The Rev. Frank A. Chong, M.S.W., M.Div.

Public Policy Specialist, AlohaCare

In the movie "Scent of a Woman," Lt. Colonel Frank Slade, played by Al Pacino, is a lonely, blind veteran. His family hires Charles Simms, played by Chris O’Donnel, a Boston Prep school senior, to spend Thanksgiving weekend with "Grandpa" and be the aid and companion to this embittered old man.

Over the weekend "The Colonel" decides that it is time that Charlie learn something about life and takes him to an upper class night club in the city. While there the Colonel "smells the scent" of a particular perfume and invites the young lady who is wearing the perfume to the dance floor.

He tells her that they are going to dance the Tango. She says that she can’t dance the Tango. And He replies,

"That’s all right, I can’t see. You be my eyes and just follow me."

Then follows the Al Pacino/Gabrielle Anwar Tango Scene - one of those magical moments of cinema history - unfettered, unforced, highly enjoyable and utterly romantic.

In his book "INSIDE HAWAII’S CAPITOL," (available from the Waikiki Health Center - $10) Jim Shon, Legislator between 1984 and 1996 and one time Chair of the House Health Committee, writes:

So here we are... reluctant partners in a dance... neither quite sure of the other’s intentions and not sure of the rhythm or the moves.

Whether the procurement process will be like Pacino’s tango, a blind man taking the lead, or Shon’s waltzing partners, government and its citizenry must come together if the dance is to have rhythm, style and grace.

1. The practice of government purchasing goods and services from the private sector is not new. It goes back in our history to a time before this country was a Republic. Those of you who are social workers you know full well the history of social welfare and how during the Elizabethan Era we had poor houses, almshouses and asylums to take care of the poor and the sick. In many cases they were operated by private groups or individuals. Often they were given a grant or a subsidy or even a contract by the local government to provide health and human services.

On a grander scale, to a certain extent, the Revolutionary War was fought with POS Contracts only they were for the manufacture of military hardware. At times there were POS Contracts for the food and lodging of militia and the Continental Army. None other than George Washington let out the first defense contract. He was also one of the first to complain to contractors when he was not happy with the quality of their work.

Even the British used the POS System when they hired a group of Hessian "Soldiers of Fortune" to fight for them during that fateful winter in 1778 when Washington crossed the Delaware.

In a country built on capitalism and free enterprise the POS System is a natural fit.

The Purchase of Health and Human Services is a little more complicated to explain. How our own local variation of that experience fits in is a little more intricate.

2. The Early Years: POS is as American as apple pie (by the way did Betsy Ross have a POS Contract for that flag?) The purchase of health and human services is a phenomena not new in concept only in scale.

Up until the 1930s, voluntary organization were the major player when it came to the provision of health and human services, generally without much financial support from government. After the 1929 Stock Market Crash Herbert Hoover suggested that the Red Cross and the Salvation Army could deal with the pockets of depression around the country. As a consequence many of the shanty towns were often referred to as "Hoover-villes." In the 1930's voluntary organizations were overwhelmed by the magnitude of the economic chaos.

Roosevelt's "The New Deal Program" and Social Security thrust government right into the midst of the turmoil and suddenly government became a major player in the provision of Health and Human Services.

3. The 1960's: The Modern POS Era begins in the 1960's with Johnson's "Great Society" which included the "War on Poverty" "Medicare," and "Medicaid." The Social Security Act was amended in 1968 to allow states to contract with local Nonprofit Organizations (NPO's), for many of the programs which came under that act, heretofore it was only with other state entities.

That was the first major policy change that started the "Gold Rush on the Federal Treasury."

For several years Congress did not set an upper limit on the appropriations and with a 25% match if you could "Hatch it and Match it" you could draw down considerable amount of federal money. For every $1 you put down you could get back $3.

4. The 1970s: In the 1970's the Hawaii State Legislature, as well as the state administration, became concerned about the significant increase in funding from the state to private organizations. The 1978 Constitutional Convention tried to deal with the issue by inserting into the State Constitution the following phrase:

What exactly those standards were was not clear.

