Memorandum from the Commissioning Joint
Committee
WHO WE
ARE AND
WHY WE
ARE RESPONDING
The Commissioning Joint Committee comprises
nominees of organisations representing all the disciplines involved
in the commissioning of local authority work and services. We
publish guides to many aspects of commissioning, particularly
those posing problems needing input from a range of disciplines.
The CJC is sponsored by CIPFA but is an independent
body, does not accept funding from any source, and meets all its
expenses from the sale of guides. Our website is at http://www.cipfa.org.uk/pt/cjc/index.cfm
Background: The Third Sector and Commissioning
...... The government's push ... is part of a wider policy agenda
of contestability, or opening up markets for public services to
new suppliers from the private and third sector.
Under this model, public, private and third
sector suppliers compete for public service contracts on a truly
"level playing-field" without discrimination on the
basis of their sector membership ...
We appreciate that that is part of the background,
not a question, but we think it contains a misconception about
level playing fields which underlies a number of the questions
which we address later.
We entirely agree that playing fields have to
be level. By this we mean that there must be no unnecessary impediment
to serious tenders of any sort; and that, if clients can do anything
to help any sort of competent tenderer to compete which does not
hinder other such tenderers, then they should do that too. But
this will not be enough to help members of the third sector, except
perhaps some of its biggest members, to win more work in competition.
What the sector needs is instead for clients to exercise some
of their many legitimate client discretions differently from now.
For services, clients first have to decide whether
to package big or small, for a single skill or several, and for
all types of service users or separately for each type. It is
a pipedream to suppose that many of the resulting options will
please all types of prospective tenderers equally. There are for
example no packages which would attract both the biggest tenderers
and the smallest. Clients sometimes try to get the best of both
worlds by lotting (packaging big and then allowing tenders for
individual lots) but it is in practice unusual for clients to
get enough small lots to cover the whole of the work.
Clients can in addition choose from an immense
and valuable range of contract conditions, specifications, payment
mechanisms, and tenderer selection and tender evaluation criteria.
The options then chosen may serve to bring out the special strengths
of some types of tenderers, thereby identifying the relative weakness
of other types. Similarly, some specifications may make compliance
easier for some tenderers, but harder and more expensive for others.
When as usual intelligent clients cannot suit
all types of tenderers, they have to make up their minds which
type of tenderer is likely to provide the best outcomes overall.
All types of tenderers are nevertheless still welcome, and if
in the event the best tender comes from an unexpected source,
this is of course a bonus. But it would be the exception, not
the rule, and would not invalidate the client's original choices.
There is nothing new about all this—it is nothing to do
with creating a level playing field; it is instead what any intelligent
client has to do.
It follows that what the third sector needs,
if it is to win significantly more contracts, is not only a level
playing field, which we hope most of them enjoy already. More
importantly, it needs a re-think of packaging, specifications
and all the other client options. It is also what client authorities
need to do whenever they believe that the third sector is most
likely to contain the best tenderers.
KEY QUESTIONS
1(b) Is loss of accountability a threat of
commissioning services? If so, how can this best be managed?
Nobody can stop the line of communication (between
client authorities and service providing staff) being lengthened
by contracting out. But accountability is not then lost, it just
gets more expensive. Authorities nevertheless continue to contract
work out, because its advantages often outweigh such disadvantages.
We see no reason why using the third sector should in this respect
be any different from using the private sector.
3(a) Will contractual relationships with the
state improve stability within the third sector?
Having contractual relationships with the third
sector will give public sector clients a strong interest in its
stability, and there is a great deal which clients can do to protect
it. This calls for:
— payment mechanisms which protect
contractors against steep and arbitrary changes in the volume
of orders, which are often unavoidable. Unit rates for example
often need to be stratified more sharply, for example, so that
they are high enough at the bottom of the range to cover contractors'
fixed costs when volumes are unexpectedly low; and low enough
at the top of the range not to make contracts unaffordable when
volumes are unexpectedly high;
— the simplification and abbreviation
of contract documents. Small contracts do not need every possible
nuance and contingency to be covered in the same way as for large
contracts;
— the least possible prescriptiveness
as to methods. Third sector bodies often use unconventional (and
sometimes startling) methods, and readily change such methods
of their own volition whenever different methods look more fruitful,
and are best left free to do so;
— abstinence on the part of clients
from driving unduly hard bargains. Influential clients can and
often do secure heroic tenders, but these are seldom good business
for either party. Although expressed to be enforceable, the courts
are in any case often unwilling to enforce them.
3(b) Will close involvement with service provision
prevent third sector organisations retaining the ability to be
critical of government?
Criticism of central government is unlikely
to affect, or be affected by, contracts with local government.
Whether it will be affected by contracts with central government
will depend in the long run on how ministers react to criticism.
We hope they will not react at all, or not adversely.
3(d) Is there a risk that third sector organisations
will lose their independence, their identity or their distinctive
ethos?
