were poor, conflicts of interest arose when
agencies undertook contract oversight and were also commercial bidders and,
there was a tension between the need for public disclosure of information and
the commercial sensitivity of business transaction data (Mellors, 1993, p. 334).
There was also concern that commercialisation might compromise ethical
standards and reduce public interest considerations (Mellors, 1993, p. 335).
Two widely utilised and familiar responses to the public sector reform agenda
have been privatisation, which entails shifting ownership to the private sector
through share transactions, and corporatisation, involving retention of state
ownership but introducing new arrangements to allow operation as a private
sector enterprise (Wanna et al., 1992, p. 5). In this paper, commercialisation of
government activities involves adopting a narrower range of commercial
principles. Accordingly attention will be placed on those activities which signal
the introduction of commercial principles, implementing ``business'' rules,
commercial forms of accountability and public sector organisational forms
conducive to competitive activity.
While commercialisation implies that government can operate as a business,
commercialised entities remaining inside the public service are inherently
political (Dixon and Kouzmin, 1994). The same mix of social, economic and
legal issues influencing the broader political environment will dominate
commercial performance. It is contended that the commercial performance of
 public sector agencies will be tempered inevitably by these broader Service delivery
considerations. Consequently, it may not be appropriate to assess public sector in the public
organisations primarily by standard business criteria. sector
While there remain concerns about the effect of commercialisation on
accountability, client service and ethical considerations (Johnson, 1995; Moss,
1997), evidence from the case studies indicates that adopting some limited
forms of commercial principles may improve service delivery. Some of the 209
important characteristics of successful commercialisation of public sector
services are identified through analysis of the case study findings. These
characteristics include taking account of the social and political influences
impacting on the commercialisation process; incorporating the demands of
social and political influences in the evaluation of the success or failure of
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commercialisation. It is argued that issues such as social justice and equitable

access remain central to the commercialisation process.
It is contended that adopting appropriate human resource management
principles encouraging staff to participate in the change process also produces
successful transitional arrangements. Commercialisation might also be
considered to be an instrument of change management. Contrary to minimalist
approaches to public sector management which emphasise reducing the scale
and scope of public service, commercialisation presents cases where expansion
of the public service is justified. In light of the evidence from the case studies,
strategies for possible business expansion could also be considered.
Commercialisation has been used in the case study agencies as a
management technique to accomplish organisational change and gain
improvements in productivity. New forms of service delivery offer the prospect
of enhancing industry capacity and improving client services. A narrow focus
on cost reduction in service delivery may result in losing important social
justice considerations and value added processes which enhance the overall
competitive outlook of the public sector.

Methodology
Yin (1994, p. 40) contends that the case study methodology serves to engage
with contemporary occurrences to develop empirical inquiry in real life
contexts. In terms of utility, case studies are argued to be a powerful tool for
studying processes within organisations (Gummesson, 1991, p. 75). Australian
case examples are utilised in this study. Three of the case studies comprise
agencies within the Queensland state public sector and the fourth case study is
part of a local government authority in Queensland, the Brisbane City Council.
Case studies were chosen in terms of those public sector agencies that
adopted commercialisation as a vehicle for reform. The agencies were then
investigated to ascertain the extent to which commercial principles had been
implemented and whether the process had been implemented successfully.
Qualitative data were gathered from interviews conducted with 26 managers,
including CEOs, within each agency. Interviews were undertaken using a
standard set of questions although open-ended questions allowed responses
 IJPSM that explored issues more widely. Documentation including public and private
13,3 reports was used to supplement information gathered through the interview
process. Agency comparisons provided cross-agency data to determine
whether patterns and linkages could be drawn between the cases (Gummesson,
1991; Bryman, 1989).
The case study agencies were investigated to determine the key drivers for
210 reform, both in terms of internal and external influences on agencies, the
political issues arising from implementing new forms of public management,
and the human resource implications of changes to the management of the
public sector. Another locus of attention in the case studies was to ascertain
whether industry capacity had improved as a result of adopting a more
commercial focus to public sector operation. Investigating these different
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aspects establish a wider set of concerns about performance and quality of

service delivery under a regime of commercialisation rather than a narrow
emphasis on costs and cost reduction.

