Network Management – Big Questions Hanging Over the Approval of New ECE Services

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Early Childhood Service Network Management.
June 22, 2022.

Anyone wanting to start an early childhood service will need Ministerial pre-approval from 1 February next year before applying for licensing. The Ministry plans to charge a fee of around $500 per application. This will be in addition to the licence fee of $2,817.50. Establishing network management and implementing the two-stage licensing process will cost the taxpayer an estimated $13 million.

The Ministry of Education’s justification is that this will prevent an over-supply of services, ensure new services provide quality settings and reflect the needs of communities, improve children’s health and safety through pre-screening of service providers, and give assurance to parents that the people setting up new services can run that type of service well.

But will closing the open market really improve it or will it simply preserve it? 

The ECE Market

Over the past 5 years the growth rate in the number of new commercial and for-profit centres has outstripped all other service types.  

Table 1. The number and type of new services and existing services closed over the last 5 years (2017 – 2021).

Number newNumber closedDifference
Private and commercial teacher-led centres435119316
Community-based teacher-led centres7583-8
Home-based150222-72
Playcentre222-20
Te Kōhanga Reo1327-14
Casual centres422
Hospital-based211

More community-based teacher-led centres closed than were opened. Double the number of Te Kōhanga Reo closed than were opened. Only two new Playcentres were established in the past five years while 22 Playcentres closed.

Network management was delayed for two years following the passing of the Education and Training Act 2020 to give service providers plenty of notice and the Ministry of Education time to sort out the processes and prepare forms and guidance.  However, business group Early Childhood Council (ECC) submitted to Parliament’s Education and Workforce Select Committee that the commencement date of 1 August 2022 was not kind to its members who had nevertheless invested in building new centres that would not get network approval. It was consequently decided to further delay implementation until 1 February 2023.

How will network management affect the market?

Meeting one or more of the Ministry of Education’s stated priorities for new services, such as being a Pacific bilingual or immersion service, will not be a requirement for a service provider to gain approval. A service provider can still be granted approval regardless of any of the Ministry of Education stated priorities if the proposed service is in an area of under-provision.

Anyone that buys a new or existing licensed service is not required to go through network management. For example, a private operator backed by investors in property management might purchase a community preschool and change the service purpose, philosophy, hours, and provide for a different clientele. But existing services that need to shift to a new building must go through pre-application at which point they may be declined or crowded out of the market by other applicants who seize on the opening in the market.  

There are other ways to get around network management because conditions placed on the approval of an applicant’s application do not carry through once the service is licensed and running. For example, a service provider that gets approval to establish a new 20-place centre could later increase the number of licensed spaces to 50 or 150 children and not go through network management again.

Te Kōhanga Reo National Trust asked to be exempted from the pre-licence application process and its request was granted. All full Māori language immersion services will be exempted too. 

But will the Ministry of Education exercise its public responsibility and see to it that other valuable service types are exempted from network management or will it be happy to see these eventually die out? 

  • Hospital-based ECE services and services providing exclusively for children with high-level special learning and disability needs should be exempted from network management.
  • Playcentres are unique in providing education and a community of learning for parents alongside and with their children. This is a very important feature of quality associated with better outcomes in children and Playcentres should therefore be exempt from network management.

The Ministry has overlooked the importance of work-place childcare.  Employers, particularly in the state sector, need to be encouraged and incentivised to establish early childhood education and care facilities on work sites. Exempting new services for employees on work sites from network management would send a clear signal to employers that the Government supports them to do this.  

Why are people in the business of setting up new services for property management and/ or making money not worried about Network Management?

  • Network management is seen to be a good thing as it will secure the future of existing large services by controlling who can open near them and reduce competition.
  • The decision on whether to give a service provider approval to apply for a licence for a new service is discretionary. 
    • The Minister of Education’s decision will be based on policy judgment – reflecting their own and their political party’s views.  Business operators can take comfort that any Labour minster will respond to lobbying by them because that is what we have seen a lot of to date. Should the government change to a National-led Government business operators are likely to feel assured that business investment interests in the sector will be prioritised.
    • The Ministry of Education’s decision on whether a service provider is capable and if the service proposed should be approved is discretionary. Its ties with the Early Childhood Council business lobby particularly over the past decade need to be acknowledged so the Ministry can begin to move forward and separate itself out from the providers and be impartial.   
  • An applicant who is the subject of a final assessment by the Ministry of Education that reflects adversely on the application for approval to apply for a licence has the right to appeal against a negative assessment to the District Court. (But only commercial providers of ECE services will likely pursue an appeal due to costs and time, which discriminates against small service providers and parents wishing to set up a service themselves in their community.)  

