Government funding of the voluntary sector has come a long way since the Treasury decided to help fund Captain Thomas Coram's Foundling Hospital in the 1750s, transforming the relationship between charities and the state. Now the commissioning of public services is starting to reshape the relationship between the sector and business as charities team up with companies for bids to win contracts.
This trend has been particularly evident in the criminal justice system. A pioneering contract in this field is the three-way alliance between social care charity Turning Point, young people's charity Catch22 and support services company Serco to rehabilitate offenders. The alliance began two years ago in response to the creation of the National Offender Management Service, through which the Ministry of Justice commissions services.
"We wanted to create a seamless management of ex-offenders so they didn't fall through the gaps," says Barry Roberts, director of strategic business development at Turning Point. Roberts says each organisation in the alliance brings different skills: Serco has expertise in custodial services; Catch22 has experience in mentoring and providing supported accommodation; and Turning Point has a history of running substance misuse services. A memorandum of understanding, which is reviewed annually, outlines how the alliance works and who reports on what. The Government favours a relationship in which each partner is responsible for leading and reporting on its own specialist area.
Contracting with compatible partners
Turning Point has been working with businesses, including training company A4E, for about five years. But can a charity ever work harmoniously with a profit-driven company? Roberts says neither Serco nor Turning Point is averse to making a profit or surplus - it's what they do with it that sets them apart. "Turning Point is a social enterprise, so we have a culture of delivering a surplus that is reinvested in the delivery of services," he says. "We are not opposed to profit. What matters is contracting with compatible partners."
Graham Beech, director of marketing and communications at Catch22, says the most important thing about a service-delivery partner is not its sector but its culture. "It is important to understand one another's motivations for working together, to build trust and understanding, and to recognise that we're all working to the same goals for the benefit of young people and communities," he says.
Chris Screech, business development director at Serco Civil Government, adds: "The secret to maximising the results comes from developing a common vision, commitment and trust, focused on delivering for the individual, rather than on seeing each partner as a separate contributor."
Beech and Roberts say working alongside a company as large as Serco, which employs 40,000 people worldwide, has taught them a great deal about the tender process and winning contracts.
Serco has embraced other charities, too. When Stoke-on-Trent Council hired Serco to run all its children and young people's services in 2007, the company sought voluntary sector partners to review its performance. Children's social care charities Tact and Shaftesbury Young People were recruited, with the former receiving £100,000 for its work. Kevin Williams, chief executive of Tact, says "philosophical differences" between the sectors mattered less than a shared aim to improve the lives of children, and that working with a big company was less daunting than he imagined.
"Serco was keen to stress there would be some performance management," he says. "But it said it would not be overbearing - and it wasn't."
Williams was also impressed by Serco's contract-winning skills and says its size and experience in this area makes it a good commissioning partner for charities. "Serco is a huge organisation that employs people specifically for tenders," he says. "For us as a medium-sized organisation, tendering can be onerous, and partnerships help to overcome it."
Tact's turnover, which is derived almost entirely from contracts, has increased from £4m to £18m over the past five years. Williams estimates about 3 per cent comes from private-sector partnerships, and expects the figure to grow. With 22 per cent of fostering services in England and Wales now delivered by the private or voluntary sector, and the figure increasing annually, further collaboration seems likely. "The Government has a clear agenda about the mixed economy of welfare," says Williams.
FOR & AGAINST
Opinion in the voluntary sector is divided on whether charity-business partnerships are a good idea
Breege Burke is the managing director of Working Links, a partnership formed by the charity Mission Australia and companies including Manpower and Capgemini in order to win public contracts. She says charity-business partnerships are both desirable and inevitable: "There is going to be a lot more of it as the lines between sectors get increasingly blurred. The Government is moving towards larger and fewer contracts and the voluntary sector is going to play a huge role. One organisation can't do it all, but one can take the lead and pull it all together."
Rod Aldridge, the former boss of contract-winning business giant Capita who now heads his own charitable foundation, agrees. "The private sector has a delivery capability that is missing in the third sector," he says.
Commissioners also like the idea, according to Chris Wilson, executive director of 4ps, an offshoot of the Local Government Association that helps councils form public-private partnerships. Local authorities, he says, are "keen to support these types of partnership in deploying procurement best practice and excellent services".
So where will cross-sector partnerships feature next? John Tizard, director of the Centre for Public Service Partnerships at the University of Birmingham, says children's services, education and health services could be next in the queue as the contract culture expands.
Andy Benson, founder of the National Coalition for Independent Action, says charity-business partnerships are bad news and that charities are being "led by the nose" into dangerous territory.
"Everybody is chasing money and a lot of charities are happy not to think about the long or medium-term consequences," he says. "It will affect everything - charities will become less flexible; it will distort their management culture."
And not all partnerships work out. The CfBT Education Trust was subcontracted by security firm G4S to train young prisoners in Oakhill Secure Training Centre in Milton Keynes.
Neil McIntosh, the charity's chief executive, admits the relationship, which ended in August 2008, "wasn't entirely comfortable". Now the charity would prefer to bid for contracts itself or occasionally get companies to subcontract for it.
"There should be a meeting of minds in terms of values," he says. "That's sometimes difficult to ensure, particularly in hard economic times when commercial companies are looking closely at the bottom line."
Unions are also sceptical about the trend, which they have described as "back-door privatisation". A Unison spokeswoman says charities themselves often don't like it. "It distracts them from their main functions and they are often not funded properly to do it," she says.
'WE NEED MORE EVIDENCE'
The arguments are based mainly on opinion because little research on cross-sector partnerships exists. John Tizard, director of the Centre for Public Service Partnerships at the University of Birmingham, says more is desperately needed.
"The Government and all political parties see a much greater role for the third sector in public-service delivery, so it's important that policy and practice are based on evidence," he says.
He says three models have emerged, the most common being businesses subcontracting elements of public sector contracts to charities. The second model is the reverse of this - charities subcontracting specific services to businesses. The third involves organisations from both sectors creating jointly owned legal entities to deliver services. "The advantage of this for the third sector is that it has a much stronger relationship with the business and is more of an equal partner," says Tizard.