Commissioning in Crisis
As the curtain comes down on a difficult year, a raft of hard-hitting reports have just been published which highlight the challenging times our country faces.
The Casey Review has shone a spotlight on some of society’s most entrenched divides, and the fact that successive government initiatives have failed to respond to the scale of the integration challenge.
The JRF provide a snapshot of poverty and social exclusion in 2016, and point to two record highs that reveal a telling trend. The proportion of working-age adults in employment is now at its highest ever level – but so too is the number of people in poverty in a working family. So the good news on employment masks the fact that policymakers’ maxim that “work is the best route out of poverty” seems to merely have succeeded in moving people from being poor and unemployed, to poor and in work.
Alongside these reports is some hugely important work from the Lloyds Bank Foundation, investigating the commissioning of public services and the difficulties small and medium sized charities face in winning contracts. This picks up many of the themes we have discussed in our Keep it Local campaign, that small, community-led organisations are being crowded out of the public service marketplace by the trend towards scale and standardisation that favours big corporations and large national charities.
The title of the report – “Commissioning in Crisis” – says it all and it outlines the challenge in fairly stark terms: throughout their research, “good examples of commissioning have been difficult to find, while examples of poor commissioning practice exceeded expectations in both depth and breadth.” The report provides a wealth of detail about how the scale of contracts, the payment structures involved, “the absurd and irrelevant demands” in tenders, and the “backroom deals” are pushing small charities out of the commissioning process.
Perhaps the most worrying trend they point to is the growth of larger contracts, with smaller organisations actively prevented from bidding. The report points to recent NCVO research which found that small and medium-sized charities’ income from government contracts decreased by up to 37% between 2008/09 and 2012/13, while government contracts to the largest charities increased by 34% in the same time.
The tyranny of “economies of scale” still looms large, where commissioners think they can save money by packaging up contracts and selling in bulk to the lowest bidder. Our groundbreaking report “Saving Money by Doing the Right Thing” showed this to be a fallacy, and that there are in fact “diseconomies of scale” in large contracts, which can be much more complex and expensive to manage than a larger number of smaller ones. “Commissioning in Crisis” bears this out and talks about how integrated contracts are “removing small sums (often around £25,000) from small organisations achieving great impact in favour of large providers where such a sum may be swallowed in large overheads or used to fund a single salary of someone with no experience in family support.”
The report also talks about how large contracts attract “predatory” organisations, who have no previous expertise but recognise a business opportunity, which they are in a position to win because of the complexity of tendering processes. In one example, 27,000 words were required for a contract worth less than £350,000 a year, which would suck up too much capacity for a small organisation, but no problem for a large company with teams of professional bid writers. Some companies, the report says, will even bid on a “loss-leader basis” to establish themselves in a particular market.
Ultimately, the crisis in commissioning has three big implications. First, it’s failing to deliver the services we need. To drive down demand on public services, we need to focus on prevention and keep people living healthy lives in their own communities. We can only do this with responsive services that are tailored to the distinct needs of the ‘whole person’. But the report says that “some charities that may be best suited to delivering services do not bid, knowing that they would not be able to deliver an effective service at the price on offer” and that “in placing too high a weight on unit cost, commissioners may select services which do not meet the need of service users”.
Second, it’s failing to realise value for money. For one thing, the increasing scale and complexity of contracts and tendering processes sucks up huge amounts of precious time for commissioners who have to wade through lengthy bids. But, crucially, it means we keep having to spend more and more on public services over time, to cope with the consequences of ‘failure demand’, rather than having the right kind of target services that address problems at source and prevent expensive crisis points being reached.
Third, it’s failing to strengthen communities. The foundation of a Keep it Local approach is a strong and healthy civil society, with enough community organisations who have the capacity to run effective services. Commissioners need to see this as a core part of their role – not simply commissioning one service to achieve a narrow output, but how the commissioning process can shape the market and support community organisations.
The Lloyds Bank Foundation report shows we face huge challenges if we want to Keep it Local and this isn’t the direction that public services are currently taking. But early in the new year, Locality will be publishing some practical guidance for councillors and commissioners for how we can buck the trend towards scale and standardisation which is failing to deliver the services we need.