How voluntary sector agencies can gain public sector contracts

Third sector organisations have the skills to deliver public services but most simply cannot afford to. Richard Gutch looks at how purchasers can create the right conditions to involve voluntary groups in service provision

Some of the big social challenges we face, such as preventing reoffending and reducing mental illness, GP time and drugs expenditure, are crying out for new approaches, which could bring big savings for the public purse.

Many voluntary and community organisations (VCOs) are already aiming to deliver services where the plans are focused on user outcomes, yet at the same time save public money. However, many commissioners still see these providers as cheap options. As a consequence, the third sector finds it difficult to command the market rate for its services or secure long-term contracts. For the sector to become sustainable, this has to change.

As the government-backed investment fund for the third sector, Futurebuilders England supports voluntary and community organisations in delivering better public services through tailored investment packages of grants, loans and consultancy support. Organisations pay back the loan through full-cost contracts or fees they secure from commissioners.

Lack of, or weak, computer technology, governance, financial and management systems can hinder commissioners doing more business with VCOs. Our scheme helps organisations to develop professional business plans and improve skills in these areas so they can compete for contracts and deliver services in a more businesslike way.

For many of our 144 investees, the system is working. In 2001, Liverpool Crossroads Caring for Carers was running a large domiciliary social care contract for Liverpool Council. The local authority contract rates were failing to meet the costs of the service, which, as a result, was discontinued.

The council struggled to find the same flexibility and quality of service that Crossroads had provided and began contracting with the organisation on a case-by-case basis. As the service grew, Crossroads applied for a Futurebuilders investment. It received £181,000, which was used to improve IT systems, introduce a qualified finance manager, develop its website and corporate governance, and instigate a charging system based on full-cost recovery. With this additional operational capacity in place, Crossroads became a preferred social care provider to Liverpool Council, Liverpool Primary Care Trust (PCT) and the strategic health authority.

Liverpool is one region where local commissioners have identified and embraced the unique contribution of the voluntary sector in delivering social care services. Its ability to innovate, be flexible and have established links with local people and service users were cited by Liverpool PCT as positive reasons for working with Crossroads to meet the needs of its population.(1)

Many other Futurebuilders investees have different experiences, but the main challenge for us and the third sector is to convince purchasers – and VCOs – that changing from piecemeal grants to long-term contracts will provide a more sustainable service. This can happen if purchasers think differently about how they deliver services, putting health and social outcomes before outputs, and are prepared to break from their usual purchasing pattern.

North Yorkshire Council has been working with Esk Moors Caring (EMC), a small, rural social enterprise, to deliver services for older people who want to live in their own homes for as long as possible. Plans are in place for EMC to deliver a seven-year contract for the council, as it is well placed to deliver this service in a remote area. The longevity of the contract provides security to EMC and continuity to the service users.

All our evidence shows that, where purchasers and providers work together from the outset, users are more likely to see the benefits of a secure and sustainable service with additional overall savings to the public purse.

However, we also have evidence where voluntary organisations have responded to user demand and set up new services. London-based Total Healthcare Practice (THP) approached Futurebuilders because it saw a local need for the support of people with long-term conditions. The THP team, comprising nurses and health professionals, were already running a stroke action group in Enfield that was so popular that people with other conditions started asking for a similar service.

They have started negotiations with their local PCTs and already have short-term contracts with commissioners in social services. The challenge for THP – like many voluntary organisations working in the health and social care sector – is the ability to develop and “sell” their service in a purchaser market that is in a state of financial and structural upheaval.

So what else can be done to make things easier? Futurebuilders, in partnership with the National Council for Voluntary Organisations (NVCO), has launched a procurement guide to help VCOs navigate the complex realm of rules, procedures and practices in public sector procurement. We’re also talking to commissioners about voluntary organisations in their area, so they can work together on potential services before applying for a Futurebuilders investment. The new Office of the Third Sector and recent Department of Health commissioning task force review shows that government is also committed to “help remove the barriers for all providers of health and social care”.(2)

But it’s here that the procurement process becomes a vicious circle for VCOs. To gain more experience of winning contracts and delivering contracted services, they need to have this experience. Commissioners need to appreciate that some VCOs may not have the same business background or marketing tools as the public or private sector in order to compete equally for contracts. But this does not mean they’re not up to the job. If commissioners can remove the barriers, as the government suggests, with fairer pricing, clearer tender documents and realistic deadlines, this will go some way to opening up the market to some excellent partnership working.

All the evidence from Futurebuilders’ work so far is that, if purchasers can create the right conditions for the third sector organisations to play a bigger role in public service delivery, they are only too willing to respond and dive in.

Richard Gutch is chief executive of Futurebuilders, the government-backed investment fund for voluntary and community organisations. He is also a member of the Department of Health’s third sector commissioning task force and has worked for third sector organisations, including Arthritis Care, the NCVO and the Community Fund.

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Using examples of successful procurement partnerships, the article analyses the challenges facing voluntary and community organisations in working and contracting with local authorities and the health service to deliver sustainable and effective public services.

(1) Stronger Organisations Deliver Better Public Services – Procuring Services from the Voluntary and Community Sector, Futurebuilders, 2006, 
(2) No Excuses, Embrace Partnership Now. Step towards Change! Report of the Third Sector Commissioning Task Force, Department of Health, 2006

Further information

  • Before Signing on the Dotted Line…All You Need to Know about Procuring Public Sector Contracts, NCVO/Futurebuilders, 2006.
  • NCVO sustainable funding project.
  • More for your Money. Guides for councils and NHS organisations procuring from social enterprises.
  • Social Issues in Procurement, Office of Government Commerce 2004.


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