Opinion: Why do we get the rough end of state deals?

There is a serious question of trust that the Government needs to ask itself: why is there such a yawning gap in the way that it treats the voluntary and the private sectors?

The Government has pursued a policy of handing more public sector delivery to the private sector, on the basis that it can do it more efficiently than the public sector. Perhaps this is right, but I do not intend to argue that point. The fact is this is what happens.

When government enters into contracts with the private sector, it tends to go through a tender process. Prices, outputs and outcomes are agreed, the contract commences and the company is paid on a regular basis (sometimes with upward-only pricing clauses). Within that agreement, the Government gladly pays the gross profit margin and, in most cases, will make a contribution to the central costs, such as the executive team's compensation.

How different to when it goes to the voluntary sector to negotiate. These talks have nothing to do with price and everything to do with cost. The buyer determines what costs are acceptable, going so far as to make decisions about those they deem to be central management and, therefore, not part of 'the deliverables'. Would you go into a restaurant and pay only for the ingredients and the chef's time? The outputs and outcomes are negotiated rigorously and minor negative deviations from these will generally result in a downward revision in price.

The difference is made all the more stark if we add in these factors: first, there are no profit margins or inflated central executive costs; and second, people work for voluntary organisations to better the lives of people, communities and wider society - the goal is not shareholder return. This is not to criticise the private sector,which often does the job well. The issue is the apparent disparity in treatment. The most likely reason for this is that the Government does not trust the voluntary sector, but does trust business - and the difference is not at the margin, it is cavernous.

When asked to deliver a public service, the voluntary sector should price on the basis of cost, building in investment for future sustainability so as to deliver more and better public services. As the sector exists to make a better society, government should trust the people in these organisations to do it and let the taxpayer get more bang for their buck.

David Gold is chief executive of Prospect Us

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