The UK Government wants to use procurement to support charities – is this feasible?

I'm grateful to Philip Hoult, editor of Local Government Lawyer, who sent in a comment on my Spending Review post a little while ago:

Peter, What is your take on this bit of the Review:
“The government will look at setting proportions of appropriate services across the public sector that should be delivered by independent providers, such as the voluntary and community sectors and social and private enterprises. This approach will be explored in adult social care, early years, community health services, pathology services, youth services, court and tribunal services, and early interventions for the neediest families.”
Looks fraught with difficulty to me!  Excellent blog, by the way.

I hadn't spotted this at the time,  so thanks Philip.  And I agree - fraught with difficulty sums it up I think.  My understanding is that EU regulations differentiate between giving organisations grants, and public procurement.  But there is nothing in between.  And the rules for grants are quite tight; you cannot give a 'grant' to a commercial organisation, or a charity which is competing in a commercial market, for instance; you would need to compete the opportunity and basically treat it as a public procurement.  Here is a useful document; 'The Compact and Procurement Law' (the Compact is the agreement between government and the voluntary and community sector to improve their relationship for mutual advantage and community gain). Here's a key quote:

A public sector grant involves the provision of subsidy (capital or revenue) funding, by the relevant public sector body, in support of a charitable, or other public benefit, service, which the public body wishes to support, as part of fulfilling its own public benefit remit. A grant is provided on conditions aimed at ensuring the proper application of the grant funds, but not in return for anything.

So I think it will be difficult to give 'grants' to social enterprises and similar who act in a fundamentally commercial manner.  Private sector organisations competing in the same markets would probably have a legitimate challenge.  Pure 'grants' could be given to charities I guess; but the government would still have to show that good value was being obtained, and it is hard to see how that can be done if there is no real competition.  Grants also cannot be associated with clear outputs and deliverables; they are "not in return for anything", which we would assume is not what  government would want to see if we are talking about provision of social care or similar.

And reserving contracts for certain organisations is only possible under EU regulations unless they are 'supported businesses' (such as Remploy), which only applies in some pretty restricted areas (see OGC guidance here).

The final option is to run competitive procurement processes, but try and encourage charities to bid and make sure that the playing field is level (or maybe even unofficially tilted towards them).  This is easier perhaps than most procurement people believe, and may be the only pragmatic route here.

Evaluation criteria that play to the third sector's strength?  Strong emphasis on demonstration of 'local understanding' and 'customer alignment' in the tender?  Smaller contracts or lots?  One problem of course is that this may run counter to the principles of aggregation and 'bigger is better'' that is certainly prevalent in UK central Government at the moment  (and perhaps inherent in potential Council mergers now as well).

Anyway, more thinking is needed here or this will become just another good idea that doesn't actually turn into reality.  And that is my fear for much of the 'Big Society' approach; great in principle, but the devil is in the implementation detail, which will include much of a commercial and procurement nature that needs to be carefully worked through.

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