Carillion: Commissioning at a Crossroads

 

This article was written by Dominic Llewellyn and originally appeared in the Public Services Transformation Academy 2018 Report – The State of Transformation.

Carillion going into liquidation in January 2018 might have been a shock for the Government. It wasn’t for many of the charities and social enterprises delivering public services. They’d seen first hand how government commissioning had become a competition for FTSE 100 companies to race to the bottom in terms of price, stripping social impact – and any margin – out of contracts and, all the while, paying their CEOs multi-million pound salaries. As a leader of a large social enterprise put it to me: “Government commissioning understands the price of everything but the value of nothing.”

The response of some to Carillion is to frame this around outsourcing versus insourcing or Capitalism versus Socialism. These arguments from the 1980s should remain there. They are not the answer. The key question is: what are the social outcomes that we want our public services to create?

What hope should the Government be giving to the 550,000 young people who don’t have a job or aren’t in education or training? Or to the 80,000 families who are in temporary accommodation? Or to the 5,000 people that are sleeping rough? Or, to the 1.2 million people in contact with mental health services? What about children on the edge of care or the 73,000 children that are looked after by the State? This list could go on, and many of these statistics have got worse over the past few years. The public sector was designed to support people in acute and infrequent need. But the need is now neither acute nor infrequent: more people need more help.

These people’s experiences should challenge those of us who believe that this is too high a level of human suffering for a developed country. Our reactive model also represents a missed opportunity to contribute to improving UK productivity and economic growth. Only six per cent of public spending is spent on preventing social problems, instead of reacting to them. The UK needs to create opportunity for all in society in a new way.

The good news is, that while many have been frozen out of large public service contracts, charities and social enterprises are learning from the lived experience of people in communities, who are innovating and creating genuine impact, preventing social problems and creating opportunity for all.

Some of these charities and social enterprises are encouraged by government ministers to bid for Government programmes such as the Work Programme and Transforming Rehabilitation. Collectively, they’re spending millions of pounds bidding only to discover that large companies got the financial backing. Locally, many social enterprises have lost their health contracts to private companies like Virgin Care who promise innovation and new technologies only to then go grovelling to the social enterprise they beat in the tender to ask for help when they can’t mobilise the contract.

There are many examples of the incredible work that social enterprises are doing. They include Catch22’s Children in Need project, providing early support to stop repeat escalations in children’s social care through a ‘pod’ model of support working with the community. HCT Group’s Travel Training gives children and young people with Special Educational Needs the skills and confidence to travel independently on public transport, opening up a world of possibilities – going on to college, employment or just being able to get out and about with friends. Shared Lives matches an adult who needs support and/or someone to move in with, or regularly be visited by, an approved Shared Lives carer, after they have been matched for compatibility. Together, they share family and community life. The outcomes can be startling, with people reporting feeling settled, valued and like they belong for the first time in their lives. They make friends – a third make five or more friends through Shared Lives – and they get involved in clubs, activities and volunteering; often a new experience.

Exceptional social enterprises aren’t just operating in locally commissioned services. An example within criminal justice is The Clink – the remarkable hospitality and catering social enterprise – working in prisons and through the gate, reducing reoffending rates. A recent Ministry of Justice report found that for every 100 typical people participating in The Clink’s training scheme, 17 would go on to reoffend within a year of release. For every 100 typical non-participants in a group of similar people, 29 would reoffend within a year. This indicates that for The Clink, there has been a 41 per cent reduction in the likelihood of reoffending for those participating in the programme.

