Policy paper

5. THE PUBLIC SECTOR: ensuring collaborative commissioning

Published 9 August 2018

Applies to England

Introduction

Many of our public services began life independent of government. Individuals and communities developed their own responses to the challenges or injustices they saw around them. The probation service, the National Health Service, and Jobcentre Plus all have their origins in models of charitable and mutual responsibility.

Over time, government stepped in to support and extend the work done by communities and private philanthropy. This helped ensure high standards and universal access, and created a system － the welfare state － which people could trust.

Over the last generation, government has introduced mechanisms intended to deliver greater value for taxpayers’ money in public services, and to broaden the supply of services to include independent providers. These mechanisms, including the use of competitive tendering, have helped stimulate a market in which commercial players, as well as charities and social enterprises, take part. The government now spends £200 billion per year on outsourced public services.^{[footnote 68]} The benefits for the taxpayer are clear: independent provision by a diverse range of suppliers can offer better value for money, open up to innovative solutions to policy challenges, and give public services access to new expertise and knowledge on complex issues.

The reforms have led to a greater focus on outcomes and costs. However, they have also spurred the development of a transactional model of service delivery, with an often rigid focus on quantifiable costs, volumes, and timescales rather than on the relationships, flexibility, and patience which the reality of life for many people and communities demands.

The commissioning model which applies in many of our public services, including the services commissioned by local authorities, often favours large companies who are better able to navigate complex commissioning systems, bid aggressively (including with ‘loss leader’ bids to take more of the market), and who can carry the financial risk passed on by commissioners to providers.

The system actively, albeit accidentally, restricts diversity of the market by putting in significant barriers that exclude smaller providers. It fails to recognise the added value that small and local organisations can bring: their local knowledge, the philanthropy and in-kind or pro-bono resources they attract, their flexibility and commitment to the mission, and the support they have from local people, in short, the trust and social capital that they are stewards of.

Even when social sector organisations do win publicly-funded work, the monitoring and best value measures required by the public sector can result in them simply replicating statutory services provision, rather than allowing them to deliver their work more flexibly and being more responsive to local needs. One of the big advantages of mutualisation as an alternative delivery mechanism is the freedom to innovate and diversify beyond the ‘basic’ contract.^{[footnote 69]}

Market mechanisms, including competition, chosen to suit specific public services challenges play a critical role in some public services, and large corporate players are a useful part of the market. However, all effective markets depend on trust, on understanding and shared goals which ensure the spirit as well as the letter of the contract is fulfilled.

The key to effective public services is the relationships between staff, volunteers, and the users of the service. In instances where this is working well, the accountability arrangement － the relationship － between the service provider and its commissioner is built on a shared mission.

The government’s ambition is that the independent origins of our public services should be reflected in the way they work today, and that public service markets should enable collaboration as well as competition.

To this end, the government’s vision for public services in the modern era is one of ‘collaborative commissioning’. This means that in the future, local stakeholders will be involved in an equal and meaningful way in commissioning and all the resources of a community, including but not confined to public funding, will be deployed to tackle the community’s challenges. People will be trusted to co-design the services they use. Rather than being seen as a place of distinct policy priorities － health or crime or educational underachievement － a community will be seen as a ‘system’ of interconnected parts, each of which impacts the others.

Rather than being treated as the passive recipients of services designed elsewhere, the people of the community will be the active shapers of their own future, trusted to ‘co-design’ services, to direct commissioning decisions, and to play their part in making the service work.

Just as there will not be an automatic assumption that the state delivers public services, there will not be an assumption that only large corporations － the ones capable of carrying major financial risk － can be trusted to do important work on the government’s behalf.

An important role of the government will be to ‘steward’ the public service market, using the most appropriate funding mechanism to achieve social value, be that contracts, grants or social investment. This means helping ensure far higher standards by commissioning collaboratively for outcomes.

