modern law review - Wiley Online Library

THE

MODERN LAW REVIEW Volume 68

November 2005

No 6

Citizen Redress in Public Contracting for Human Services PeterVincent-Jonesn This article examines from a regulatory perspective the legal position of citizens in respect of contracted out human services. It argues that the inadequate protection of individual interests and the public interest here is a re£ection of increasingly complex relationships between the state and independent sectors, expressed in the essentially hybrid character of contemporary public service organisation. Accordingly a hybrid reform strategy, rather than one that attempts to extend or develop private or public law in any particular direction, is most likely to be successful in addressing associated legal governance problems. The attainment of improved redress for service recipients, and increased accountability of contractors and other parties engaged in human services networks, requires the careful tailoring of remedies to the conditions prevailing in particular sectors.The goal of responsive law should be to foster qualities of good administration and respect for fundamental public interest values within the whole range of regulated agencies and bodies performing public service functions.

INTRODUCTION

Public contracting for human services is a relatively recent development in most countries. In Britain under New Labour, such services in the health, social care, and education and training sectors are routinely commissioned or brokered by public agencies on behalf of individual citizens to whom they are delivered, rather than provided by the state directly. They di¡er from municipal or ancillary services that are similarly organized on the basis of the purchaser-provider split, such as refuse collection and hospital cleaning, in their aim of modifying behaviour or addressing the welfare needs of disadvantaged populations.1 Typically they are n

Professor of Law, School of Law, University of Leeds.This paper is part of a broader project for which the support of the ESRC is acknowledged: ‘Regulation and Responsibilisation:The New Public Contracting in Socio-Legal Perspective’ (award no R000271186). The paper draws on research undertaken whileVisiting Fellow in the Law Program at the Research School of Social Science (RSSS), Australian National University, during 2003. Earlier versions were presented to the RSSS on 27 March 2003; the Faculty of Law, University of New South Wales, 2 April 2003; the Socio-Legal Studies Annual Conference, Nottingham Trent University, 16 April 2003; and the Faculty of Law, University of Manchester, 14 May 2003. I am grateful to all who contributed at those events, and would in particular like to thank Peter Cane and Terry Daintith, and the anonymous referees of this journal, for detailed comments on previous drafts. 1 R. H. De Hoog and L. M. Salamon,‘Purchase-of-Service Contracting’ in L. M. Salamon (ed),The Tools of Government: A Guide to the New Governance (Oxford: Oxford University Press, 2002), 320. In comparison with routine procurement, the purchaser-provider split involves the agency process of securing another party (organisationally separate from the purchaser or commissioner) to provide goods or services on a competitive basis to a third party.

r The Modern Law Review Limited 2005

(2005) 68(6) MLR 887^924

Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

Citizen Redress in Public Contracting

co-produced through human interaction, are complex and have uncertain outcomes, and are highly labour-intensive. In quasi-market organisation, public agencies choose among an increasing variety of private, non-pro¢t, and public bodies competing for the right to provide the services, which remain funded from general taxation and are free or subsidised at the point of delivery.2 The legal accountability de¢cits accompanying this form of privatisation have received much attention from academics and legal commentators. In public services generally, the regulating capacities of private and administrative law are subject to major challenge. The e¡ect of contractualisation has arguably been to undermine the legal protection of both the public interest in good administration, and the more particular interests of individual citizens directly a¡ected by decisions or the quality of services.3 While the problem is not peculiar to human services, it appears especially acute in this sector due to the frequently vulnerable position of service recipients and the signi¢cant impact on their life chances or living conditions. Accordingly the principal focus of this article is on citizen redress in public contracting for such services.4 The emphasis is on the administrative mechanisms that enable citizens to seek remedies for what they perceive to be poor treatment, mistakes, faults or injustices in their dealings with the whole range of public and independent sector bodies engaged in human services networks.5 The main legal governance issues here concern, ¢rstly, the nature of individual rights and the corresponding duties of contractors to ‘third party’ consumers or citizens with whom there is no contract at private law; and secondly, the nature of the legal relationship between citizens or service recipients on the one hand, and the public agencies performing various contract management functions on their behalf on the other. The argument is developed as follows. The ¢rst section (Human Services ^ Regulation and Organisation) considers various dimensions of the citizen and consumer interest in human services in the context of three distinct modes of provision: direct delivery by a government body; quasi-market organisation involving purchase-of-service contracting; and provision by a private body subject to statutory regulation. It is suggested here that debates on citizen redress should take full account of the shifting organisational foundations of public services, and of the trend towards increasing private sector involvement in their provision. The paper then maps the multiple relationships involved in quasi-market organisation of these services with reference to the concept of ‘contracting regimes’, showing how relations between citizens/consumers and purchasers and 2 J. Le Grand andW. Bartlett (eds), Quasi-markets and Social Policy (Basingstoke: Macmillan,1993) 10; P. Vincent-Jones, ‘The Regulation of Contractualisation in Quasi-Markets for Public Services’ [1999] PL 303. 3 D. Galligan, Due Process and Fair Procedures: A Study of Administrative Procedures (Oxford: Clarendon Press, 1996). 4 For a wider discussion of the regulatory role of the state, for example in regard to rationing and other aspects of demand management, see P.Vincent-Jones,The New Public Contracting: Regulation, Responsiveness, Relationality (forthcoming, OUP). 5 This focus is distinct from the associated concern with the adequacy of citizen redress in relation to the actions or decisions of government departments or agencies ^ see National Audit O⁄ce (NAO),‘Citizen Redress:What Citizens Can Do If Things GoWrongWith Public Services’ (London:The Stationery O⁄ce, 2005).

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providers are structured through government policies linking legal rights and duties with regulatory instruments including competition, corporatisation, exit, choice, and voice. The second section (Legal Debates and Reform Strategies) reviews a variety of reform proposals aimed at rectifying de¢ciencies in the current law governing contracted out human services. Arguments in favour of extending the scope of judicial review, and/or the Human Rights Act 1998, to include the activities of private and independent sector providers are subjected to critical scrutiny, together with private law alternatives entailing reform of the doctrine of privity of contract.Whatever their merits on other grounds, such reforms are considered unlikely by themselves to result in any signi¢cant improvement in citizen redress in the present context. The suggestion instead is that the essentially hybrid character of contemporary public service organisation requires the transcending of the dichotomy of public and private law. Hybrid legal reform arguments based on the revival of traditional common law obligations in respect of essential public services, and on the recognition of underlying common values of fairness and due process in public and private law, are examined in light of the European Commission’s recent White Paper on the regulation of ‘services of general interest’ for the bene¢t of all EU citizens. The ¢nal section (Responsive Regulation and Citizen Redress) argues that even hybrid legal or doctrinal reforms can only be part of the solution to governance problems accompanying contractualisation. The attainment of improved redress for service recipients, and increased accountability of contractors and other parties performing public service functions, requires the careful tailoring of remedies to the conditions prevailing in particular sectors. Regardless of the character of any ultimate legal guarantee, ‘remedial hierarchies’ should be directed at minimising grievances, complaints and disputes, and maximising performance through incentives for the decisions of government and independent sector bodies to be made fairly and properly in the ¢rst instance.The ultimate goal of responsive law should be to foster qualities of good administration and respect for fundamental public interest values within all regulated agencies and bodies engaged in human services networks. Despite some recognition of the advantages of such an approach by the Government in its White Paper on tribunals,6 and the National Audit O⁄ce in its report on citizen redress for government services,7 current reform proposals are regarded as unlikely to further this goal. The section concludes by considering how far the contractual relationship between public agencies and service providers might serve as a basis for more responsive regulation in this area, through the joint involvement of public purchasers, contractors, and citizens and consumers at all stages of the public contracting process from standard-setting to performance management and service delivery.

6 Department for Constitutional A¡airs (DCA), ‘Transforming Public Services: Complaints, Redress and Tribunals’ Cm 6243 (London: HMSO, 2004). 7 n 5 above.


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HUMAN SERVICES ^ REGULATION AND ORGANISATION

It is trite to maintain that members of society may at the same time be both citizens and consumers. The real question is when it is appropriate to view public service relationships in terms of citizenship, and when in terms of consumption.8 Current consumers have an obvious interest in how human services are organized and provided. Individuals who are not presently consumers have an interest as citizens in the conditions under which services are delivered to others. Citizens have a similar interest in services that may be required in future, for example in old age or retirement. Again, individuals may be applying for or intending to receive a service, access to which depends on satisfying eligibility conditions or rationing criteria. In addition to individual interests of consumers and citizens, the public interest in these cases lies in the transparency of decision-making processes and the proper accountability of the various public and private agencies performing public service functions. The state role in public services

In the broadest sense, the ‘public service’ may be equated with the role of government in providing public goods that are both non-excludable and non-rival, such as defence and criminal justice. There are no identi¢able individual consumers of such governmental functions, which are performed by the state for citizens generally. Because the services are not marketable they cannot be charged for directly, so are ¢nanced from general taxation. There is no choice whether to receive the services, other than by in£uencing policy decisions regarding their provision. On the other hand, services that are not public goods may be provided to citizens in a number of ways, with varying degrees of state involvement. In markets for pure private services the relatively limited role of the state is to secure institutional conditions facilitating exchange between providers and purchasing consumers. The relationship involves the exchange of money at the point (but not necessarily the time) of delivery, the services being funded by payments from those who receive them. Markets may be regarded as naturally responsive in the sense of having the potential to deliver e⁄cient satisfaction of wants by empowering individuals to act in their own self-interest.9 Consumers make choices according to their needs and their own assessment of the trade-o¡ between quality and price.10 In addition to recourse to private law remedies, dissatis¢ed consumers may choose to exit the 8 On the tendency of the Citizen’s Charter to reduce citizenship interests to those of mere consumption of public services, see D. Prior, J. Stewart, and K.Walsh, Citizenship: Rights, Community and Participation (London: Pearson Professional,1995) 22; see also P. Rawlings and C.Willett,‘Consumer Empowerment and the Citizen’s Charter’ in C.Willett (ed), Public Sector Reform and the Citizen’s Charter (London: Blackstone Press Ltd, 1996) 26: ‘The more that citizenship is spoken of in terms of market provision of services and the expectations which citizens have of these services, the more our citizen looks like what is generally thought of as a consumer. By consumer we mean someone who enters transactions and through exercise of market power (including economic strength, knowledge, bargaining skill and choice) exercises some control over the quality of the service which he receives and the price which the supplier charges’. 9 H. Collins, Regulating Contracts (Oxford: Oxford University Press, 1999) 70. 10 ibid 305.

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Peter Vincent-Jones Service Type Form of Organisation

State Involvement

Demand Function Funding and Payment

Public Services

Private Services

(1) Bureaucratic

(2) Quasi-market

(3) Regulated market

(4) Private market

Traditional bureaucratic organisation

‘Contracting regime’ Purchaser-provider split Purchase-ofservice contracting

Statutory framework Independent regulatory agency Privatized utilities, telecommunications

General institutional framework Legal enforcement machinery

Representative government/ state

Representative purchaser agency, competition/ contestability

Limited consumer sovereignty, choice, competition

Consumer sovereignty, direct choice, competition

Publicly funded, free at point of consumption

Individually funded, payment at point of consumption

Figure1 State Involvement in Public and Private Services relationship with a particular supplier and transfer their custom elsewhere, given a competitive market. In practice, however, there remain signi¢cant physical, ¢nancial, and social obstacles to the realisation of the market ideal.This is particularly so in the human services sector, where many consumers are likely to be in a vulnerable position even where they can a¡ord to purchase services on a private basis.11 Most human services accordingly have a ‘public’ dimension,12 implying a fundamental role for government in respect of the activity in question.13 Three modes of public service organisation may be distinguished (Fig 1), with di¡erent implications for the forms of redress available to the ultimate consumer or service recipient: ¢rst, direct state provision by a government body; second, quasi-market organisation involving ‘purchase-of-service’ contracting by a public body representing the consumer interest; and third, provision by a private body under a public law duty or statutory regulation. In the latter two instances, provision by private or independent sector bodies in no way detracts from the ‘public’ nature of the services in question. In traditional direct provision by state bureaucracies (1), there is no competition or choice of supplier, while in quasi-markets involving the purchaser-provider 11 See for example N. Ryan,‘The Competitive Delivery of Social Services: Implications for Program Implementation’ (1995) 54 AustralianJournal of Public Administration 353. 12 I. Harden, The Contracting State (Buckingham: Open University Press, 1992) 76: ‘A public service exists not because of choices in the market but because of a public decision that it should exist’. 13 E. M. Garcia,‘Public Service, Public Services, Public Functions, and Guarantees of the Rights of Citizens: Unchanging Needs in a Changed Context’ in M. Freedland and S. Sciarra (eds), Public Services and Citizenship in European Law ^ Public and Labour Law Perspectives (Oxford: Oxford University Press, 1998) 62^63.