Commercialisation in the Queensland public sector

In general, the response of the Queensland government has been to support the
adoption of commercial principles as a framework for public sector reform but
in effect, restrictions on the use of mechanisms such as downsizing, large-scale
contracting out and privatisation have prevented these more extreme measures
being implemented. Commercialisation might be viewed as a compromise
between a traditional style of public administration and marketisation in the
form of privatisation, contracting-out and contestability. In Queensland,
commercialisation and purchaser-provider split were favoured as mechanisms
which provided some of the efficiencies associated with marketisation, yet did
not result in large scale downsizing and redundancies associated with other
``market'' modes of delivery.
Thus, the Queensland government has only adopted limited forms of
contracting out, purchaser-provider split, commercialisation and
corporatisation (Queensland Commission of Audit, 1996, p. 10; Queensland
Treasury, 1997a, p. 8). These instruments represented a compromise between
the main agencies responsible for public sector management. The Commission
of Audit report (1996) for Treasury recommended a wide scope for private
engagement in public sector service delivery including large scale contracting
out, selling public assets, a high level of private sector involvement in
providing public infrastructure and greater contestability for private providers
to deliver government services.
However, the Office of the Public Service (OPS) cautioned agencies against
embracing competitive approaches to public management. With regard to
private provision of public services there was a commitment to restrict
outsourcing to situations
. . . where the public sector workforce cannot attain an acceptable level of service delivery and
value for money (OPS, 1997, p. 3).
 This approach signalled a clear preference for government provision of Service delivery
services. Indeed, agencies were directed to achieve ``in-house'' best practice in the public
capabilities before considering private provision of services. sector
The strongest justifications for introducing private market-oriented delivery
systems are usually based on the need to reduce government expenditure,
improve cost efficiency or provide more accountable and transparent delivery
systems (Stewart and Walsh, 1992). In relation to the first two issues, 211
Queensland has experienced a strong budget position and has been noted as
delivering its public services cost-effectively (Queensland Audit Commission,
1996).
The range of new delivery modes applied to the Queensland public
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service was limited by important political and social constraints.

Contracting-out and privatisation were usually associated with downsizing
government agencies, particularly in regional areas as services are
consolidated and rationalised. The Queensland government has tended to
avoid implementing policies decreasing levels of public sector employment,
especially in regional areas, because of the powerful political influence of
these regions. Indeed, employment security in regional areas was a strong
influence on the Office of Public Service's objection to privatisation and
contracting-out (OPS, 1997).
It was mostly external factors such as following international trends in
public management (Queensland Commission of Audit, 1996), or conforming to
national policies for competitive delivery of services (National Competition
Policy) (COAG, 1995) which moved the state towards market modes of service
delivery. Thus, Queensland public sector reform attempted to balance internal
political pressures to maintain public sector employment and cross-
subsidisation of services and external demands for competitive modes of
service delivery. One such compromise policy instrument was commercialisation
which was claimed by Queensland Treasury to be ``. . . a means of improving the
quality and performance of public sector management . . . '' (1994, p. 7). In some
ways, commercialisation appears to have also balanced social and political
objectives with economic and efficiency objectives.
The common themes of analysis across the case studies are examined in the
following sections. Policy and process movements to new modes of service
delivery have been incremental rather than dramatic in the four case studies
and this process has shaped the reform agenda in several ways. Agencies have
been able to consolidate gains over time and have had more adequate lead time
to achieve internal efficiencies and second, longer time frames for reform have
meant that staff reductions have not been driven by dramatic forced
redundancies. Also, by changing to commercial principles on an incremental
basis, procedural and commercial reforms undertaken within the public sector
have the opportunity to be tested prior to opening competition with the private
sector.
 IJPSM Case study agencies
13,3 The reform process in Queensland has been much slower than in other
jurisdictions. This approach has been a result of factors such as the solid
financial position of the government, the strong political influence of regional
areas, the tenuous political mandate of the Queensland government and, in the
case of Brisbane Transport, the strong political mandate of the Soorley
212 Administration (Ryan et al., 1998).
Brisbane Transport (BT) is a case study of partial commercialisation of a
public service (Consultancy Bureau, 1997, p. ii). The three main reforms
affecting Brisbane Transport were setting up BT as a commercial business unit
within the Brisbane City Council (BCC), clarifying social policy objectives
through greater transparency of community service obligations and adopting a
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goal of achieving competitive neutrality in comparison with private providers

