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John Tizard: Procuring from the VCSE is different from procuring from major corporates

Tuesday February 21st, 2017

How often do I hear from voluntary and community organisations and small social enterprises (VCSE) that they are scarred and damaged by incredibly bureaucratic public procurement processes?

John Tizard

The short answer is “far too often”!

I find this both disappointing and frustrating. The position has with a few honourable exceptions changed very little over the last decade or more. This is in spite of an ever stronger rhetoric from national and local political and public sector executive leaders that they value the VCSE and wish to award more contracts to the sector.

So what is going wrong and what is going right?

Even where public sector leaders are genuinely committed to a greater role for the VCSE in public service delivery they on many occasions fail to persuade or instruct their staff engaged in commissioning and procurement to make the policy pledge a reality.

The litany of barriers facing VCSE organisations, especially small ones – from bidding to, more importantly, winning public sector contracts – is very long. Let me cite a few examples of the problem.

How can a small VCSE organisation spend hours, indeed days, on completing pre-tender documentation and lengthy tender documents many of which are disproportionate to the size of the potential contract and the risks associated with it? And how many can afford to risk the cost of preparing such documents when the likelihood of winning is slender?

Pre-tender dialogue is an important part of any procurement but small organisations need this to be smart and not all time-consuming. Their key people cannot run their services while being sat in many lengthy conversations with commissioners and procurers. Of course, they should have dialogue – but in sensible ways.

Why do public bodies require evidence of balance sheets far in excess of the value of the contract and the risks associated with it? Or require successful bidders to bear the costs of funding massive cash-flow deficits because of deliberate delays in payments or some ridiculously long-term complex payment by results scheme?

A newly formed VCSE organisation will not be able to demonstrate many years of successful service delivery nor financial sustainability. Many VCSE organisations have successfully been sustainable for many years but cannot demonstrate financial viability beyond the next few months at any one time. Too often public procurement rules applied to individual contracts ask for such evidence.

Too many public service contract opportunities are for large-scale provision which is outside the capacity of many smaller potential providers.

A further example of discrimination is when procurement officials evaluate bids from small VCSE organisations and compare them with bids from bigger organisations, expecting the same quality of presentation.

If the Government and wider public sector is truly committed to driving more public service delivery by VCSE organisations and gaining greater public and social value from public procurement, there has to be a major change in culture and processes.

This should start with mature conversations at national and local level between VCSE representative bodies and public sector leaders, including procurement officials. There has to be better understanding, respect and ultimately trust between them.

Rob Wilson, Minister for Civil Society, has stated:

“We need to empower the voluntary sector to be the very best it can be, and harness its expertise so we can improve people’s lives in communities across the country. That’s why it’s so important that we do all we can to help local charities and social enterprises to make connections and help shape and deliver public services across the country.”

The Minister has appointed former NCVO Chair Martyn Lewis to chair a voluntary sector-led implementation group to drive this agenda forward. Local government, including the Local Government Association, is involved. This is a great starting point.

In my opinion, the public sector procurement profession has to step up to the plate and offer some solutions. These could include ten immediate steps:
⦁    simplifying pre-tendering and tendering processes and ensuring that they are proportionate to the size of and risks associated with the potential contract
⦁    setting minimum financial conditions on potential bidders which are proportionate to the size of and risks associated with the potential contract
⦁    sizing contracts in ways that are viable for small VCSE bodies
⦁    encouraging and supporting the creation of consortia for VCSE bids and service delivery which reflect and respect individual organisations’ values and missions
⦁    setting contracts based on outcomes not prescriptive inputs so as to allow VCSE providers to maximise their impact
⦁    contracting on commercial and financial terms that are realistic for VCSE organisations, including timely payments that cover full operational and overhead costs plus a margin to fund investment and growth as would be the case with a major corporate provider
⦁    fostering innovation and encouraging new entrants in ways that maintain the wider diversity and capacity of the VCSE in any place
⦁    recognising and respecting the voice and campaigning role of many VCSE organisations
⦁    being prepared to persuade their public bodies to substitute competitive contracting where appropriate with collaboration and grants
⦁    requiring large national VCSE bodies and business sector bidders and providers to work with smaller VCSE organisations as partners and in their supply chain on a fair, practical and sustainable basis – ending “bid candy” and abusive supply chain exploitation

Interestingly the adoption of an approach based on these ten points would also benefit many small businesses, especially start-up businesses seeking to contract with the public sector.

This requires a change of mindset and behaviours in the public sector procurement profession and more widely across the public sector. It requires procurement professionals to ensure that their political and senior executive leaders are advised and encouraged to work more effectively with the VCSE sector; and for these professionals to understand and engage with VCSE organisations to implement a new paradigm in public services.

One practical and powerful way for public procurement professionals to understand and appreciate the VCSE better would be to become a volunteer and possibly a trustee.

Public sector procurement should not be a barrier to but rather a champion of greater social value, a strong and vibrant civil society and better public services.

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