Challenging Existing Frameworks for Price Indexation in Australian Human Services Procurement: Achieving Sustainability

Abstract

The aim of this research is to demonstrate and better understand why current indexation methodologies are inadequate. The Consumer Price Index (CPI) and Wage Price Index (WPI) are inappropriate in relation to human services industry pricing indexation and arbitrary indexation rates are not reflective of economic changes. In understanding the nature of each of these indexes relating to input, output, and methodology it can be seen that the human services industry requires an alternative approach to funding indexation which includes considering of the real costs of service delivery, demand and service quality.

This report shows that the current indexation rate and formula is inadequate and inappropriate. It has caused a significantly underfunded social services industry through cumulative inadequate indexation increases year-on-year. A more appropriate cost index formula is possible if all human services economic conditions and variables are understood. An appropriate indexation model would go some way to establishing a sustainable funding basis for human services in Australia.

Keywords: Funding Indexation, Not-for-profits, Funding

JEL Classification: H41, H43