Will new legislation improve charities’ ability to compete for public sector contracts?

By Patrick Nash

We ask, will the implementation of the new Public Services (Social Value) Act 2012 will result in charities being able to compete for public sector contracts on a level playing field?

Charities and social enterprises have traditionally struggled to compete with private sector organisations for public sector contracts. This is because large profit-making companies can generally afford to undercut charities in terms of cost, meaning they win the largest proportion of public sector work by far.

According to Publicservice.co.uk, the government’s annual spend on commissioning public sector services is a massive £236bn, but just 11 per cent of its contracts are currently delivered by social enterprises and charities. By comparison, £82bn of taxpayers’ money – a third of the total amount spent on public sector commissioning and procurement – is spent with private sector suppliers, The Guardian reports.

This figure is set to increase to £140bn, with the introduction of policies such as the Health and Social Care Act, the Work Programme and the Welfare Reform Act. So with the lion’s share of public spending being awarded to large corporations with seemingly endless finance and resources, how can charities and social enterprises possibly compete to win public sector contracts?

Thanks to the introduction of new legislation, this may now become easier than ever before.

In March, the government passed the Public Services (Social Value) Act, and this legislation is set to have a real impact on public sector contracts this year, as charities and social enterprises should now be able to able compete for work with private sector companies on a more equal basis.

Under the Act, for the first time, all public bodies in England and Wales are required to consider how the services they commission and procure might improve the economic, social and environmental well-being of the area in question. That is to say, public bodies will be asked to closely examine the ‘social value’ of the services they are paying for.

In practice, this means that public service commissioners must look further than the price on the budget sheet. Service commissioners are being enforced to ask: ‘If £1 is spent on the delivery of services, can that same £1 be used, to also produce a wider benefit to the community?’

The intention of the legislation is to encourage organisations to invest in people and services, rather than revenues and profit.

For example, it could mean that a mental health service is delivered by an organisation that actively employs people with a history of mental health problems. The social value of commissioning the services comes through the person with mental health problems having a job where they may otherwise have been unemployed, therefore becoming more socially included, and having a say in how mental health services are run. It should also result in a local job for a local person.

What remains to be seen is how effectively this legislation is implemented.

There are already calls for this legislation to go further and to scrutinise all providers of public services. A report by The Shadow State has found that two-thirds (66%) of adults said it is unacceptable for shareholders to make a profit from running children’s care homes, hospitals and health services, and policing.

Therefore, with taxpayers calling for open-book accountancy on public sector contracts, and public unrest concerning the amount of profit made by suppliers of these services, the Public Services (Social Value) Act 2012 is most certainly a step in the right direction. But, whether this will be regarded as a baby step, or a marathon stride, towards equality in the long battle for public service contracts, only time will tell.

One thought on “Will new legislation improve charities’ ability to compete for public sector contracts?

  1. Pingback: Connect AssistCan the crisis of confidence in private contractors provide opportunities for the charity sector? | Connect Assist

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