Gagging clauses in public service contracts

Contracts that prevent charities from speaking out do not align with government calls for transparency, according to some in the sector. Andy Hillier investigates and Stephen Cook hears why one subcontractor decided to ignore the gag

An extract from a gagging clause quoted in the 2013 report by the Panel on the Independence of the Voluntary Sector gives an indication of just how draconian such conditions can be.

Taken from a Work Programme contract issued by a prime contractor, it warns subcontractors that they must "pay the utmost regard to the standing and reputation" of the prime and of the Department for Work and Pensions, the contracting body, and agree not to do anything that will "damage the reputation" of the prime or the contracting body or "attract adverse publicity".

In the new era of public sector commissioning, most contracts issued by NHS trusts, local authorities and central government departments, or by their prime providers, now include such restrictions on providers speaking freely or releasing any information without permission.

The Panel on the Independence of the Voluntary Sector included in its 2014 report a specific request to the government that such clauses be outlawed. Nick Hurd, the Minister for Civil Society, said in response that it was the government's ambition for the UK to be "the most transparent and accountable government in the world"; but he said it had a duty "to ensure all publicly released information is accurate and validated, and contracts with providers are designed to reflect this".

A DWP spokesman says it works "closely and constructively" with providers and subcontractors, but adds: "It's right that all publication of statistics is carried out in line with UK statistical authority rules to ensure accuracy and consistency."

Many in the sector have concluded, however, that such clauses are designed not only to prevent publication of inaccurate figures, but also to prevent discussion of the terms, conditions, strengths and defects of the contracts. Asheem Singh, director of public policy at the charity chief executives body Acevo, says gagging clauses are unacceptable and charities and social enterprises should challenge them.

"There is no doubt that many confidentiality clauses in government contracts are designed to protect not the public but the department or the ministers concerned," he says. "We need an open, transparent system where data is freely shared. We have reams of data protection legislation that is designed to protect the vulnerable. Contractual confidentiality clauses that aim to prevent 'bringing a department into disrepute', as one example puts it, merely protect officialdom."

Joe Irvin, chief executive of the local infrastructure body Navca, is equally critical. "We've had members say they couldn't attend meetings to discuss the Work Programme because of these clauses," he says. "With the Work Programme this hasn't helped people looking for work; it's just hidden poor practice by primes. The government has a transparency agenda and must ensure this is achieved right down the supply chain."

Irvin says that, even in cases where there is no formal gagging clause, the voluntary sector can feel constrained about speaking out. "Sometimes the clause is perceived rather than real," he says. "Smaller charities dealing with large prime providers can feel browbeaten. Such charities need support, or they end up signing unfair contracts. And there must be proper procedures for whistleblowing."

Tom Murdoch, senior associate at solicitors Stone King, says such clauses have become commonplace because of a profound imbalance of power between those issuing contracts and service providers. The result is that commissioners can dictate terms. He says that in many respects the contracts given to the voluntary sector follow the same principles as those used in the private sector, which is fair in some ways. "Subcontracting in the private sector has long been subject to this secrecy, and it's reasonable in a way for the public sector to echo it when it gets into equivalent commissioning," he says. But he questions just how enforceable gagging clauses are in practice: "In theory, if someone breaches these provisions, they could be taken to court for damages - but it's rarely going to be in the commissioner's interest once the confidential information is out."

But like Navca's Irvin, Murdoch believes that many charities are inhibited from disclosing information or speaking out not necessarily by a clause in a contract but by the need to preserve relationships. "It's not in most charities' interests to fall foul of their local authority or other public bodies that are funding them," says Murdoch.

He also draws attention to the right to whistleblow if individuals believe there has been serious wrongdoing. "If it's in the public interest, there is a right to disclose and be protected from the consequences," he says. One problem, he says, is how commissioners are being told to commission. In the NHS, convoluted model contracts have been produced, which are now are being applied to relatively small contracts. "What they are trying to do is assist commissioners, but one side-effect is that sledgehammers are used to crack nuts," he says.

The problem is compounded when some large prime contractors add onerous extra conditions to contracts issued to their subcontractors, he adds.

There are signs that the government is listening to the complaints. The draft contracts for the Ministry of Justice's Transforming Rehabilitation programme do not, say some in the sector, include some of the more onerous requirements of Work Programme contracts. But the government has so far failed to remove gagging clauses from WP contracts, despite the request of the independence panel.

Caroline Slocock, head of the secretariat at the panel, says it believes clauses that prevent charities speaking freely are a breach of the Compact, the agreement that sets out how public and voluntary sector organisations should treat each other: "To the panel, it seems obvious these clauses should not exist, and there should be a proper respect for charities' campaigning role."

She also questions whether trustees should agree to such conditions: "It is inconsistent with the duties of trustees to sign such clauses, particularly if a charity has objectives that can be pursued only if it has an independent voice."

Case study: 'This won't ever get resolved if we can't talk about it'

In February, Kevin Curley, former chief executive of the local infrastructure umbrella body Navca, warned charities in his monthly Third Sector column of the potential pitfalls of acting as subcontractors to big private sector companies involved in delivering large public service contracts.

The following week, Third Sector published a letter from Kim Harper (right), chief executive of Community Action Derby, relating what happened to Community Enterprise Derby, a community interest company of which she was director. CED was a subcontractor of A4e, the prime contractor for the Work Programme in that area. The CED case illustrated Curley's warning, she wrote.

It had always met minimum performance levels, the letter said, except with people receiving Employment and Support Allowance - hard-to-place clients of whom many, in her view, should never have been on the Work Programme.

A4e terminated the contract in December; as a result, two CED staff were made redundant and four were transferred to A4e. CED had to pay a termination fee of £70,000 to the company.

Three days later, Ron Pierce, executive director, partner and strategic capabilities at A4e, wrote to Harper pointing out that CED had failed to meet minimum performance levels for clients on Jobseeker's Allowance as well as for those on ESA.

"I would also like to remind you that you had agreed not to make any press announcements about your Work Programme contract without prior approval from A4e or the Department for Work and Pensions on signing the WP contract. The terms of your WP contract termination are confidential between A4e and CED only and should not be discussed in the press or any other third parties." (sic)

Harper hesitated about publicising this letter, which she says she interpreted as a threat. She was concerned that she might be personally liable if A4e decided to take legal action for breach of the "gagging clause" to which Pierce referred. But in the end she decided to pass his letter to Third Sector. "The kind of difficulties we had won't ever get resolved if we can't talk about it publicly," she says. "It's very frustrating. What is there to lose since the contract has been terminated? I would just like to see this programme work properly for the people who need the jobs."

A spokeswoman for A4e said Harper's letter gave an inaccurate account of the termination of CED's contract "and we wrote to express our dismay at this". On Harper's perception of the letter as a threat, the spokeswoman said: "The letter was nothing more than a simple reminder of what Community Enterprise Derby had previously agreed."

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