(Consultancy Bureau, 1997). Brisbane Transport's reform process comprised
not only commercial considerations, but also a series of social and non-market
aspects in relation to equity and access to public transport and environmental
protection (Consultancy Bureau, 1997).
The core business of Queensland Property Management (QPM) is to furnish
a range of property services such as contract management, project
management, leasing services for government agencies and consultancy
services. Responsibilities include office leases, office fit-outs, cleaning services,
building management, property disposals and acquisitions (Department of
Public Works and Housing, 1997). Introducing commercial principles has
meant a shift from being a government tenant and owner advocate to a
strategic business partner with government-affiliated clients (QPM, 1997). This
process has entailed a change from adopting a role of ``rent collector'' to that of
government facilities manager. The approach adopted by QPM was to
implement efficiencies to provide a commercial service, but also to add value by
providing specialised services for government clients.
The Department of Natural Resources (DNR) offers two separate case
studies focusing on commercialisation as a response to the public sector reform
agenda. The first case concerns water supply services and the second case
relates to land valuation services. State Water Projects (SWP) was established
as a commercial business unit supplying commercial water services and
supervising water resources. State Water Projects' core activities centre on
water management and provision in the areas of bulk water in the power
generation industry, agricultural water and urban bulk water (SWP, 1998).
Valuations moved to a model of partial commercialisation in the provision of
land and asset valuation services in which the commercial basis for operations
was effectively ``quarantined'' (DNR, 1997). Introducing commercial principles
into Valuations comprised two distinct operational areas. First, in relation to
inputs, Valuations set up as a competitive service provider and second,
implemented a ``user pays'' approach to supplying government services (DNR,
1997).
 Strategies for introducing a more commercial focus to agency operations Service delivery
appear to differ according to the nature of the case study agencies in relation to in the public
issues such as responsiveness to change, key drivers, corporate culture and sector
leadership. The case studies indicate that agencies have tended to follow the
``minimalist'' model advocated by the Office of the Public Service and
maintained ``in-house'' capabilities for service provision, with an emphasis on
user-pays for determining full cost pricing, rather than engaging in large-scale 213
contracting out or privatisation.

Drivers of reform
In all cases there have been external pressures to adopt alternative forms of
service delivery that involve a greater emphasis on competition and
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performance according to commercial principles. Queensland Treasury has

been one of the most significant drivers of public sector reform in Queensland
(Queensland Treasury, 1994, 1997b). The Queensland Commission of Audit
also attempted to drive the agenda for change by recommending the
introduction of a high level of commercial activity and subjecting public sector
operations to ``the constant stimulus of competition'' (1996a). However, the
Commission was not able to influence implementation of the more extreme
commercial policy prescriptions of significant privatisation of government
activities. The Office of the Public Service shaped the reform agenda by
moderating the embrace of a high level of commercialisation in agencies (OPS,
1997).
The case study agencies indicate that some services such as bus transport
and property management had commercial suppliers ready to compete in the
newly established marketplace, while other areas such as water supply and
valuations were more difficult to organise entirely on a commercial basis. In
allowing a commercial orientation to be introduced on an incremental basis, a
commercially competitive ``in-house'' capacity could be built up and reduce
problems of dissipation of expertise, dislocation of internal labour markets and
disruption to service delivery. In-house expertise could then be tested in the
marketplace and if this was found to be uncompetitive, private suppliers could
take over service provision or public interest considerations might warrant
continued public involvement.
Interviewees noted that while Queensland Property Management (QPM)
personnel possessed strong technical skills, there was little interest initially in
moving towards a commercial focus, as this orientation required acquisition of
new management skills including marketing, strategic management and
business planning. However, QPM's approach was driven by a July 1995
decision in which government agencies were no longer locked into
arrangements for QPM to maintain sole responsibility for government leasing
and property services (QPM, 1997). This decision effectively compelled QPM to
adopt principles of commercialisation in order to compete with potential
private sector providers.
 IJPSM Both Valuations and SWP within DNR are constrained by statutory
13,3 obligations limiting the extent to which different approaches to reform may be
applied flexibly.
A review of Valuations undertaken with a view to enhance service delivery
of valuations recommended that the government maintain a regulatory role but
that commercialisation, corporatisation or outsourcing be considered as
214 options for service delivery (DNR, 1996). An impetus for reform in Valuations
arose from a Cabinet submission exploring operating alternatives. Partial
commercialisation, which drew all aspects of the state-wide valuation service
together, was expected to ensure greater consistency of service to clients (DNR,
1996). An internal driver for reform compelling the change to a commercial
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focus centred on the fixed budgetary regime of Valuations. Business activity in

