JOHN HODGINS

The Australian mixed system of legal aid service delivery has survived the fiscal cuts and is adjusting to the purchaser-provider paradigm. There have been a number of major impacts during the 1990s on the legal aid system; but essentially the mixed model has survived with the legal aid system being generally regarded as more efficient, accountable and responding to government’s service priorities. Adjustments are continually being made in an environment of financial stringency.

In 1990, the National Legal Aid Advisory Committee (NLAAC) submitted its report "Legal Aid for the Australian Community" to the Commonwealth Government. Key aspects of the report included:

• endorsement of Australia’s mixed system of legal aid service delivery, involving the private legal profession and salaried workers in both Legal Aid Commissions and community legal centres;

• defining a set of national legal aid principles and guidelines; and
• advocating the adoption of a ‘solution-oriented’ approach to program management in place of the then prevailing ‘services-orientation’.

However, NLAAC also warned that unless access to justice and the productivity of the legal aid administrative systems improved in the 1990s, the cost of legal aid would continue to rise and attainable service levels would decline.

Despite a number of inquiries and reports in following years, systems changes and funding changes were minimal, and catch-up to overseas levels of expenditure did not occur. The "Holden Kingswood" as it was described never made it to Rolls-Royce or Cadillac status. In 1994, the Access to Justice Advisory Committee Report, "Access to Justice: an Action Plan" pried loose in the May 1995 Justice Statement $160m over 4 years. These gains quickly evaporated in 1997.

The election of the coalition government in March 1996 led to dramatic changes to legal aid. The Commonwealth Government identified that an arrangement existed under which it was expected to provide funding in the absence of effective mechanisms to influence or set priorities through which legal aid commissions could be made accountable to taxpayers. The pre-1997 arrangement left it to legal aid commissions to decide how government funds should be used, by having responsibility for the setting of priorities and guidelines for the provision of legal aid.

The area of greatest contention for the Commonwealth Government was that funds were being directed increasingly to provide assistance to people facing criminal prosecution at the expense of those who needed assistance with their family law matters. Criminal law matters are primarily brought under State law and the Commonwealth saw them as a State responsibility. The Commonwealth had always placed a high priority on providing legal assistance for matters which arise under the Family Law Act. It had no effective mechanism to direct legal aid commissions to spend more funds on family law matters.

The funding provided by the Commonwealth went into a general pool of funds. The funding was indexed annually. The Commonwealth had developed the approach of responding to calls for additional funds by establishing separate funds on a reimbursement basis for some Commonwealth priorities, e.g., war veterans’ matters, child support matters. The Commonwealth argues that this approach was not satisfactory.

The Commonwealth gave notice in June 1996 that it intended to terminate the legal aid funding agreements it had with each of the States and Territories. It then announced in the August 1996 budget that a $100m reduction in Commonwealth legal aid funding was to be achieved between 1997/98 and 2000/2001. Funding beyond 1996/97 for the Justice Statement initiatives was withdrawn. These measures represented a reduction in Commonwealth legal aid funding of more than 20%.

For the longer term, the most significant change that arose out of the funding cuts was the decision that Commonwealth funds could only be expended on Commonwealth matters. The growth in criminal expenditure, principally due to law and order campaigns, has put enormous pressure on legal aid commissions.

The Commonwealth negotiated funding arrangements for legal commissions, with the Commonwealth stipulating the policies and priorities for the use of Commonwealth funds. In New South Wales, Victoria and Queensland those agreements are based on a purchaser-provider arrangement which is the Commonwealth Government’s preferred model for future funding. Legal aid commissions are now administering Commonwealth legal aid in accordance with nationally consistent guidelines, with the exception of Victoria and South Australia, which have slightly different cost management guidelines for family law matters. The Commonwealth guidelines require that eligibility for assistance be assessed in accordance with the guidelines, a means test to assess the applicant’s financial circumstances and a merits test to assess the "reasonableness" of the applicant’s matter. The guidelines form part of each agreement between the Commonwealth and States or Commissions.

