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 coproduced .

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Policy shift-It s all in the full stop
‡ Social enterprises are businesses with primarily social objectives. They principally reinvest their surpluses in the business or community for these purposes. ‡ Cabinet Office section on Voluntary Sector ‡ Formerly the Office of the Third Sector, Cabinet Office
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The idealised model

Social Enterprise is in here, somewhere

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Private Sector ~£1trillion GDP

Lets get real
Social Enterprises ~8.4billion monetised civil society ~£157billion Public Sector ~£400billion revenue

Procurement ~£150billion

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.the car owners of Britain .
‡ Pretty much everyone, then ‡ Most people are employees ‡ Most people are not owners (of the private sector) ‡ So, is Big Society all the employees or all the owners?
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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

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 size of procurement
Sodexo £12bn revenue 380,000 employees 80 countries 8 client segments: Corporate, Health Care, Seniors, Education, Defense, Remote Sites, Justice and Sports & Leisure. ‡ 6% operating margin ‡ ‡ ‡ ‡ ‡
Social enterprises are just not competing with these publicly listed companies They are competing with SME & privately owned businesses

‡ Serco
‡ ‡ £3.9billion revenue provide and operate two new prisons in the UK, at Belmarsh West, London, and Maghull, Liverpool, with a combined value to us of around £600m over 26½ years. formed a new partnership, GSTS 4 Pathology LLP, with the Guy s and St Thomas NHS Foundation Trust, to pursue opportunities in this substantial market, which is valued at approximately £2.5bn. signed three contracts under the UK Government s Flexible New Deal initiative worth £400-500m Running schools and inspecting schools for Ofsted
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Top privately owned companies
These are not known for their public contractingexcept construction

Note the complex mix of ownership types, inc EBT
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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

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Poor understanding of wickedness of social issues Poor understanding of the complexity 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

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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 of Wicked Problems, by Jeff Conklin, Ph.D., Wiley, October 2006.

PS, the trick is not to tame an issue, but to keep it wicked

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lets take a diversion for a minute

Social construction of procurement

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therefore: getting back on track

The (hidden) overhead for the Big Society
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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 shortterms 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 microtransactions, 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-design co-finance co-decide Co-produce co-deliver co-assess

Co-operate

Pro-sume

value unpaid labour 3rd job

contract purposively

develop trust

reward reciprocity
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