Prime contractors should not cherry-pick the best clients and must not use charity subcontractors as "bid candy" when working together on public service contracts, according to a code of practice published today.
The code has been produced by the National Council for Voluntary Organisations and services company Serco to help improve the relationships between the private sector and the voluntary and community sector when they work together to deliver public service contracts.
The guidelines have been drawn up after charities experienced problems delivering government contracts that use the prime and subcontractor model of working.
In February, a Public Accounts Committee report on the Work Programme, the government’s back-to-work scheme, which uses a supply chain model, found evidence of prime contractors "creaming off" those people who are easiest to place in work and "parking" the hardest ones with charity subcontractors. A separate report published by the Third Sector Research Centre the same week, found that charities had encountered numerous problems with the back-to-work scheme.
The new code of practice is split into five sections and provides advice on issues including setting reasonable expectations, having mechanisms for open dialogue between contractors and developing financially sustainable models.
The first point of the code says that the delivery model "should recognise and mitigate the risk of perverse incentives in the supply chain, such as the ‘cherry-picking’ of clients".
Another theme, entitled "no bid candy", says that prime contractors should consider themselves "under obligation" to deliver a service with organisations that form part of their bid.
The code says that regular discussions should take place between prime and subcontractors when referral numbers are lower than expected. It says prime contractors should take measures to support the less financially secure members of their supply chain – there have been complaints by several charities and social enterprises about the length of time it has taken to receive payments from prime contractors.
Serco has pledged to follow the guidance and will encourage other outsourcing companies to sign up to the document.
Sir Stuart Etherington, chief executive of the NCVO, said: "There has been a major growth in subcontracting, but the NCVO’s members have had very mixed experiences of it. This joint guidance is part of our attempt to raise standards in subcontracting.
"We are certainly not saying that subcontracting is always the right way in which to deliver public services. But where services are delivered in this way, we want to make sure that they are delivered well and that subcontractors are treated fairly."
Jeremy Stafford, chief executive of Serco UK & Europe, said: "This code sets the bar high for how companies such as Serco should work alongside their partners in the voluntary sector – and rightly so."
Nick Hurd, Minister for Civil Society, said the code of practice provided an important framework with which voluntary sector and private sector organisations could strengthen their partnerships.