land valuation experiences a growth of 2 per cent each year and centrally-
allocated operating funds have declined in real terms. This financial position
has meant that strategic change and innovative ways of operating have been
inevitable in order to cope with expanding business activities and a fixed
budgetary position.
For State Water Projects, a major external driver for reform was National
Competition Policy with its imposition of funding arrangements tied to
implementing commercial reforms (Council of Australian Governments
(COAG), 1995). Prior to NCP, a Working Group on Water Resource Policy was
formed to investigate water pricing and policy on a national basis (COAG,
1995). The recommendations of the Working Group report centred on `` . . . the
efficient and sustainable reform of the water industry'' through an ecologically
sustainable development plan, including integrated catchment management
and, importantly, developing a pricing mechanism to reflect the true costs of
water provision (Neale, 1994). Thus the key driver to reform shifted from
developing a framework which emphasised the development of a national
response to water policy and management issues to an approach focusing on
contestability and creating a market relationship for water supply and
management. Internally, devising a means of developing a better
understanding of the costs of water provision was an important consideration
in shifting to a program of commercialisation.

Human resource issues

The Queensland public sector has not embarked on the extensive program of
privatisation and contracting out with the resultant reductions in employment
(Queensland Audit Commission, 1996) that has occurred in other jurisdictions
such as New Zealand (Boston et al., 1996). However, static or shrinking budgets
and increased workloads caused agencies to rethink their employment
strategies. Doogan (1997) argues that commercialisation of government
services results in a fragmented labour market with attendant problems of lack
of morale and loss of expertise. However, the case study agencies have been
 mostly successful in retaining staff and, where staff reductions have been Service delivery
necessary, in managing the process through staff turnover and voluntary in the public
redundancies. sector
Human resource management emerged as the possibly the greatest area of
concern for QPM. There appeared to be a consistent concern about the capacity
of QPM management to deliver ``client services'' as opposed to ``products''. One
problematic human resource issue for QPM was uncertainty within its 215
workforce. The organisation reduced its workforce from around 700 employees
in the early 1990s to about 550 full-time employees in 1998. In addition,
interviewees reported that QPM has required a different set of skills as human
resource management has changed from focusing on employee advocacy to
business management.
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Changes within BT resulted in staff reductions of around 300 (Brisbane