5. The 1980s: In Hawaii the most important year to remember is 1981! At the Federal level the Omnibus Budget Reconciliation Act was passed. In it Ronald Reagan essentially dismantled much of the federal infrastructure for federal POS. Federal funds were no longer an open faucet for the states. Funds would now be appropriated to the states in large lump sums to be distributed by the states in the manner in which they saw fit as long as they fell into the various blocks such as "Maternal Child Health, Drug and Substance Abuse, and so forth." The trade off was less regulation and red tape at the Federal level but also a lot less money coming to the states in the form of these "Block Grants."

The result was that states suddenly had to devise a process whereby private organizations could contract with the state for the provision of health and human services. In 1981 The Hawaii State Legislature enacted Act 207/ Chapter 42. The initial attempts to regularize this process was to define the types of requests or applications for state funds. It came in the form of "Grants, Subsidies and Purchases of Services." Other than that most of the chapter dealt with Qualifying Standards.

This first pieces of legislation focused on qualification standards and reflected some of the political issues of the time: Hawaii Based Corporation, Conflicts of Interest, Nepotism and Licensing. Some of the key players writing the legislation were people with names like Kawasaki, Abercrombie, Cayetano, Sutton, Andersen (Eileen) - Dir of B&F, and others. All of whom served on either the House Finance Committee or the Senate Ways and Means Committee. In Ben Cayetano’s case, he also served as the Chair of the Ways and Means Committee.

Prior to Chapter 42 contracts and specifications on what was being purchased was unclear. With legislative approval the grant money went directly to local organizations, incorporated or not, often in lump sums. Among the more famous complaints was Eileen Andersen's concern about canoe clubs that Henry Peters apparently funded though this mechanism. The Waikiki Drug Clinic (now the Waikiki Health Center) received a portable classroom reportedly designed by world renowned architect, Vladimir Ossipoff.

You will note that the first draft of these POS laws do NOT mention anything about accountability either by the state or the provider. And by being silent it put the Legislature between the State Agencies and the private providers. Those of us in the field learned very quickly how the political process worked and how to work the Legislature. Today, members of the health and humans services sector are some of the most effective lobbyists at the capitol. It was during this time that I began to compile information about each legislator and started to write my Legislative Action Yellow Pages.

6. The 1990's: POS always raises the questions about the appropriate role of government in society.

1. "Are the services necessary?"

2. "Should government pay for it?"

3. "If government should pay for it should government make it or buy it?

4. "If government chooses to buy it who should Government buy it from?"

In Hawaii, with a declining economy after the outbreak of the Gulf War, Government was under assault to cut costs and still maintain services. Every President since Ronald Reagan has talked about bringing down the cost of government.

"Do more with less" has been the mantra.

In the mid 1990's a procurement scandal involving telephones in the State Office Tower led to the discussion about a more formalized procurement system.

In 1994 the Office for State Procurement was established. That one act alone raised the discussion to an entirely different level. Both the art and the science of procurement was brought under one roof.

The discussion has gone from private provider and departmental branches to discussions on the statewide implications of POS Contracts.

Were it not for the firm of "Lloyd, Aaron and Mara" we would still be in the dark ages. They have lifted the conversation from petty complaints to a comprehensive discussion on the impact of POS Contracting on the state.

* We now have a calendar that is somewhat predictable.

* Forms that are for the most part consistent, even though there are some idiosyncracies between divisions in the same department.

* But most important, there is a person that we can complain to if we are not satisfied with the process or upset with a department.

We have in fact gone from, the Age of Dis-enlightenment and entered into the Age of Procurement ala "Fujioka Smith and Company," a.k.a. Ch 103F.

7. The 21st Century: That's where we have been. Where are we now and where do we need to go? The buzz words: Collaboration, Consensus and Competition.

There is a great deal of pressure from all sides to collaborate. Collaboration means shared values, shared risks, shared rewards and shared losses. Many of us have tried it and most of us have failed at it because the interests and stake holders are too diverse and many cannot make the commitment for shared risks, do not have shared values, and cannot afford to share in any loss. And in most cases there are no shared rewards because the contracts are too restrictive and don’t have enough money to even meet fixed costs.

There is an underlying assumption that we will all come to some kind of consensus on what the community needs and wants and what kind of services and resources should be available.

Unfortunately this is a very naive assumption when each of our organizations represents a kaleidoscopes of constituents, a unique history and volunteers and staff who have a variety of loyalties.