In response to the Commonwealth Government’s termination of the former cooperative funding arrangement, the Queensland Government established a new legal aid body, Legal Aid Queensland, to handle matters arising under Commonwealth and State law. Legal Aid Queensland contracted with the Commonwealth Government and the State Government separately to provide legal aid services. Priorities, guidelines and performance targets are set out in the agreements. The Legal Aid Queensland Act 1997 makes specific reference to purchaser-provider arrangements. The purchaser being the one who decides what services are required and the provider being the agent who delivers them. Legal Aid Queensland is a purchaser of legal aid services and a provider of legal services, through its Legal Practice. The organisation is structured along purchaser-provider lines with three Divisions:-

• Grants—purchaser of legal aid services
• Legal Practice—provider of legal services
• Corporate Services—provider of corporate services to both Divisions

Discussions are currently taking place with the Commonwealth to develop a Performance Information Framework. It has been helpful to identify services that fall within the separate categories of purchasing and service provision. Attachments 1 and 2 provide a breakup of the respective services.

The Commonwealth is of the view that the purchaser-provider arrangements operate more effectively because they provide a mechanism which enables the Commonwealth to work directly with commissions to ensure the implementation of Government policies and priorities. The Commonwealth prefers more direct involvement with the commissions, as service providers, rather than relying on arrangements administered through State and Territory Governments.

It is acknowledged that the division between purchaser and provider is not pure because commissions are purchasers in relation to assignments and the Commonwealth funds the commissions for the purchase of services. The critical issue for the Commonwealth is to set the policies and priorities to be applied to the provision of legal aid for Commonwealth matters. It is also recognised that legal aid commissions do not have a strictly commercial relationship with the Commonwealth; but rather, the relationship is based on a shared undertaking of each other’s roles and responsibilities and a shared purpose to implement government policy of providing reasonable access to justice through responsive high quality legal services and giving value for money.

It is further recognised that legal aid commissions are independent and governments should not be involved in making decisions about individual cases.

The purchasing role played by commissions on behalf of the Commonwealth also requires responsibility to ensure that the method of providing services is determined in accordance with contestability requirements. It is vital to know the unit cost of inhouse legal services. To this end, considerable effort has been made to install activity based costing systems and also time recording systems to accurately cost inhouse legal services. Legal aid commissions are expected to make meaningful decisions about the proportion and type of services provided by inhouse practitioners.

In responding to the Commonwealth purchaser-provider thrust, other impacts also need to be managed:-

• growth in criminal law numbers and expenditure

• the impact of Dietrich—almost a requirement to fund trials involving serious crime

• fewer lawyers doing legal aid work

Contestability (or tendering) in legal aid serviced provision has been a mixed bag in Australia. The tendering efforts can be divided into two categories:-

• non-casework services
• casework services

The former category has seen successful with continuing tendering or contracting out of duty lawyer and DNA testing services, with good savings being achieved, while at the same time maintaining or increasing the quality of services. The latter category has had its difficulties, although the concept has been proven.

The Goulburn duty solicitor scheme, in 1978, was the first example of contracting out of the duty solicitor scheme. No tender was involved but a lump sum payment was made. In March 1993 in Queensland, a pilot scheme of tendering for duty lawyer services in nine locations commenced. The pilot scheme was successful, with significant cost savings being made. The duty lawyer service is now tendered out in twenty locations across Queensland. In child support cases, the DNA testing service has been successfully tendered for a number of years to medical laboratories. Another service tendered is a visiting advice service to inmates of a correctional centre.

It might be helpful to further explain how the duty lawyer service operates in Queensland. The duty lawyer scheme provides free representation, in Childrens and Magistrates Courts, to any unrepresented defendants who seek representation on remands, breaches of probation and bail, bail applications and pleas of guilty. Duty lawyer schemes use the services of salaried lawyers and private legal practitioners (solicitors and barristers).

Duty lawyers must be accredited through the Queensland Law Society as Magistrates or Childrens Court duty lawyers.

Where the services of private practitioners are used, it can be on a court rostered or court tendered basis. Practitioners will only be rostered for a court in the area of their normal practice except where there is an insufficient number of practitioners in the area ready and willing to participate on the roster. Under existing preferred supplier arrangements, preferred suppliers are required to participate in a roster, if called upon to do so. When rostered, private lawyers are paid at the rate of $73 per hour.

All duty lawyer tenders are evaluated on the basis of value for money. A lump sum price is required. The evaluation committee not only looks at price but also at such considerations as accreditation, experience, capacity to perform to the agreed Legal Aid Queensland quality standards, and reliability of service.