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split (2), choice is exercised by public purchasing agencies among competing providers on behalf of consumers. Despite this di¡erence, in both cases the demand function is concentrated in a public body or agency. The links between such ‘demand’ and individual preferences are ‘complex and contingent.’14 The demand function includes responsibilities for deciding the overall level of resources devoted to a service, the price paid, and the quality of provision. Private services (4), by contrast, are allocated on the basis of choice exercised directly by sovereign consumers. A key di¡erence between private and public services is that standards are set through the market rather than by authoritative determination. Finally, in regulated markets (3), in which competition and consumer choice exist to only a limited degree, aspects of supply and demand including price, availability, and quality are typically subject to regulation by independent agencies in accordance with statutory frameworks established by the state.15 In reality the boundaries between quasi-markets and regulated markets are less clear-cut than this analysis suggests, with choice increasingly pervading all forms of public service organisation. The more that consumers are brought into direct relationship with non-state providers, the more the state role resembles that of market regulator rather than service commissioner or broker. The blurring of the boundaries between modes of public service organisation has signi¢cant implications for the way in which the problem of inadequate citizen redress is conceived. Many human services are provided through hybrid forms of organisation with overlapping public and private dimensions. For example, domiciliary services and long-term care for the elderly are publicly funded at least in part, and dependent on an initial assessment of need and subsequent referral by a public agency or professional body. This is combined with a degree of consumer choice as to where or how the ‘voucher’ or budget earmarked for the purpose designated is spent.16 Such a‘private’ element is similarly evident in the requirement that consumers contribute towards the costs of certain services through ‘co-payments’ or top-up fees paid directly to the chosen provider. Dental and optical services, NHS prescriptions, and tertiary education all combine state funding with user charges coupled with an element of choice in this manner.17 Again in the case of legal services, consumers are required privately to fund a proportion of the costs of advice and assistance obtained from one among a select number of competing providers.18 14 Harden, n 12 above, 6. 15 T. Prosser, Law and the Regulators (Oxford: Clarendon Press, 1997). 16 Vouchering as a form of quasi-market organisation combines supply-side competition with the devolution of demand decisions to consumers in the form of an earmarked budget subsidized by the state ^ see Le Grand and Bartlett, n 2 above. This arrangement exhibits features of regulated market provision in the sense of the more direct relationship thereby created between consumers and service providers. 17 ss 23 and 24 of the Education Act 2004 enable Higher Education Institutions to charge ‘variable fees’ above the minimum speci¢ed rate provided that they have in force a plan under Part 3 of the Act (Student Fees and Fair Access) approved by the new Director of Fair Access to Higher Education in England, or the body designated by the National Assembly for Wales. 18 Access to Justice Act 1999. See G. Bevan, ‘Legal Aid: A Case Study in Quasi-Market Failure’ in W. Bartlett, J. A. Roberts and J. Le Grand (eds), A Revolution in Social Policy: Quasi-Market Reforms in the 1990s (Bristol: The Policy Press, 1998). The current regulated quasi-market in legal aid ser-

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The following discussion takes account of the fact that in some instances human services continue to be delivered by government or public bodies, while in others they are provided by private or voluntary sector organisations under contract with commissioning agencies. Within provider organisations such as hospitals or residential homes for the elderly, citizens are likely to be receiving the same or similar services through a variety of funding arrangements and in di¡ering relationships with providers. A basic aim of regulatory reform should be the promotion of consistency in the protection of citizens’ interests across these modes of provision. Given the acknowledged public character and status of human services, levels of protection should not vary according to the method of funding or the public or private identity of the service provider. Contracting regimes

Quasi-market contracting may be considered ‘an identi¢able method through which collective action is structured to address a public problem.’19 Far from being automatic in the sense of real markets that allow quality and cost outcomes to be determined by supply and consumer demand,20 quasi-markets are highly administered arrangements, raising complex issues of direction and coordination. This conception of quasi-market organisation as an instrument of government is compatible with a regulatory perspective in which the state is viewed as a purposeful actor, pursuing strategies linking state law with power resources of force, wealth, and information and persuasion,21 and engaged in the coordination of processes of standard-setting, monitoring, and enforcement.22 Accordingly, a ‘contracting regime’may be de¢ned as regulatory regime in which the mechanism of contract plays a principal or central role, supported by a range of governmental

19

20

21 22

vices combines limited consumer choice with stringent control of funding through the franchising of service providers, replacing the more open vouchering system which had existed since 1949. Only ¢rms that have bid successfully and been awarded contracts with the Legal Services Commission can provide speci¢ed legal services on a publicly funded basis. L. M. Salamon,‘The New Governance and the Tools of Public Action: An Introduction’ in Salamon (ed), n 1 above, 19; S. Kelman,‘Contracting’ in ibid. Other such tools of government action, many of which may in practice be combined with contracting, include government corporations; public information; economic regulation; direct loans; insurance; corrective taxes/charges; labelling requirements; social regulation; tax expenditures; vouchers; government-sponsored enterprises; loan guarantees; grants; and tort liability. Salamon, n 19 above:‘Automaticity measures the extent to which a tool utilizes an existing administrative structure to produce its e¡ect rather than having to create its own special administrative apparatus’, 32. Automaticity in this sense does not imply that markets are not highly constituted through regulation ^ see C. Shearing, ‘A Constitutive Concept of Regulation’ in P. Grabosky and J. Braithwaite (eds), Business Regulation And Australia’s Future (Canberra: Australian Institute of Criminology, 1993). Quasi-markets are even more so constituted. T. Daintith,‘Regulation’ in International Encyclopedia of Comparative Law, Vol XVII,‘State and Economy’ (eds R. Buxbaum and F. Madl) 24. C. Hood, O. James, G. Jones, C. Scott, and T. Travers (eds), Regulation Inside Government (Oxford: Oxford University Press,1999); Collins, n 9 above, 62; P. Vincent-Jones,‘Contractual Governance: Institutional and Organisational Analysis’ (2000) 20 OJLS 317, 332.


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tools deployed for the attainment of determinate policy objectives.23 The following analysis shows how human services in contemporary Britain have been, and continue to be, structured through government policies linking legal rights and duties with regulatory instruments including contracts, competition, corporatisation, exit, choice, and voice in varying combinations. The development of contracting regimes since 1979 re£ects the commitment of Conservative and Labour governments to policies encouraging increasing independent sector involvement in all areas of the public service.24 Contracting regimes directed at economic reorganisation were ¢rst introduced in the ¢eld of local government through compulsory competitive tendering (CCT) in the 1980s,25 followed by the similarly compulsive policy of market testing in the NHS and central government.26 The restructuring of major human service sectors on a quasi-market basis began in the 1990s with the introduction of purchaser/provider splits in social and community care and the NHS.27 In social care, the radical objective was to shift the centre of gravity of provision from the public to the non-state sectors.28 The role of local authorities became that of enabling and developing markets through community care planning,29 with guidelines specifying relatively high proportions of local authority budgets that had to be spent on contracting with private or voluntary organisations.30 In the health sector the reform was less fundamental. Regulated contractual relationships between purchasers and providers occurred within an internal market, with competition being restricted to NHS Trusts.31 An increasingly important feature of contracting regimes in the welfare arena is the separation of provider functions from direct government control through corporatisation, the relationships thus created being governed through legally binding contracts or ‘operating agreements’ in accordance with conditions set out in enabling statutes. As a regulatory instrument, corporatisation shifts the

23 M. Eisner, Regulatory Politics in Transition (Baltimore: John Hopkins University Press, 2nd ed, 2000). In this account a regulatory regime is de¢ned as ‘a historically speci¢c con¢guration of policies and institutions which structures the relationship between social interests, the state, and economic actors in multiple sectors of the economy’ 1; see also J. Freeman,‘Private Parties, Public Functions and the NewAdministrative Law’ (2000) 52 Administrative Law Review 813, 857^8. For a di¡erent usage of ‘contract regime’see M. Considine,‘Contract Regimes and Re£exive Governance: Comparing Employment Service Reforms in the United Kingdom, the Netherlands, New Zealand and Australia’ (2000) 78 Public Administration 613. 24 For an analysis distinguishing three types of contracting regime ^ involving administrative contracts, economic contracts, and social control contracts ^ seeVincent-Jones, n 4 above.The present focus is on economic contracts. 25 Local Government (Planning and Land) Act 1980; Local Government Act 1988. 26 Vincent-Jones, n 2 above. 27 National Health Services and Community Care Act 1990. 28 L. Challis et al, ‘Managing Quasi-Markets: Institutions of Regulation’ in Bartlett et al (eds), QuasiMarkets in theWelfare State:The Emerging Findings (Bristol: SAUS, 1994) 10. 29 K. Walsh et al, Contracting for Change: Contracts in Health, Social Care, and Other Local Government Services (Oxford: Oxford University Press, 1997) 81. 30 M. Knapp, B. Hardy, and J. Forder,‘Commissioning for Quality:TenYears of Social Care Markets in England’ (2001) 30 Journal of Social Policy 283. 31 D. Hughes, ‘The Reorganisation of the NHS: The Rhetoric and Reality of the Internal Market’ [1991] 54 MLR 88.

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balance of power among key players in sectors such as health and education and training by altering the legal status and capacities of certain agents. Under legislation introduced in the late 1980s,Training and Enterprise Councils (TECs)32 and City Technology Colleges (CTCs)33 were constituted either as charitable bodies or private companies limited by guarantee, with dual legal accountability to shareholders and the Secretary of State. This model has been adopted by New Labour as a mechanism for constituting other corporate bodies separate from but regulated by central government, such as Academies.34 Corporatisation here serves to increase the involvement and in£uence of local business communities, and to inject an element of competitive discipline into the design and implementation of educational and training programs. While typically there is no legal requirement for formal competitive tendering, private and non-pro¢t organisations or consortia are invited to bid for the right to provide de¢ned services, with submissions being subject to rigorous assessment and comparison. In the health sector, corporatisation describes the process of conferment of legal autonomy and associated increased powers on Foundation Trusts (FTs)35 and Primary

32 Training and Enterprise Councils (TECs) were established through powers exercised by the Secretary of State under s 25(1) of the Employment Act 1988 (amending s 2 of the Employment and Training Act 1973) to make arrangements for training for employment ^ see D.Vere,‘Training and Enterprise Councils: Putting Business in the Lead’ in A. Harrison (ed), From Hierarchy to Contract (Oxford:Transaction Books, 1993). 33 City Technology Colleges (CTCs) were established under the Education Reform Act 1988, s 105(1), which gave the Secretary of State powers to enter into agreement with any person for establishing and maintaining a CTC.While CTCs are not subject to the same controls as schools in the maintained sector, they must be run in accordance with their funding agreements and schemes of governance. Regulation takes the form of monitoring of performance by the DfES, and inspection by the O⁄ce for Standards in Education (OfSTED) in the same way as for maintained schools. 34 CityAcademies were ¢rst introduced in 2000 under s 482 Education Act 1996 as replacements for failing or under-achieving inner-city schools. They became simplyAcademies under s 65 Education Act 2002. Academies are all-ability schools established by sponsors from business, faith or voluntary groups working in partnership with central government and local education authorities. Sponsors contribute to capital costs, most of which are borne by the Department for Education and Skills (DfES). Running costs are met in full by the DfES. In any agreement made in the exercise of powers under s 482, payments made by the Secretary of State are dependent on the ful¢llment of speci¢ed conditions (s 4). The intention is that Academies will generally replace an existing poorly performing school, or be part of a proposal to tackle a group of under-performing schools.Where the demand for new places justi¢es it, an Academy may be established without the closure of an existing school. 35 Part 1 of the Health and Social Care (Community Health and Standards) Act 2003 establishes NHS FTs as a new form of NHS organisation. Section 1 de¢nes FTs as public bene¢t corporations authorised under the Act to provide goods and services for the purposes of the health service in England. The process of creation of NHS Foundations Trusts involves ‘authorisation’ following application by NHS Trusts or other bodies to the Independent Regulator established under s 2, provided in both cases that the application is supported by the Secretary of State. The authorisation may specify conditions, such as the provision of certain goods and services by the Trust for the purposes of the health service (s 14(4)), and restrictions on private work undertaken (s 15(1)). Failure to comply with a term of authorisation may result in the application of various sanctions by the regulator, including the removal of existing directors or board of governors and the appointment of others to perform these functions (s 23), and ultimately dissolution of the Trust itself (s 25).


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Care Trusts (PCTs).36 While the internal market has been formally abandoned as an organisational model for healthcare, a more genuine quasi-market is being developed through the rede¢ned roles of PCTs and FTs, coupled with increasing competition among a diversity of providers in the public, private, and non-pro¢t sectors. For example, many of the new specialist diagnostic and treatment centers from which PCTs are being encouraged to procure services are owned or managed by international corporations, in some cases competing with services o¡ered by the NHS. Contracting regimes link members of public service networks in particular ways.37 The characteristic features of networks generally include interdependence between diverse organisations including non-state actors; continuing interactions between network members exchanging resources and negotiating shared purposes; and a signi¢cant degree of autonomy from the state, which nevertheless attempts indirectly to steer activity in particular directions.38 In contracting regimes the contractual regulatory function of standard-setting, monitoring, and enforcement is performed by public agencies in relation to the other contracting party, in accordance with the powers and responsibilities delegated through bureaucratic regulation. Hence purchasing agencies (such as local councils, health and education authorities) exercise discretionary contracting powers, monitoring and evaluating the performance of service providers through contract terms, speci¢cations and standards, but under more or less strict central government direction.39 Provider organisations in the public, private, and voluntary sectors also are subject to extensive regulation through central standards, performance indicators, requirements for targets in performance plans, performance measurement and evaluation in relation to targets, and the collection and presentation of information on performance in comparative form involving league tables or ‘star ratings’.40 Public agencies and authorities that are considered to be failing in their public service functions are liable to various central enforcement measures and intervention powers.41

36 The National Health Service Reform and Health Care Professions Act 2002 provided for many of the functions performed by Health Authorities to be transferred to PCTs, and for resources to be allocated directly by the Secretary of State to support their enlarged planning and commissioning role. In contrast with ‘NHS contracts’ governing relations between PCTs and ordinary Trusts, contracts with NHS FTs are legally binding. 37 De Hoog and Salamon, n 1 above, 331. 38 R. A.W. Rhodes, Understanding Governance (Buckingham: Open University Press, 1997) 53. 39 Contracting regimes exemplify government ‘at a distance’ ^ see P. Miller and N. Rose,‘Governing Economic Life’ (1990) 19 Economy and Society 1. In his analysis of contracting as a tool of government, Kelman (n 19 above) also stresses the indirect and contingent nature of regulation, re£ecting the mixture of public and private resources and di¡erent styles of management at play in modern ‘third-party’ government, and the emphasis on networks and collaboration in place of hierarchy and control. 40 P. Vincent-Jones , ‘Values and Purpose in Government: Central-Local Relations in Regulatory Perspective’ (2000) 29 Journal of Law and Society 27. 41 See for example s 23 of the Health and Social Care (Community Health and Standards) Act 2003 (‘Failing NHS Foundation Trusts’); Pt 4 Education Act 2002 (‘Powers of Intervention’ in the case of ‘schools causing concern’). For the position of local authorities under Best Value, see P.VincentJones, ‘Central-Local Relations Under the Local Government Act 1999: A New Consensus?’ (2000) 63 MLR 84.

