Thriving Kids program: what providers need to know

The DCJ is currently seeking to contract not-for-profit organisations to deliver Thriving Kids services. This aligns with DCJ’s pricing, procuring, contracting and funding human services policy.

There may be limited circumstances in which DCJ engages private providers to deliver specialised or professional services that are not available from not-for-profit organisations.

NGO stands for Non-Governmental Organisation. It is a non-profit, citizen-based group that functions independently of any government. Formed on local, national, or international levels, NGOs serve specific social, environmental, or humanitarian purposes.

NSW DCJ has stated that they will contract using their Agreement for Funding of Services: 

In that Agreement:

‘Personnel’ means officers, employees, volunteers, agents, contractors and subcontractors.

Clause 6.3 deals with subcontracting as follows:

Clause 6.3 Subcontracting

1. In this clause 6.3 ‘subcontract’ includes entering into a joint venture, partnership or agency relationship.
2. You agree not to subcontract the whole or any part of the Services without Our prior written consent except to the extent stated in the Schedule.
3. We may in Our discretion:
   1. approve or not approve the engagement of any subcontractor; and
   2. impose any conditions on Our approval of a subcontractor that We consider appropriate.
4. You agree:
   1. that any subcontracting of any part of the Services by You does not in any way reduce Your responsibility for those Services;
   2. You are liable for any subcontractor’s acts and omissions as if they were Your own;
   3. that any subcontract You enter into with a subcontractor in relation to the Services must be consistent with the Agreement; and
   4. to ensure that all subcontractors comply with the terms of the Agreement as if they were a party to it.
   5. We may at any time require You to immediately cease using any subcontractor on reasonable grounds by notice in writing to You and You agree to comply with any such notice.

Practical differences and implications of common structures referenced in the EOI include:

• identifying the lead contractor;

• subcontracting or brokerage;

• joint ventures;

• consortium arrangements.

In Australia, the Competition and Consumer Act 2010 (CCA) prohibits competitors from colluding. Specifically, Part IV, Division 1, which outlaws cartel conduct and anti-competitive agreements.

A cartel exists when businesses agree to act together instead of competing with each other.

A cartel:

1. is made up of independent businesses;

2. attempts to increase members’ profits while maintaining the illusion of competition;

3. can involve businesses of any size, from small, local businesses to large corporations;

4. can be local, national or international.

Cartel conduct is illegal and is strictly prohibited. It is considered a criminal offence or civil contravention for competitors to agree to fix prices, rig bids, restrict supply, or divide up markets. The laws about cartel conduct are set out in the Competition and Consumer Act 2010 and apply to all corporations in Australia, as well as individuals involved in the conduct.

Cartel activity is when 2 or more competitors agree to:

1. fix prices: when competitors agree on pricing instead of competing against each other;

2. market share: when competitors agree to divide a market between themselves, so they don’t have to compete;

3. control output: when competitors agree to limit the amount or type of goods and services available;

4. rig bid: when suppliers discuss and agree among themselves who should win a tender, and at what price. If the businesses acting together are owned by the same company, this is not a cartel.

The CCA prohibits businesses from engaging in conduct that have the purpose, effect, or likely effect of substantially lessening competition, even if they do not amount to a formal contract.

Contraventions carry severe penalties. Corporations can face fines up to $50 million or three times the total benefit gained, or 30 per cent of their annual turnover. Individuals involved in criminal cartel conduct can face up to 10 years in prison and heavy personal fines.

While collusion and cooperation among competitors are banned, businesses that want to engage in collective bargaining or cooperation can apply for an exemption or authorisation from the ACCC if it can be proven to provide a net public benefit.

Genuine joint ventures are a statutory exception to collusion and cartel prohibitions under the Competition and Consumer Act 2010 (CCA), but only if the arrangement meets strict and specific legal tests to ensure it is not anti-competitive.

A successful joint venture requires clearly aligned objectives, thorough due diligence on partner compatibility, strong leadership, equitable resource allocation, a robust governance structure, supporting employees through change, a well-defined legal agreement and a clearly defined exit strategy.

What to clarify up-front?

• Due diligence;

• structure

• culture;

• roles and responsibilities;

• decision making; 

• governance and clinical oversight;

• insurance;

• reporting; 

• dispute resolution; and

• exit arrangements. 

Business partnerships most commonly fall apart due to incompatible personalities, misaligned expectations, poor financial communication, undefined roles, and unequal contributions or if one partner does not perform.

Common failure points and situations providers should avoid when approached about partnering:

• misalignment of culture and values;

• not being clear on roles and responsibilities;

• lack of financial planning; and

• subcontracting practicalities. 

Providers need to be aware of where the head contractor is liable for subcontractor performance, and the importance of flow-down obligations.

Issues to consider when subcontracting include:

• due diligence;

• services (clear roles and responsibilities, including deliverables);

• risk management (including work health and safety);

• regulatory compliance (including working with children checks);

• alignment with head contract;

• payment terms (cash flow, solvency and liquidity);

• replicating the head contract obligations;

• warranties;

• indemnities and insurance;

• dealing with variations;

• reporting;

• documentation and goodwill ownership and access;

• dispute resolution;

• practical rights (if something goes wrong, including termination and step in);

• restraints upon termination;

• Australian Consumer Law, small business contracts; and

• transition and onboarding.

As outlined in clause 6.3 of the Agreement for Funding of Services – Standard Terms, service providers must not subcontract the whole or any part of the services without prior written consent. The only exception is when subcontracting has been expressly authorised in the contract because it was agreed during the procurement process.

The DCJ has stated in the draft Program Specifications that subcontracting will be limited.

7.2.1 Subcontracting 

In delivering Thriving Kids services, a NGO provider may enter a subcontracting arrangement only when necessary to maintain delivery of contracted services. Subcontracting arrangements must be: 

• Time-limited in nature.
• Approved in accordance with program and contractual requirements.
• Undertaken for the purpose of supporting service delivery while the NGO pursues the development of in-house capability. 

Ongoing reliance on subcontracting as a delivery model is not permitted. 

Use of subcontracting 

Subcontracting is when a service provider uses DCJ funding to pay a third party (an organisation or individual) to fulfil part or all the services that DCJ has contracted the service provider to deliver. The contracted service provider remains responsible for ensuring subcontractors meet all relevant program, governance and compliance requirements. These may include: 

• Where a service provider has a contract with one or more third parties to deliver all or part of the contracted services.
• A fee-for-service arrangement, where a service provider (regularly or from time to time) uses purchase orders to buy services from one or more third parties to deliver all or part of the contracted services. 

If a subcontracting arrangement was disclosed at tender and approved by DCJ, a list of pre-approved subcontracting arrangements and conditions will be listed in the finalised contract. This means that DCJ’s approval has been given for the subcontract arrangement and service providers are not required to request any further approval.

During the term of the contract, service providers may apply for DCJ approval (via their DCJ contract manager) to subcontract. Subcontracting without DCJ’s prior written consent may result in termination of the contract. If approval to subcontract is granted, the service provider will be subject to additional responsibilities and obligations. The contracted provider retains responsibility for oversight, governance and compliance of any subcontracted arrangements.