An issue has arisen of predatory pricing where private firms tender prices which do not cover costs so as to establish some form of incumbency advantage or to drive potential competitors out of the market. The issue is not one of quality, as quality standards have to be maintained under the contract. The view has been taken that there should not be any policy against predatory pricing. The answer is to encourage a wide range of potential contractors by marketing the advantages of tendering to provide duty lawyer services. The possibility of alternate suppliers entering the market will ensure the incumbent supplier performs the duty lawyer service efficiently.

The only other State that now tenders its duty lawyer service is Western Australia, which is currently tendering out in a number of locations in the south-west.

Only two States, Queensland and Victoria, have tendered casework services.

In July 1994, the Legal Aid Commission of Victoria invited all firms which were referred over 50 summary criminal cases, to tender to participate in a franchising pilot. The firms that replied were sent a tender specification on which a number of firms submitted tenders. Six firms were selected and given a delegation to grant legal assistance in summary criminal cases being heard before the Magistrates Court. For the Summary Criminal Law Franchising Pilot, the practitioners agreed:-

• to a scale of fees
• to practice management standards
• to attract eligible clients in the usual course of practice
• to operate within normal levels of referral cases
• on a disbursement budget

The findings of the evaluation were:

• the compliance levels to the required practice management standards were generally higher for those franchised firms that have greater number of referrals, i.e., over 100 grants per annum. The overall result indicates that franchising can provide a high quality service to clients;
• the findings indicate that a satisfactory degree of accountability can be maintained provided the level of control is appropriately managed;
• franchising has not resulted in uncontrollable growths of grants of assistance;
• responses from 5 out of 6 franchises indicated that their own administrative costs have been positively affected by franchising;
• all franchisees responded that their service to clients was enhanced;
• post audit legal payment costs were similar to the previous 12 month period (prior to franchising);
• franchising would achieve minimal savings, based upon extending franchising to high referral firms; and
• delegating to private practitioners the power to grant legal assistance would, if soundly established with appropriate safeguards, be financially feasible and could improve client service.

In Queensland, a Tender of Prescribed Crime Pilot was conducted from September 1995 to June 1996. The pilot followed recommendations by a Public Sector Management Commission Report in 1992 and a Criminal Justice Commission Report in 1995. The purpose of the pilot was to compare the conventional assignment of cases to a panel of private practitioners with assignment by competitive tendering. The pilot involved tendering in three locations, Brisbane, Southport and Cairns, of 50% of serious crime matters. 657 cases were tendered out to nine firms in the three locations. The cases were assigned to these firms in blocks of between 25 and 100 matters; 1058 cases were assigned using the normal process. The cases tendered were District Court trials and pleas. As part of the tendering process, a tender firm was selected to trial the electronic lodgement of applications for legal aid.

The pilot was evaluated by Griffith University and a report prepared. The evaluation reviewed quality of service and cost effectiveness issues. Interviews were conducted with private practitioners from successful and unsuccessful tendered firms, with the Queensland Law Society, the Bar Association of Queensland, Judiciary, legal aid staff and clients form tendered and non-tendered firms. A cost comparison between tendered and conventionally assigned matters was completed as was a comparison of outcomes for clients from the two methods of service delivery.

The potential for higher savings was reduced by several factors. There were increased administrative costs, largely associated with auditing. The relatively open nature of tendering specifications was reflected in the large difference in tender prices. Additionally, there were disproportionate costs in one region where a proper competitive environment did not exist. The results of the poll indicated that the greater costs lay with trials and complex pleas of guilty, and this was where tender applicants had the most difficulty predicting costs. It was also the area where successful tender firms were most likely to lose money.

Measures of service quality, comparing case outcomes and client satisfaction ratings were tendered and non-tendered firms showed no significant differences. This finding contrasted with the results of interviews with private practitioners and other external stakeholders which, on the whole, suggested an adverse impact on standards of client care. The evaluators felt that there was evidence that tendering would affect the relations between the Legal Aid Office and private practitioners in terms of narrowing of the provision of service to clients, and the increased practitioners consideration of costs. This eventuality was not reflected in the quantitative data. However, it was noted that any continuation or expansion of tendering might give close attention to minimising the potential for harm to standards of client care.

