This post is written by Iona Joy, Head of Charity Effectiveness at New Philanthropy Capital and was originally posted on the NPC Blog.
I had a Damascene moment at the launch of our commissioning report recently. Thanks to two of our very lively guests, I gained sudden clarity on a niggle that had been bugging me for a while. Chatham house rules so I won’t name the guests, but suffice to say one was a QC and the other a charity chief executive.
It is this business about contracts and procurement. The legal paperwork gets longer and longer and more and more convoluted. What starts as a very constructive strategic conversation between commissioner and provider ends up mired in a procurement process whose main purpose is to eliminate risk, rather than enable good outcomes.
This concern was summed up by my QC lawyer colleague, clearly bent on reducing her workload, and then backed by the charity chief executive who said that her best funding contract had been ‘just a paragraph and a good relationship of trust’.
My heart sank when a government participant responded by saying ‘ah, but if we build capacity…’. Capacity to do what? I want charities to have the skills and capacity to provide excellent services to people with autism, and achieve terrific outcomes for young people from troubled backgrounds. I’m not that excited about charities developing detailed and boring expertise in legal documentation. I’m not even sure I’m happy that they are having to develop contracts and tendering departments. All this is expensive and has very little to do with serving the needs of real people.
I was a banker once and what I learnt was that the legal documentation could be as long as the encyclopaedia Britannica, and the lawyers could rack up fees beyond reason, but if the deal doesn’t stack up, no amount of belt and braces paperwork will put it right. Indeed, we generally reckoned that if negotiations were heavy going and documentation lengthening, it was likely that the loan would default. Too rarely were over-complicated deals abandoned—deal fever, like summit fever, is hard to resist, especially if you’ve racked up costs and commitment.
I then moved into venture capital, where the focus was less on the documentation and more on the quality of management and proposition. The documentation was relatively simple, accompanied by a generally accepted template covering basic terms. Aligning the interests of investor and investee was of paramount importance in pursuing a deal, with the potential risks and return shared accordingly. When I see negotiations between charities and commissioners, I worry that the important alignment of interests—ie to solve a particular social problem, such as worklessness or youth disaffection—is lost in the procurement process.
A process that tries to neutralise risk can often do just the opposite. It can debilitate efforts to improve or rethink services so that problems really are solved. And in a dynamic and changing society, stifling improvement and dynamism will result in services becoming out-of-date and no longer fit-for-purpose.
So commissioning needs to get back to basics, focus on what matters, nurture relationships, and cut the legalese. That would save a tonne of money and time. And it would encourage improvement!