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Peter Vincent-Jones STATE

(d) State – Purchaser

Public Purchaser

(e) State – Provider

(a) Purchaser – Provider

(c) Citizen/User – Purchaser

Provider

(b) Citizen /User – Provider

Citizen/User

Figure 2 Contracting regime (human services)

Notwithstanding important di¡erences between sectors and types of contracting regime, the principal relationships involved in public contracting for human services may be modeled as axes of a triangle (Fig 2) with separate dimensions:42 (a) purchaser^provider; (b) citizen/user^provider; and (c) citizen/user^public purchaser. Since the contracting powers devolved to public purchasing agencies are exercised within a system of hierarchical regulation in which the government continues in many respects to determine the manner in which public service functions are performed, further dimensions have to be added to this model. These represent relationships between state and public purchaser (d), and state and service provider (e). Taken together, such vertical and horizontal relationships combine in any particular service sector to form the contracting regime. While current debates on legal accountability and redress have tended to focus on the user-provider axis, the emphasis here is on all three regulatory dimensions comprising the lower half of the diamond. In attempting to rectify responsiveness de¢cits in traditional bureaucratic provision, quasi-markets have given rise to new governance problems in relationships between individuals and a wide range 42 cf H. Schoombee, ‘Privatisation and Contracting Out ^ Where Are We Going?’ in J. McMillan (ed), Administrative Law Under the Coalition Government (Canberra: AIAL, 1997) 136: ‘Contracting out gives rise to a triangular relationship between, ¢rstly, the government body which does the out-sourcing and acts as a ‘‘purchaser’’ of the services; secondly, the party contracting with the government . . . ; and thirdly, the members of the public to whom the service is delivered . . . ’. The present model di¡ers from this conception both in its emphasis on citizenship, and in the location of the ‘triangle’ within a more complex web of relationships constituting the regulatory framework governing public contracting for human services.


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of public and private bodies.43 The fundamental problem remains how to connect citizens and consumers with the purchaser and provider functions that have been separated as a result of quasi-market organisation. Exit, choice, and voice

Exit implies the exercise of choice in the decision to end an unsatisfactory relationship, accompanied by the transfer of custom or support to another supplier or organisation o¡ering the prospect of better performance. While some citizens have always chosen to receive services from the private sector, exit from state to private provision has been deliberately facilitated since the 1980s by speci¢c policies underpinned by individual and collective legal rights in the ¢elds of education, housing, and health and community care.44 Individual withdrawal from state provision may be a lifelong decision, or be con¢ned to a singular event such as a private hospital operation. Citizens may opt out of a whole range of publicly provided services or only one or two.45 Private and independent sector involvement in public services is being further encouraged by macro-economic policies aimed at enhancing domestic competitiveness in global markets, combined with the decline in public subsidies and the growing importance of vouchering, copayments, and direct payments.46 Within quasi-market structures in which public purchasing agencies continue to perform a dominant commissioning or purchasing function, the Government is keen to encourage the development of new forms of consumer choice.Whereas exit from the public sector implies opting out of any form of organisation in which the state is involved in funding, purchase, or provision of the service, exit within the public sector refers to the exercise of choice (whether on the part of the public purchasing agency or the consumer to whom decision-making has been devolved) in the selection of a di¡erent state-funded public, private, or voluntary sector provider. Choice in this sense is a central plank in New Labour’s modernisation program. The fourth principle of public sector reform adopted following the 2001 general election was ‘more choice for customers and the ability, if provision is poor, to have an alternative provider.’47 This notion of choice played a fundamental role throughout Labour’s second term and in its strategy for the 2005 43 S. R. Smith and H. Ingram,‘PolicyTools and Democracy’ in Salamon (ed), n 1 above, 570. 44 I. Leigh, Law, Politics and Local Democracy (Oxford: Oxford University Press, 2000) 148. Government policies may be interpreted as an attempt deliberately to break the loyalties of citizens, consumers and public managers to traditional forms of service provision. Examples include the encouragement of owner-occupation through new legal rights for council tenants to leave the public sector under ‘right to buy’ and ‘change of landlord’ legislation, vouchering and assisted places schemes in education, and various other incentives involving tax relief or transferable state set-o¡ against the full market cost of services. 45 Clayton P. Gillette,‘Opting Out of Public Provision’ (1996) 73 Denver University Law Review 1185. 46 Cabinet O⁄ce/Department of Health, ‘Making A Di¡erence: Direct Payments’ April 2005: ‘Direct Payments are intended to create £exibility in the provision of social services by giving money directly to service users in place of social care services. This o¡ers people greater choice and control over their lives and decisions about how care is delivered.’ See Commission for Social Care Inspection, ‘Direct Payments ^ What Are the Barriers?’August 2004. 47 Cabinet O⁄ce, ‘The Second Phase of Public Sector Reform: the Move to Delivery’ 22 March 2002.

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general election. NHS patients increasingly are being given the option to have operations performed privately or abroad rather than in publicly managed hospitals. NHS patients already have access to European health care in a landmark deal agreed by ministers in Brussels, which will have a major impact on the ability of patients to shop around the EU for the best or fastest treatment.48 The agreement enshrines a formal right for members of the EU to go anywhere in Europe for publicly funded services in the same way as for other services, if treatment is not available in their own countries within a time limit that is medically justi¢able. New rules are to come into force in 2005, subject to approval by the European Parliament. Such developments are reinforced by international trade rules aimed at opening up competition for public services.49 While choice and voice are typically counterposed as alternative mechanisms for rectifying poor management performance,50 voice is of fundamental importance in all modes of human service organisation. Because of the often vulnerable and disadvantaged position of citizens, the capacity to articulate needs and communicate grievances is essential even where individuals obtain and pay for these public services on the private market. The e¡ectiveness of voice is dependent on the existence of institutions and mechanisms that can communicate complaints cheaply and e¡ectively.51 Voice is especially important in quasi-markets due to the separation of purchaser and provider functions and the associated complexity of contracting regimes. Reforms aimed at increasing participation in public services may be viewed as merely the latest in a long history of attempts to empower consumers and citizens through more and better voice mechanisms. However, current government initiatives in this regard appear unduly fragmented and lacking in any coherent overall rationale. In particular, as will be shown, insu⁄cient attention has been paid the multi-dimensional character of contracting regimes and the need to build public involvement from the bottom up rather than attempt to impose governance solutions from the top down. It will be argued that in addition to the obvious focus on the user-provider relationship, empowerment

48 Independent 8 October 2002. 49 Under the system of formal requests for market liberalisation that came into operation under the General Agreement on Trade in Services (GATS) in March 2003, markets for ¢nancial services abroad, for example, could be opened up for the City’s business and ¢nancial services ¢rms in return for concessions to other countries in respect of access to domestic markets for other services such as health and education. GATS raises questions about the ability of government (or its intention) in the long term to protect public bureaucracies delivering human services from private sector competition. 50 A. Hirschman, Exit, Voice and Loyalty: Responses to Decline in Firms, Organisations and States (Cambridge, Mass: Harvard University Press,1970). In Hirschman’s seminal analysis, customers or members of an organisation may express dissatisfaction with deteriorating management performance of ¢rms or other groups such as political parties and voluntary organisations by either means. Both exit (where customers stop buying the ¢rm’s products or members leave the organisation) and voice (where customers or the organisation’s members express dissatisfaction directly to management, or engage in some other form of public protest) may trigger a search by management for the causes and possible cures of customers’ and members’ dissatisfaction. Hirschman’s main concern was with the comparative e⁄ciency of the two‘mechanisms of recuperation.’ Hirschman questions the e⁄cacy of exit in this regard. In many situations exit drives out voice and assumes a disproportionate share of the burden in the attempted attainment of this end (at 120). 51 ibid, 43.


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strategies should be directed at increasing the in£uence of service recipients on all aspects of the contractual process, including standard-setting, provider selection, determining the trade-o¡ between price and quality, monitoring delivery, sanctioning poor performance, and the resolving of performance problems.

LEGAL DEBATES AND REFORM STRATEGIES

Citizen and consumer interests are arguably poorly served by both private and public law governing contracted out human services. The consumer is prevented from suing the service provider in contract due to lack of privity and/or consideration. These elements are similarly lacking in the relationship with the public purchaser. In public law the problem concerns the relative lack of accountability of private or voluntary bodies compared with state agencies performing the functions directly.52 While judicial review of contractors’ decisions may be possible on the basis that the body is exercising discretions as agent of a public authority,53 delegations of authority are rarely so complete as to imply an agency relationship.54 Agency aside, amenability to review depends on factors such as the governmental nature of the body,55 its performance of a public function,56 and the origin of its jurisdiction in a source other than contract.57 While the common law has been supplemented by a new basis of review under the Human Rights Act 1998, the courts have adopted a similarly 52 The focus here is on the denial of forms of individual redress that were (or would be) available in the case of state provision, and which still apply in respect of decision-making by the public agency responsible for service commissioning. The related problem of lack of accountability of government agencies for the exercise of contractual powers is beyond the scope of the present discussion.The exercise of contractual powers by public authorities is amenable to judicial review only in respect of decisions that are ‘statutorily underpinned,’ or which involve ‘some other su⁄cient public law element’ - Rv Lord Chancellor, ex parte Hibbit & Saunders (A Firm) [1993] COD 326 (per Rose LJ); Rv Legal Aid Board, ex parte Donn & Co [1996] 3 All ER 1. 53 P. Craig, Administrative Law (London: Sweet and Maxwell, 4th ed,1999) 772: ‘The fact (the government department or agency) chooses to ful¢l . . . functions by contracting out some of the work to private ¢rms cannot, as a matter of principle, alter the fact that it is a statutory power or duty which is being exercised’; N. Seddon, Government Contracts: Federal, State and Local (Sydney: Federation Press, 2nd ed, 1999) 281. 54 Rv Servite andWandsworth LBC, ex p Goldsmith and Chatting [2001] LGR 55. Here Moses J. rejected the argument that Servite Houses (a charitable Housing Association) was acting as agent, on the ground that the local authority lacked the power to delegate its obligations under s 21 of the National Assistance Act 1948. 55 Rv Chief Rabbi of the United Hebrew Congregations and the Commonwealth, ex pWachmann [1993] 2 All ER 249; Rv Football Association, ex p Football League Ltd [1993] 2 All ER 833. 56 Rv Panel onTake-overs and Mergers, ex p Data¢n plc [1987] 1 All ER 564.This case established that the body need not itself be public, nor did its powers have to originate in statute or prerogative, provided it was under some ‘public duty’ (Lloyd LJ, at 724; Nicholls LJ, at 725^726) or there was otherwise a‘public element’ in the case (Sir John Donaldson M. R, at 714). 57 The courts remain reluctant to include powers derived from or associated with contract within the scope of judicial review ^ Rv Disciplinary Committee of theJockey Club, ex Aga Khan [1993] 2 All ER 853. Conversely, the absence of a contractual relationship between citizens and service providers following corporatisation is a factor in favour of a ¢nding of amenability to review ^ see Rv Governors of Haberdashers’Aske’s Hatcham CollegeTrust, ex parteTyrell [1995] COD 399; The Times, 19 Oct 1994; Rv GwentTraining and Enterprise Council, ex part Ghafoor (unreported decision of Brooke J, Queens Bench, 22 Feb 1995, as discussed by M. Hunt,‘Constitutionalism and the Contractualisa-

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conservative approach on the application to private bodies. The e¡ect of these restrictions is an increasing potential for the abuse of discretionary powers by a range of non-state bodies, disengaged from formal accountability processes that apply in bureaucratic organisation.58 Where there has been a reduction in public law accountability following contractualisation,59 there is prima facie a strong case for redressing that loss, whether by administrative law or other means.60 Judicial review

Some commentators argue that these accountability de¢cits should be addressed through extension of the scope of judicial review to include any body performing a public function in providing public services.61 This reform strategy, which is part of the modern‘expansionist’ tendency in the ¢eld of judicial review, is at least partly inspired by Continental jurisprudence which has traditionally placed greater emphasis on the function than the identity of the actor (whether private, public or voluntary) as the crucial determinant of the legal relationship between user/citizen and service provider.62 The public function test might be satis¢ed wherever a body ‘seeks to achieve some collective bene¢t for the public or a section of the public and is accepted by the public or that section of the public as having the authority to do so.’63 A related approach, while skeptical whether institutions or functions are capable of intrinsic de¢nition in this way, argues that the application of public and private law should be based on a close examination of the reasons and justi¢cations for drawing the distinction in particular contexts, notably whether they relate to access to government information, the extent of

