The third sector consortium 3SC was launched with much fanfare in 2009 to bid for national contracts, particularly in the area of welfare-to-work. It was dubbed a "Serco for the third sector" and some predicted it would win £200m of work.
It started well, winning a big contract under the Labour government's Future Jobs Fund. But it failed to win a prime contract in the coalition government's Work Programme, and it now has £20m of contracts and a turnover of £4m a year.
Martyn Oliver, 3SC's former finance director, who took over on a permanent basis as chief executive in May, says it has been forced to adjust to a world in which it cannot meet all its goals, and it will be a long time before its ambitions are realised.
"The great hullaballoo we were formed with, saying we were going to be winning £200m of contracts, was just fantasy," he says. "The Future Jobs Fund didn't prepare us for the environment we find ourselves in now. The truth is, 3SC just doesn't have the balance sheet and the track record to compete for big contracts."
The original idea was to enable small charities to club together to deliver large contracts without being beholden to large, private sector companies. Oliver says the ambition to be a prime contractor remains, but will be some time coming.
"Being a first-tier subcontractor is where we have a market at the moment," he says. "We think we have a good offer helping people become contract-ready and trying to help them make sense of a complex contracting environment. We're involved in three Work Programme contracts, as well as other welfare-to-work initiatives. We have a good pipeline of opportunities."
Despite 3SC's modest success, Oliver believes more such organisations are needed. "I don't think people are thinking big enough," he says. "There's room in the market for more 3SCs. Children's services, health, education, disability - there's room in all of these sectors to set up more like us."
Barriers to entry are high for new consortia, he says: a lot of organisations must work together, and someone must take the lead. "Before it gets close to winning a national contract, the new organisation must have many things," he says. "It needs bidding skills and a performance management framework."
But he believes it's worth working on issues such as scale and finance because third sector organisations produce better results for the public in the services they deliver. "That's why we think more public services should be delivered by third sector organisations. It's our job to help make it happen. If we don't solve these problems, it will be a big opportunity missed."
CASE STUDY - SHEFFIELD WELLBEING CONSORTIUM
Sheffield Wellbeing Consortium recently won its first sizeable contract, worth just under £1.8m over three years, to provide support to carers, from the local primary care trust. As with Desta (see below), it was an aggregation of many small contracts, most of which had previously been delivered by the sector.
"It was make or break for the organisations involved," says Mandy Forrest, director of the consortium. "But no one organisation had the ability to win the whole contract."
The consortium was established three years ago and has 72 members, including Autism Plus and Sheffield YMCA. Before the win, it had gained a number of other small contracts and will now be turning over more than £1m a year. The principal contract will be delivered by eight members.
The contracting environment in Sheffield is a difficult one, Forrest says. Many contracts that the sector would like to win are not put out to tender, and the local authority is resistant to voluntary organisations generating a surplus. "Commissioners seem opposed to full cost recovery," she says. "They are very keen to see our costs before handing out a contract."
CASE STUDY - DESTA
Desta was established two years ago by a group of charities working in west and central London to bid for health and social care contracts. It had a start-up grant of £500,000 from the Big Lottery Fund.
The consortium has 35 members, says Shani Lee, head of partnerships and commissioning at Cavsa, the umbrella body for charities in Hammersmith & Fulham, which was involved in setting Desta up.
Its members include Age Concern Kensington & Chelsea, Foundations UK, the Migrants Resource Centre and Hammersmith and Fulham Mind.
"It was a difficult process setting up a consortium because you're dealing with so many people, but we had a lot of goodwill from local organisations," Lee says.
"We've been fortunate to have the resources to set it up using specialist staff. Others have had to do it using trustees and internal staff."
The first contract it won, nine months after forming, is worth £337,000 a year, and is an aggregation of a number of small contracts of about £16,000 a year, let mostly to small charities serving the local community. Twelve members are involved in service delivery.
Lee says the creation of the consortium was partly organic and partly a response to the decision by local bodies to aggregate their contracts."There's no way any of the organisations delivering the previous contract could have won the new one," she says. "It's too big."
Lee expects Desta to expand fast."We're going to bid for three contracts shortly," she says. "I expect to win all of them. In five years, I expect Desta to have a turnover of £20m. We've also set up another consortium, Valens, to bid for children's and young people's contracts. We expect that to be the same size. We just need to be good at bidding and good at delivery."
Lee says that developing a bigger balance sheet is key for her organisation. "We have £60m of reserves between our members," she says. "We need to leverage that to get more money onto the balance sheet of the consortium."
Some income for the consortium comes from profit, she adds."We expect to make a 25 per cent surplus. Of that, 10 per cent will go to Desta and 15 per cent to members."