Social Enterprise & Public

Procurement
Revd Timothy Curtis
Senior Lecturer in Social Entrepreneurship
University of Northampton

HEFCE/Unltd Ambassador for Social Entrepreneurship in Higher

Education

Supported by
 Brief
• What are the challenges for local government
in policy, commissioning and procurement
that make it harder for them to get the most
out of social enterprises?
– ‘wickedness’ of the issue not addressed
– procurement is uni-directional & untrusting
– Needs to be ‘purposive’, ‘prosumed’ and ‘co-
produced’.

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The ‘idealised’ model marketplace

Social Enterprise is in here,

somewhere

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 Private Sector
~£1trillion GDP

Lets get real…

‘monetised
civil society’ Public Sector
Social ~£400billion revenue
~£157billion
Enterprises
~8.4billion

Procurement
~£150billion

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 Publicly listed companies
• Sodexo • Serco
• £12bn revenue • £3.9billion revenue
• provide and operate two new prisons
• 380,000 employees in the UK, at Belmarsh West, London,
• 80 countries and Maghull, Liverpool, with a
combined value to us of around
• 8 client segments: £600m over 26½ years.
Corporate, Health Care, • formed a new partnership, GSTS 4
Seniors, Education, Defense, Pathology LLP, with the Guy’s and St
Thomas’ NHS Foundation Trust, to
Remote Sites, Justice and pursue opportunities in this
Sports & Leisure. substantial market, which is valued at
approximately £2.5bn.
• 6% operating margin • signed three contracts under the UK
Social enterprises are just not Government’s Flexible New Deal
initiative worth £400-500m
competing with these publicly • Running schools and inspecting
listed companies schools for Ofsted
They are competing with SME &
privately owned businesses
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 Privately owned companies

These are not

known for
their public
contracting-
except
construction

Note the
complex mix of
ownership
types, inc EBT
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 SME’s
• There were an estimated 4.81 million private
sector enterprises in the UK at the start of 2008
• Small and medium-sized enterprises (SMEs)
together accounted for 99.9 per cent of all
enterprises, 59.4 per cent of private sector
employment and 50.1 per cent of private sector
turnover.
– http://stats.berr.gov.uk/ed/sme/smestats2008-ukspr.pdf

• Average turnover £215,000

– http://www.publications.parliament.uk/pa/cm200506/cmhansrd/vo050615/text/50615
w10.htm

• Therefore, rule bound procurement environment

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 Not untypical LA expenditure

One local authority (A) reports a spend of

£331m. The top 10 spending categories
account for £226m (28% of the total
spend)

Curtis 2005

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 Progress in Procurement
The way it was
• Non-transparent opportunities
& leads
• Councils knew their budgets
but not their spend (BEST
Procurement)
• Incumbents had the advantage
• Lowest cost v best value
• Fragmented supply chains
• Grant/SLA/Short-term
contracts
• Liability foisted on contractor
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The way it is
• The Compact
• LM3/e-procurement
• OGC portal(s)
• Whole-life costing
• Consortia/supplychain
development
• Full cost recovery
• Longer/larger contracts
• Customer more active in risk
mgt
• RELATIONSHIP CONTRACTING
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 The problems of procurement
• Rule bound but does not recognise social construction of contract development
– Justice Holmes commented one hundred and five years ago: "Nothing is more certain than that
parties may be bound by a contract to things which neither of them intended, and when one does
not know of the other's assent”
• Poor understanding of wickedness of social issues
• Poor understanding of the inefficiency of ‘overhead’ in providing services
• The value added by ‘good’ participants (like volunteers) is lost to the value
calculation
• Requires and implies centralisation, professionalisation, risk avoidance and
individualism (Young & Temple 2010)
• Perverse outcomes: cherrypicking of easy to reach targets, focus on contract terms
rather than what is really going on, unstructured supply chains (NAO 2010)
inefficient duplication of procurement overheads (see later)
• “Market logic applies to narrow deliverables, but misses out the crucial dimension
that allows doctors to heal, teachers to teach and carers to care: the relationship
with patient, pupil or client.” NEF 2006
• Essentially ‘untrusting’ & ‘uni-directional’
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 lets take a diversion for a minute

The problem with social issues

“Some problems are so complex that you

have to be highly intelligent and well
informed just to be undecided about
them”

Dr. Laurence Johnston Peter

Chapter 1 of Dialogue Mapping: Building Shared Understanding

of Wicked Problems, by Jeff Conklin, Ph.D., Wiley,
October 2006. The University of Northampton 11
 lets take a diversion for a minute

Wicked Issues
• The problem is not understood until after the
formulation of a solution.
• Wicked problems have no stopping rule.
• Solutions to wicked problems are not right or wrong.
• Every wicked problem is essentially novel and unique.
• Every solution to a wicked problem is a 'one shot
operation'
• Wicked problems have no given alternative solutions.
– Horst & Rittel and Conklin

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 lets take a diversion for a minute

