Earned income has been the single biggest driver of the growth in charity income for most of the past 20 years, and it currently represents more than 50 per cent of all charity revenue.
For many charities, the marketisation of government services has played a central role in that growth, particularly during the decade of expansion before the spending reviews of 2010.
A rising tide, as the phrase goes, floats all boats. But austerity and competition, particularly in the past four or five years, have shone a spotlight on the capability and culture gaps the sector needs to fill if it’s to stay afloat as those tides of funding continue to ebb away.
Last week’s announcement by the National Audit Office that the Ministry of Justice "set itself up to fail" when it outsourced probation services, and now faces £500m of extra costs as a result, will come as little surprise to those who’ve payed attention to the unfolding saga.
A scathing report by the Public Accounts Committee in March 2018, for example, warned: "The so-called ‘rehabilitation revolution’ is showing worrying signs of becoming a contracting catastrophe."
Back in 2015, I interviewed Chris Wright, chief executive of Catch22, who talked about the challenges inherent to the MoJ’s competitive bidding approach, which resulted in none of the four social sector organisations that made it through the selection process being awarded any contracts.
He said: "I think that was largely as a consequence of the dissonance between the policy intent and rhetoric, and the reality of government commercial procurement, which ultimately wanted to shift all the risk to the provider."
I’d venture that all four of those organisations probably did well to avoid what in retrospect would have been a pyrrhic victory.
In a similar vein, the recent Third Sector story that more than half of social care providers are handing contracts back to local authorities, might be a sign that excessive price competition is about to backfire on commissioners in that sector as well.
But it’s also a sign that, in the past at least, those same providers were ill-equipped, improperly trained and poorly positioned when it came to influencing buyers, securing favourable terms and crafting good contracts.
That’s not entirely unexpected – they aren’t skills and behaviours one would naturally associate with charities – but a good proportion of charities in the public-sector outsourcing space are clearly being exposed by their absence.
John Tizard’s recent article made an eloquent and well-argued case for commissioners to move away from competitive procurement.
However, returning to monolithic state provision isn’t a solution for the complex problems of society, and waiting for authorities to adopt a more collegial approach can’t be the only option for a sector founded on activism and agency.
If we want to see a change in commissioning practices, we need to stop enabling and start changing ourselves.
Financial distress often indicates an inability to surgically address performance issues, to make and follow through on decisions about people and business dispassionately, objectively and robustly. In a values-led, passion-driven charity culture, this can be a tough ask, especially for on-mission work that directly affects beneficiaries, but it needs to happen nonetheless.
But handing back failing contracts also indicates gaps further upstream: in relationship management, sales and negotiation skills, in the ability to form collaborative consortia, to align interests and present compelling, integrated solutions with a united front. Blaming a commissioner when it’s your own pen signing the contract is simply displacement of attribution.
The external barriers to success, constructed by procurement teams and competitive processes, might be beyond our immediate control, but the internal barriers, of attitude and aptitude, of collaboration, culture and particularly of capability, are absolutely within our gift.
Martyn Drake is founder of the management consultancy firm Binley Drake Consulting