58

59 60

61

62 63

tion of Government’ in Taggart (ed),The Province of Administrative Law (Oxford: Hart Publishing, 1997) 37^8). However, in the case of publicly funded health and social care services the actions and decisions of contractors are generally within the Ombudsman’s jurisdiction ^ s 7(2)(a) Health Service Commissioners Act 1993; see M. Seneviratne, Ombudsmen: Public Services and AdministrativeJustice (London: Butterworths, 2002) 70^71, 162^167. For a full list of government departments and other public bodies within the jurisdiction of the Parliamentary and Health Service Ombudsman, see: http://www.ombudsman.org.uk/make_a_complaint/parliamentary/who_can_we_look_at.html (last visited 22 August 2005). The argument is that administrative law is being ‘pushed out of the public sphere by the re-labelling of public activities’ ^ Seddon, above n 53, 279. While it is self-evident that contracting out has entailed a diminution in public law accountability, this does not necessarily imply overall or net accountability losses. A narrow public law approach tends to exaggerate the e¡ectiveness of traditional accountability mechanisms, as well as ignoring the potential of new forms of accountability accompanying contracting out ^ see C. Scott,‘The ‘‘New Public Law’’ ‘in C.Willett (ed), Public Sector Reform and the Citizen’s Charter (London: Blackstone Press Ltd,1996); R. Mulgan,‘Contracting Out and Accountability’ (1997) 56 AustralianJournal of Public Administration 106. See for example P. Craig, ‘Contracting Out, The Human Rights Act And the Scope of Judicial Review’ (2002) 118 LQR 351; E. Palmer,‘Should Public Health be a Private Concern? Developing a Public Service Paradigm in English Law’ (2002) 22 OJLS 663; Lord Woolf ,‘Judicial Review: A Possible Programme for Reform’ [1992] PL 221. M. Ross,‘Article 16 E.C. and Services of General Interest: From Derogation to Obligation?’ (2000) 25 European Law Review 22. S. A. de Smith, Lord Woolf, and J. Jowell, Judicial Review of Administrative Action (London: Sweet and Maxwell, 1995) 167. Extending the scope of review might similarly be justi¢ed by the need for judicial control over all forms of monopolistic rather than just governmental power ^ Lord Belo¡, ‘Droit Public ^ English Style’ [1995] PL 57.


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government power, the separation of powers, or procedural protections for public authorities.64 Such reform would bring the law governing private and voluntary sector bodies into line with that applying to public providers, in relation to whom citizens have traditionally had recourse to judicial review for the enforcement of individual rights.65 All these bodies would be under duties at common law to observe standards of legality, reasonableness, and procedural fairness in decisionmaking. For example, private nursing home residents whose care was publicly funded under contract with a local authority would have the same rights regarding the protection of legitimate expectations as enjoyed by citizens in the state sector.66 The common factor justifying judicial control would be the impact of decisions on the interests of individual citizens, and their signi¢cance for the interests of the public at large.67 An obvious weakness in this argument is that the reform advocated is beyond judicial interpretation and development, and requires legislation. The suggestion that the courts should be prepared to act boldly in developing the notion of reviewability of all exercises of power has been criticized for uncertainty,68 and for leaving the judiciary ‘armed with a concept in a theoretical twilight zone.’69 More fundamentally, however, many administrative lawyers are skeptical of the extension of judicial review by whatever means as a response to the accountability de¢cits accompanying outsourcing and contractualisation. In one view the failure to develop a coherent basis for progressive reform around the concept of public function in the ‘Data¢n project’ is inevitable, due to the over-rigid dichotomy of public and private power that this approach assumes.70 While the importance of public law qualities such as openness, participation, fairness, impartiality, accountability, and rationality is acknowledged, the argument is that the implementation of such values within administrative practices might better be promoted through mechanisms other than judicial review. There is disagreement among public lawyers as to how far the governance issues raised by contractualisation amount to a crisis in administrative law.71 One 64 P. Cane, An Introduction toAdministrative Law (Oxford: Clarendon Press, 3rd ed, 1996) 12^18. However, the argument here appears circular ^ ‘public functions are functions which ought to be subject to public law controls’ 18. 65 Rv Cambridge Health Authority, ex p B [1995] 2 All ER 129; Rv North Derbyshire Health Authority, ex p Fisher [1997] 8 Med LR 327; Rv North Devon Health Authority, ex p Coughlan [2000] 3 All ER 850; [2001] QB 213. 66 For the argument that the result achieved in Coughlan (where the Court of Appeal decided that the closure of a NHS nursing home amounted to a breach of the applicant’s legitimate expectation that it would remain open for the rest of her life) should apply to privately managed homes, see Palmer, n 61 above, 664. 67 ibid, 670. 68 Hunt, n 57 above. 69 J.W. F. Allison,‘Theoretical and Institutional Underpinnings of a Separate Administrative Law’ in Taggart (ed), n 57 above, 89. 70 M. Aronson,‘A Public Lawyer’s Responses to Privatisation and Outsourcing’ inTaggart (ed), n 57 above: ‘Data¢n has failed to dent the common law’s refusal to treat contractual power as public power, with the result that contractual power is usually not amenable to the common law of judicial review’, 46. 71 For a critique of the apocalyptic tenor adopted by many ‘crisis’ commentators, see P. Cane,‘Mapping the Frontiers’ in P. Birks, (ed),The Frontiers of Liability (Oxford: Oxford University Press,1994) 151. In this view, while the problems posed by contractualisation for the traditional conception of

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argument is that the‘court-centred focus’ of the common law has vested too much importance in the position of the judiciary within the structure of governance. The increasingly ine¡ectual role of the courts is regarded here as a re£ection of the failure of the legal order to respond to new challenges of social complexity, resulting in the displacing of law as an active regulatory mechanism over great areas of public life.72 For commentators dubious about the prospects for both administrative law and complex regimes of administrative regulation in dealing with persisting governance problems, the implication is that the courts and traditional legal processes should be further marginalized in favour of new legal forms and methods of accountability.73 The expansionist judicial review project may be criticized for more pragmatic reasons. In the ¢eld of nursing home care, for example, there are practical di⁄culties with granting the same legal protection to residents in the private or voluntary sectors as is currently enjoyed by those in publicly managed homes. The attempt to hold the contractor to account through such a ‘rights’ strategy is in many cases likely to be futile. The underlying problem here concerns the nature of the market for residential nursing services. Private or non-pro¢t providers cannot be compelled to maintain a non-pro¢table business, or one that cannot break even.The quasi-market in long term care in the UK has been particularly vulnerable to changing market conditions.74 In extreme cases, contractors may have no choice other than bankruptcy where businesses cannot be run at a pro¢t. In human service sectors where market structures are more robust and where transfer of risk to private or non-pro¢t bodies is both appropriate and practicable, the question is whether judicial review is the best way of holding providers to account and of protecting the public interest more generally.75 The more traditional and limited forms of procedural review that are likely to be involved in the majority of cases might be ine¡ectual in controlling the behaviour of contrac-

72 73

74 75

judicial review are acknowledged, the di⁄culties are regarded as capable of being addressed by careful mapping of the various frontiers of public law. M. Loughlin,‘Courts and Governance’ in Birks (ed) ibid. C. Harlow,‘Public Service, Market Ideology, and Citizenship’ in Freedland and Sciarra (eds), n 13 above, 54; A. C. Aman,‘Administrative Law for a New Century’ in Taggart (ed), n 57 above: ‘The new administrative law of market approaches and structures is largely the creation of the legislative and executive branches of government. It is unclear just what the role of the courts will be’ (at 95). Aman considers two main options for the regulatory role of the state in the new administrative law: the delegation of public functions to the private sector, and the application of market organisational models involving corporatisation. These regulatory transformations are argued to mark a shift in the focus of administrative law from legitimating extensions of public power and increased state intervention, to ‘legitimating new mixes of public and private power, new uses of private power, and increased reliance on market approaches to further public interest goals’, at 92. D. Gibson and R. Means,‘Policy Convergence: Restructuring Long-Term Care in Australia and the UK’ (2000) 29 Policy and Politics 43. In‘legitimate expectation’ cases involving the closure of nursing homes there remain doubts about the propriety of the judicial role in reviewing the substance of administrative decisions, and concerns in particular about interfering with the capacity of contractors to deliver bene¢ts of increased e⁄ciency and responsiveness through business restructuring. (The closure in Heather was part of a restructuring operation in which the original home was to become a high dependency unit to meet the pressing need for such facilities, with existing residents being re-located in community-based units in neighbouring towns).


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tors, being ‘subject to all the usual defects of judicial review generally, with some peculiar to that area.’76 Human rights

The Human Rights Act 1988 incorporating the European Convention on Human Rights into UK law may be expected to be of increasing signi¢cance in controlling the contractual activities of public authorities. By comparison with common law judicial review, the jurisdiction asserted on human rights review has been described as ‘relatively intrusive’. It is concerned with substantive values rather than procedural norms, with the content and e¡ect of decisions as well as the process of decision making, and ultimately with justi¢ability and proportionality rather than reasonableness.77 A broad range of substantive fundamental rights is encompassed, as distinct from the largely process-oriented rights conferred by the common law. The e¡ect of section 6 (1) is to create a new ground of judicial review on which an act, decision or failure to act may be held unlawful. There are likely to be many cases involving human services in which the claims of dissatis¢ed citizens and consumers will be cast in these terms. However, the Act has full direct e¡ect only in respect of public authorities such as the government, police, local authorities, courts or tribunals.78 Its application to other bodies is limited to their performance of functions that are public in nature,79 so that a given body may be subject to human rights review in respect of some activities but not others.80 The meaning of ‘public function’ in this context is proving as problematic as the common law test of amenability to judicial review under Data¢n. Contrary to Parliament’s original intention, the courts appear to be adopting a restrictive interpretation,81 with the result that citizens 76 Aronson, n 70 above, 47; Seddon, n 53 above, 300: ‘Even if judicial review did start to move into the ‘‘private’’ area of government contracts, the results would not be very startling. This is because . . . there is not much that judicial review can deliver . . . in the area of contracted out services’. 77 M. C. Elliott,The Constitutional Foundations of Judicial Review (Oxford: Hart Publishing, 2001) 203. 78 Decisions as to the scope of supervisory jurisdiction will be informed (in addition to domestic law) by the test applied by the European Court of Justice in deciding whether a respondent is a state body in respect of which a directive should have direct e¡ect ^ see Aston Cantlow PCC vWallbank [2001] 3 WLR 1323; [2001] 3 All ER 393; Loughlin, n 72 above, 98. 79 Section 6(3)(b) of the HRA 1998 de¢nes public authority as including ‘any person certain of whose functions are functions of a public nature.’ Sub-section (5) states that in relation to a particular act, a person is not a public authority by virtue only of subsection (3)(b) if the nature of the act is private. Advocates of the extension of the scope of administrative law controls into the contracted out sector have tended to argue that both forms of review, at common law and under the HRA, should be available ^ see Craig, n 61 above; Palmer, n 61 above. In Poplar Housing and Regeneration Community Association Ltd v Donoghue (2001) 33 HLR 823^846, the Court of Appeal held that a registered social landlord (Poplar Housing) was a public authority for the purposes of s 6 ^ see M. McDermont, ‘The Elusive Nature of the ‘‘Public Function’’: Poplar Housing v Donoghue’ (2003) 66 MLR 113. 80 D. Oliver, CommonValues and the Public-Private Divide (London: Butterworths,1999) 227; ibid,‘Functions of a Public Nature under the Human Rights Act’ [2004] PL 329. 81 But see A. W. Bradley and K. D. Ewing, Constitutional and Administrative Law (Harlow: Pearson Education, 13th ed, 2003): some bodies previously outside the scope of judicial review may now, following incorporation of the Convention, be regarded as public authorities amenable to judicial review where their decisions are not subject to some other remedy (at 738).

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are being denied human rights protection on the relatively arbitrary criterion of the body’s administrative links with state institutions.82 A recent report of the Joint Committee on Human Rights considers that all bodies delivering public services should be subject to human rights obligations, and that all citizens should enjoy the same protection under the Convention regardless of the private or public identity of the service provider.83 In addition to being indefensible in principle, the current gaps and inconsistencies in human rights protection are likely to mean that the UK is falling short of its international obligations to secure e¡ective protection of Convention rights (article 1) and to provide an e¡ective remedy for their breach (article 13).84 Rejecting various reform options including statutory amendment, supplementing the Act with a scheme of Ministerial designation of public authorities, and using purchaser-provider contracts as a means of requiring adherence to Convention rights, the Joint Committee concluded that a human rights culture across all sectors might best be developed through clear principles of interpretation: ‘As a matter of broad principle, a body is a functional public authority performing a public function under section 6(3)(b) of the Human Rights Act where it exercises a function that has its origin in governmental responsibilities, in such a way as to compel individuals to rely on that body for realisation of their Convention human rights.’85 While the argument for legal reform is more clearly established in principle in relation to human rights than common law judicial review, similar practical problems are likely to remain. A more generous interpretation of section 6(3)(b) through judicial regard to principles of interpretation is but a small part of the solution to the overall problem of the present inadequacy of citizen redress in public contracting for human services. As to the possibility of using the HRA to enforce Convention rights against private contractors,86 there is little prospect of the courts recognising any form of direct horizontal e¡ect. In the absence of contract, it is di⁄cult to see how a cause of action necessary to extend the rights of the citizen can be grounded in the common law in this context.87

82 Joint Committee on Human Rights, ‘The Meaning of Public Authority under the Human Rights Act’ Seventh Report of Session 2003 -04, HL Paper 39, HC 382, para 1. 83 ibid, para 58. 84 ibid, para 73. 85 ibid, para. 157. ‘Under section 6 of the Human Rights Act, there should be no distinction between a body providing housing because it itself is required to do so by statute, and a body providing housing because it has contracted with a local authority which is required by statute to provide the service. The loss of a single step in proximity to the statutory duty does not change the nature of the function, nor the nature of its capacity to interfere with Convention rights’, para 26. 86 M. Hunt, (1998) PL 423; G. Phillipson, ‘The Human Rights Act, ‘‘Horizontal E¡ect’’ and the Common Law: A Bang or a Whimper?’ 62 (1999) MLR 824; R. Buxton, ‘The Human Rights Act and Private Law’ (2000) 116 LQR 48; H.W. R.Wade,‘Horizons of Horizontality’ (2000) 116 LQR 217. 87 Bradley and Ewing, n 81 above, 421. Phillipson, n 86 above, follows previous commentators in concluding that the Act will have only indirect horizontal e¡ect: ‘Plainti¡s seeking to invoke Convention rights in private common law cases will not be able to rely solely on the right in question, but will have to anchor their claim in an existing common law cause of action’, at 847.