The Purchase of Health and Human Services is different today than it was 20 years ago not only because of volume but also because of needs.

In 1982 the biennial amount was something like $32M. Yesterday Governor Lingle announced that the biennial POS Budget for Health and Human Services is something like $685M.

Even if the biennial POS Budget is $685 million it is still approximately .050% of the biennial state budget of $13.5 billion. A very tiny speck on the state budget but a very important speck for the health of the community.

Today's context is different because the players are very different and there are many more.

Competition is between local not-for-profit organizations as well as with local for-profit organizations. Competition is between Hawaii based organizations and organizations which are based outside of Hawaii. In Mental Health and Public Safety we have seen not only out sourcing to out-of-state organizations but also the sending of residents of Hawaii to those mainland locations for services. If we ever get to point of serious competition for large portions of what the state currently provides in health and human services we will see competition between public service unions, the not-for-profit and the for-profit sector. When the magnitude of the dollars increases and the economies of scale changes competition also carries with it the other "P-word," Privatization.

20 years ago the focus of accountability was on how the money was spent and for what purpose. Accountability used to mean keeping a paper trail. But then things changed and many people in Health and Human Services suddenly found themselves ill equipped to deal with this new level of accountability. We were trained to develop programs and activities. MBA, MPH, MPA, MSWs and others became part of the alphabet soup of NPO Management and administration.

Accountability, both ways, on the part of the NPO and Government has also evolved. Joseph Califano, Secretary of Health and Human Services under Jimmy Carter was determined to be able to defend his Budget on Capitol Hill so he placed a big emphasis on being able to articulate the "cost per unit of service" in dollars that the average congressperson could understand. (e.g. A family planning visit cost $X. The administrative and facility overhead for that visit is $Y. The federal dollars for that visit is $Z.) So in the 1980's a lot of data was collected so that NPOs could tell government who did what to whom, for what reason, for how long, and at what cost.

Emphasis was placed on program volume (output) and fiscal accountability (number of $$$) with less attention paid to program effectiveness (outcomes). For the past 20 years we have been fiscally driven to determine the unit cost and to judge our programs on the stewardship of that dollar; almost to the extent that the issue of the quality of our services have been put aside much less the effectiveness or any behavioral change. We know how to measured quantity and unit cost but we are way behind in measuring what impact our services have on our clients both in the short term and in the long term. That technology is still in its infancy.

But in an environment where doing more with less is the political ideology of the time "What happens to the people you serve?" (Effectiveness) is a very different question from "What did you spend my money on?" (Efficiency)

Outcomes are a measure of the quality of our services. Outcomes cannot be articulated without quality measurements as well as quantity measurements.

As service providers are we willing to discontinue programs that have little or no influence on the people we serve, even though they are fun and look good and help us to meet our administrative costs? And is government willing to discontinue contracts for those services which have no articulated outcomes or value?

Outputs tend to be program service oriented. (Department of Labor)

Outcomes tend to be problem solving oriented. (Department of Job Creation)

A number of years ago the American Cancer Society embarked on a strategic plan that revolutionized the way in which it thinks, plans and carries out its programs. Very simply the plan are all outcome based: By 2015 reduce the number of deaths by cancer by 50%, reduce the number of new cases of cancer by 25% and increase the quality of life for cancer survivors. Consequently the programs of the American Cancer Society have had to undergo tremendous re-evaluation and programs heretofore unthinkable are taking place. They have always done smoking cessation programs they are now aggressively taking on the tobacco industry and working at the county level to restrict smoking in public places as well as in the work place.

A different way of thinking and looking for a different kind of outcome.

9. The most difficult dilemma for NPO's in the 1990's has been Mission Confusion and Goal Displacement. As POS Contracting has become more complicated more and more pressure is being placed on the administrative and organizational infrastructure to keep up with all of the reports and nuances related to accountability, outcomes, risk management and compliance. When CAMHD tells you that they are now in the process of fine tuning an elaborate database system to track Felix kids they fail to tell you that you will have to invest in all of that MIS equipment to be able to capture all of that information. The human capital alone to train and find time to do all of that detracts from your mission. Non-revenue generating activities are almost a numerous as the programs themselves: Quality Management, Corporate Compliance, Accreditation, HIPAA and so forth can quickly bring a small organization to its knees.