Mission 13: a framework for collaborative commissioning

Supporting civil society from Whitehall

Collaborative commissioning means that local policy-making collaborates across organisational silos and also engages mutuals, social enterprises, community-based businesses, and charities rather than just the ‘core’ public sector. As one organisation urged during the engagement exercise: “instil a culture within public services that celebrates improved collaboration that acts as a catalyst for real partnership between civil society and public services. […] Collaboration is not a single activity, but a way of working. It is about inclusion and involvement, input, and influence. These come with an equal need for responsibility, accountability, and a willingness to work with others towards a shared purpose.” The design of new policies and programmes should focus on desired outcomes and have regard both for their impact on civil society, and the potential role of civil society in delivery.

In order for civil society to be represented at the apex of public sector commissioning － the Strategic Supplier Group － the Cabinet Office aims to include social enterprise in this Group.^{[footnote 70]}

The current support programme for public service mutuals is proving popular and successful. The government is exploring options to extend the support currently offered to public sector teams aspiring to form mutuals to other community-led and social organisations which are already outside the public sector and wish to deliver public services. This would create an environment of far greater user-led, community-led and staff-led delivery. We intend to consult on the implications of this ambition, including the need for a specified threshold of eligibility and the potential value of public recognition of those organisations which meet this threshold － before designing a programme of action if the consultation indicates that this is needed.

The consultation will also take views on the impact of national pay deals on locally provided services that are no longer part of formal national arrangements (for example, former NHS or local government organisations).

Citizen Commissioners

More than new protocols in the government, the most effective means of ensuring ‘collaborative commissioning’ is by empowering communities directly. Responses to our public engagement overwhelmingly backed the proposal that more public services should be designed and produced with their users.

The government will support the spread of ‘Citizen Commissioners’, local people supported to make commissioning decisions on behalf of their communities such as the scheme implemented by Sutton Council. This will also include young people (see Chapter 1 ‘People’).

The government will support local authorities who are leading the way in co-designing, co-producing, and co-delivering their services with users and their local communities. Building on the successful publication of the Enabling Social Action toolkit, the government will support and share the lessons from these local authorities by setting up learning events, champions, and a peer network.^{[footnote 71]} This will bring together commissioners, civil society organisations, and councillors to share good practice to create long-term culture change in service providers across the country.

The role of local government

Local authorities are uniquely placed to bring together all partners, including the voluntary, community and social enterprise organisations, to take a wider view in addressing some of the key challenges faced by communities and to ensure the most vulnerable people are not left behind. As the Secretary of State for the Ministry of Housing, Communities and Local Government said recently at the Local Government Association conference – “the power of local government [is] an incredible force for good – not as a distant, faceless bureaucracy, but, from the biggest unitary to the smallest parish council, as the heartbeat of the communities it serves”.

In the face of current challenges, local authorities continue to play an active role in communities by helping to establish clear local priorities, including bringing the voices of the voluntary, community, and social enterprise organisations to bear in the design and delivery of local services. Some local authorities, for example Calderdale council, have prioritised maintaining strong links with local social sector organisations to provide vital and tailored services to those who need it most.

Some councils are also increasingly taking a systems-wide approach to commissioning (rather than viewing it through the lens of individual services) to achieve better outcomes for their local population and enable more collaborative and grounded conversations about priorities and organisations’ individual contributions to them. For example, Plymouth council when considering how to achieve savings to their social services whilst maintaining standards of care, the entire partnership of statutory and social sector providers agreed an overall approach which protected mental health services (despite them already being in receipt of the largest budget) as they determined this was the linchpin service for the whole system.

Case study: government, NHS and voluntary, community and social enterprise partnership working to enhance health and care

Voluntary, community and social enterprise organisations improve health outcomes and tackle health inequalities not only by delivering services but also by shaping their design and advocating for, representing, and amplifying the voice of service users, patients, and carers. Their input is essential to a vibrant local health economy.

The voluntary, community and social enterprise health and wellbeing programme was launched in April 2017. It is the place where the Department of Health and Social Care, NHS England and Public Health England work together with voluntary, community, and social enterprise organisations to drive transformation of health and care systems, promote equality, address health inequalities and help people, families and communities to achieve and maintain wellbeing. The objectives of the programme are to:

• encourage co-production in the creation of person-centred, community-based health and care which promotes equality for all
• enable the voice of people with lived experience and those experiencing health inequalities to inform national policy making and shape the delivery of services
• build evidence of sustainable, scalable solutions to mitigate and prevent inequalities impacting on the health and wellbeing of communities