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Private law

From a private law perspective, a di¡erent strategy for securing the increased accountability of contractors for the exercise of ‘public’power is through the creation of private rights on the part of consumers and other a¡ected members of the community.88 This approach suggests that the administrative law goals of increasing public accountability and participation may be achieved by means other than public law.89 For example, in addition to providing enforceable substantive rights to certain standards of service, contract may in principle also be the basis of procedural protection in the form of duties of fairness, considerate decision-making and good faith.90 The fundamental problem with this avenue of redress is the absence of a contractual relationship between service recipient and provider. Even where public services are marketed and paid for directly by consumers, the law of contract often does not apply where the provider is carrying out a public legal duty.91 Where there are legal entitlements, these are a patchwork of legislation and judicial decision-making about the tort of breach of statutory duty. The purchaser-provider contract may contain terms and conditions in respect of the nature and quality of service delivery, but the consumer is denied access to the courts for redress for poor performance or dispute resolution.92 The uncertainty and inconvenience associated with the doctrine of privity in commercial business relationships are well known. One suggestion for reform is that the doctrine should not apply to linked commercial contracts that in e¡ect comprise a ‘network’, de¢ned as ‘a group of contracts which have collectively as their object the attainment of a common underlying purpose . . . in which each contract in the group contributes in some way towards the achievement of that purpose.’93 A similar argument leading to the same conclusion is that the parties in such cases are linked by membership of a ‘complex economic organisation.’94 Extending and applying this analysis in the present context, human services 88 M. Allars,‘Private Law But Public Power: Removing Administrative Law Review From Government Business Enterprises’ (1995) 6 Public Law Review 44. 89 M.Taggart,‘The Province of Administrative Law Determined?’ inTaggart (ed), n 57 above.While public law and private law have di¡erent starting points rooted in the primacy of ‘other-regarding’ or ‘self-regarding’ behaviour respectively, the results of private law analysis may approximate to those derived from administrative law (at 5). 90 The potential £exibility of the common law in implying a term of fair dealing into all contracts is illustrated by the Australian case of Hughes Aircraft Systems International vAirservices Australia (1997) 146 ALR 1 (where the term was implied in a pre-award contract involving a commercial tender). In the United States the courts have similarly been eager to‘proceduralize’private relationships by importing public law due process norms into contracts ^ see J. Freeman, ‘The Private Role in Public Governance’ (2000) 75 NewYork University Law Review 543, 589. However, such developments are of limited signi¢cance for the user-provider relationship in quasi-market organisation, since in this instance there is no contract into which a term may be implied. 91 J.Wightman, Contract: A Critical Commentary (London: Pluto Press, 1996) 161^169. 92 Seddon, n 53 above, 34. Where the public purchaser can be persuaded to sue on the consumer’s behalf, the problem with a damages claim would normally be proving loss to the government, in cases where the harm had in fact been done to the citizen. 93 J. Adams and R. Brownsword,‘Privity and the Concept of a Network Contract’ (1990) 10 Legal Studies 12, 12. 94 H. Collins , ‘Ascription of Legal Responsibility to Groups in Complex Patterns of Economic Integration’ (1990) 53 MLR 731, 744.

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quasi-markets might be considered just such an example of complex economic organisation, entailing the creation and maintenance of de¢nite relationships between purchasers, providers, and consumers for the furtherance of particular policy purposes. On this line of reasoning the consumer would be able to sue either the public purchaser or the private provider to enforce the terms of the contract between them, while either principal party might be able to rely on contract in response to the consumer’s action.95 However, such reform is clearly beyond judicial interpretation and development in the human services context given the constraints imposed by prevailing doctrine. In the UK a statutory exception to the doctrine of privity has been legislated in the form of the Contracts (Rights of Third Parties) Act 1999.96 The bene¢t of such measures may, however, be limited in practice. Remedies may not be available to a person a¡ected by the actions of the service provider, but who is not currently a service recipient. Assuming that a contractual claim against the service provider can be established in principle, liability depends on the terms of the contract, and on the prior willingness and ability of the purchaser to include terms that protect the consumer interest. Even where service standards and the provider’s obligations have been adequately speci¢ed in the contract, the consumer may face formidable obstacles in ¢nding out that information, or in gaining access to contractual documentation. This court-based remedy su¡ers from disincentives to enforcement associated with the disproportionate expense and time involved in pursuing legal action, particularly given the relatively small size of many claims. If the prospect of private law actions to enforce breaches of contract is remote, incentives to perform fairly and e⁄ciently may be lacking. Private law might, under certain conditions, provide redress in the form of compensation for non-performance or poor quality in service delivery, but it is unlikely to serve as a substitute for administrative law in upholding ‘public’ values and controlling the exercise of power in decision-making processes.97 Whatever the merits of the argument as to the inherent responsiveness of the private law of contract as a regulatory mechanism,98 its potential in the governance of complex public services appears limited. As has been seen, quasi-market organisation involves a triangular relationship between service recipients, contractors and public purchasers. Even assuming the construction of a legal nexus between service recipient and contractor, for example through relaxation of the privity rule, the advantages claimed for private law regulation in standard-setting,

95 For judicial consideration of the potential for relaxing the privity rule at common law, see the Australian High Court case of Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107. 96 See Law Commission (UK), Privity of Contract: Contracts for the Bene¢t of Third Parties, Report No. 242 Cmnd 3329; E. Palmer,‘Residential Care: Rights of the Elderly and the Contracts (Rights of Third Parties) Act 1999’ (2000) 22 Journal of SocialWelfare and Family Law 461. 97 cf J. Freeman,‘The Private Role in Public Governance’ (2000) 75 NewYork University Law Review 543, 590. Even assuming the standards imposed in private law actions become more demanding, ‘their chances of achieving a public law resolution in private law seem slim’.The parties might also minimize or avoid new obligations by contracting out of them. 98 Collins, n 9 above.


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monitoring and enforcement presumably could not apply in the absence of consumer engagement in these contracting activities.99 This leaves open the question of whether such involvement is practicable in quasi-market organisation, or whether responsiveness in this sense is dependent on a more direct market relationship between consumers and service providers.100 In the law of tort, legislation would be required for the public agency to be vicariously liable for the actions or omissions of the service provider, since under common law the provider in the vast majority of cases is an independent contractor rather than agent of the authority.101 Were this option to be adopted, the public body would in e¡ect accept liability on the basis that the contractor was acting as its agent, and then seek redress from the contractor under the terms of the head contract.102 This option would have the bene¢t of convenience for the individual consumer. However, there would be additional costs for the public agency in administering the contractual relationship with the service provider, whose incentive to e⁄cient and fair administration and to developing adequate internal complaints mechanisms might thereby be weakened. The economic bene¢ts of more direct responsibility for harms caused would not be achieved.

Transcending the public/private divide

Rather than seeking to extend the ambit of private or administrative law, or delineate more sharply the boundaries of public and private action,103 a di¡erent reform strategy challenges the assumption that the problems associated with the blurring of public and private spheres can be addressed through doctrinal clari¢cation or development within either branch of law. The attempt here is to transcend the arti¢ciality of the public/private distinction.The traditional dichotomy is considered no longer helpful in constructing the key tasks of administrative law.104 The necessary co-existence of public and private elements in modern 99 see ibid, 56^93. 100 In purely private markets for services such as social and residential care, there remain however signi¢cant problems of market structure. Consumers have limited capacity to articulate demands and assert their interests. In the empirical research study reported by Ryan, n 11 above, ‘market mechanisms were considered to be particularly imperfect in situations where proprietors were able to persuade, in£uence or even intimidate their clients’, at 355. 101 For an argument in favour of vicarious liability as a reform strategy, see Seddon, n 53 above: ‘Why should the government not be responsible for what contractors do? This of course requires an agency relationship between the government and the contractor, the latter simply being an extension of the government for the purpose of achieving some public purpose.Yet, the common practice in government contracts is to ensure by a suitably drawn clause that the contractor is not an agent of the government’, at 150. 102 ibid, 34. A contract term might be included stipulating that damages could be recovered on breach measured by the loss su¡ered by the citizen. 103 see for example de Smith, Woolf and Jowell, n 63 above, who argue that there should be ‘clear criteria for identifying the kinds of o⁄cial decision that are subject to public law and a clear division in a modern state as to what constitutes the ‘‘public’’ and the ‘‘private’’ realm’, at 163. 104 Aman, n 73 above, 116. For a sophisticated critical defence of the public/private distinction and an overview of current scholarship on this subject, see P. Cane, ‘Accountability and the Public/Private Distinction’, in N. Bamforth and P. Leyland (eds), Public Law in a Multi-Layered Constitution (Oxford: Hart Publishing, 2003).

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public service organisation is re£ected in notions of ‘hybridity’,‘mixed administration’, and the sharing of regulatory roles among various actors in government and the non-state sectors.105 In one variant on this theme, contemporary advanced societies are regarded as undergoing a fundamental transformation involving the development of a distinct ‘third sector’ of the economy which, while neither public nor private, is populated by institutions that are simultaneously independent of the state and yet closely associated with its goals, activities, and responsibilities.106 The legal reform prescriptions associated with this type of analysis are very di¡erent from those based on the traditional public/private law divide. For example, on one view the common law should require powerful bodies to act fairly and with due regard to individual interests and the public interest irrespective of whether the power they exercise lies in public or private hands.107 The emphasis here is on the underlying common values ^ notably autonomy, dignity, respect, status, and security ^ that operate increasingly across both private and public law. While these values are readily apparent in employment, family and welfare law, they may be observed also in contract, for example in the increased protection of security and status through the development of concepts of legitimate expectations and reliance interests.108 Rather than denying the di¡erences between public and private bodies, this analysis challenges the signi¢cance of such di¡erences for the issue of legal governance.109 Consistent with this position, or at least not incompatible with it, is the suggestion that the legal relationship between service providers and consumers may be constructed on the basis of common law obligations in respect of essential public services. Since administrative law is regarded historically as having usurped many of the functions of control of what happens in the public sphere, there is no reason why common law obligations should not be revived and adapted to perform this function in a modern setting. Three inter-related but distinct doctrines can be traced in the common law requiring certain services to be provided to the public at reasonable prices and without discrimination: the law relating to common

105 Aronson, n 70 above, 52^53. On the legal e¡ects of hybridisation, see C. Scott,‘The Juridi¢cation of Regulatory Relations in the UK Utilities Sector’, in J. Black, P. Muchlinski and P.Walker (eds), Commercial Regulation and Judicial Review (Oxford: Hart Publishing, 1997); J. Black, ‘Reviewing Regulatory Rules: Responding to Hybridisation’ in ibid. On hybridisation generally, see Cane, n 104 above, 269^275. 106 M. Freedland,‘Law, Public Services, and Citizenship ^ New Domains, New Regimes?’ in Freedland and Sciarra (eds), n 13 above, 3. The continued regulatory role of the State in respect of privatized functions is explained in terms of the partial or incomplete nature of transfers to the private sector,‘leaving the activity in question perched between the public and private sectors in a genuinely distinctive situation, which should be regarded as constitutionally a third sector’, at 4. 107 D. Oliver, ‘Common Values in Public and Private Law and the Public/Private Divide’ [1997] PL 630. According to Oliver there is a ‘developing common law right of those seriously a¡ected by decisions taken by powerful bodies to have the e¡ects of a decision on them considered and taken into account fairly and rationally before a decision is made’, at 638. 108 D. Oliver,‘The UnderlyingValues of Public and Private Law’ inTaggart (ed), n 67 above, 233^239. 109 Both public law and private law are argued to be concerned with the control of power and with the protection of individuals against abuses of power, and with upholding common values of respect for the interests of individuals. Both are concerned with standards of considerate action and decision-making, and with balancing this quality against the need to uphold authority and protect the interests of good administration ^ Oliver, n 80 above, 11.


