Poor commissioning threatens survival of small charities

Commissioning in crisis

A new report published last week (7 December 2016) by Lloyds Bank Foundation for England and Wales finds that central and local government are using shockingly complicated and inappropriate contracting and commissioning processes to secure vital public services. The experiences of small charities taking part in commissioning processes reveal a system in crisis which leaves charities threatened with closure and the future of public services, including homelessness, domestic abuse and mental health support, at risk.

Commissioning in Crisis brings together the experiences of small charities who have taken part in 120 tenders and shines a spotlight on a catalogue of errors and unacceptable hoops small charities are forced to jump through to be able to continue supporting local people in need. Some of the worst examples of poor commissioning practice reported by small charities include:

  • Poor scrutiny: a charity being marked down during the tender process for not explaining the process it would use to get its services accredited – because it already had the accreditation.
  • Irrelevant requirements: a charity being penalised during the procurement process for not having a hard-hat policy despite bidding to deliver mental health support.
  • Forced mergers: a charity being told it was a requirement to merge with another organisation simply to be able to bid for the work.

Commissioning in Crisis report

Findings

The report identifies that poor commissioning practices, far from being isolated issues, are widespread. It also reveals a system that routinely discriminates against small charities on the basis of their size, preventing them from competing fairly, leaving them deprived of funding or at the mercy of larger providers, many of which can behave unscrupulously. Small charities have the local knowledge and expertise needed to deliver targeted support to local people. Being failed by current commissioning processes and the public funding that follows means they are at risk of closure with communities likely to lose critical support at a time of growing need.

The report identifies 10 common failings:

1: Unrealistic payment structures

Payment by results contracts are, in themselves, tricky due to the cash flow problems they create. Add to this additional payment pressures and many charities, particularly those that are small and medium-sized, can be excluded. (To see whether PbR is an appropriate mechanism for a particular contract, check out this interactive tool.)

2: Inaccurate information

When commissioning services, information provided needs to be correct so that bidders can submit accurate tenders. Problems inevitably arise when bidders cannot access this information.

3: Absurd and irrelevant demands

Adopting commissioning processes that apply to a wide range of services can make them inappropriate for the specific service being commissioned – one bidder for a mental health service was disqualified because it didn’t have a hard-hat policy.

4: Pushed out by backroom deals

Many charities maintain regular contact with local commissioners to ensure they are ready when bids emerge. Despite having been promised a fair and transparent commissioning process which would enable commissioners to fund the most effective service, charities can then miss out when back room deals are instead agreed by the commissioning body. The survey for this report uncovered a number of examples of this (illegal) practice.

5: Penalised for quality and success

Completing a 27,000 word bid is already a big ask for a small charity without professional bid writers to take on the task. Yet things can get even trickier when rigid processes penalise charities for already holding the contract and/or recognised quality marks — 1 bidder was penalised for not having a plan to achieve accreditation for a service which was already accredited.

6: Funding shortfalls

Full cost recovery has been an issue of debate in the charity sector for years. Where the costs of delivering the service together with the necessary back office administration have been slashed in a new contract, organisations already struggle to make ends meet. Yet they are asked to bear any additional costs that arise from meeting the contract specification.

7: Unfunded TUPE requirements

TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006), while necessary to protect staff, can be challenging for many charities when it is not proportionate nor properly resourced. Where these requirements are increased without associated funding, organisations are marginalised even further.

8: Forced mergers

Partnership working can be effective, enabling a range of providers to meet needs together while only requiring the commissioner to manage one relationship. It can take many forms, both formally and informally, whether across whole organisations or different services. In most cases, partnership working will only be successful where the conditions, values and relationships are right and it should only be done where it adds value to the services and organisations; not when mandated by commissioners.

9: Disrespecting expertise

Most bidders would expect that if, based on experience, they could propose a more effective way of meeting a need and delivering a service, they should do so and it should be considered. However, some specifications are too prescriptive to allow this.

10:  Inappropriate contract amalgamations and divisions

Large contracts can present a very real challenge when holistic services which respond to local needs are required. This is made harder still when services are packaged up across large contracts which do not reflect the nature of services and make-up of providers in the area.

Pressures on commissioners

Whilst highlighting major challenges faced by charities, the report recognises that commissioners themselves are under pressure operating with smaller budgets and fewer staff. Despite this, and in many cases, it is the commissioning processes itself adding cost, inefficiency and complexity.

Recommendations

With public funding tight and more of it being distributed through contracts rather than grants, the report calls for urgent reform to ensure small charities are able to compete for contracts on a level playing field. This is vital to ensure their continued survival. Recommendations for commissioners at a local level include:

  • Getting to the heart of how small charities operate and using this to inform commissioning
  • Simplifying the process and ensuring collaboration between all involved
  • Focusing on the long-term value of effective service delivery, rather than on short-term time and cost savings

The Foundation is also calling for central government to challenge poor commissioning practices and hold commissioners to account, to introduce measurable targets and improve transparency to ensure small and medium-sized charities get a fair chance and can continue to support individuals and communities in need.

 

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