Funders should offer a pool of finance that charities and social enterprises can only access if they collaborate or merge, delegates at the Conservative Party Conference in Manchester heard yesterday.
Phillip Blond, director of the think tank ResPublica, told an event organised by his organisation and the local infrastructure body Navca that third sector bodies must unite and work together to compete successfully with big business when trying to win public sector contracts.
"Without collaboration charities aren't going to grow to scale, and aren't going to win contracts," he said. "Social finance providers should say 'we aren't going to fund you unless you come with a supply chain'.
"Unless you incentivise people to work together they will flap round uselessly like a bird with a broken wing."
Blond said that the holistic services that people wanted could only be delivered "locally and bespoke", but organisations at that level struggled to win contracts.
He said the sector must learn a lesson from Europe, where small businesses have been successful in competing with larger organisations.
"To be successful, you have to link up," he said. "Nothing at the moment encourages that sort of link-up, but ultimately that's what's needed. At the moment there are too many small charities doing too much of the same thing. If we can get them to link into networks, they can beat the big players."
Blond also warned that if the Public Services (Social Value) Act 2012 was applied too rigidly, it could become a box-ticking exercise, and it would be large organisations with "armies of accountants" who were most able to comply with the rules.
Nick Hurd, the Minister for Civil Society, told delegates at the same event that his priorities were smarter commissioning, mobilising people and generating more social investment.
Hurd said that the government needed "to create space for innovation in an environment where the culture is of silos". He said that any party that did not try to find a solution to growing problems such as social care "could not aspire to government".
He said that the current culture of austerity was driving much better commissioning, as public bodies looked for better ways of doing things.