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callings, the law regulating monopolies in the public interest, and the doctrine of ‘prime necessities’.While the latter two became the basis of American public utilities law in the nineteenth century, in Britain these bodies of law became progressively marginalised as the regulatory role was assumed by the legislature.110 This attempt to resurrect the common law shares with other hybrid approaches the advantage that it is not dependent on the classi¢cation of legal duties as private or public in character, in fact it may be said deliberately to accommodate a blending of public and private law principles.111 On the other hand, it remains vulnerable to criticism on the ground that it is unhelpfully antiquarian. While of theoretical interest, there are signi¢cant practical obstacles to the rediscovery of judicial controls based on essential service obligations in common law jurisdictions.112 Services of general interest in EU law

In contemporary European debates the notion of rights in respect of essential services is strongly associated with the increasing in£uence of EU law in the telecommunications and utilities sectors. More generally, the term ‘services of general interest’ (SGI) has been adopted in recent European Commission policy statements as a vehicle for the encouragement of further political and economic integration. The Communication of September 1996 on Services of General Interest in Europe has been described as ‘in e¡ect the White Paper or de¢nitive policy document for the development of a Community public service sector, or services of general interest sector.’113 The core values of the EU are said to include access for all members of society to universal services of general bene¢t that contribute to social solidarity, equality of treatment, and European citizenship. Continental jurisprudence may be regarded as useful in helping to provide a ‘framework within which issues of how to develop principles of public service can be debated.’114 While it is clear that the ambit of any SGI regime will extend to private businesses as well as public bodies, there is less certainty over the range of economic activity that might come within the de¢nition of a service of general interest.115 Obviously included are the telecommunications and postal service sectors, which have traditionally been regarded as involving universal service obligations. Other sectors identi¢ed in the 1996 Communication were transport, electricity, and broadcasting. However, the more complex the service and the less obviously it 110 Only since the privatisation programme of the 1980s has public utility law begun to develop in the direction of recognising duties in respect of essential public services ^ see Taggart, n 89 above, 7; T. Prosser, ‘Public Service Law: Privatisation’s Unexpected O¡spring’ (2000) 63 Law and Contemporary Problems 63. 111 Taggart, n 89 above. 112 Aronson considers the common law power to set a reasonable price particularly problematic, arguing that the acknowledged di⁄culties of this function (determining the value of assets, return on capital, level of investment in infrastructure) make it much better suited to performance by a regulatory agency with a speci¢c remit ^ n 70 above, at 51. 113 Freedland, n 106 above, at 15, referring to COM(96)443, 11 Sept 1996. For more recent Green and White Papers on Services of General Interest, see respectively COM (2003) 270, 21 May 2003; COM (2004) 374, 12 May 2004. 114 Prosser, n 15 above, 292. 115 Freedland, n 106 above, 16.

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may be regarded as an essential component of modern daily living, the harder the task of justifying its special treatment in terms of minimum standards governing the citizen-provider relationship. In quasi-markets for human services the existence of multiple relationships poses particular di⁄culties. The services are not natural monopolies, although the supplier may have won the exclusive right to perform the function for a speci¢ed period (competition for the market rather than in the market) through a franchise or contracting out following competitive tendering. Assuming the existence of a legal basis to the relationship between the citizen and service provider, it is di⁄cult to see how human services could be brought within the realm of essential services in the same manner as say the utilities and telecommunications. As to the content of obligations, it remains unclear how core standards of equality, continuity, and universality might be interpreted and applied in sectors such as health and social care.116 Nevertheless, the developing law and practice on public services in the EU has provided a signi¢cant impetus to debates on the public/private divide and arguments in favour of its transcendence. Even in the private law sphere there is evidence of increasing hybridisation, for example in the project for harmonisation of contract law across the EU.117 Solutions to at least some of the doctrinal and regulatory problems accompanying the contractualisation and privatisation of public services are likely to be found in Continental jurisprudence.118

RESPONSIVE REGULATION AND CITIZEN REDRESS

The conclusion to be drawn from the foregoing review of current legal debates is that a hybrid reform strategy, rather than one that seeks to extend or develop private or public law in any particular direction, is needed in order properly to address the legal accountability de¢cits accompanying contractualisation. 116 Following widespread concerns about interference with national autonomy, expressed in response to the 2003 Green Paper by a broad range of public and non-state bodies within member states, the White Paper concedes that it is doubtful whether a framework directive on services of general interest is the best way forward at this stage. Instead member states are urged to ‘pursue the modernisation of services of general interest at their level in order that all citizens have access to quality services adapted to their needs and requirements’ (White Paper, para 4.1). The Commission remains of the view, however, that there should be a systematic approach to the regulation of the development of social and health services at EU level, and accordingly proposes to issue a further Communication on social and health services of general interest in the course of 2005. 117 S.Whittaker,‘Unfair Contract Terms, Public Services and the Construction of a European Conception of Contract’ (2000) 116 LQR 95. The signi¢cance of Directives aimed at harmonising aspects of contract law is not con¢ned to the realm of the private, since lying at the heart of such measures is a judicial power to review the terms on which contracts are made ^ ‘and judicial power to review administrative decisions is central to traditional concerns of public law’, at 120.The ‘European conception’ of contract law ‘would straddle the private/public divide, recognising the role of public participants in the modern market . . . and the importance of the regulation of that market in the interests of consumers.’ EU regulation may itself be regarded as a type of hybrid, transcending the public/private categorisation. 118 C. Harlow, ‘Public Service, Market Ideology, and Citizenship’ in Freedland and Sciarra, n 13 above. In this view it is private law, albeit in some hybrid form, that is regarded as o¡ering an escape route from the inadequacies of administrative law doctrines and the ‘malaise of complex administrative regulation’, 54.


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However, legal or doctrinal development of whatever kind can only be part of an overall solution to contemporary governance problems. The attainment of improved redress for service recipients, and increased accountability of contractors and other parties performing public service functions, requires the careful tailoring of remedies to the conditions prevailing in particular sectors. The ultimate goal of a responsive regulatory strategy is to foster qualities of good administration and respect for fundamental public interest values within the whole range of regulated agencies and bodies engaged in human services networks. Focusing on the relationship between statutory regulation, formal law, and informal complaints-handling and redress mechanisms in speci¢c human service sectors, this ¢nal section identi¢es some fundamental problems with current regulatory arrangements in achieving this goal. An alternative approach is then suggested, re£ecting the current interest shown by government and o⁄cial bodies in informal dispute resolution, and drawing on theories of responsive regulation. Grievances and redress ^ statutory frameworks

For present purposes a‘grievance’may be de¢ned as a perception on the part of the consumer or citizen of a wrong or injustice, giving cause for complaint against the party believed to be responsible for the in£iction of the harm.119 Grievances may be associated most simply with dissatisfaction over quality or some other aspect of performance by the responsible service provider. They may concern perceived unfairness in decision-making, for example in the award of places on educational and training courses, the withdrawal of services due to economic restructuring, or the withholding of services on the ground that the user no longer satis¢es eligibility criteria. The harm may take the form of contractors’ reneging on promises that have given rise to legitimate expectations on the part of users that the services would continue to be provided inde¢nitely.120 Or grievances may have more complex and deep-seated causes, for example concerning the nature of service standards and lack of control by consumers over speci¢cations and terms of contracts between purchasers and providers. Procedures for the redress of grievances and disputes resolution in all human services ¢elds are subject to detailed government guidance and regulations made in accordance with statutory frameworks. Statutory complaints and redress mechanisms have traditionally varied depending on whether services are provided directly by central or local government, provided by a private company or voluntary organisation under contract with a public body, or provided and funded entirely privately. In the residential and nursing home sectors, Part 2 of the Health and Social Care (Community Health and Standards) Act 2003 sought to bring the rules governing contracted out provision into line with those 119 cf P. Birkinshaw, Grievances, Remedies and the State (London: Sweet and Maxwell, 2nd ed, 1994); N. Lewis and P. Birkinshaw,When Citizens Complain: Reforming Justice and Administration (Buckingham: Open University Press, 1993). 120 Rv North Devon Health Authority, ex p Coughlan [2000] 3 All ER 850; [2001] QB 213. In the most extreme cases the harm may involve deprivation of liberty, as in the unwarranted exercise of discretionary powers by contractors providing prison services. It is clear in both Australia and the UK that such decision-making is subject to judicial review.

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applying to local authorities as direct providers. Under the Act, the Commission for Social Care Inspection (CSCI) became the single inspectorate for social care, with a remit to carry out local inspections of all social care organisations ^ public, private, and voluntary ^ against national standards; to register independent service providers that meet national minimum standards; to report on the outcome of inspections; to publish the star ratings for all social services authorities; and to validate all published performance assessment statistics on social care.121 Local authorities were required by the Health Service and Community Care Act 1990 to establish complaints procedures for their social service departments in accordance with policy guidance and regulations.122 In homes managed by local authorities, complaints about standards within the 2003 Act are governed by the Social Services Complaints Regulations 2004, while complaints about other matters (such as the quality of food in the home) are dealt with under the Care Homes Regulations 2001. The procedure for complaints against social services departments involves a two-stage process. The authority is required initially to attempt an informal local resolution, which may entail a formal investigation leading to the production of a report with ¢ndings, conclusions and recommendations, coupled with an adjudication or decision on the matter complained of. The second stage involves independent review under the auspices of the CSCI, which may require the matter to be considered by an Independent Complaints Panel, or commission an investigation, or where appropriate refer the complaint to the Local Government Ombudsman.Where the claimant remains dissatis¢ed, a complaint about local authority actions or decisions may be referred to the Local Government Ombudsman, while any complaint about the service provided by CSCI may be referred to the Parliamentary Ombudsman. A ¢nal avenue of redress is available through judicial review. Proposals for a reformed social services complaints procedure, involving closer partnership between local authorities and the CSCI, are due to be implemented in October 2005.123 The situation is di¡erent where residential and nursing home services are not provided directly by the local authority. The Care Standards Act 2000 requires regulated private and voluntary providers to have their own complaints procedures, subject to minimum standards established under the Care Homes Regulations 2001.Where services are publicly purchased from the independent sector on behalf of citizens, there may be separate grounds for complaint directed at the care home concerning compliance with minimum standards, and the local authority in its function of assessing needs and specifying the level of care required. Due to the complexity of regulations and procedures, and the confusion likely to be 121 Under the Act the CSCI assumes responsibility for work previously undertaken by the Social Services Inspectorate (SSI), the SSI/Audit Commission joint review team, and the National Care Standards Commission. 122 The guidance requires that the procedures should be acceptable to sta¡ and users, be widely available and publicized, and be coordinated by a single responsible person. There are further requirements as to time limits for responding to complaints, the monitoring and recording of complaints, con¢dentiality, the availability of interpreters and advocates, and the provision of training for sta¡ in handling complaints. 123 DH, Learning from Complaints ^ Consultation on Changes to the Social Services Complaints Procedure for Adults, 265082, October 2004.


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experienced by citizens as to where to address complaints under what legislation, local authorities are required to coordinate the complaints process and liaise with providers registered under the Act. The position of the citizen is di¡erent again where services provided by a privately managed home are self-funded, or where the service recipient is accommodated in a voluntary home on an individual basis (ie in the absence of any commissioning arrangement with the local authority). Where the matters complained of are unconnected with the continuing statutory responsibility of the local authority, they remain outside the jurisdiction of the Local Government Ombudsman and cannot be the subject of judicial review proceedings. Similarly with healthcare services, redress mechanisms have varied historically depending on the public, private, or publicly commissioned nature of provision. In the NHS, complaints may be made by any person about services provided by NHS organisations or primary care practitioners such as GPs, dentists, opticians and pharmacists. Directions issued in 1996 and 1998 required NHS Trusts to have written procedures for local resolution of complaints within their organisation, and for a second stage of grievance-handling involving independent review.124 The local resolution procedure extends to services provided overseas or by the independent sector, but only where these are funded by the NHS. Registered service providers are similarly required to establish informal complaints mechanisms and to provide information on how to complain for users of the service and their relatives. Regulations under the Health and Social Care (Community Health and Standards) Act 2003 transferred the independent review stage of the reformed procedure from local NHS bodies to the Healthcare Commission (HC). The aim of the procedure is to resolve complaints quickly and as close to the source of the grievance as possible using the most appropriate means, for example conciliation.125 In the case of complaints against an independent healthcare provider or a NHS FoundationTrust (FT),126 a citizen who remains dissatis¢ed following attempted local resolution may also make a request for an independent review to the HC.127 When the HC receives a complaint that has not been resolved locally, an initial review is carried out by a case manager to determine whether 124 The legal framework for NHS complaints consists of Directions made under powers conferred on the Secretary of State by s 17 of the National Health Service Act 1977, Section 1A of the Hospital Complaints Procedure Act 1985, and paragraph 6(2)(e) of Schedule 2 to the NHS and Community Care Act 1990. Primary care practitioners are required through their contracts of employment to operate a practice-based complaints procedure and to co-operate with the independent review process operated by PCTs, which took over this role from health authorities in October 2002. Local resolution of complaints should be sought within six months of awareness of the grievance, although PCTs and NHS Trusts have discretion to waive this time limit where there are good reasons for doing so. 125 As a non-governmental body, the Healthcare Commission will issue its own independent guidance based on the Department of Health regulations. An important part of the Commission’s role is to learn from the complaints it investigates and to feed this knowledge and experience into its wider assessment of the performance of NHS organisations and the NHS as a whole. 126 The term ‘independent healthcare’ refers to any private, voluntary, not-for-pro¢t or independent healthcare establishment (or service, agency, practice or business) required to register with the Commission under the Care Standards Act 2000, as amended by the Health and Social Care Act 2003. 127 The HC took over responsibility for regulating and inspecting the independent healthcare sector from the previous regulator, the National Care Standards Commission (NCSC).