The programme seeks to achieve its objectives through two co-dependent funded mechanisms:

• a national partnership arrangement: the Voluntary, Community and Social Enterprise Health and Wellbeing Alliance
• funding for bespoke projects: the Voluntary, Community and Social Enterprise Health and Wellbeing Fund

Voluntary, Community and Social Enterprise Health and Wellbeing Alliance

The Voluntary, Community and Social Enterprise Health and Wellbeing Alliance is a partnership between the voluntary, community and social enterprise sector and the health and care system, designed to provide a voice and improve the health and wellbeing for all communities. It is made up of 21 voluntary, community and social enterprise members that represent communities who share protected characteristics or that experience health inequalities. It has been established to:

• facilitate integrated working between the voluntary, community and social enterprise and statutory sectors
• support a two way flow of information between communities, the voluntary, community and social enterprise sector and policy leads
• amplify the voice of the voluntary, community and social enterprise sector and people with lived experience to inform national policy
• facilitate co-produced solutions to promote equality and reduce health inequalities

Through their networks Alliance members can link with communities and voluntary, community, and social enterprise organisations across England. Individuals and voluntary, community, and social enterprise organisations who would like to share their experiences and ideas with NHS England, Department of Health and Social Care and Public Health England can do so via Alliance Members.

Image credit: Department of Health and Social Care

Mission 14: Funding the future of public services

Alternative commissioning models

To help the next generation of public services take form, communities need a richer, more diverse funding environment than currently. Supported by the government and stimulated by outcome-based commissioning or ‘Payment by Results’ contracts, recent years have seen the emergence of new finance models including Social Impact Bonds. These bring innovation, additional private sector finance, and a wider range of service providers to the task of addressing long-term social challenges. They additionally require a focus on outcomes and as such, enhance the social value of public service contracts. Participants in our engagement exercise argued that Social Impact Bonds had greater potential in commissioning than currently realised.

The Centre for Social Impact Bonds will continue to provide support to government departments to take Social Impact Bonds to the next level of scale, and the government will continue to work with Big Lottery Fund to ensure that the £80 million Life Chances Fund grows the use of these types of commissioning tools in the mainstream of local public services.

The Centre for Social Impact Bonds will continue to build the evidence base for Social Impact Bonds, by supporting the monitoring and evaluation of programmes and further fund our partnership with the Government Outcomes Lab in Oxford University.

In addition, the government will work with partners to develop additional financial models for social enterprises which deliver public services alongside debt investment, including non-repayable capital grants, last-call or repayable grants (that are only paid once the enterprise is profitable), and equity investment.

Grants 2.0

Throughout the engagement exercise, we heard that the government should re-evaluate and promote the use of grant funding, partly in order to introduce into commissioning a more proportionate attitude to risk. In addition to Social Impact Bonds, and to social impact investment (see Chapter 4 ‘The private sector’), the government wishes to broaden the range of funding options for community initiatives. This includes a revival of grant-making － ‘Grants 2.0’ － to reflect the fact that grants can combine flexibility with the accountability and performance rigour of a contract, and also bring ‘additionality’, such as philanthropic or in-kind investment.

The government recommends that all public bodies, including local government, follow the Grants Functional Standard, which sets out minimum grant standards for general grants, including mandatory training on proportionate grant management for all grant managers. The Cabinet Office Grants Efficiency Function have made available a new e-learning package via Civil Service Learning which is accessible to all public bodies and all grant makers are encouraged to complete this. The government will also promote and open-up access to the Grants Centre of Expertise, an online repository of best practice information for grant makers to all public sector commissioners.

Compliance to the Grants Functional Standards is checked on an annual basis and the government is exploring how to supplement this with intelligence from grant recipients.

As part of the UK’s Open Government National Action Plan, the government is increasing transparency of public sector grant-making by publishing grants data to an open, standardised format, and we are currently developing a further commitment to this as part of the UK’s next National Action Plan.^{[footnote 72]}

The government also wants to see a greater number of grant funders in the UK commit to greater transparency in grants funding data, and will host a ministerial event with key sector partners to discuss how to collectively improve data infrastructure and open data publication to support civil society.