Within commissioning, there are some glimmers of hope. Life Chances Fund, the £80m top up fund for locally commissioned outcomes-based contracts for charities and social enterprises, is significantly over-subscribed. This is supporting charities and social enterprises to deliver contracts that are often preventative across homelessness, children and families, drugs and alcohol, health and adult social care, employment and criminal justice. Cities such as Sheffield are also looking at creating social impact bonds of a magnitude not seen before in the UK. Somerset County Council has formed a joint venture, Discovery, with the social enterprise Dimensions. It’s to help people with learning disabilities and autism get more from life. It supports 900 people in services including long-term residential care, supported living, home care, crisis support and employment support. Also, Leicester City Council has recently started a process to build an innovative partnership with a social enterprise for its children’s services

However, these kinds of contracts are often the exception rather than the norm. The contracting of public services would be so much more impactful if commissioners acted differently. But, to take full advantage of this, commissioning must be bolder. It’s time for government to look beyond economic and physical regeneration and to think more about societal transformation. What can probation workers do for someone in prison who wants to move to a life free from crime?  How can children’s services give hope and aspiration to someone in the care system? How can adult social care ensure that the elderly have lives of meaning and purpose?

So what should local and national governments do to take advantage of the outstanding practices of some of our best charities and social enterprises? Here are five suggestions:

  1. Reboot the Social Value Act and take risks: The Social Value Act has created a new conversation around impact and public services, but it’s time to put it centre stage. Revisions to the act could ensure that there is a minimum percentage for social value in procurement of at least 20 per cent and ensure commissioners are clear on the social value they want to create.
  1. Be sensitive to resources: Government needs to consider the amount of resources and time required to bid – especially when charities and social enterprises don’t have the balance sheets of some of their private sector competitors. They can help provide real support and engagement across the provider market well before procurement begins, ensuring all bidders are equally prepared, and then the best provider can be selected.
  1. Re-evaluate contracting mechanisms such as the parent company guarantees: National and local commissioners need to make it easier for smaller companies, charities and social enterprises to bid for contracts. Once they can do this they should work on reducing the barrier of a parent company guarantee. Charities and social enterprises tend to have smaller reserves and often cannot provide this. With asset backed FTSE 100 companies failing, it’s time for Government to re-examine this situation.
  1. Prioritise value over price: Commissioning mustn’t be a race to the bottom in terms of price. One option is to set a standard price against which bidders are asked what they can deliver for that cost. This will help stop smaller organisations who can’t deliver multi-lot bids from being undercut by larger organisations, who benefit from economies of scale. This will ensure value for money for the taxpayer.
  1. Be more transparent about impact: Charities and social enterprises delivering public services are often much more open about the impact they are, or aren’t, creating. Government needs to be much more open about its effectiveness and the outcomes it creates – and wants to create. Without this transparency, we’ll still get counterfactuals where the public don’t understand what ‘good’ constitutes.

There is significant opportunity; and what’s more, there are hundreds of millions of pounds waiting to invest in projects like these through social investment.

Large insurance companies are also exploring how they can underwrite contracts for charities and social enterprises with small balance sheets.

Here are three ideas that I’m excited about:

  1. Creating social primes: Charities and social enterprises should have the opportunity to deliver public services at scale and that means the main barrier is policy. With the Chief Inspector of Probation admitting that Transforming Rehabilitation isn’t working, there is an opportunity for the Government to be brave and support the creation of more social sector prime providers within criminal justice. This social prime could be backed by social investors and would also enable the face to face services and specialist interventions which, as the Chief Inspector says, Transforming Rehabilitation badly needs.
  1. Building people centred public services: Devolution provides a “once in a generation” opportunity to shape public services around individuals and communities. It makes it easier for budgets to be joined up and focused on people – not just specific interventions – with services shaped around them. This should enable those on the frontline to support people earlier and ensure that they don’t keep falling into the poverty trap.
  1. Developing Housing First: With increased evidence that hostels don’t provide good outcomes for people moving from homelessness, “Housing First” – and the move to smaller units of accommodation – provides an opportunity for social enterprises delivering outstanding services to tackle disadvantage, and end rough sleeping, allowing social investment to help with the purchase of properties for individuals.

The collapse of Carillion demonstrates the problem with large, private, share value focussed companies being awarded public contracts procured at the cheapest price. Social enterprises offer a different model, where profits are reinvested and interests are aligned in pursuit of public benefit. Commissioning is at a crossroads and now is the time for social enterprises and charities to showcase what they can deliver. It’s time for local and national government to take them seriously.

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