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the complaint should go to an investigation or panel.Where the grievance has not been satisfactorily redressed or the case otherwise disposed of by independent review, the Health Service Ombudsman is empowered to investigate complaints made by or on behalf of citizens who claim to have su¡ered due to unsatisfactory treatment or service by the NHS. The Ombudsman has jurisdiction over health services provided by non-NHS bodies where these are funded by the NHS, but not where they are ¢nanced privately. The complexity of these regulations, complaints procedures, and redress mechanisms in the health and social care sectors is likely to have given rise to considerable confusion on the part of citizens as to where and how to pursue grievances.128 There is a proliferation of regimes and central directions, with varying implications for citizen redress depending on the method of funding or the identity of the provider. Important di¡erences remain in the nature and degree of protection of citizens’ interests in spite of recent attempts at harmonisation. Further problems associated with the centrally-driven nature of the regulatory process concern the general lack of involvement and participation of stakeholders in standard-setting and enforcement, and the likely ine¡ectiveness of bureaucratic regulation in achieving its goals of improved redress and responsiveness in human services provision. Remedial hierarchies

There appears to be general agreement among policy-makers and academics as to the desirability of dealing with grievances in the ¢rst instance as close as possible to the site where the harm in question was supposed to have originated, with graduated enforcement from informal to more formal sanctions where necessary. The Government has recently emphasized the need for informal or alternative disputes resolution (ADR) in the handling of grievances arising from the activities of government departments and executive agencies in cases where there exists a statutory right of appeal to a tribunal.129 Similarly the National Audit O⁄ce, in its more general analysis of citizen redress in public services, has stressed the importance of informal complaints procedures located at the bottom of a metaphorical ‘ladder of redress’.130 While informed primarily by pragmatic e⁄ciency and cost considerations, such sentiments may be regarded as consistent with a responsive regulation approach which acknowledges the limits of law and legal processes in addressing regulatory problems.131 In this approach, the role of an 128 See for example: Health Service Ombudsman for England,‘Making Things Better? A Report on Reform of the NHS Complaints Procedure in England’ 10 March 2005. The Report reviews ¢ve key weaknesses in the current system and approach (para 23): complaints systems are fragmented within the NHS, between the NHS and private health care systems, and between health and social care; the complaints system is not centred on the patient’s needs; there is a lack of capacity and competence among sta¡ to deliver a quality service; the right leadership, culture and governance are not in place; and just remedies are not being secured for justi¢ed complaints. 129 DCA, n 6 above. 130 NAO, n 5 above, 8. 131 J. Braithwaite,T. Makkai,V. Braithwaite and D. Gibson, Raising the Standard: Resident Centred Nursing Home Regulation in Australia (Canberra: Australian Government Publishing Service, 1993); P. Nonet and P. Selznick, Law and Society in Transition:Toward Responsive Law (Harper Torch Books,


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e¡ective and properly functioning remedial hierarchy should be not only to serve e⁄ciently in the redress of grievances, but also to provide incentives for decisions to be made fairly and properly in the ¢rst instance. In public services generally, a broad range of public and private bodies has since the 1990s been required by the Citizen’s Charter and its successor, Service First, to observe core principles of public service delivery, including the requirement ‘to have a clear, well publicized, and easy-to-use complaints procedure, with independent review wherever possible.’132 As has been seen, public agencies and non-state bodies engaged in human services networks are subject to a range of speci¢c regulatory requirements concerning informal complaints procedures. Where citizens have grievances that have not been satisfactorily resolved by these means, more formal internal and external redress mechanisms are available to varying degrees further up the ladder of redress including application to the Ombudsman and, at the apex of the hierarchy of remedies, judicial review.133 The role of the Administrative Court as adjudicator of last resort in disputes involving public authorities is reinforced by the procedural rule that permission to proceed will not normally be granted until the applicant has exhausted alternative remedies.134 This requirement has been reiterated by the Court of Appeal in Cowl v Plymouth City Council, in which Lord Woolf criticized the ‘unfortunate culture’ of ‘over-judicialising’ disputes in such cases.135 This case illustrates the ine¡ectiveness of the remedial hierarchy ^ as presently constituted in the publicly managed nursing home sector ^ both in providing incentives for public o⁄cials to make decisions that are ‘right ¢rst time’, and (where errors are made or grievances occur) in ensuring that complaints are dealt with at the lowest

132

133

134 135

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1978); P. Vincent-Jones,‘Responsive Law and Governance in Public Services Provision: A Future for the Local Contracting State’ (1998) 61 MLR 362. Service First ^ The New Charter Programme, Principle 6. http://archive.cabineto⁄ce.gov.uk/ser vice¢rst/1998/introduc/nine.htm (last visited 10 August 2005). Since the formal completion of the Service First and Modernising Government programmes, such commitments are now contained in Public Service Agreements (PSAs). For an analysis of the limited impact of judicial review on ¢rst-instance administrative decisionmaking, see S. Halliday, Judicial Review and Compliance with Administrative Law (Oxford: Hart Publishing, 2004); M. Hertogh and S. Halliday (eds), Judicial Reviewand Bureaucratic Impact (Cambridge: Cambridge University Press, 2004). Civil Procedure Rules 1998 (SI 1998 3132). Frank Cowl & Orrs v Plymouth City Council [2002] 1WLR 803 (CA); A. Le Sueur,‘How to Resolve Disputes With Public Authorities’ [2002] PL 203. The case involved a challenge to the legality of the council’s decision to close down a residential care home. The seven resident applicants (aged between 77 and 92 apart from one aged 66, and all frail and in poor health) sought judicial review to quash the defendants’ decision to close the home, at least three claiming that they had been given assurances by employees of Plymouth council that they would be able to stay in the home for the rest of their lives, and that they had a legitimate expectation that the council would be held to its promises. A⁄rming the decision of Scott Baker J. at ¢rst instance that the claim should be rejected on the ground that there was insu⁄cient evidence to establish that ‘home for life’promises had been made, the Court of Appeal issued general guidance on the paramount importance of avoiding litigation wherever possible in disputes between members of the public and public authorities exercising powers on their behalf. Under the CPR the court must further the overriding objective of enabling the just disposal of cases through active management (CPR 1.4(1)), including encouragement of the parties to use any ADR procedure where appropriate (CPR 1.4(2)(e)). The parties could be required to explain the steps taken to resolve the dispute without the court’s involvement, for example through complaints mechanisms, in an inter partes hearing.


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possible level.136 It further raises questions not only of institutional design and the relationship between the di¡erent levels of redress, but also of the responsiveness of regulatory arrangements in terms of knowledge on the part of citizens and consumers of complaints mechanisms, and their ability to express grievances through appropriate voice mechanisms.137 The provision of information about grievance procedures and the existence of accessible channels of communication for complaints are essential pre-requisites for the e¡ective operation of remedial hierarchies. The more fundamental problem for present purposes, however, concerns the lack of uniformity in regulatory schemes governing di¡erent modes of provision of human services, and the resulting unevenness in the protection of citizens’ interests. To reiterate, grievance procedures vary depending on whether the decision-making body is a government department or agency, an independent provider delivering a public service under contract with a commissioning public agency, or a private body delivering a public service directly to the citizen. The jurisdiction of the Ombudsman extends to independent bodies only where services are publicly funded. Judicial review is possible only where the decision complained of involves a government department or other public agency, or an independent body performing a public function as this term has been de¢ned in law. The fact that the body in question provides services to third party citizens under contract with a public agency is not by itself su⁄cient to render decisionmaking amenable to judicial review.The result in such cases is that the relationship between the citizen and service provider may be regulated neither by contract nor by administrative law.138 There is a need for greater consistency in the protection of citizens’ interests in human services regardless of the manner of delivery, the nature of funding, or the public or private identity of the service provider. All providers and other bodies performing public service functions in human services networks should have in place adequate complaints mechanisms and procedures through which grievances can be investigated and settlements reached wherever possible, prior to submission of disputes that cannot be so resolved to more formal adjudication and ultimate judicial determination. A key regulatory objective informing the design of 136 The appeal of the nursing home residents was dismissed subject to agreed terms going beyond what the Council was obliged to do under its statutory complaints procedure.When required to focus on the future well-being of the claimants, the parties had no di⁄culty in coming to an agreement which was ultimately annexed to the judgment and formed part of the order of the court. The terms of reference of the panel appointed to resolve the dispute included making recommendations to the Council’s social services committee as to whether the home should be closed, taking account of the issue of whether any of the residents were promised a‘home for life’, and the emotional, psychological, and physical health of the residents and the impact of a move upon them. The Cowl ruling emphasizes the necessarily residual role of judicial review even in disputes involving the provision of services by public bodies that are unambiguously public in character (leaving aside the separate issue of how far the decisions of private organisations are amenable to review on the basis of their performance of a public function). 137 Ombudsman’s Annual Report for 2003^4 (2nd Report^13 July 2004). 138 Where public services are privately funded and directly provided in the market, the apex of the remedial hierarchy is judicial enforcement of contractual rights and duties. The level of citizen protection in such cases may be superior in some respects while inferior in others, compared to that a¡orded under direct government provision or purchase-of-service contracting.


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remedial hierarchies should be sensitivity to the need to minimize grievances, complaints and disputes, and maximize performance through appropriate incentive structures.The ¢nal section shows how this goal might be attained through a hybrid legal reform strategy combining elements of public and private law, and involving the development and implementation of responsive remedial hierarchies in particular human services sectors. Hybrid governance

Debates on the accountability de¢cits accompanying contractualisation have tended to focus on the relationship between private contractors and ultimate consumers of public services.139 The general preoccupation of legal commentators with this relationship is understandable, given that the fundamental purpose of outsourcing is to transfer responsibility for provision from government agencies to external parties. This objective might be undermined if remedies in respect of contractor performance were to lie against public purchasers rather than the service provider. Furthermore there are sound economic reasons why the contractor should be principally responsible.The costs associated with the risk of legal action, handling complaints and paying compensation, can theoretically be factored into the tender price. Contractors are also thereby subject to incentives to provide services in a fair and e⁄cient manner, since complaints are likely to be minimised and pro¢ts maximised by such performance.140 A principal argument of this article, however, is that the citizen/user^provider dimension of contracting regimes cannot adequately be considered in isolation from other relationships involved in human services organisation. Accordingly the following analysis takes account of all three main axes of contracting regimes with a bearing on the quality of citizen redress (Fig 1(a), (b), (c)). The focus is on how the regulatory framework protects both particular interests and the more general public interest in the contractual organisation of public services, and how it might be con¢gured to serve this purpose more e¡ectively. The idea that hybrid governance structures might be designed speci¢cally to regulate the relationships between the various parties engaged in public service networks following contractualisation has recently been explored in Australia.141 Here it has been argued that consumer protection arrangements under the Commonwealth Telecommunications Act 1997 may serve as a model for public services generally.142 Applying this approach in the human services context, public 139 S. Fredman and G. Morris, ‘The Costs of Exclusivity: Public and Private Re-examined’ [1994] PL 69: ‘. . . Supervision of contracting power should not be available only at the suit of those who have failed to secure, or retain, a contract; the users of a service also have an interest in ensuring that there is no misuse of contracting power and that services provided pursuant to a contract are delivered’. 140 Schoombee, n 42 above, 142. 141 ibid. 142 Under the Commonwealth Telecommunications Act 1997, regulation of the liberalised telecoms markets is shared between government regulatory agencies (the Australian Competition and Consumer Commission and the Australian Communications Authority) and industry bodies: the Australian Communications Industry Forum is an industry-owned, operated and ¢nanced company, and the Telecommunications Industry Ombudsman is similarly self-funded by mem-

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purchasing agencies would specify through terms in the contract with providers performance standards in relation to such matters as internal and external customer complaints procedures and time limits for dealing with service requests and complaints.143 As has been shown, human services are already governed to some degree by such standards designed to ensure satisfactory outcomes for service users. The scheme would provide for a monetary penalty (with minimum and maximum limits) payable by the contractor to the customer in the event of noncompliance with service standards. Self-enforcement through an informal, internal complaints mechanism would be backed by provision for complaint to an independent party such as an Ombudsman, who could certify breach of the standard where the complaint was held to be justi¢ed.144 Self-organisation and self¢nancing of schemes within service industries might encourage the development of e¡ective complaint-handling mechanisms that minimise the need for formal investigations.145 The Ombudsman’s recommendation might be made enforceable in an industry-speci¢c tribunal. In the event of non-payment or non-compliance by the contractor, the complainant would have an enforceable right of recovery in a court of law. The public law element in such regulation lies in the enforcement of service standards by the consumer without having to establish a contractual nexus, and in the initial process of investigation of the complaint and certi¢cation of breach of such standards.This element might be strengthened to include orders for corrective action to be undertaken by a provider.146 The private law dimension lies in the monetary form of redress, and in the ultimate enforceability of the claim by civil action if necessary. To counter di⁄culties of third-party enforcement, the scheme might provide for enforcement on the consumer’s behalf, whether by the public agency or a body representing the consumer interest. Framework legislation could provide an adaptable template for the introduction of hybrid regulatory schemes of this nature, serving as the basis for more speci¢c development of standards, remedies, and procedures in particular human service sectors.147 The implementation of service standards should be relatively straightforward, since the purchaser-provider contract already contains detailed service speci¢cations and a range of other standards. Any legislation would then

143

144 145 146 147

bers of the scheme ^ see K. MacNeill,‘Self-Regulation: Rights and Remedies ^ The Telecommunications Experience’, in C. Finn (ed), Sunrise or Sunset? (Canberra: AIAL, 2000); A. Stuhmcke, ‘The Rise of the AustralianTelecommunications Industry Ombudsman’ (2002) 26 Telecommunications Policy 69. In the case of services funded privately rather than publicly, ie in a regulated market rather than in quasi-market organisation, similar conditions might be applied through terms contained in licenses or operating agreements governing relationships between independent regulatory agencies and private or voluntary sector providers.The following argument on the need for citizen and stakeholder involvement in public contracting processes is valid also in such regulated market contexts ^ cf C. Graham, Regulating Public Utilities: A Constitutional Approach (Oxford: Hart Publishing, 2000). The Ombudsman role would be closer to that currently performed in private sector industries than existing public sector models ^ see Seneviratne, n 58 above, 55. MacNeill, n 142 above, 255. In the telecoms scheme a‘complaint’ becomes a‘dispute’ if the manager in charge of the informal investigation is unable to resolve the matter to the satisfaction of the complainant. Schoombee, n 42 above, 144. ibid, 143^144; Seddon, n 53 above, 148.


