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Charities need more 'commercial savvy' to deliver new probation service contracts

Chris Grayling, Secretary of State for Justice
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Charities need more 'commercial savvy' to deliver new probation service contracts5

Finance | Vibeka Mair | 27 Feb 2013

Secretary of State for Justice Chris Grayling has told MPs that the voluntary sector is not commercial enough in its approach to delivering public sector contracts.

Giving evidence this morning to the House of Commons Justice Committee on transforming rehabilitation, Grayling said while he wanted charities to be involved in the government’s new plans to contract out probation services for low and medium-risk offenders to the private and voluntary sector, they would need to develop more savvy commercial expertise.

Referring to the Work Programme, which Grayling led while he was the Secretary of State for Work Pensions, he said charities were finding their participation frustrating as they had signed up to contracts that were not commercially viable.  

“I want to work with charity sector representatives on the issue this time around,” he said. “Charities should not do deals which don’t work. I talked to some charities on the Work Programme who signed up on mad terms – why would you do that – sign up to a deal where you are losing money?”

Speaking about the structure of the new proposed rehabilitation services, Grayling said he did not automatically want it to take a prime and sub-contractor model, similar to the Work Programme. “This might emerge in part,” he said. “But we want to see a partnership of equals with skills from the private and voluntary sector brought to bear.”

Large contracts necessary

He said he would like to see voluntary sector groups backed by social investors teaming up to cover geographic areas.

The government had proposed introducing 16 regional contract areas to deliver probation services. But NCVO and Acevo have warned that this approach is likely to limit almost all charities to subcontracting roles, as the contracts will be too large.

Grayling defended the need for large contracts to MPs today, saying that smaller areas would mean high administration costs and that there was not enough expertise to commission multiple smaller services. He also said contract areas needed to be aligned with police authorities and Work Programme contract areas.

In a similar stance to the Work Programme, Grayling said that big commercial providers, who wanted to be involved in delivering rehabilitation services, would have to demonstrate they had a pool of organisations with expertise.

And he promised if big companies used charities and smaller organisations as “bid candy”, they would be dumped and that the government would work hard to avoid the practice of “creaming and parking”.

Grayling also said he hoped to set up an accreditation framework for smaller organisations, so they would not have to fill in a form for each big company they wanted to work for, reducing paperwork and bureaucracy.

“We want to set up a system that lets people know this is a good organisation,” he said.

Social impact bond model

During his evidence session, Grayling held up a scheme in Peterborough as a good model for private and voluntary sector partnership in prisoner rehabilitation and said the government’s plans would be a major opportunity for the social investment sector.

The scheme in Peterborough sees a collection of charities; funded through social impact bonds, support short-term offenders in the area.

Grayling said that he had not decided which metrics he would use for the payment-by-results system planned for rehabilitation services, but hinted that he wanted to use the social impact bond model currently in place at HM Prison Peterborough.

Grayling also said the Justice Department was also doing very intense work on data to provide a databank which can be used by charities to understand their impact.

Grayling said the aim was to introduce the new system by 2015.

Marcus Ward
Senior Partner
Peach Consultancy
1 Mar 2013

Having worked extensively in both the commercial and voluntary sectors i can perceive no generic differences other than perhaps motivation and scale - and there are equal examples of innovation/forward thinking and stagnation/poor management in both.

Whether motivated solely by profit (private sector), or poly-motivated by the need to serve beneficiaries whilst also making surpluses (voluntary sector), the real difference between organisations is usually the quality and commitment of the "people" that run the organisations and those that deliver the services/product.

Nigel Scott
Course Director
London South Bank University
28 Feb 2013

We've been having a long debate in LinkedIn about being "businesslike". Most agreed that efficient and effective were better adjectives as we could think of many businesslike practices that are entirely inappropriate. One of those is making sufficient profits to build up a Balance Sheet capable of taking the risks involved in PBR contracts like the Work programme or Probation.

Put simply we are all too small for these contracts and Government doesn't understand that. They talk in £billions while we can only deal in £thousands. That will always limit us to the role of sub-contractor and then we have a moral decision to take - watch as our beneficiaries are damaged by the private sector or take the hit but at least help our target group.

Andrew
private comment
28 Feb 2013

I agree with Peter.

Of course we need to be businesslike in the charitable sector. But our primary purpose it to achieve our charitable missions, not to replace the public sector. And we should not be made a scapegoat for poorly designed schemes poorly commissioned by a civil service which is clearly struggling at present.

Julian Blake
Partner
Bates Wells & Braithwaite
27 Feb 2013

But the scheme Chris Grayling cites as a good model is run by St. Giles Trust - a charity

And no mention of 20 years of social enterprise - depressingly charity is still equated only with voluntary and implicitly amateur

Peter Horah
Private comment
27 Feb 2013

I really don't understand Chris Grayling's accusation that charities are agreeing "mad terms" or unviable contracts and I feel this needs further explaining with examples.

In my experience of government procurment (albeit in the last century); it was the role of Civil Servants to rigourously examine the bids and not to award if the sums fail to add up or the terms were not sustainable.

Having leaned on the Third Sector since the 1980s to deliver more; it would seem an irresponsible admission that the Government is taking advantage of charities by accepting contracts that were not viable. Who agreed to them on behalf of the Government, what impact assessments were made and where are the reports and evaluations of the bids for the Work Programme?

Is the Government taking advantage of a stretched sector to demonstrate that it can't deliver? And if it is - setting up somone to fail is usually called bullying!

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