Recognising that an important role of local government is to ‘steward’ the public service market and the important role and value of small and local charities, the government will develop new guidance for all commissioners on grant-making to small and local charities, updating the Department for Digital, Culture, Media and Sport guidance ‘Commissioning for social action’. The Commissioning Academy continues to support senior decision-makers to consider how to introduce co-design and co-production in their organisation.

Flexible contracting

It is also possible to use contracts to create a more diverse supply of public services. Already commissioners are able to use public money in imaginative ways, if the will and the knowledge are there.^{[footnote 73]} As participants in the engagement exercise stressed, more must be done to encourage commissioners to use the flexibilities available to them.

In addition to the existing learning and development underway for the Government Commercial Function, all central government commercial buyers will be required to undertake training on how to take account of social value in commissioning and procurement.

The government encourages public authorities to support the learning and development of commissioning skills (for example, through programmes such as the Commissioning Academy) not only commissioners but also for local councillors, for legal, procurement and planning officers, and a wider range of staff.

As explained, (see ‘Measuring success’), the government will consider the most effective ways to measure and evaluate social value. The Department for Digital, Culture, Media and Sport will commence this by publishing a guide to selling to government for voluntary, community, and social enterprise organisations, including social value.

The Crown Representative for the voluntary, community and social enterprise sector champions an improvement in commissioning practices to enable small voluntary, community, and social enterprise organisations to contribute effectively to public services. The role functions as an intermediary between the government and the social sector both to support and challenge.

The Crown Representative will run an awareness campaign to encourage use of Contracts Finder and Mystery Shopper services to promote early engagement and co-design and to hold authorities to account for poor practice.

The government will explore the potential to use flexibilities in the law governing contracts (such as the Mutuals Reservation) to reserve some competitions to other social purpose vehicles, and explore how the effectiveness of the reservation could be improved.

Civil society organisations frequently complain that the law requires commissioners to issue a public competition to deliver a service which a civil society organisation has designed, often at significant resource cost. This makes the financial risk of collaborating on service design untenable for some civil society providers and strains relationships with commissioners.

The Innovation Partnership model exists to open up opportunities for commissioners to select innovative providers with whom they can then deliver services outside competitive tendering requirements. However, it is not being used. The government will review this procedure and explore whether more can be done to encourage contracting authorities to work directly with partners to research and develop an innovative project or service, including trialling the Innovative Partnership model.

Case study: public service mutual - PossAbilities

PossAbilities left Rochdale borough council in 2014 to support people with learning disabilities, dementia, brain injury, and young people leaving care. Over the last four years, they’ve doubled in size and now turn over more than £11 million per year and employ 550 staff. They invest heavily in learning and development, and have seen staff absence drop by over 50% since spinning out. As an independent community interest company, they reinvest their profits into improving the organisation and supporting the local community. They’re able to respond quickly to opportunities and develop more innovative services, such as their urban farm and wellbeing centre, which is run by people with learning disabilities. This success is reflected by them being one of the 1% of organisations recognised as “Outstanding” by the Care Quality Commission.

Mutuals have an important role in delivering high quality public services and offer a distinct alternative to in-house delivery or traditional outsourcing. Over 115 mutuals are operating in diverse sectors, from health and adult social care to libraries and youth services, delivering an estimated £1.6 billion of public services. They put more control in the hands of staff and communities, driving more innovative, responsive, better quality services and happier staff. In January 2018 the Department for Digital, Culture, Media and Sport launched a package of support worth £2.7 million to help new mutuals to emerge and existing ones to grow.

Photo credit: PossAbilities

Mission 15: commissioning for social value

Strengthening the Social Value Act

The Public Services (Social Value) Act 2012, known as the Social Value Act, requires public sector commissioners to ‘consider’ economic, social, and environmental factors in their procurement.^{[footnote 74]} It was a milestone in the development of civil society. The Act has tremendous potential and we have seen it put to great use.

The government is determined to ensure that public spending is used to generate social value in addition to the services it purchases. There needs to be an increase in social value commissioning across all levels of government. This means improving the use of the Social Value Act.

Evidence provided to this Strategy suggests that too often the Act is treated as an afterthought, and a ‘tick box exercise’ to be performed for compliance only, rather than social value being designed into the service in a purposeful manner.