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simply refer to the contract. The advantage of this reform compared with simple extension of current Ombudsman jurisdiction would consist in the ultimately enforceable nature of the right to payment, within a graduated self-enforcement structure aimed at making such formal recourse generally unnecessary. Such features also distinguish this proposal from current arrangements under public service charters in Britain for the payment of compensation to consumers for poor performance, which for various reasons are regarded as having been unsuccessful.148 The success of such a reform strategy would depend most obviously on the quality of contract management by public purchasing agencies.149 Particular attention needs to be given to service speci¢cation and the de¢nition of contractor obligations, and to monitoring, evaluating and reporting on contractor performance. Purchasers might be made responsible for specifying the contractual information to which service recipients and other members of the public should be entitled, and how they are to gain access to that information. There are particularly strong public and citizen/consumer interests in the availability of, and access to, contractual information.150 In England and Wales, access to documents that are claimed to be ‘commercial in con¢dence’ is limited under existing freedom of information legislation.151 Additional responsibilities in this regard might be imposed on public agencies through the hierarchical dimension of contracting regimes,152 in anticipation of the obstacle under prevailing arrangements that 148 G. Drewry,‘Whatever Happened to the Citizen’s Charter?’ [2002] PL 9. The provisions for Financial Remedies for Maladministration, drawn up by the DWP, fall far short in various respects of what might be regarded as an adequate contractual system of redress for poor performance. Most notably, the compensation scheme is discretionary in nature. Ex gratia special payments are described in Government Accounting as ‘payments which go beyond administrative rules or for which there is no statutory cover or legal liability’. http://www.jobcentreplus.gov.uk/pdfs/Malad ministrationGuide.pdf, para 8 (last visited 10 August 2005). 149 Schoombee, n 42 above: ‘No remedy of whatever type could operate e¡ectively unless there is speci¢city in relation to the obligations of the contractor, and public disclosure of those obligations’, at 142. 150 N. Seddon,‘The Victorian Audit Review of Government Contracts ^ Lessons Learned from the Kennett Era’ (Public Sector Accountability and Governance Conference, University of Wollongong, 2000). A radical change in policy would be needed to remove the obstacle to public accountability that is currently posed by over-use of ‘commercial in con¢dence’ clauses. 151 The Freedom of Information Act 2000 confers a general right of access to information held by public authorities (s 1).‘Public authority’ includes any body, by order of the Secretary of State (s 5), exercising functions of a public nature, or providing under a contract with a public authority any service whose provision is a function of that authority.‘Exempt information’ includes information provided in con¢dence, where disclosure would constitute an actionable breach of con¢dence (s 41 (1)), or where information constitutes a trade secret whose disclosure ‘would, or would be likely to, prejudice the commercial interests of any person (including the public authority holding it’) (s 43 (1) and (2)). The protection of commercial interests under this exemption is signi¢cantly greater than originally proposed in the White Paper (‘Your Right to Know’, Cm 3818, December 1997), where the exemption would apply only if the company could prove that substantial harm would be caused by release of the information. 152 See Administrative Review Council (ARC),The Contracting Out of Government Services, Report No 42 (Canberra: Commonwealth of Australia, 1998). The ARC Report recommended that public purchasing agencies should be subject to a range of responsibilities. They should be required to keep relevant information relating to the management and monitoring of contracts to enable evaluation of service e¡ectiveness . . . (R1); contract terms should be included requiring contractors to keep and provide su⁄cient information, to the agency and for parliamentary scrutiny. . . (R2 and

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many public bodies lack su⁄cient incentive or resources to undertake such extra burdens. Citizen involvement in contracting regimes is a vital ingredient of responsiveness. While there has been considerable debate on the protection of contractor interests in the purchaser^provider relationship, relatively little attention has been accorded the issue of the role of citizens and consumers in standard-setting and contract management.153 Empirical research on contracting out in local government in England has shown the bene¢ts of increased responsiveness associated with consumer and citizen participation in a wide range of contractual activities.154 In the council housing sector, for example, competitive tendering for housing management services has been conducted in some authorities on the basis of elaborate procedures for involving council tenants at every stage, from the drawing up of contract speci¢cations and allocation of responsibilities through to tender evaluation, contractor selection, and the monitoring and enforcement of contracts.155 Mechanisms for increasing consumer voice include consumer councils, systems for registering consumer views in the management of contracts or when they are due for renewal, and in appropriate circumstances ‘consumer input into the process of articulating some of the contract speci¢cations or regulatory goals.’156 Of crucial importance to responsiveness is the manner of determination of service standards. In Britain generally, standards in many public service sectors are centrally prescribed, in pursuit of the government’s deliberate policy of reducing local variations in quality and ‘post-code lotteries’ through national frameworks. Regulation cannot be responsive where standards do not re£ect the needs of service recipients, for example residents in nursing homes, or fail to take account of regional di¡erences and preferences. Greater £exibility is required for public purchasing agencies in processes of standard-setting and service speci¢cation. The

153 154

155 156

3); agencies should consider when letting the contract whether to require the contractor to agree to a performance audit from the Auditor-General . . . (R4); agencies should require contractors to adopt complaint-handling procedures where these are not already in place . . . (R5); agencies should be responsible for ensuring that service recipients are made aware of such avenues of complaint; agencies should ensure that contractors are under a contractual obligation to act on the recommendations of the Ombudsman, and to give e¡ect to any decision of a merits review tribunal reviewing the contractor’s decision . . . (R13 and 21); agencies involved in contracting out should provide their sta¡ with regular training on FOI issues . . . (R17); agency heads should be empowered under existing arrangements to make payments to people who have su¡ered loss or damage as a result of contractor action . . . (R26); agencies should require contractors to make available records to enable the agencies’ accountability for management of the contract to be maintained, and should develop mechanisms for obtaining information from service recipients . . . (R29 and 30). Such dimensions were excluded from the terms of reference of the ARC investigation into contracting out in Australia ^ n 151 above, para 1.9. P. Vincent-Jones and A. Harries,‘Limits of Contract in Internal CCT Transactions: A Comparative Study of Buildings Cleaning and Refuse Collection in ‘‘Northern Metropolitan’’’ in D. Campbell and P. Vincent-Jones (eds), Contract and Economic Organisation: Socio-Legal Initiatives (Aldershot: Dartmouth, 1996). P. Vincent-Jones and A. Harries, ‘Tenant Participation in Contracting for Housing Management Services: A Case Study’, in D. Cowan, (ed), Housing: Participation and Exclusion, (Aldershot: Dartmouth Publishing Company, 1998). Harden, n 12 above, 60.


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service standards in particular sectors might be collectively established through tripartite consultation between public purchasers and consumers and representatives of provider organisations. The ultimate aim would be to render explicit for all interested parties the quality of services that consumers could reasonably expect, and the terms on which services would be provided. The standards thus established, including procedures for complaints handling and disputes resolution, might govern relationships between contractors and consumers regardless of the public, private, or voluntary sector identity of the service provider. An immediate objection to such reform might be that the addition of a further layer of regulation to the governance of contracting would be excessively costly, bureaucratic and di⁄cult to implement. In addition, the proliferation of schemes for di¡erent service sectors might be both confusing for consumers and result in unnecessary duplication of institutions dealing with very similar problems. However, many of the elements necessary for this type of scheme are already present in some form in the regulatory environment. Some such strategy appears to o¡er the best hope of satisfying the need created by contracting out to provide both redress for individual grievances, and a mechanism for holding contractors to account for unfairness and other de¢ciencies in decision-making processes that impact on individual and public interests.157

CONCLUSION

Debates on the legal position of citizens and on the adequacy of redress need to take proper account of the shifting organisational foundations of public services. A fundamental purpose of government in restructuring major welfare sectors since the 1980s has been to o¥oad functions traditionally performed by the state onto non-state bodies.The deployment of regulatory instruments including competition, corporatisation, and choice in conjunction with contracting regimes is playing a major part in increasing private sector involvement in human services. The more that consumers are brought into direct relationship with independent providers, for example through vouchering, co-payments and direct payments, the more the arrangement begins to resemble a regulated market rather than a quasi-market. This article has suggested that, in the longer term, the trend may be away from regulated public contracting towards regulated private contracting in the organisation and provision of human services. In that case, the principles of stakeholder engagement and participation that have been argued to be essential to responsive contracting regimes might apply similarly to the governance of relationships between citizens, service providers, and independent regulatory agencies in regulated markets. Some current problems with public contracting for human services may be due to excessive or inappropriate privatisation of provider functions. The solution to public service failures in such cases may lie in the adoption of an alternative 157 For a discussion of the advantages of an alternative ‘transaction-based’ approach, characterized by uniformity in mode of redress across a diverse range of services or products, see MacNeill, n 142 above, 265.

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form of provision,158 rather than in attempting to graft redress mechanisms onto the currently failing mode of organisation. For example, the severe economic dif¢culties and governance problems a¥icting the nursing and residential care sectors beg the question whether these human services might better be provided directly. Generally, it may be suggested that where quasi-market contracting is adopted as a tool of government, the state has particular responsibilities for overseeing and maintaining the conditions of operation of markets and for protecting the interests of vulnerable citizens. Quasi-market organisation (and other forms of privatisation) create the potential for certain harms to individual and public interests for which no legal remedy can be expected to compensate. As to the relationship between citizens and non-state providers in purchase-ofservice contracting, the starting point for better governance is due recognition of the essentially public character of human services. Provider organisations in quasi-markets operate within complex economic networks oriented explicitly to the provision of public services. Private contractors are not ‘just’ private. But neither should they be treated by the legal framework in exactly the same way as government bodies purely on account of the ‘public’ function they perform. The attempt to do so has inevitably encountered severe doctrinal di⁄culties, re£ecting the intermingling of public and private sectors in new ways and the essentially hybrid character of contemporary public services. Hybrid economic organisation calls for hybrid institutional solutions to governance problems. It has been suggested that one such solution, transcending the traditional dichotomy of private and public law, entails the combination of formal law and legal procedures with more informal institutional processes for handling complaints and dealing with grievances within public service organisations themselves. This reform strategy, involving the careful tailoring of remedial hierarchies within particular human service sectors, avoids the problems of perverse incentives and game-playing that tend to accompany ‘command and control’ regulation and which are likely to frustrate regulatory objectives and produce little or no bene¢t for service users.159 The aim of responsive regulation is to facilitate within the whole range of public and non-state organisations engaged in public service networks the development of public service values, processes, and principles of good administration,160 including mechanisms for the redress of grievances of citizens and consumers with interests or stakes in the human services in question, and thereby ultimately to minimize grievances and disputes.161 In this vision, the onus should be on organisations themselves to devise means by which standards, both substantive and procedural, could be satis¢ed. Escalation to formal enforcement 158 The contracting out of employment and training services in Australia, for example, has been argued to be so problematic as to call into question the viability of any form of outsourcing of this function ^ see G. Ramia and T. Carney,‘Contractualism, Managerialism and Welfare: The Australian Experiment With A Marketised Employment Services Network’ (2000) 29 Policy and Politics 59. 159 J. Braithwaite,‘Rewards and Regulation’ (2002) 29 Journal of Law and Society 12, 15. 160 P. Selznick,The Moral Commonwealth: Social Theory and the Promise of Community (Berkeley, University of California Press, 1992) 338. 161 J. Braithwaite, Restorative Justice and Responsive Regulation (Oxford: Oxford University Press, 2002) 255: ‘The most e⁄cient way for an organisation to continuously reduce the injustice for which it is responsible will be dispute prevention rather than dispute resolution’.


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and dispute resolution should be necessary only in cases where the interests of service recipients are not su⁄ciently met by self-regulation. Where complaints are upheld as a result of any disputes handling mechanism, the regulatory objective should be not to punish the provider for breach of contract, but to make e¡ective restoration to those who have been inconvenienced by the failure to perform in accordance with service standards ^ the users of public services.162 At the apex of remedial hierarchies, the speci¢cally human rights of citizens might be protected through obligations imposed on service providers in their contracts with public purchasers, combined with the adoption by the courts of a functional interpretation of the meaning of public authority in section 6(3)(b) of the HRA 1998. Finally, a fundamental precondition of the success of such hybrid governance is greater involvement of citizens and service recipients in standard-setting, the monitoring of performance, and other aspects of contract management. While governments in recent years have paid lip service to the importance of citizen participation, the dominant regulatory approach has in practice been centrallydriven and top down in character. If contracting regimes are to serve more responsively in the governance of human services, they need to be redesigned from the bottom up, with more information concerning contractual processes being made available to citizens and better voice mechanisms for the communication of complaints and grievances. The public contracting process opens up a space for the collective representation of consumer interests that exists neither in traditional bureaucratic organisation, nor arguably in regulated market provision. In the citizen/user-public purchaser relationship, voice is crucial in ensuring that the exercise of decision-making powers by public agencies remains responsive to the needs and preferences of those whom they represent.

162 ibid, 254.

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