An important recommendation was that consideration be given to a modified form of contracting out through a "preferred supplier" model, which allowed for price competition; but with less narrow and short term contractual arrangements, quality accreditation and auditing, more stability, and retention of a greater degree of solicitor of choice.

In summary, it is my view that the pilot proved that the concept of competitive tendering was workable in the legal aid environment. Quality standards were developed and have been approved since the tendering pilot to ensure that both in-house and private practitioners adhered to a quality standard. As with the Victorian summary crime franchise pilot, the cost benefits in tendering, given the current low level of fees is marginal. The minimal savings achieved with the tendering price were more than made up for by the cost of setting up an audit function. The inability to be satisfied that costs savings could be made has led to tendering of casework services not progressing further in both Victoria and Queensland.

In October 1997, the Board of Legal Aid Queensland approved the introduction of a preferred supplier list of firms who were prepared to act on behalf of legally assisted persons. The decision to introduce this was made following consultation with the Queensland Law Society, District Law Associations and individual practitioners and firms. A circular letter was sent to the 1,029 firms on the Queensland Law Society list. At the time the circular letter was sent, there were 1,034 firms listed on the Queensland Legal Aid Panel.

The outcome of introducing the preferred supplier strategy has been to reduce the number of firms across Queensland to 406. Only two of the four firms who applied for inclusion on the Preferred Supplier List were refused entry outright. Preferred suppliers who applied for inclusion on the lists had to undertake to satisfy Practice Management Standards and Case Management Standards.

There are currently five Preferred Supplier Lists:

Family Law—General

Civil Law—General

Criminal Law—General

Criminal Law—Juvenile

Criminal Law—Life

Two existing lists of practitioners have been exempt from the preferred supplier selection process. These lists are the Child Representative and Conferencing Chairperson lists.

The Preferred Supplier Lists are defined as follows:

Family Law-General—any family law matter, including representation of parties at conferences and representation before the Magistrates Court and Family Court of Australia.

Civil Law-General—any civil law matters funded by Legal Aid Queensland.

Criminal Law-General—all Magistrates Court matters, exclusive of those matters which will be committed to the Supreme Court and those matters which carry a maximum penalty of life imprisonment. Also, includes all District Court matters, exclusive of those matters which carry a maximum penalty of life imprisonment, including appeals.

Criminal Law-Juvenile—all matters before all criminal jurisdictions where the applicant is a child.

Criminal Law-Life—committals to the Supreme Court and all Supreme and District Court matters carrying life imprisonment. Appeals to the Court of Appeal and High Court and Mental Health Tribunal matters.

A conscious effort was made in the selection process to ensure that all areas of the State were covered and firms were able to be included in rural and remote areas on this basis.

An audit strategy has been put in place to review on a regular basis:

The accuracy of claims to payment.

The quality of service delivery.

The veracity of electronic data.

Firms who do not meet the audit standard are given a Show Cause Notice as to why their name should not be removed from the Preferred Supplier List.

An expressions of interest register is maintained of firms who wish to be included on the Preferred Supplier List. Preferred suppliers were initially appointed for a term of 12 months. A mid-term review was conducted in August 1998 and additional firms included on the list. The Board of Legal Aid Queensland extended the 12 month period to the end of July 1999 to enable it to introduce the concept of a Model Service Agreement.

The Board determined that it would introduce a Model Service Agreement to take effect from 1 August 1999. The Model Service Agreement is proposed to be for a period of 3 years. It sets out the terms and conditions upon which preferred suppliers will undertake legal aid work. It requires adherence to Practice and Case Management Standards. It covers matters such as refund of monies resulting from the audit process. The agreement provides that preferred suppliers shall accept payment of work done by way of electronic funds transfer and also requires a commitment to electronically lodge applications for aid and accounts, and to electronically communicate to Legal Aid Queensland in relation to all requests and information.

The Preferred Supplier Agreement is in many respects a cut down version of the Franchise Agreements applied by the United Kingdom Legal Aid Board. The Agreement has simply been adapted to the local environment. One essential difference with the United Kingdom legal aid system is that Legal Aid Queensland does not have the marketing and purchasing power of the United Kingdom Legal Aid Board.

Also, due regard has to be had to the fact that Queensland is a very decentralised State with approximately 50% of the work being conducted outside the Brisbane metropolitan area.