Alternatively, if designed badly, social value requirements can act as a barrier to entry for civil society organisations. Commissioners can sometimes prescribe too tightly and quantitatively － often for reasons of measurement and evaluation － what ‘social value’ the provider must deliver.

Civil society organisations themselves need to improve their understanding of social value. Commissioners report that too often charities or social enterprises undersell their social value, failing to properly account for the ‘additionality’ they bring.

The solution to these challenges is better information and training for commissioners and bidders, and a strong and public steer from central government about the priorities for public spending.

Another message the government heard during the engagement exercise was for the government to strengthen the Social Value Act. The government’s aspiration is to strengthen and extend the Social Value Act, but first taking into account the concerns and risks expressed to us. This means a phased approach, to take into account the learning and development needs identified and to give public authorities the flexibility to adapt to local market conditions.

The government’s long-term vision is for the principles of the Social Value Act to be applied to the whole of government spending and decision-making, including goods and works, such as building projects, as well as services.

Firstly, as announced on 25 June 2018, central government departments will be expected to apply the terms of the Act to goods and works and to ‘account for’ the social value of new procurements, rather than just ‘consider’ it as currently. The Department for Digital, Culture, Media and Sport will lead the way by applying this wider remit to major projects, to be followed by other departments in due course.

Secondly, the government will explore the potential for the use of social value in grants as well as contracts. Thirdly, the government will explore the suggestion submitted to this Strategy that the Social Value Act should be applied to other areas of public decision-making such as planning and community asset transfer.

Ministerial statement: refugees and civil society

The Rt Hon Caroline Nokes MP, Minister of State for Immigration says:

The Vulnerable Persons Resettlement Scheme was launched in January 2014. In September 2015 the then Prime Minister stated that this would be expanded to commit to resettling 20,000 of the most vulnerable refugees fleeing the Syrian conflict by 2020. Since then we have resettled over 11,600 refugees under the scheme (11,649 as of March 2018), meaning we are well over halfway towards meeting our target. This is in addition to those resettled under the Vulnerable Children’s Resettlement Scheme, which aims to resettle up to 3,000 at-risk children and their families from the Middle East and North Africa region by 2020, as well as our long-running Gateway and Mandate schemes.

The response of the British public to the Syrian refugee crisis has been fantastic. Working with local authorities across the UK, civil society has played a vital role in supporting the more than eleven thousand refugees resettled under the Vulnerable Persons Resettlement Scheme since 2015.

In 2016, the government launched a Community Sponsorship scheme to enable community groups to play a more direct role in welcoming and supporting vulnerable refugees fleeing conflict. Under this scheme refugee families are supported by groups of local people who provide a warm welcome, housing, and access to local services. Crucially, they help refugees to integrate into the communities they are joining. Since then over 130 refugees have been welcomed by more than 20 local community groups across the UK. The sponsoring groups include a variety of faith and non-faith community groups, often working in partnership together, and with the local authority.

For me, community support for refugees is the essence of civil society － groups of people deciding to use their own social capital to help others connect to wider UK society. I am incredibly proud that our country has risen so generously to the challenge of supporting vulnerable refugee families fleeing the conflict in Syria. That is why, on 18 June 2018, I announced the award of £1 million of funding to Reset, a consortium of civil society organisations, to train and support those community groups who want to sponsor refugees through Community Sponsorship.

1. Chancellor of the Duchy of Lancaster David Lidington speech to Reform, 2015 ↩

2. ‘Public Service Mutuals: The State of the Sector’, Social Enterprise UK, 2018 ↩

3. Strategic Suppliers are suppliers with contracts across a number of Departments whose revenue from government exceeds £100m per annum and/or who are deemed significant suppliers to government in their sector. ↩

4. ‘Enabling social action: guidance’, Department for Digital, Culture, Media and Sport, 2017 ↩

5. ‘Open government’ [collection], 2018; UK wide ↩

6. ‘The art of the possible in public procurement’, E3M, HCT Group and Bates Wells Braithwaite, 2016 ↩

7. The Social Value Act extends to England and Wales. The Welsh government and Welsh public bodies carrying out devolved or partly devolved functions are not required to follow the policy. ↩