Memorandum from the Commissioner for the
Compact
I took up post as the first Commissioner for
the Compact in October 2006, and have worked with a small interim
team since February 2007. I welcome this inquiry and have some
general points to make. I then have some evidence to offer in
answer to some of your questions.
THE COMPACT
1. The Compact was agreed between government
and the voluntary and community sector in 1998. The Compact and
its Codes set out a framework for government and sector relationships
and partnerships, recognising the independence of the sector,
its role in voice and advocacy, the expertise it should be able
to offer through consultation and its right to be fairly funded
for any public services it provided.
2. The Compact predates both concepts in
your inquiry—the wider grouping that is the "third
sector" and the new sense of "commissioning". There
are a range of understandings and definitions of these terms;
I use the HMT and OTS definitions.[50]
However both have been used in a confusing variety of ways, though
some of the issues were around before 1998, albeit with different
names.
3. The Compact and its Codes reflect the
diversity of the sector: some of its organisations do not want
to deliver public services; some are interested in voice and community
engagement or do not want to work to the public sector's agenda
and funding; others are revising their missions or reconfiguring
into social enterprises to embrace the public agenda. Most are
in between.
IMPLEMENTATION OF
THE COMPACT
4. Though there is general commitment to
the Compact, both government and the sector have a gap to close
between rhetoric and practical implementation; particularly when
delivering full cost recovery, longer-term funding and reducing
disproportionate bureaucracy. One predominant issue is the tension
between the tightly focused nature of competitive service procurement,
and the need for competitive procedures to be fair to all; and
the special undertakings that government has made to the third
sector in (or alongside) the Compact.
5. Some of these special undertakings relate
specifically to financial relationships, whether based on grant
or contract: for example, timely decision-making on funding; adequate
notice of its termination, full-cost recovery; three-year funding
as the norm except where value-for-money requires otherwise. Some
relate to wider relationships, and assert a commitment to a role
for the third sector where, nationally or locally, policies are
made and services are specified: for example, meaningful and timely
consultation; a key role in the new, local "place-shaping"
agenda; and a say in the identification of needs and the design
of services to meet them.
THE FINANCIAL
RELATIONSHIP
6. Difficulties arise with the financial
commitments partly because most competitively funded services
where the third sector is involved in delivery are not exclusive
to them as providers. They are bid for also by others in the private
or public sector. On a "level playing field", it may
not be straightforward for commissioners to deliver consistently
and fully the Compact financial undertakings to third sector partners
unless these have been built into the terms of the programme concerned
at the outset, and thus apply to bidders from other sectors as
well.
7. This is not consistently the case. Commissioners
may point to the difficulties of reconciling third-sector specific
Compact commitments with a competitive environment. But the third
sector may correctly point to the facts that the commitments have
been unequivocally given, and that the Compact Code on funding
and procurement explicitly states[51]
that they are consistent with the requirements of Government Accounting
and EU procurement law, and that they apply in contract relationships
as well as grants.
8. The current trend towards a procurement,
rather than a grant, model may also blur public bodies' wider
Compact obligations to third sector bodies that bid. It is important
for public bodies to recognise that their responsibilities to
consult and involve the sector in decisions about policy and strategy
are not disconnected because a contract exists for the provision
of services.
9. Also important is the Compact commitment
by government to act in financial relationships in ways which
strengthen the third sector's capacity in the long term. The implication
is that public bodies should look past the narrow delivery issues
of particular service procurements and consider, on a range of
alternative approaches, what the impact may be on the composition
of the third sector. This is particularly important locally, where
a procurement which allows for (as opposed to imposing) bids by
consortia or for subcontracting by a lead partner may strengthen
the sector's capacity, while one that favours a single, non-local
supplier may seriously damage it.
10. The pace of change in the landscape
is striking. I am concerned at the rush to "sector-blind"
attitudes fostered among public sector staff by the shift towards
a procurement model of finance, and the problems inherent if these
came to dominate the mindset to the detriment of the wider "nurturing"
relationship and other public sector Compact commitments.
