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Public sector commissioning is changing rapidly

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Times of change

A recent (9 April 2015) report from New Philanthropy Capital“Times of Change” –  is an excellent short summary of the main trends in public sector commissioning in terms of how they affect the voluntary sector.

The report covers a very wide range of issues which I would not be able to do justice to in a single blog post, so I’ve decided to pick out some of the key trends broken into two simple categories – changes which encourage voluntary sector participation in public sector service delivery and changes which obstruct that participation.


Favourable changes

In addition to the fact that political parties of all persuasions were talking positively about the involvement of the voluntary sector in delivering public servicesin the run up to the election, there have been two key legislative changes which should favour charities in their attempts to secure contracts. These are:

  1. The Social Value Act which requires public sector commissioners to consider how the procurement of services will contribute to the economic, social and environmental well-being of the area which should work in favour of smaller, local charities.
  2. The Localism Act which shifts power from central to local government and from local government communities. For the voluntary sector, key innovations include the Community Right to Challenge which gives community groups the right to express an interest in running local authority services and, if the council accepts the challenge, triggers a procurement exercise in which the community can bid.



However, there are also a number of substantial challenges which make it harder for smaller charities in particular to continue to be key players in local service provision. The large cuts in public funding have already had significant negative impact on the voluntary sector. A NPC study into the commissioning experiences of larger charities in 2012 found that a third had lost government income, and almost two thirds had closed services or expected to do so in the next year.

These challenges include:

  • The continued shift from grant to contract-based funding which requires charities to invest large amount of resources in repeated procurement competitions.
  • The fact that local voluntary sector providers have increasingly to compete against large national charities and private sector providers to “win” the right to provide services which they have spent many years developing.
  • A growing trend towards payment by results contracts which can make cash flow difficult and require considerable time and effort in monitoring and recording, rather than service delivery.
  • Cutbacks in commissioning which mean that there are fewer experienced individuals to manage the commissioning process including complexities such as PbR.



Although, the NCP report identifies many positive developments, I take a more pessimistic view and worry both that the voluntary sector will play a smaller role in the delivery of public services and that some of its core principles will be compromised as it is forced become more commercial in approach.

The NCP report identifies two alternative scenarios, both of which are extremely worrying.

The first concern is that there will be a “hollowing out” of the charity sector where large charities have the scale to compete for contracts or will partner with those that do, and small charities can still keep going through remaining grants and grassroots activity and voluntary action, but medium-size charities struggle to find grant or contracting opportunities at a scale which allows them to survive. Without government income in the funding mix, many medium-size charities may go bust.

An alternative scenario, about which NCVO has warned, is that smaller organisations are more likely to face cuts in government income and will very quickly cease to exist.

In my opinion, if the new government operates a market-driven approach to public sector commissioning, we will see a serious erosion of the voluntary sector and its role of championing the powerless.


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2 Responses

  1. There are 2 key negatives that are not attracting a lot of attention that are related to the new world of market testing and procurement. Firstly there is a transfer of pension liability from Local Authority and NHS in contracts won by the voluntary sector. This is just a transfer of risk, and will ultimately cause real problems for the voluntary sector. Organisations that do try to bid in this highly competitive market are now spending huge amounts of their money on tendering, either by having internal teams, or by contracting the job out to consultants. This money used to be spent of service delivery. Don’t get me started on the length of tenders now, or PbR!

  2. Hi Debbie, thanks for your comment. I agree that pensions are a time bomb and that we need to find a better way of commissioning, longer contracts and consolidating effective local partnerships with local communities as well as statutory and other voluntary sector partners.

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