It is hard to believe that there will be no
such effect at all, if indeed increasing use of the third sector
is sustained. Clients can however minimise it by:
— matching their specifications, and
their selection and evaluation criteria, as closely as they can
to the abilities sought from the third sector bodies which they
want to attract to the service under consideration. The more sensitively
and effectively that clients do this, the more likely that contracts
will reinforce the ethos of third sector bodies, rather than erode
it;
— avoiding imposing on small third
sector tenderers the same insurance requirements and financial
standing criteria that they impose on large private sector contractors.
There is no point in trying to make third sector bodies act more
like private sector bodies, or in forcing them to insure at high
cost with reluctant insurers. Client bodies ultimately have to
pay anyway, so that requiring small contractors to take out insurance
puts clients in the same position as if they were themselves insuring
a multitude of small risks with high chances of occurrence, which
for large organisations is not cost effective.
3(e) Might the third sector become polarised
between large service providing organisations and more radical
groups ? If so, would this matter?
Giving any sort of business to any sector must
be expected to have the effect of making some of its members bigger.
Whether this would tend to make them less radical is a separate
question, which we tried to answer at question 3.b, and we hope
that third sector bodies will be encouraged to carry on with any
campaigning which they think fit.
We do in any case see no correlation between
small size and radicalism. Some of the biggest and longest-standing
voluntary organisations have always been forceful and intrepid
campaigners.
4(a) Does the state risk losing control of
service delivery in a way which might be damaging?
There is certain to be some perceived loss of
control. One of the strengths of voluntary organisations which
work with vulnerable and disadvantaged people is that such people
do not normally perceive third sector staff or volunteers as being
"officials". Any such "loss" is likely to
be counted as one of the advantages of using the third sector.
It is of course always possible that small voluntary
organisations will use methods so unconventional as to embarrass
client authorities. To strike the right balance, client officers
will need a good grasp of two disparate subjects, namely of contract
law and practice, and of the real world in the service areas in
question. There will at first almost certainly be a shortage of
such practitioners.
4(b) What capacity will the state need to
ensure that it can be an intelligent customer of services?
All stages in commissioning call for the same
range of expertise and knowledge as just mentioned. This suggests
to us that it would be unconstructive to force (for example by
legislation) the pace at which third sector services are taken
up.
4(c) How is duplication of effort in order
to monitor and manage contracts best avoided?
Some duplication is unavoidable whenever any
work or services are contracted out, for the reasons given in
answer to question 1.b. It can however be reduced by:
— rationalising all the different data
needed for making contract payments, supervising output, updating
personal records, and ordering essential support services. The
more often that one piece of data can serve several such purposes,
the better;
— eliminating the number of different
clients' personnel who have to visit the same end users, or the
same sites. This means rationalising their duties in the same
way as for data.
It has to be accepted that this also reduces
useful occasions for cross-check between different types of data,
and the work of different officers. Judgements will have to be
made as to how far it is safe to go in the pursuit of economies,
and experience will from time to time no doubt trigger reappraisals
of such judgements.
4(d) How good is the state at managing bidding
processes and defining contractual obligations when commissioning
services?
This debate is academic unless it is thought
possible that the public sector is so bad at the jobs in question
that it would be better not to commission work from the third
sector at all. We know of nobody with knowledge of the subject
who goes that far.
It seems more constructive to look constantly
for ways in which both jobs can be done better. We have done our
best to suggest improvements in our own recent Guides to Buying
from the Third Sector, and Commissioning Social Care.
5(b) Are there "hidden costs" such
as contract oversight?
There are always costs to any type of contracting
out. They are not so much hidden as unquantifiable. Many attempts
were made to quantify them when competition for most work and
services was compulsory in local government, but with no success.
There is no reason to expect any similar attempt at quantification
to succeed in the case of commissioning services from the third
sector. Client authorities therefore have to make their own judgements
about whether to go ahead with contracting out.
5(c) Are the benefits of the third sector
participation in public service provision so great that it is
appropriate to have financial rules which encourage this, or should
the aim be to have "competitive neutrality" between
public, private and voluntary sectors?
Financial and other rules have been tried for
different sectors but most have had short shelf lives. They have
in some cases been lobbied for by service providers but have failed
to command the respect of practitioners. These would almost certainly
prefer voluntary guidance, of which there is no shortage. Apart
from our own Guides, a steady flow of guidance is likely from
OGC and, in local government, from the Society of Chief Procurement
Officers, the Improvement & Development Agency and the Regional
Centres of Excellence.
Competitive neutrality is unattainable if it
means commissioning in such a way as to make contracts equally
attractive to all three sectors. This is for the same reason,
which we try to explain in our notes under "background",
that a level playing field is not enough. The decision as to which
sector is likely to serve best has to come first, and the competition
comes afterwards.
6. Are the costs and benefits to the state
the same when commissioned from the third and private sectors?
This is a fair rhetorical question, but we prefer
not to answer it. Generalised judgements of this sort can only
be highly subjective, and all participants will no doubt form
their own.
It seems however inevitable that there will
be horses for courses. Different types of service provider will
be top of class in different specialisms. The sooner that judgements
about their relative merits gain wide acceptance, the sooner that
practitioners will be able to adapt their packaging and other
procurement strategies to the types of service provider most likely
to perform best.
We hope that there will be plenty of other guidance
and research focused on bringing out this sort of information.
March 2007
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