Transport, 1998b). However, Brisbane Transport was sensitive to the economic
vulnerability of employees such as bus drivers. As part of the reform process,
workplace practices and conditions of head office staff, engineers and middle
management were reviewed before negotiating with bus drivers. BT provides a
high standard of conditions in relation to eating facilities, drinking water,
heating and cooling, rest breaks and ergonomic design of vehicles. In addition,
there is a clear commitment to staff within BT, beginning with the
accreditation of drivers and a certificate program in transport management, to
a work and family strategy, performance measurement and career development
(Brisbane City Council, 1998, p. 10).
Commercialisation in Valuations was viewed as a means of protecting
valuers from direct, open competition for their jobs and as a mechanism to
maintain employment security. The process was also perceived as a way of
restoring the professional status of valuers. Previous attempts at multiskilling
and regionalising were not considered favourably as valuers considered these
changes diminished their professional standing (DNR, 1996). In SWP, the
general approach to reform was to increase business rather than reduce the
permanent workforce. The organisation made a large investment in retraining
and reskilling as part of the commercialisation process. A difficulty, however,
has been the imperative from NCP to involve rural user groups in local area
management of water resources (COAG, 1995) as these groups are not
necessarily skilled in developing structures and policies for managing water
utilisation.
Regions have been proactive in developing innovative ways of managing
workloads in tight budgetary circumstances. There has been an emphasis on
overcoming the ``tyranny of distance'' by greater use of air travel in both SWP
and Valuations within the Department of Natural Resources (DNR) and using
technology to access mapping services in Valuations. Brisbane Transport and
QPM embarked on an ambitious program to upskill the workforce. DNR and
QPM have maintained a deliberate program of retaining in-house expertise
rather than outsourcing specialist functions.
 IJPSM Most agencies attempted to implement new management practices by giving
13,3 appropriate attention to workforce considerations. These cases provide some
insight into the means by which public service jobs might be protected through
education and training and innovative use of information technology. However,
while these measures have protected jobs in the short term, in the longer term,
public sector employees may be at risk of losing jobs if agencies are unable to
216 improve commercial outcomes. Broader government policy such as
employment security, the maintenance of regional employment levels, and
budgetary constraints limit the capacity of agencies to compete with the
private sector. There has been a deliberate policy of implementing new
processes incrementally and improvement in commercially oriented delivery of
services has been gradual.
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Industry capacity
Industry capacity is concerned with the extent to which the delivery of public
services assists industrial development and the capacity of private or public
agencies to provide services. An area of debate is the extent to which industrial
development is best served by private or public provision. In all the case study
agencies, there appeared be some level of private capacity to provide services.
In this way, the threat of privatisation, or high levels of contracting-out was an
important factor in achieving productivity gains in Brisbane Transport, QPM
and Valuations.
Another area of debate is the capacity of governments to deliver services.
This issue relates to the expertise, knowledge and infrastructure within
government to furnish high quality services. A ``government capacity'' has been
a central argument used to justify public ownership and delivery in QPM,
Valuations and Brisbane Transport. In the cases of Brisbane Transport and
Valuations there appears to be a competent ``in-house'' capacity to deliver high
quality public services.
A third area relates to the justification for maintaining service delivery
capabilities. In the case of State Water Projects there is a strong social justice
and public benefit justification for maintaining a public capacity to manage
and supply water services. Water supply operates in a monopoly market,
suggesting that there are issues of access and monopoly rents in relation to
private provision. In the cases of Brisbane Transport, QPM and Valuations
there are more complex justifications used to maintain a public capacity to
deliver services which might easily be contracted out.
In all of these cases, the political capacity to control service delivery was an
important issue. The services provided by Brisbane Transport were viewed as
important components of economic and social infrastructure. Government
control of QPM's services provided public servants and politicians with
stronger control over government property management. Maintaining a public
monopoly in Valuations was a means of delivering services to the non-
profitable regions. The control and delivery of the state's water resources was
considered crucial to retain as an area of government activity.
 Commercialisation moves service delivery towards identifiable products and Service delivery
should provide a clearer focus on the markets for these services. A future issue in the public
for agencies is the extent to which the public sector may enter into export or sector
already-established private markets.

Outcomes
The case studies provide some insight into common issues and debates across 217
agencies in relation to changing modes of service delivery. However,
introducing new forms of service delivery in these case study agencies has
translated into partial change rather than full implementation of a different
model.
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BT achieved good results in relation to client services. In 1997, surveys

indicated that 76 per cent of bus passengers and 94 per cent of ferry passengers
were satisfied with BT services, while 89 per cent of customers rated buses as
value for money and 94 per cent rated ferries as value for money (Brisbane
Transport, 1998a, p. 4; Brisbane Transport, 1989b, p. 1). Annual bus patronage
increased by about 12 per cent since 1993 while ferry patronage has increased
at about 20 per cent per annum since 1993 (Brisbane Transport, 1998a, p. 3).
This increase in patronage has assisted BT in achieving an increase in revenue
per kilometre from $1.59 in 1995/6 to $1.75 in 1997/8, which is similar to the
revenue achieved by private operators (Brisbane Transport, 1998a).
However, the delivery of a cost-effective transport service was not the sole
organisational objective, as meeting community needs, achieving social
objectives and developing responsive services were also important goals for
BT (Consultancy Bureau, 1997). In this way, BT achieved some successes in
partially commercialising its operations, but also retained a focus on policy
objectives beyond economic efficiency.
In interviews conducted for the QPM Marketing Plan (Colquhoun and
Associates, 1996), some clients indicated that QPM's service had improved,
particularly in the area of account management, speed of service delivery and
response to client concerns. Some of QPM's services such as cleaning, office fit-
outs and security appear to be cheaper if outsourced to the private sector.
However, the total costs of outsourcing are not always transparent. In the case
of cleaning and security, QPM attempted to ``add value'' to services in terms of
quality, value for money, contract negotiations and monitoring contracts.
Clients have tended to remain with QPM because of a range of non-commercial
reasons including public service networks and loyalties, the security associated
with dealing with another public sector agency and the ability to exert greater
control over service delivery. QPM has appeared to exceed targets identified in
its business plan (Department of Public Works and Housing, 1997, p. 38).
In order to meet its objective of putting water provision on a more
commercial basis, the DNR committed to a program of competitive pricing for
water supply and services. However, there is a difficulty in calculating a
 IJPSM commercial price which includes consideration of capital costs, operating costs
13,3 of administration and maintenance and refurbishment costs as well as the fact
that water constitutes a ``natural monopoly'' (DNR, 1996, p. 6).
Outcomes in Valuations are expected to focus on increased client
satisfaction, high quality service and greater awareness of commercial
practices (DNR, 1997, p. 1). Commercialisation was chosen as the vehicle for
218 reform because of its capacity to determine areas of accountability,
responsibility and control, define boundaries of operation, distinguish
functional and client relationships, and provide appropriate performance
criteria (DNR, 1997, p. 2). The commercialisation process is an ongoing project
being undertaken over a two year implementation schedule (1998-2000) (DNR,
1997).
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In relation to issues of accountability, there are both positive and negative