Why are not-for-profit ECE operators worried?

  • The above reasons why those whose purpose in being involved in the sector is to make money or for property management are not worried by network management, are the reasons why others in the sector are worried.
  • Additional concerns are:
    • It does not look like there is provision for existing services to be notified of applications to establish new services in their area and no provision for existing services to raise concerns or object. Furthermore, there is no provision in the Education and Training Act 2020 for an appeal to be made against a Ministerial policy decision to pre-approve a new service.  The Minister’s decision is final.  
    • Community-based centres are at risk of closure if they need to relocate (e.g., if in a rented community hall or school buildings that are being re-purposed) or when in an older building that needs to be replaced because they are required to apply for pre-approval as a new service and may be crowded out by other applicant(s).   
    • It will be harder, if not impossible, for a community group or a group of parents to set up a new service for two reasons.  First, they must be able to show upfront that they have the money available to meet the cost of establishing a service instead of fund-raising as they go.  Second someone or an entity who is not currently or has never been a service provider is very unlikely to be approved by the Ministry of Education under network management.  

What is the public not being told?

  • The Ministry of Education is only required to consider the previous licensing history of a service provider that involves previous licence suspensions and cancellations. It will matter little or not at all that a service provider has previously or currently shown a disregard of minimum licensing standards until they get caught (as reflected in parent complaints, SELO funded assistance, written notes and provisional licences) and has operated one or more services that does not have high standards of quality as reflected in all ECE qualified teachers and low staff turnover.  
  • Should a service provider hold multiple licences, then one or a few licence cancellations and suspensions for child abuse under their watch or other serious breaches of the regulations can still see the service provider being approved to open a new service. According to the Ministry of Education “licensing history is only one of the criteria that will be taken into consideration when determining if a licence will be granted and there will be no absolute or automatic declining of an application if a service has a proportionally small number of their licences impacted.”
  • Applicants will now not be required to move toward a licensing application in a timely manner. To satisfy the concerns of the Early Childhood Council (ECC) businesses the Minister of Education has indicated that the Education and Training Act 2020 will be amended to give applicants three years to establish a new service with provision for this to be extended up to five years. Currently the Act provides for a two-year network approval period, with a right to have this extended to four years should circumstances such as a natural disaster require. According to the Ministry even as much as two-years would be unnecessarily long for some network approvals as shorter timeframes may lead to faster establishment of services where these are needed in communities. Issues with a period of more than two years include applicants delaying applying for licensing when it is beneficial for the applicant to take longer to do so. Network approvals can ‘crowd out’ other potential applicants as it is most unlikely that another pre-application approval would be granted at the same time in the same location for a similar service.

Summary and recommendation

In summary, network management may not prevent low standard services from expanding.  Unique early childhood services, such as early intervention services and Playcentre are not exempted from network management and this is a problem. Network management may stymie any growth in employer-provided childcare on work sites – yet in a tight-labour market that needs to support women’s participation in paid work and to support infant and young children’s health (e.g. for breastfeeding and for parents to easily check on their children during the day) this is the very thing that the Government should be encouraging.

A two-step approval and licensing process may slow down those who are in ECE for the purpose of property management from building new centres, but it could also see an increase in the acquisition of existing services by investors. Therefore, while network management will close the open market it is likely to preserve it as a market that favours commercial providers and investors.

That is not to say we should oppose network management.  It is just that if more active management of the network is to be depended upon to help ensure all children have access to quality settings and prevent unintended consequences of oversupply then the Ministry of Education needs to make sure it has adequately considered and addressed the problems and questions identified here.

* this article is opinion. Please check back as updates may be added and changes or corrections may be made should any further information and clarifications come to hand.

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