In a recent speech on creating a ‘smarter state’, the Prime Minister said that government will increasingly be ‘bringing in new providers or allowing new ways of doing things’. Following this, the Institute for Government convened an event to explore what we can learn from new approaches to commissioning, setting up and managing public service markets and how to enable integration and collaboration between service providers and government.
Christine Chang, who leads our work on public sector markets, joined the panel to share some of the lessons we have learnt to-date. You can read her speech below, or watch the video of the whole event.
Christine's comments in full
"Thanks to the Institute for Government and the Business Services Assocation for hosting this discussion. In this environment where more needs to be delivered for less, it is imperative that the public, private and third sector work collaboratively to meet society’s needs.
To give you a bit of background about Big Society Capital, we were set up to build the social investment market in the UK, so that charities and social enterprises can access appropriate repayable finance. Since we launched in 2012, we’ve invested over £160 million, and we’re also here as market champions to help charities and social enterprises and the Government figure out how to make social investment work for them. I lead our work in Public Service Markets – finding ways that our capital can be used to support charities and social enterprises to deliver more and better public services.
We saw the logic of bringing the best of corporates and the best of charities and social enterprises together to make social change. We launched a corporate challenge prize, called the Business Impact Challenge, at the end of last year offering a potential match investment of up to £15 million. An exciting initiative between Interserve and Catch22 emerged from that - Interserve a FTSE 250 public service provider and Catch22 a social enterprise with £55 million turnover. In recognition of the fact that public services need to be delivered in a new way, they will create a joint venture that will aim to build the capacity of the many small and medium-sized social enterprises and charities bidding for public service contracts.
We can see the value of bringing these two organisations together. For example, the joint venture (JV) will draw upon the IT procurement knowledge and leverage the economies of scale of Interserve and pass those on to charities. Also, Catch22 will bring their knowledge of social impact measurement to share with the sector. The JV is expected to have equal ownership across the private sector and social sector. And we announced today that Interserve and Catch22 have been selected by the Business Impact Challenge Panel as the winner of the challenge prize because of the potentially transformational nature of the partnership.
However, there are things that government commissioners need to do to create a more level playing field in public service markets for charities and social enterprises, and in fact SMEs more broadly.
I spent last year working with charities and social enterprises bidding in the Ministry of Justice (MoJ)’s Transforming Rehabilitation Programme. And out of twenty-one Contract Package Areas, only one is being delivered by a social sector led consortia when a host of credible charities and social enterprises bid.
There are some key takeaways from that experience that can be applied across Government procurement processes
1. If commissioners have minimum requirements for financial health, these need to be made explicit as early as possible in the procurement process, so organisations don’t spend precious time and money to bid for a programme where they don’t qualify.
2. Price and Quality scores should be normalised in evaluation of bids because it’s easier to differentiate on the basis of price than quality. Also, consider setting a standard price against which bidders are asked what they can deliver for that price to prevent a race to the bottom.
3. Government departments are asking for guarantees, which large organisations find much easier to provide than smaller charities. Re-think the role of guarantees, the degree of risk government is seeking to transfer, and whether that compromises other VFM objectives, such as market plurality and outcomes. Consider whether there are alternative incentives to guard against bad-faith bids, e.g. exclusions for future contracts. Publish the terms of any Guarantee requirement early, so that bidders can withdraw if they do not meet them.
In the Depatment for Work and Pensions (DWP)’s Work and Health Programme announced in the recent Spending Review to replace Work Programme and Work Choice, the support needs of the hard to reach – a supportive environment, long term adviser relationships, connections with local communities and access to integrated services – are the essence of what the social sector can bring. It would seem sensible, therefore, to maximise the potential for the sector to deliver in this programme.
Thanks for your time. I’m happy to answer any questions.