Probation contracts show the government does not value diversity
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Version 0 of 1. Last week, the Ministry of Justice announced the preferred bidders for delivering probation services. Much was made of the charities and social enterprises named in these bids. But what matters is the volume of work they get and the positive impact they can have. And here the picture may not be so rosy. Only one out of 21 contract areas has been won by a socially-led consortium – ARCC in Durham and Tees Valley, one of the smallest contract areas. Nearly two-thirds of the total value of contracts has gone to bids led by Interserve, US-based MTC and Sodexo Justice Services. And although plenty of charities are named in the bids, they will in most cases be minority partners or subcontractors to private companies. In order to dispel charges of charities being used as social window-dressing or “bid candy”, the MoJ needs to commit to publishing the major subcontracting workflows within each contract area. This would create some transparency on how these private-social partnerships work in practice. But there has been a deeper, more structural issue with this procurement process: its bias towards organisational size. There are practically no service-delivery charities or social enterprises in the UK that have assets anywhere near the size of the winning bidders. Unless this size bias is addressed, the future for the social sector in the big government outsourcing markets, such as Work Programme Plus and NHS community health contracts, will be limited to being junior partners or subcontracting to big private companies. Part of the problem was the sheer stamina needed to survive 13 months of formal procurement. Most problematic, though, was the MoJ’s insistence on a “parent company guarantee”, which ranged from £13m to £74m per contract area. This is similar to a parent guaranteeing the mortgage debt of their child so that if they miss a repayment the parent covers it. Here, what the “parent” is covering is service failure. Companies with large balance sheets can just about stomach this. But bidders with smaller balance sheets had to either “bet the ranch” on one contract, or look to a third party, such as a social investment bank, to provide a guarantee on their behalf. Third parties are not parent companies (by definition) and critically lack the information, control or expertise over service delivery that a parent company has. At Big Society Capital we offered a form of guarantee (as a third party) to two very credible socially led bids by a mutual and a large charity, but they weren’t successful. If plurality and diversity in the UK public service market is to mean anything, it must include social sector organisations managing primary contracts, and not just being subcontractors to big private firms. The government has to seriously address the bias towards size by removing the parent company guarantee, or stop pretending that it really values market diversity. |