Tamed Problems

Chapter 1 of Dialogue Mapping: Building Shared Understanding PS, the trick is not to tame an issue,
of Wicked Problems, by Jeff Conklin, Ph.D., Wiley,
October 2006. but to keep it wicked 13
 lets take a diversion for a minute

Social construction of procurement

14
 therefore: getting back on track
The (hidden) overhead for the
Big Society
• “Perceived need to control the very complex arrangements for delivery of
services leads to layer upon layer of indirect activity.”
• A team to specify what service is needed and to create a bidding specification
• Several organisations to commit resources to create competitive bids often, in the case of activities that will last
over several years, these bids can run into hundreds, even thousands, of pages and cost tens or even hundreds of
thousands of pounds to produce
• The “purchasing” team to negotiate, answer queries, re-specify details and so on, before ultimately selecting one
“provider”
• The provider to set up a democratic structure with Board, committees, procedures to supervise and give
legitimacy, and to demonstrate “Good Governance”
• The committee to be involved with the “purchaser” in setting up a new organisation that meets all the
expectations of “good practice”, equal opportunities, financial accountability to the last penny, smooth public
relations to let the public know that they are there and so on
• A building, a phone system, intranet/ website/ customer and back-office systems strong enough to give people
the information they need for complete public accountability
• Sub-contracts for cleaning, food, stationery (lots and lots of paper!), maintenance
• A Human Resources department, disciplinary and grievance procedures, appraisal and career
• development system
• Salaries, bonuses, pension provisions, cars and allowances for indirect staff and senior managers all at
competitive market rates
• And so on and so forth

HOW SOCIAL ENTREPRENEURS CAN HELP BUILD A TRUST-BASED BIG SOCIETY

By Charlotte Young, Chair of School for Social Entrepreneurs and Nick Temple, Policy + Communications Director, School
for Social Entrepreneurs June 2010
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 Outcomes based commissioning
• Ignores the equity required in the process of
delivery
• Neutral regarding how the contractor achieves
the outcomes- performativity
• Services cease or don’t expand when fixed
outcomes are met
• Unintended outcome ignored

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 Social Impact Bond
• requires the taming of an issue to agree on
the metrics of success
• Secures long-term investment to create short-
terms savings in government spending
– Enticing, but is very close to PPP without
consideration of who the ‘social investors’ are,
and what return on investment they require

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 Personal budgets
• Leads to a ‘retail consumption’
model of service provision and use
• Individual budgets without mutual
support misunderstand the nature
of public services.
• Replaces relationships with market
transactions
– Buying a dog with a personal
budget
• what users need is long-term
relationships of mutual trust if they
are going to benefit.
• drift to Maybelline model of
services

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 Mixed provision is no panacea
• Pathways is led by Jobcentre Plus in some areas but is contracted out to
third sector and private organisations in over 60 per cent of the country.
• The National Audit Office found that there is no evidence that the
programme is performing better or costing significantly less in contracted
out areas than in those run by Jobcentre Plus.
• the private contractors were only really any good at the easy bits of the
contract - the volunteer particpants in the scheme who were keen to get
back into work.
• When it came to the really hard, time consuming, expensive cases -
people who were reluctantly forced onto the scheme - no provider
excelled, but the private sector performed even worse than Jobcentre
Plus.
• One third of prime contractors and two thirds of subcontractors expecting
to make a financial loss.
– National Audit Office 28 May 2010 ‘Support to incapacity benefit claimants
through Pathways to Work’.

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 Relational contracting
• Tony knows more than me!
• increasing the degree of contractual
incompleteness can enhance efficiency (Wu &
Roe 2007)

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 Coping with the problems

not seeking to propose a ‘one size fits

all’ solution that tames the
wickedness of this issue

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 Trust
• Hidden currency of contract success
• Large number of small interactions
• Regular interactions
• Direct transaction
• Open, transparent sharing of trust feedback

• Technology now exists to provide for micro-

transactions, micro-manufacturing and
transacting trust relationships- ebay, paypal,
facebook, smart phone apps

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 Co-production
• reduce or blur the distinction between
producers and consumers of services, by
• reconfiguring the ways in which services are
developed and delivered
• services can be most effective when people
get to act in both roles
• as providers as well as recipients.

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 Pro-suming
• Prosuming is the creation of wealth without
being paid for it, doing it for yourself or to give
it away. Alvin Toffler, Third Wave 1980
• In mental health- peer provision

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 To develop NEF
• Define public service clients as assets who have skills that
are vital to the (cost-effective) delivery of services.
• Define work ‘long-term share value’ to include anything
that people do to support each other.
• Include some element of reciprocity.

• NEF example “engaging disaffected 16-year-olds by using

them as tutors for 14-year-olds, and achieving both
major academic improvement for both and reductions in
bullying.”
• The value of the engagement, and consequent efficiency,
is lost to the system
• Let the 16-year olds earn ‘sweat equity’

• NOT – more ‘procurement with new organisations on the

same, old, terms

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 Co-own Co-operate

co-design

co-finance co-deliver

co-decide co-assess

Co-produce

Pro-sume

value unpaid labour contract develop reward

3rd job purposively trust reciprocity
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