MOVE FROM
GRANT FUNDING
TO PROCUREMENT
11. In the past few years, and looking to
April 2008, the sector sees less grant, less funding which is
ring fenced for them or their traditional activities and more
commissioning and more competitive open procurement. This applies
across local and central government and the regional bodies. The
sector does not experience government as one corporate entity
in delivery, but has very different interactions with different
departments, programmes within departments, and agencies. Some
are local, others national and some have regional delivery of
national bodies' programmes. Often there is no thread to connect
national, regional and local delivery—or the national and
local Compacts.
12. The OTS Public Services Delivery Plan
sets out eight principles of commissioning agreed with the then
five key delivery departments. But departments and their NDPBs
work with different legislation, different policies, different
bidding and monitoring regimes and different partners in delivery
chains. This is very hard for a third sector organisation that
is trying to work across departmental boundaries—such as
Foyers working with young homeless to provide skills and counselling.
Of course government has very different relationship with big
national charities such as Barnardos to those with a small body
which may be just starting to deliver services.
13. My final concern is the extra pressure
put on commissioning from the third sector at a time of financial
constraints or structural reorganisation. In some cases the pace
of change is too fast for the sector and perhaps for the long-term
outcomes the community wants; grant streams are being pooled together
and/or devolved to Local Area Agreements to choose how to deliver—including
by commissioning or involvement of the third sector—but
are simultaneously decreasing in 2007 or will end in 2008. The
predominant perception by third sector funded bodies is of rationing,
rather than the creation of opportunities for transformation of
services that both the Government and the sector aspire to as
an aim of cross-sector partnership. The priorities are largely
those set by government through legislation, Public Service Agreements
(PSAs) and the inspection and regulation process, and to a lesser
degree by Local Area Agreements, many of which have some third
sector representation.
14. Many third sector organisations have
found European Social Fund funding in particular involves disproportionate
bureaucracy and inflexibility. I will shortly be meeting with
DWP as I hope they will be able to address these sector concerns
in the 2008-11 programme.
ANSWERS TO
SOME OF
THE COMMITTEE'S
QUESTIONS
1. What are the benefits of contestability
to the users of public services?
1.1 In theory, contestability offers benefits
of choice, pushes services to be more responsive to users needs,
and enables new providers to "enter the market". A number
of benefits to users are asserted by the third sector from their
involvement in service delivery: innovation; understanding of
and responsiveness to the needs of users as individuals; contribution
to social cohesion by community and volunteer involvement where
this occurs. Both the sector and government assert a belief in
the value of these benefits, although little quantified evidence
to demonstrate and evaluate them authoritatively is available.
1.2 Guidance to commissioners in the public
sector generally draws their attention to potential benefits of
this kind, and to their ability to give them weight in assessing
competitive bids. There is a widespread perception, however, that
this happens to a limited extent in most cases; and that decisions
are driven predominantly by factors that are both more tangible
and more traditional to procurement professionals, including low
cost. It should be a priority both for government and the sector
itself to assemble evidence on the added value from third sector
involvement in services. If government wishes such added value
to weigh more as a factor in procurement decisions, action is
needed to develop methodologies and to develop the working practices
and culture of commissioners so as to encourage their application.
2. Is the third sector more likely to provide
better public services than the state or the private sector?
2.1 There is no decisive evidence to answer
this, and I agree that more research and analysis is needed, looking
at specific services and client groups as circumstances will differ:
(a) Is there evidence that where services
are provided by the third sector, that they are popular with those
that use them?
(b) Do public services provided by the third
sector more accurately reflect the changing needs of those that
use them?
(c) Is there evidence that contracting to
the third sector leads to greater scope for innovation in public
service delivery?
2.2 These are all areas needing more research.
On popularity, there is positive objective evidence such as from
CSCI[52]
about some social care services, and I have heard many accounts
of locally provided services, well commissioned to meet special
needs, such as culturally specific meals on wheels provision.
But I have also noted the contrary findings of the recent research[53]
published by the National Consumer Council into sector-specific
customer satisfaction with public services.
3. Does commissioning benefit the third sector?
3.1 Good commissioning can benefit the sector
and enable more of those within it who want to provide quality
services to do so. But the reality is difficult—even the
best commissioner operates with constraints of time, money, geography.
3.2 Even third sector bodies which make
a success of partnership in the delivery of public services often
find the process very difficult and demanding. Funding is often
uncertain, and, though recent commitments to three-year deals
as the norm may help with this, may be given only for short periods
in many cases. Processes are variable, and often over-complex
and inconsistent with good practice. Many small organisations
cannot commit the capacity, skills and resources to be involved
on the terms the public sector seems to require, going through
several stages of bids.