One of the ways in which an organization can infuse new capital into the infrastructure is to acquire as many contracts as possible which will allow you to spread out the administrative cost or to be a master contractor and subcontract with other organizations.

The up front cost of starting a new program can be overwhelming unless the cost can be spread out over a number of years or subsidized by other programs of the organization.

This tendency has challenged NPO's to examine their Mission as well as their Organizational Goals. Unless NPOs have a good Strategic Plan they can very easily drift away from their Mission and Organizational Goals can easily be displaced.

Chasing the money can lead to diffusion of efforts and confusion in outcomes. Without clear goals bigger may not be better and without adherence to standards of excellence "quality" can quickly becomes another buzz word thrown into the grant proposal.

10. At the community level Planning is much more challenging and demands a different kind of sophistication heretofore nonexistent.

Planning is NOT a neutral function. Everyone agrees that planning should be data driven. And all data is driven by particular interest. And all data is biased. POS has always been part of someone's political ideology as well as part of someone's social philosophy.

Planning in the POS context is by definition planning in a political context. And that takes a lot of sophistication because it requires the bringing together of very divergent interests for a common purpose.

We are beginning to build a data bank of information that appears to be useful. Right now to do any community wide planning would be very difficult. Although we have a lot of data it is not in any coordinated format that can be easily used by different sectors. Market place analyses tell us that to a certain extent "demography is destiny" so it behooves us to do our data collecting and interpreting well. Evidence based planning is still in its infancy.

Planning strategically is very difficult in our context because POS will always be part of someone’s political ideology and social philosophy and political priorities are constantly changing. Nonetheless strategic planning requires a vision of community life that can capture the imagination of all sectors of the community so that POS is seen as one of the many pieces of the puzzle to take us to that vision.

11. What is needed is charismatic leadership that can articulate a vision for us in a way that can lift us up out of our parochial silos and enable us to see each other as essential pieces of the puzzle needed to make our community a better place to live.

The history of Hawaii in the 20th Century shows that the center of power, influence charisma and imagination has moved around a lot.

Prior to WWII the center of power, influence and imagination lay with the Big 5, agriculture and business. For about 20 years (1940-1960) different groups competed for the center of power and influence including the labor unions, the military, veterans, non-ag business interest and a two party political system. In the 50's we saw the rise of the 442 veterans and the Democratic Party. With statehood we saw the overlapping concentric circles of business, labor, government and academia and the eventual development of a dormant visitor industry taking center stage.

In the 60's and 70's we saw the university campus as one of the centers of imagination and influence. In the 80's we saw developers, offshore economic interests, the visitor industry and government all vying for center stage.

In the 90's government was the only force to take the center but as the economy waned so did government's ability to be a charismatic leader of power, influence and imagination.

For a number of years there has been a vacuum. No charismatic leader or group has

stepped up.

In the new millennium where will the center of power, charisma, influence and imagination be? Who will fill center stage? Will it be eco-tourism, e-commerce, the sovereignty movement, the Third Sector (that's us), a newly revived Republican Party or will become a third world playground for the rich and famous and the latest "survivor" reality TV show?

Whoever it is it will have a great influence on the future of POS Contracting because all of our planning will be based on the imagination and ability of the new leaders to articulate their vision of a new tomorrow. But all of this would be for naught if we did not remember that all of our POS contracts are between institutions.

They are between government and some kind of service provider. But the subject of our contracts is always to provide some kind of service to someone that has a particular need that we believe that we can meet.

Fiscally driven contracts are output driven to make people "better."

Outputs driven contracts deal with issues related to "social services"

12. The guest are all gone. And the King says to Mrs Anna, "I want you to teach me to dance." She proceeds to teach him in a very stately fashion. He complains that "That is not the way that you danced with that English Gentleman" and then puts his arm around her waist. And thus begins one of the most famous dance scenes in cinema history "SHALL WE DANCE" from the King and I.

Whether the procurement process will be like Pacino’s tango, or Shon’s waltzing partners, or Yul Brenner and Deborah Kerr’s polka, government and its citizenry must come together if the dance is to have rhythm, style and grace.

Questions about the conference?  Contact Mara Smith at (808) 587-4704 or Corinne Higa at (808) 587-4706

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The Third Conference on Purchases of Health and Human Services

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