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.