3.3 I hope that OTS's programme for the
training of 2000 commissioners, which I strongly support, will
specifically address these issues, especially as they affect smaller
organisations.
3.4 In considering benefit to the third
sector, it is important to bear in mind that even those third
sector organisations which operate under commercial business and
management disciplines are strongly driven by altruism, rather
than by profit, and that they will generally be engaging in service
delivery as a way of furthering a charitable or philanthropic
mission.
(a) Will contractual relationships with the
state improve stability within the third sector?
3.5 Long term funding is important for stability,
which can be achieved through contracts or grants. However, there
may be instability for individual organisations and sections of
the third sector if the public sector moves too quickly or too
strongly towards highly-specified contracts away from grants.
3.6 I want to see that contracts have the
Compact principles built in, in keeping with the commitments that
government has given for itself and its commissioning arms. These
include Lottery bodies, agencies and NDPBs, and the NHS. In the
interest of consistently and stability, I would like to see the
Government adopt clearer disciplines to support this building-in.
These might most obviously take the form of consistent requirements
for public reporting by departments of delivery of Compact commitments,
including exception reporting where they have been departed from.
3.7 In keeping the Compact and Codes under
review I will be interested to consider the comments in other
evidence to the Inquiry supporting standard contracts and pre-qualification
questionnaires to help those working across several commissioning
relationships—local, regional and national—or across
sectors such as health and employment support.
(b) Will close involvement with service provision
prevent third sector organisations retaining the ability to be
critical of government?
3.7 Large national charities such as Barnardos
and Turning Point are strong enough to be able to speak out confidently
in the interests of their service users regardless of their financial
relationship with government and its many branches. But I hear
plenty of concern about this, particularly at local level, from
organisations who feel that their prospects depend on their maintaining
good relationships with a small number of politicians or key officials.
However, I have seen evidence that it can be managed: I would
like to see third sector bodies being more assertive in demonstrating
the special added value that they believe they bring to service
delivery, and in challenging what they feel may be coercive behaviour
on the part of funders or particular individuals within them.
3.8 These issues turn on personalities and
cultures, and there is no systems answer that can deliver a complete
solution. At local level, however, the development of commissioning
through LSPs and LAAs involving third sector representatives may
help to develop working methods and cultures that ensure respect
for the independence and the multiplicity of roles of the sector
and of individual organisations within it.
(c) Is there a risk that the service providers
will become increasingly bureaucratic?
(d) Is there a risk that third sector organisations
will lose their independence, their identity or their distinctive
ethos?
3.9 The risk of these things does exist.
In my view it is most likely to materialise when:
— bidding and monitoring processes
are disproportionately onerous for third sector service providers;
or
— the third sector provider cannot
recover its full costs in providing a service and has no resources
from which to subsidise the shortfall; or
— the third sector provider, in the
search for resources to sustain its existence, promises more than
it is equipped to deliver.
3.10 Pressures on third sector organisations
to form consortia, or to operate as sub-contractors to a large
prime contractor, could also increase the risk, though, depending
on circumstances, third sector bodies (and particularly small
ones) may also find these approaches the best way to safeguard
their ability to become involved in service delivery.
(e) Might the third sector become polarised
between large service providing organisations and more radical
groups? If so, would this matter?
3.11 The sector is massively diverse now
but the polarisation is not so simple. Some of the largest organisations
are both significant service-providers and active campaigners
for change. It is difficult to predict the long-term effects of
a big shift towards commissioning and contestability. The unpredictability
is greater given that most commissioning is done at local or regional
level, which is creating different patterns of activity across
the country. Overall, however, the likelihood is that the distinction
will increase between those organisations whose activities wholly
or mainly involve delivery of publicly funded services, and others.
4. Does commissioning services from the third
sector have any benefits for the state?
4.1 Good commissioning—enabling the
third sector to offer its best mix of skills, commitment, understanding
of citizens' needs, and challenge to the policies and practices
of government—will benefit the wider community that the
state exists to serve. There will be better outcomes from quality
services and efficient use of resources.