outcomes. On the positive side, agencies reported that commercialisation
required calculating the real costs of purchasing and delivering services.
Across all cases studies managers reported that a benefit of commercialisation
was to achieve greater transparency in relation to costs of services, although
negative aspects reported in the case studies were that lines of accountability
became confused as chains of accountability were disguised and responsibility
shifted between agents.
As a consequence of the incremental change, productivity gains have been
mostly modest rather than significant. In the case of QPM, government
agencies accepted higher charges in return for a higher level of control over
service delivery and a higher level of quality in services. QPM and Valuations
are agencies in which commercialisation forced the organisations to give
greater attention to clients.

Conclusion
These case studies suggest that it is possible to achieve improved outcomes in
terms of efficiency, client focus, transparency and accountability without
adopting the more extreme alternatives of privatisation and corporatisation or
by contracting out large sections of an organisation's activities.
Some case study agencies have introduced reforms with a particular focus
on quality of service delivery. QPM developed a range of high quality, value-
added services in security, cleaning and property management. Valuations
ensured the professional status of valuers was protected and in so doing, added
value to the land valuation service. In BT, there was some attention given to
developing services responsive to community needs in the context of social
policy objectives. In many ways, BT is a case study of successful public
management rather than a model of successful commercialisation.
In the case of Brisbane Transport, the threat of privatising Brisbane's bus
service was undeniable, as private bus companies could have easily taken over
existing bus routes. Valuations gave their valuers time to demonstrate their
capacity to compete with the private sector; however, the competitive provision
of valuation services was the intended outcome of the commercial process.
 While retaining regulatory control of water resources and water service Service delivery
delivery, State Water Projects has begun to experiment with private provision in the public
of infrastructure through the local area management schemes. The services sector
provided by QPM are under constant threat of being outsourced. The threat of
contestability has been an important influence in the willingness of agencies to
accept some degree of change.
A feature of the change to a commercial environment in BT was the 219
considerable attention given to ``bottom up'' change processes incorporating
employees, consumers and other stakeholders. QPM is a case of a government
agency that is gradually changing its culture from a public provider of services
to managers of government business and implementers of policy. It appears to
have been successful in developing a business strategy that emphasises its
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capacity to understand the needs of public service organisations and the public
service environment yet adopt a more commercial and ``business'' orientation.
Indeed, QPM has increased substantially funds administered on behalf of its
clients since the early 1990s, although its net profit remains at around
$A1million (QPM, 1997).
Internal funding considerations have been paramount in the trend towards
commercialisation. While the Queensland public sector has a sound budgetary
position, funding and cost considerations still appear to be significant drivers
of the reform process. It may be the case that future incentives might relate to
objectives such as public benefit, civil society or improved standards of living,
rather than focusing solely on financial, bottom line budgetary considerations.
The case study findings highlight the importance of focusing attention on
the quality and the ``public'' nature of services, rather than simply ``bottom-line''
and cost recovery aspects of commercialisation. Thus there is a need to redefine
the meaning of commercialisation to incorporate a wide range of non-profit
outcomes affecting public service agencies.

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