Author: Ben Ackland

Should we be commissioning internal and external providers in a similar way?

Key points

  • Adopting a more consistent approach to managing relationships with both internal (government) and external (non-government) service providers has the potential to improve outcomes for the people of NSW
  • Many agencies are exploring different approaches to doing this, and to addressing the challenges involved in making it work in practice


Commissioning is often associated with ‘outsourcing’ service provision to non-government providers. However, in most social service systems, government plays a key role as a both a commissioner and a provider of services. This means that commissioners, who are responsible for the way the overall service system delivers outcomes, need to manage relationships with both internal (government) and external (non-government) providers.

In many service systems, the management of internal and external providers differs considerably, which gives rise to a provocative question: should we be commissioning internal providers and external providers in a more similar way?

Differences in relationships with internal and external providers

Where government partners with external providers there is usually clear structural separation between commissioner and provider roles, and contracts usually define the specific responsibilities and risk allocation between each side. 

This is sometimes also true where government is both a commissioner and provider: NSW Health commissions services from Local Health Districts via service agreements, and Training Services NSW commissions services from TAFE NSW via Smart and Skilled contracts. However, in other cases, accountabilities are often not as transparent, and sometimes the same division, team, or even person may play both commissioner and provider roles. The entanglement of roles resembles a noodle soup – all mixed up and difficult to separate. 

An example is caseworker teams that work with children and families in out of home care. The same teams that deliver services to children (provider role) simultaneously manage relationships with non-government providers (commissioner role). This entanglement can cause tension between commissioner and provider accountabilities. Most obviously, there is a matter of prioritisation: spending more time on one role can come at the detriment of the other. More subtly, there can be a tension between the provider’s interests in the outcomes of their particular service, and the commissioner’s interests in the functioning of the entire service system.

Untangling the Noodle Soup?

A more consistent approach to managing relationships with both internal (government) and external (non-government) providers may have a range of benefits including:

  •  A similar “expectation of service” for the clients, regardless of whether they are accessing services from an internal or external provider
  • A more ‘level’ playing field between internal and external providers
  • Clearer accountabilities and risk allocation between commissioner and internal providers, which provides the basis for more rigorous and realistic performance conversations
  •  Increased autonomy for internal providers, within the system vision set by the commissioner

In all commissioning systems it is important that we understand commissioner relationships with both internal and external providers. There are a range of challenges in realising this potential, particularly in contexts where the sort of strong structural separation seen in external partnerships is either not feasible, or not desirable. However, a critical first step is to get clarity on the relative roles of commissioners and providers.

Many NSW government agencies are exploring different approaches to commissioning internal providers, including in collaboration with Commissioning NSW. If you’d like to know more or contribute to these conversations, please don’t hesitate to contact us at