(a) Does the state risk losing control of
service delivery in a way which might be damaging?
(b) What capacity will the state need to ensure
that it can be an intelligent customer of services?
4.2 Evidence to date is that loss of state
control is less of an issue than damage done by over-tight specifications
which proscribe innovation.
4.3 Given the devolution of commissioning
responsibilities it will be important for commissioners to consider
how best they can act in the interests of the users, residents,
citizens and taxpayers. That must surely be by involving them
in design of services and in decisions about trade-offs and rationing.
The state in listening to the competing voices of the various
interest groups, must be able to distinguish between special pleading
and concerns of broader importance.
(c) How is duplication of effort in order
to monitor and manage contracts best avoided?
4.4 I am concerned that resources are wasted
in monitoring which adds nothing to service quality. I want to
encourage central and local government, through the LGA, to undertake
streamlining of monitoring and inspection processes, in line with
existing commitments to proportionality in these areas in the
Compact and its Codes.
(d) How good is the state at managing bidding
processes and defining contractual obligations when commissioning
services?
4.5 Good effective commissioning exists
but not everywhere. The state is very diffuse—the NHS, Non-Departmental
Public Bodies, and local councils have a far greater commissioning
role than central government departments have. My staff are currently
considering various cases and programmes where there have been
problems to learn lessons. In some cases the core Compact commitments
have not been adhered to—and the failures have been on both
sides. Some in the sector have also been slow to understand their
responsibilities in this process.
4.6 On the Government side, Ministers acknowledged
at the last Annual Review Meeting for the Compact[54]
that there was a gap between the commitment expressed to Compact
undertakings and their delivery in practice. Departments do not
feel as responsible as they should for delivery of Compact commitments
by the NDPBs and other spending bodies they sponsor, and I have
already stated my concern at how "competitively neutral"
processes are not always linked to appropriate capacity building
and preparation to enable competent third sector groups to reach
the "level playing field".
5. What are the financial implications of
providing services through the third sector compared with directly
provided state services?
(a) Are services cheaper to provide?
(b) Are there "hidden costs" such
as contract oversight?
5.1 Most local authorities now operate a
complex mix of relationships with the third sector—from
very small local community groups with few or no staff to big
national players. Authorities also buy services from each other
and private suppliers. The costs of contract oversight are dependent
on other factors besides the sector of the provider, such as the
size of the contract and the experience and professionalism of
the provider. There is not yet a level playing field, given differences
such as irrecoverable VAT, the costs of TUPE and a reluctance
to consider full lifetime benefits beyond short-term considerations.
Many third sector organisations also need capacity building support
and pump-priming before they deliver to their best.
(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?
5.2 There is wide consensus today that third
sector organisations have special characteristics enabling them—in
some circumstances—to provide services which satisfy the
needs of citizens more completely than other service-providers
could. There is some evidence to bear that out—but the evidence
base is patchy and the evidence itself is not conclusive.
5.3 The decisive factor in the commissioning
of any service is surely the quality of the service—the
extent to which it meets needs and provides value for money in
doing so. Clearly there should be fair treatment of all organisations
as regards the bidding, monitoring and other processes in which
they are required to engage. But equally it is right to take into
account, when considering what represents a high quality, value
for money service, any wider social benefits that might flow from
the choice of a third sector organisation as the service-provider.
I am not suggesting that those wider benefits can be inferred
in the case of every third sector organisation. But they should
be looked for, and where they are likely to materialise, acknowledged
and given weight in commissioning decisions. The decisive consideration
should always be the quality of services delivered to users.
5.4 For the time being, and without prejudice
to the wider issues, the Compact and its Codes commit government
to operate special financial rules of the kind in the question,
though such rules at present are not fully or consistently delivered.
June 2007
50 Partnership in Public Services-An action plan
for third sector involvement, www.cabinetoffice.gov.uk/thirdsector Back
51
Para 1.4 of Funding and Procurement: Compact Code of Good Practice
(2004) Back
52
The state of social care in England 2005-06, CSCI December 2006 Back
53
Delivering public services : Service users' experiences of the
third sector. Report to the Office of the Third Sector by the
National Consumer Council (June 2007) Back
54
Minutes of the Seventh Annual Meeting (22 November 2006) published
in a report to Parliament (March 2007) Back
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