Headlines: November 26th, 2007

The Government’s aim to secure greater involvement of the third sector in the delivery of public services has been severely dented in the first test of a major procurement exercise. Only one third sector organisation was successful in securing a contract for the Department for Work and Pension’s pathways to work programme. An independent inquiry found no conspiracy to squeeze out third sector organisations, but practical realities such as the guidance under which those procuring services operate and the scale of risk bidders for contracts are expected to take.

The 2006 Action Plan of the Office of the Third Sector acknowledges that third sector organisations ‘have an enormous amount to contribute to our public services’, particularly in the area of welfare-to-work. It calls for ‘a step-change in the

quality of interaction with government that third sector organisations can expect.’ The plan includes a commitment to facilitate the involvement of ‘the broadest range of suppliers’ in contract delivery.

The inquiry found that the procurement was influenced significantly by the Departments’ commitment to secure savings following the 2004 Gershon efficiency review. This resulted in a cost reduction strategy which included reducing the number of contracts and letting one prime contract for each district. The effect was that the contracts were awarded to larger organisations and this excluded many third sector organisations from the outset. The Department also carried out the procurement exercise centrally rather than through local JobCentre Plus districts and this excluded any local knowledge.

The structure of the contracts drawn up by the Department created unacceptable risks for third sector organisations. The creation of ‘prime’ contracts for districts resulted in even the larger organisations with an annual turnover of 100 million pounds deciding that the risks were too great. The contracts also provided for monthly payment, but only for a percentage of the total price. Many third sector organisations were unable to provide the finance to support this deferred cash flow.

The Association of Chief Executives of Voluntary Organisations has called for a clear shift in Government procurement practice. The Association wants strategic commissioning and greater emphasis on added social value in contract design and evaluation. For the third sector it will promote improvement of capacity-building and partnership-building and greater dissemination of the commitments in the Office of the Third Sector’s Action Plan.