Its chair, Nick Gibson, says the environment changed from supportive to hostile
Over the past few years, charities have won more government contracts. But as those contracts have grown larger, charities have begun to look into forming consortia to gain the scale they need to compete.
So the demise of the Bedfordshire organisation ConsortiCo last month came as a setback. It consisted of about 40 voluntary bodies, mostly doing health-related work and looking for contracts.
Nick Gibson, chair of the consortium and chief executive of Sight Concern Bedfordshire, says the environment changed from supportive to hostile while the consortium was being created. He says it started up in the week that the government announced a nine-month moratorium on new local government contracts. It had applied for other contracts, and was developing its skills, when the £980-a-month repayments of a £60,000 loan from the Futurebuilders fund began to bite. With no income, it decided to close.
Nevertheless, Gibson remains a supporter of the consortium concept, and is convinced it will prove the answer for ConsortiCo members one day. Charities, he says, should try to win many local government contracts, because they provide "pound for pound the best service" for local people. But they are disadvantaged because of their size and their problems getting contract finance.
"You need a way to remain small while getting large," he says. "Our local commissioners tell us they like us to be small, and value our ties to the community, but they can't create an environment for us. So we need to adapt. Consortia bring scale."
Consortia look good in theory, but there are many barriers to starting them up in practice, says Richard Litchfield (right), chief executive of Eastside Consulting. He worked on the development of the consortium 3SC, which has almost 2,000 members across a range of sectors including skills, social housing and healthcare.
"The challenge is that in the eyes of the commissioners you have no track record," says Litchfield. "Winning the first contract can be very difficult. The success of 3SC was driven by securing a first contract before the legal entity and delivery model was set up, because the Department for Work & Pensions had allowed for it in the commissioning procedure."
3SC won several contracts for charities through the Future Jobs Fund, and has since won first-tier subcontracts through the Work Programme. But it has been less successful than the sector hoped. Martyn Oliver, interim chief executive of 3SC, says the organisation has scaled its operation back. "You can only bid for contracts based on the strength of your balance sheet," he says. "A consortium needs to have the same sort of financial muscle as the organisations it's competing against."
He says charities need access to "risk capital" or "patient capital", which bring a return based on the success of an organisation, so they do not have to rely on conventional loan finance. "You have to have the right form of finance," he says. "With a loan, you haemorrhage cash when you start making repayments."
Dan Gregory, an adviser at Common Capital, a consultancy working with third sector organisations contracting with the public sector, says commissioners have a role to play in the success of a consortium. "The rhetoric is ahead of the reality," he says. "If you form a consortium, commissioners have to be willing to deal with it."
Gibson says it was hard to set ConsortiCo up in a way that satisfied commissioners. "Locally, commissioners were getting more skilled," he says. "But the cuts are pushing everything backwards."