Understanding the costs of co-commissioning: Early experiences with co-commissioning in Australia

Public services, such as health and other human services, are increasingly being delivered by third-party providers (providers) under contract to public sector organisations (PSOs). While often advantageous to PSOs, this creates a fragmented service context which is difficult for consumers to navigate. Further, providers often deliver services under multiple contracts to multiple funders, with high reporting requirements, high administrative costs, and low operational sustainability. Policymakers have encouraged co-commissioning—where PSOs come together to jointly commission services—to increase the efficiency and effectiveness of outsourcing. This article seeks to understand the costs of co-commissioning in Australia, and consequently the enablers and barriers to co-commissioning. This qualitative study is based on the early experiences of co-commissioning by one of 31 Primary Health Networks (PHNs). Using transaction cost economics (TCE) theory, the study explains how the PHN started co-commissioning services with other PHNs, before co-commissioning with other types of organisations. The PHN also co-commissioned relatively simple activities first, before moving on to more complex services. The insights provided using TCE theory help explain why co-commissioning is initially complicated (and costly), requiring time to understand both the services to be commissioned and the governance requirements of each party involved. While initial transaction costs may be high when co-commissioning, this may reflect organisational learning and capacity development costs - therefore, costs are expected to reduce over time.

Points for practitioners

• Fragmentation in policy and funding also leads to fragmentation of human services and high costs to service providers.
• Co-commissioning is where multiple funders pool funds and strategically commission services together.
• Co-commissioning offers a way to reduce fragmentation and reduce costs to service providers, potentially offering better public value.
• Co-commissioning can initially take time and resources to establish.
• Over time, as organisations learn, the cost of co-commissioning reduces potentially offering benefits to funders, providers, and service users.