Hivetec-DES-Report-V1.4

DRIVING GREATER COMPETITION AND
CONTESTABILITY IN DES
Current Model
(Market Share Approach)
Heavily regulated provider market
Customer flow is allocated on a market share
arrangement and coordinated by Centrelink
Difficult for new providers to enter DES market
during the 5-year term of the Deed.
High barrier to entry and long term security
High performing providers restricted in
expanding business to new and existing
markets during the 5-year Deed term
Providers have a relatively stable cashflow
forecast and stable business environment
Margins are high 20%+
Changes Proposed
(Open Market Principles)
More flexible provider market
DES Provider Panel to make it easier for existing providers to
expand and for new providers to enter DES market.
Market share restrictions lifted so successful providers can grow.
Lower barriers to entry with lower security, numerous providers
issued licences to operate in each ESA
The flow/volume of jobseekers engaging with a provider will be
more market driven.
Providers will have uncertain cashflow forecasts with little or no
reduction in fixed costs.
Providers will have more competition and increased uncertainty
(Amplified Risk & greater need to engage, retain and deliver on
participant’s expectations)
Margins lower than 7-9% expected
Implications
1. Five-year licenses for DES will be issued using an ‘approved provider panel’ system, which replaces market
share allocation. The approved provider panel will streamline entry to new ESAs for high-performing Providers
and also enable new entrants to apply for licenses during the five year term.
2. Once approved to operate in an ESA, Providers will be free to promote their services and attract Participants
in a contestable market. Participants will be able to switch Providers and seek more suitable, quality services
outside ESA boundaries, meaning service revenue for Providers will be much less predictable.
3. Despite the lack of guaranteed market share, ESA coverage will remain a key procurement factor for DES.
Providers will need to be able to demonstrate that they can deliver services across the entire ESA, e.g. through
a combination of full time, part time and outreach services. This increases risk for Providers, particularly those
that do not have other contracts to support infrastructure.
4. It is anticipated that Providers will likely favour delivery locations on, or near, ESA boundaries to attract
Participants from adjacent ESAs without increasing fixed costs.
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