Uncertainty is probably the only certainty for the public sector over the next few years. This uncertainty is compounded by the challenges of ever-reducing public sector budgets and, for many services, rising demand. Plus, of course, policy changes are adding yet more pressures. This means that public service providers in the charitable and indeed the wider social sector and businesses are going to face dramatic uncertainty too.
The public sector is currently being encouraged to procure services from a wide range of providers. This has been a trend for some time (indeed, since before the current coalition government), and is one that is likely to continue and possibly accelerate. Public sector commissioning and procurement must be excellent if we are going to secure the principles of public value, social value, public service ethos and value for money. Sadly, however, I observe that there are too many examples of poor public sector commissioning and procurement resulting in poor quality services with too little emphasis on the key principles. This has to change and politicians have a duty to ensure that it changes. Charities have to speak out against poor practice.
Strategic commissioning is political – it always has been and in my view, should always be so. It is not simply a technical process or set of operational activities. It is about identifying need and aspiration; determining the outcomes required to meet these needs and aspirations; identifying the best ways of securing these outcomes; and about allocating resources. And it must involve service users, the wider community, staff and potential providers. These are all ‘political’ matters. Charities should seek to advise politicians.
Social value
Public sector procurement needs to be aligned with the wider policy objectives of the public body. It must focus on the principles of public service ethos, public value and social value, and secure value for money as well as service outcomes. It is deeply dispiriting to note that too often public procurement is driven almost wholly by price, especially as austerity is demanding cost and expenditure reductions. This is deeply short-sighted. Buying ‘cheap’ with no regard to value invariably proves more expensive in the long-term and all too often leads to unintended consequences. And quite apart from often leading to the selection of the wrong provider, it entices providers to bid at unsustainable prices. Charities in particular can find themselves scared of not winning bids unless they pitch at ridiculously low and (in the long-term, as they find to their cost) unviable prices.
The pursuit of social value should include economic, social and environmental value. In that context, the Best Value Social Value Act has the potential to make a huge difference and could yet be the catalyst for a major breakthrough in public sector procurement. In particular, the Act could and should have a huge impact on community wellbeing – but only with genuine local involvement and an imaginative and unfettered approach by the public sector and providers.
Sadly, recent behaviours from these players suggest that a radical change in attitudes and behaviours is needed. And here, I am not just talking about ‘compliance’. Local authorities and other public bodies that adopt the easy and lazy approach to pursuing social value – driven simply by mechanistic procurement and imposition of new rules and hurdles – will invariably fail their communities.
Charities, the voluntary and community sector, and indeed the wider social sector organisations, should be in pole position to benefit from the Social Value Act. However, I advise against simply ‘presuming’ that everything the social and charity sector does maximises social value. Rather, providers have to be able to demonstrate their contribution and impact. Social value is not unique to any one sector – yes, the public and charity sectors have a strong record here but actually, the business sector can add social value given the right conditions.
Providers must ensure that social value requirements such as the living wage are fully costed and included in contract prices. And the public sector must recognise that they have to pay the right price for quality and social value. Local authorities and other public bodies must clearly decide how much they wish to take into account wider ethical standards from their suppliers and how far they are comfortable testing providers’ ethics, governance and values. This again should be beneficial to the charitable and social sectors but my strong advice is to presume nothing and focus on being able to demonstrate your own ethical and governance standards before criticising others.
The roles of charities
Some voices in the charitable sector are encouraging the public sector to put more services out to tender. At the same time, more rational voices are questioning the sector’s capacity and appetite to take on more and more public service provision, especially with low fees and over-prescriptive specifications. And many in the charity
sector (especially trustees but also staff) believe strongly that the voluntary and community sector should not and must not become the agent or the ‘prisoner’ of the public sector commissioner and procurer.
My own view is that whatever the contracting opportunities and the business and operating models adopted, charities have to be agile and responsive in order to: meet the needs and aspirations of their beneficiaries; be true to their missions; innovate; manage risk well; and campaign.
Charities need more commercial skills to underpin their core services and activities. And when they do take on public sector contracts, they should do so only on terms that are commercially and financially sound. Finance directors in particular have a major role to play. The sector has always been at its best when it focuses resolutely on:
• Results for beneficiaries;
• Speaking out and up for beneficiaries;
• Innovation;
• Being responsive.
The sector has been at its weakest when simply following some pre-ordained specification that frankly any provider in any sector can deliver. Charities, therefore, must qualify ‘opportunities’ and not seek every passing bid. They must be discerning and only pursue contracts where they can be true to themselves, their beneficiaries and their financial imperatives.
For its part, the public sector must ensure that its approaches do not exclude charities and the wider social sector, for example, by the size or the scope of the contract, the degree of the risk transfer being sought, the payment mechanisms (such as payment by results contracts requiring major cash flow financing), or by demanding major capital investment or large security bonds.
This is why pre-procurement dialogue is so important. Public sector worries about uncertainty and objectives must be openly shared with potential providers. They should seek to manage these collaboratively. At its best, be in no doubt that charities and the wider social sector can help the public sector to manage uncertainty and fulfill the principles and ethos of public service. However, this must be a two-way process.