ILC: A Serious Imbalance in the NDIS

The NDIA has just announced the latest development in its roll out of the ILC and LAC. We have some serious concerns about the development of these programs and how they threaten the credibility of the NDIS.

By Roland Naufal

Updated 15 Apr 202423 Mar 2016

The NDIA has just announced the latest development in its roll out of the Information Linkages & Capacity Building (ILC) program. The Agency has outsourced Local Area Coordination (LAC) and Planning functions in Victoria to:

  • Brotherhood of St Laurence in North East Melbourne
  • Latrobe Community Health Service in Central Highlands
  • Intereach in Loddon.

At DSC, we played a key role in assisting one of the winning LAC tenders. What we’ve learned worries us about the way the ILC and LAC are developing, for three key reasons:

  1. The way the LAC contracts were awarded in NSW threatens the credibility of the NDIS
  2. Planning and LAC should not have been combined in Victoria
  3. There is a serious lack of balance in the funding committed to ILC versus NDIS market based or individualised funding

But before I go into these concerns, here’s a quick backgrounder on the ILC and LAC programs.


ILC & LAC: New Kids on the Block Funding

ILC is the only source of NDIS block funding and LAC (one of five streams in the ILC) consumes the overwhelming majority of the ILC program. LAC is estimated at over $550 million annually out of a total of less than $700 million for all of ILC.

It is clear that LAC has the lion’s share of ILC grunt. So, if the ILC is going to address the problems that individual funding cannot address, then LAC is the program to do it.

The ILC’s aims include providing at least some support for the 900,000 people with disability who are not eligible for the NDIS, and to improve the access of all people with disability to mainstream services. It is also a grab bag of services that are vital but cannot be individually funded; from Indigenous supports to early intervention for parents, to information about living with different types of disability.

The most current details on the ILC can be found in the ILC Commissioning Framework. For me, earlier criticism of the current ILC framework from Carers Australia still resonates: “the key difficulty with the framework is that it is written at such a high level of abstraction and generality that it is often difficult to interpret the meaning of some concepts and how they would translate into practice’. The framework just doesn’t say much that’s useful.

LAC is essentially a community development type concept. It has grown out of WA and has since become popular in Queensland, the UK and more recently with the NDIA. LAC services are designed to both assist individuals to pursue their goals and work ‘with communities and mainstream services to build awareness and to become more inclusive of the range of needs and aspirations of people with disability.’

To date, LAC’s are mostly NDIA staffers in the trial sites; in a couple of places LAC has been outsourced to one of the big non profits. What we have been hearing is that LAC has not been the star ‘inclusion’ performer. Perhaps because the focus of effort has been on planning and supporting NDIS individual participants, community development seems to be suffering. So far LAC has looked more like case management: this was the UK experience, the program became highly individualised with little focus on mainstream inclusion.


Why is LAC being outsourced?

Essentially, the Productivity Commission allocated $850 million for the NDIA operating costs; around $550 million of which was to employ LAC’s. The Abbott Government did not agree with this approach and announced that the NDIA’s projected size will be dramatically cut back and many of its functions outsourced. The NDIA’s target staffing level will be below 3,000, down from the original estimate of above 10,000. Many of the outsourced positions will be the NDIA’s LAC services.

Outsourcing is also meant to address the concern that the NDIA’s LACs are not sufficiently aware of the local market context and lack the independence to properly advocate for participants because they are employed by the NDIA and also that non-participants are treated as a low priority by the NDIA.

So, my big three concerns…


The way the contracts have been awarded or the lack of walk in the NDIA talk

… at least 93% of NDIS expenditures will be contestable. As a result a new marketplace for disability services will develop and, over time, lead to increased effectiveness, efficiency and innovation.

In Victoria organisations had to go through a rigorous and painstaking process to tender for LAC contracts in late 2015. Tendering organisations were not allowed to be NDIS registered providers, which excluded most of the potential tenderers. The tender process was complex, opaque and demanding. The NDIA did not meet its own deadlines for announcing the winning tenderers which will place enormous pressure on everyone concerned with a roll out date in the North East less than 100 days away.

And then boom! At the beginning of February in NSW they just gave huge ‘far-reaching LAC contracts across NSW’ to Uniting and St Vincent De Paul with no competitive process at all. This is a very significant group of contracts and over $200 million of public money. Uniting advertised the next week for 400 new staff!

