News analysis Last place for third sector in commissioning race

29 Nov 07
When the winners of the first phase of the Department for Work and Pensions' Pathways to Work contracts were announced in September, the sense of disappointment among voluntary organisations was palpable.

30 November 2007

When the winners of the first phase of the Department for Work and Pensions' Pathways to Work contracts were announced in September, the sense of disappointment among voluntary organisations was palpable.

The third sector was awarded only 13% of the prime contracts, despite submitting bids constituting 23% of the total received.

By contrast, private sector bids constituted 72% of the total but private sector companies secured 87% of the work.

Expectations had been high. Ministers had started to back their warm rhetoric on greater engagement with the third sector with action.

Last December, the Office of the Third Sector (which sits within the Cabinet Office) published Partnership in Public Services, a plan setting out the practical steps that can be taken to remove barriers in commissioning and procurement chains.

Specifically, the tendering of the DWP's Pathways to Work contracts, which aim to get people off Incapacity Benefit and into work, was presented as the moment that would bring about a real change in the commissioning process and see the third sector becoming involved as a major player.

'We were certainly given very clear indications from ministerial level that they saw this as an opportunity to demonstrate the government's enthusiasm for the third sector through the procurement and commissioning systems,' said Peter Kyle, director of strategy and enterprise at the Association of Chief Executives of Voluntary Organisations.

'The sector didn't just imagine this sense of enthusiasm, which is why we wanted an inquiry to see what went wrong.'

Acevo commissioned Dame Mavis McDonald, former permanent secretary at the Office of the Deputy Prime Minister, to chair an independent inquiry to scrutinise the contracting process and recommend how it could be altered to allow the third sector to compete more fully.

McDonald and her panel reported on November 22, identifying a lack of clarity about the outcomes the DWP wanted to achieve. If greater third sector involvement was what ministers wanted, they could not expect their procurement professionals to deliver it without a clear policy lead from the top of government.

While it was legitimate for the government to have different sets of objectives – greater efficiency, improved customer service, a bigger role for the third sector – which of these objectives should be given most precedence was a political choice.

'This isn't a choice for the procurement experts running the project,' said McDonald. 'This is a choice for the people in charge of the policy – a balancing out of what they want to achieve, knowing that their procurement choice can impact on whether or not they can achieve that objective,' she added.

'If you really mean what you say about involving the third sector, you have to plan that in to start with.'

McDonald's is not the only mind that has been considering the tricky question of how the third sector can better engage with the commissioning process. The influential Commons public administration select committee is taking its first look at third sector issues and considering the costs and benefits of the government's policy.

Ministers are prevented from using one of their favourite tools – target setting – to bring about change. Strict European Union competition rules prevent the government from stipulating that a certain proportion of its business should be given to a certain type of contractor.

Nor is it the approach the government wants to adopt. Cabinet Office minister Ed Miliband recently told the PASC that it would not be appropriate for him to make judgements on what proportion of public services should be given to voluntary organisations to deliver.

'I think it's right not to set a target,' he said on November 20. 'What I've learned… is that the key is what happens on the ground. It's local commissioners and the decisions they make. Do they recognise the contribution and role the third sector can make? How do they shape services either locally or regionally and what involvement does that mean for the third sector?'

Kyle agrees that the public service market should not be skewed with quotas, and insists that voluntary organisations want to compete fairly for contracts.

'We're not asking for new legislation. What we're asking for is the strengths the third sector can bring to be recognised and for those strengths to be incorporated within the commissioning framework,' he told Public Finance.

'There is the flexibility within that to set very nuanced guidelines that can affect, quite profoundly, the outcomes of commissioning processes.'

McDonald's report echoes this. It calls on the Office of the Third Sector and the Office of Government Commerce to clarify to government procurers what flexibility there is within European Union procurement regulations to maximise the involvement of the third sector in public service delivery.

One key way forward is greater use of social clauses. These stipulate that contractors need to secure wider social benefits through their work rather than just meeting narrow, value-for-money tests.

A social clause might, for example, require a contractor to employ a set number of long-term unemployed or disabled people and give them training over the course of the contract. Social clauses should be regarded as guidance, Kyle explains.

'It's about allowing the commissioner the freedom to investigate areas of social benefit, not about setting a rigid part of a commissioning framework.'

A government pilot is under way to demonstrate the use of social clauses in the recycling sector and will end next spring. Guidance for commissioners on best practice in the use of social clauses is expected to follow.

While wishing to see the use of social clauses accelerated and embedded, Kyle acknowledges that change isn't going to happen overnight. Change also needs to come from voluntary organisations themselves, he adds.

'The third sector has got to engage in this process in a way that is professional and meets the standard that commissioners are after. It has really got to raise its game in certain areas if it's going to compete with the private and public sectors on a level playing field.'

Miliband is adamant that third sector organisations will take on a bigger share of public service contracts but stresses that expectations of the sector need to be realistic and credible.

'I've said before that the amount of third sector delivery will increase, but I think it needs to be appropriate to third sector organisations being ready to do that, wanting to do that and it being appropriate to local circumstances and local needs.'


Did you enjoy this article?