OPINION: Under-pricing our services is selling us short

Geraldine Peacock, a charity commissioner and a civil service commissioner

Not a lot of people know that the phrase 'cap in hand' did not originally refer to asking for money, but was derived from a game where cash was held in a cap and paid out to the winners. At the first meeting of the Acevo commission on the sector's funding needs, it seemed appropriate to reflect on this when the talk turned to contracts.

One of the sector's unique selling points is our understanding of beneficiaries and how their needs can best be met. Many would say that this is the most important aspect of the added value that we bring when delivering service contracts.

However, our concern to ensure beneficiaries receive an appropriate service, combined with management inexperience or capacity, has also meant that, in the long term, such services are at risk.

Over the past decade, in our determination to protect our beneficiaries and win contracts, we have sometimes sold ourselves short and 'costed' rather than 'priced' services in order to win contracts; thus we charge out only what it takes to run the current service and not the organisation of which it is a part. Unlike private providers, we do not include a profit element - it's not what we are about.

But we do need to invest in our services sustainability, otherwise we are not protecting beneficiaries' rights to appropriate services. What we should be doing is pricing our services to cover full cost, including provision for ongoing investment. Not only does that provide a cushion against unexpected problems, such as, for example, under-occupancy, but it ensures sustained effectiveness.

Not surprisingly, therefore, some local authorities have an unrealistic view of what the sector can provide, and at what price. Contract income (combined with short-term and spot contracts) has, for some, become a millstone and a vulnerability.

This can be, and increasingly is, avoided by a combination of entrepreneurial nous, increasing management competency plus diversification of voluntary sector organisations, funding bases. By pricing rather than costing our services, and persuading statutory authorities to think flexibly about the framework for contracting, we can reinforce the original meaning of 'cap in hand' and spend the 'winnings' on behalf of those for whom we work.

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