And it appears they are doing the same with extending the Tasmanian Gateway LAC contract.

Where’s the contestability in that? The NDIS was meant to move us away from the days when the big charities just did stuff based on relationships and the largesse of governments. Although the NSW decisions appear driven by the NSW government they damage the credibility of the whole NDIS.


Planning and Local Area Coordination should not be combined

The NDIA surprised us all when it decided to put planning functions into the LAC role. The tender winners are going to undertake planning for around 70% of participants. The NDIA will plan for the 20% most complex cases and 10% are expected to ‘self plan’.

Yes, that means NGO’s will be deciding how much NDIS funding participants receive, and what services they are entitled to. It means these NGO’s will have to go from zero to hero; recruiting, training and deploying large numbers of LAC staff who also do planning (PLAC’s?). Then those staff will need to process hundreds of thousands of new NDIS participants over the next 3 years, commencing 1 July this year. That’s an awfully big ask.

I remain incredulous that the NDIA have combined the LAC and Planning functions. Staff will need to bring both an individual case management type approach with exceptional community development capabilities. These are incredibly different skillsets and in my 30 years in the community sector I have met very very few people who can do both functions well. I also know very few people who think this was a smart decision.

My prediction: the LAC’s will be overwhelmed with processing large numbers of individuals in distress and the community development function will simply fall off the table. So much for the mainstream inclusion agenda for quite a while to come.

The NDIA have never consulted anyone about combining the LAC and Planning roles or outsourcing them. They have never explained how the decision was reached and to add insult to injury, the decision was announced in the middle of the ILC co-design consultation process! This isn’t the type of collaborative approach that the NDIA promised as part of their culture. This is the single biggest decision they have made about the look and feel of the NDIS and there’s been no consultation with any people with disability or service providers. And not even an ex post justification or explanation for what they have done. That’s really concerning.


The lack of balance in the funding committed to ILC versus NDIS market based or individualised funding

The people who invented the NDIS are mostly brainiac economists in the Productivity Commission, who believe market forces can deliver better on most things that matter. The NDIS is therefore all about the individual and how they buy stuff in ‘disability’ markets. The idea of block funding anything was seen in a negative light by the the economic rationalists; an anathema to free markets!

Prior to the NDIS being set up, I led the huge community consultation process for the National Disability & Carer Alliance (NDAC), asking thousands of Australians with disability, families and service providers what they thought the NDIS should look like. The single biggest concern raised was how would individualisation work in practice, particularly for:

  • People who cannot exercise choice, and
  • For services that need to be block funded to be effective.

NDAC repeatedly raised concerns when the NDIS was being designed about how services for ATSI, CALD, rural and remote groups that cannot be individualised would be delivered. The NDIS response to these problems was that this would be handled by the ILC program and through the hope of continued state government funding.

Let’s do the ratios. In full scheme the NDIS will be spending about $22 billion. The indicative budget for the ILC program will be $132 million. So if you take out LACs (which I think you can if they are also doing planning) the ratio is 2/3 of 1% of total NDIS funding will be available for the ILC block funded activities. That’s a serious imbalance that even the economic rationalists would find difficult to justify.


When More than Markets Fail

Market failure is a beginner’s economics concept. New students learn that markets (aka individualisation of services) cannot adequately provide for many public goods. To be effective, markets need to be transparent and truly contestable. Markets need informed consumers, the easy movement of staff and services to the places people want them and the absence of vested interests and monopoly providers.

Currently in the NDIS:

  • We do not have well informed consumers
  • Many people with disability continue to struggle to exercise choice, let alone take control
    Lots of CALD, ATSI and complex needs groups do not fit into the market model
  • Staff and services are not mobile enough to service many rural and remote areas
  • Vested interests have not gone away

There is not enough NDIS block (ILC) funding to address these market failures. And do not hold your breath waiting for state governments to come to the rescue.

The NDIS itself is not responsible for all of these problems. Some were given them by the Productivity Commission, others are current and previous government driven decisions (such as outsourcing and speed of roll out), but some the NDIA just has to wear the responsibility for.

This is a pivotal moment for the NDIS. It’s not just an issue of market transition, it’s an issue of peoples’ lives and the long term success of the NDIS.


Roland Naufal

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