Finance: Charities are still getting a raw deal on contracts, says Gershon

There needs to be "sustained pressure" to treat third-sector organisations bidding for public service contracts in the same way as private-sector bidders, Sir Peter Gershon said last week.

Delivering the annual Social Enterprise Institute lecture, Gershon, who conducted the Government's review of public sector efficiency, said he was shocked to discover the disparities between contracts for voluntary organisations and those for commercial providers.

"The same public-sector bodies that are perfectly willing to enter into seven or ten-year contracts with the private sector for back-office functions are also perfectly willing to drip-feed the voluntary sector on a month-to-month basis to provide essential social services," he told an audience at the Royal Bank of Scotland head office in London.

The Gershon Report, which was published in 2004, called for greater use of voluntary and private-sector 'intermediaries' in public services. It also recommended multi-year funding arrangements with voluntary and community groups, full-cost recovery and streamlined monitoring, regulatory and reporting requirements.

But Gershon was not confident about the immediate prospects of a better deal for charities delivering on behalf of the state.

"There is still a huge way to go before we have a level playing field for private sector and third-sector organisations bidding for government work," he warned. Too many public-sector procurers were still in a comfort zone and did not have the confidence to break out of it.

Responding to Gershon's comments, Geoff Mulgan, director of the Young Foundation, said social enterprises' holistic approaches meant they faced problems in conforming to government definitions of efficiency. They often provided "collateral value" alongside their core activities, but it was difficult to reflect this in contracts, he said.

"For example, with school meals, can you create a contract that includes the encouragement of healthy eating?" Mulgan asked. "At the moment, it's not clear how contracts can do that. Is it possible to incentivise a more rounded approach?"

He also lamented the fact that it was difficult to get funding for new concepts pioneered by social enterprises because contracts did not exist for what they wanted to do. "There is a problem with radical innovation in public services," he said, adding that no government department had a non-technological budget for innovation.

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