The National Audit Office report Public Funding of Large National Charities, published in August, shows how poor contracting practices are preventing a greater third sector role in public service provision.
The report, which is based on the experiences of 12 of the largest UK charities, which receive a total of £742m in public funding between them, describes the contracting process as "frequently inefficient and excessively complex" and says there is much scope for improvement.
If large charities are reporting problems, how much greater must they be for small and medium-sized voluntary organisations?
A study of five US cities
In 1993 I carried out research for the NCVO in five American cities into how the contract culture affected charities there. In much of the US, massive problems had been created by the transfer of services from government providers to non-profit organisations. Most people I spoke to were amazed that we should be considering following their lead. In spite of this, I was optimistic that we could avoid the magnitude of the problems encountered there.
I believed that our experience of successful joint planning would ensure that health and local authorities worked alongside the voluntary sector on developments. I was wrong. The purchaser-provider split that has dominated public services in the UK over the past 15 years has meant the exclusion of the third sector from service planning discussions. This has discouraged partnership, collaboration and openness - worse, it has stifled ideas and innovation and resulted in poorer services.
I thought that the established system of government grants would ensure smaller organisations would be protected from the ravages of the open market. I was wrong. The public sector focus on outcomes, value for money and contracts has eroded grant funding, with a particularly devastating effect on small voluntary groups.
I considered that the unbridled competition in the US that forced down prices and staff pay at the expense of quality would not occur here, where local authorities would often fund (and even require) voluntary organisations to pay staff on local government scales. I was wrong. To survive in a climate of reduced funding and tendering, in which the lowest price wins, many voluntary organisations have been forced to abandon links to public sector pay rates and reduce service quality.
I felt that the trust and mutual understanding that existed between staff in local authority grants departments and the voluntary sector would avert the need for bureaucratic, US-style monitoring and reporting systems. I was wrong. The move to rigid procurement processes and formal contracts has destroyed those positive relationships and resulted in a plethora of red tape.
I was confident that the strong mission base of voluntary organisations in the UK would stop them compromising their values in order to secure work. I was wrong. Tendering now dominates procurement practice. This and the pressures on commissioners to make savings mean that contracts are normally awarded to the lowest bidder. This has resulted in a race to the bottom as organisations compete to offer the lowest prices, but with lower quality and abandonment of their principles.
One chief executive recently told me: "You have to cut corners to win contracts; we reduce costs by not taking up Criminal Records Bureau checks on care staff before placing them with service users."
I expected that the research I and others carried out would enable us to learn from experiences elsewhere. I was wrong. The problems experienced by voluntary sector organisations with short-term contracts, delayed funding decisions, late payments, a lack of consistency between funders, excessive bidding requirements for small contracts, and oppressive monitoring and regulation all highlight how lessons from abroad were ignored.
High on rhetoric, low on action
Despite all these problems, ministers show ever greater enthusiasm for the involvement of the third sector in delivering public services. But Government rhetoric on partnership is rarely translated into action at a local level. For commissioners in local authorities and primary care trusts, the most pressing issues are not about following government Compacts with the voluntary sector but concern making 'efficiency' savings, satisfying local and European commissioning regulations and ensuring that they are not ostracised by their colleagues for jeopardising public sector jobs.
The eagerness of ministers to embrace the sector, together with a series of initiatives over the past year, gives fresh hope that there is a determination to make collaboration between the public and third sectors work. It is in the interests of all - government, voluntary organisations and service users - that we get it right this time.
- Robin Currie is chief executive of the health and social care charity PSS and senior research fellow at Liverpool Hope University.