1. Social Enterprise & Public Procurement Revd Timothy Curtis Senior Lecturer in Social Entrepreneurship University of Northampton HEFCE/Unltd Ambassador for Social Entrepreneurship in Higher Education Supported by

2. Brief What are the challenges for local government in policy, commissioning and procurement that make it harder for them to get the most out of social enterprises? ‘wickedness’ of the issue not addressed procurement is uni-directional & untrusting Needs to be ‘purposive’, ‘prosumed’ and ‘co-produced’. 2 The University of Northampton

3. The ‘idealised’ model marketplace Social Enterprise is in here, somewhere 3 The University of Northampton

4. Private Sector ~£1trillion GDP Lets get real… Public Sector ~£400billion revenue ‘monetised civil society’ ~£157billion Social Enterprises ~8.4billion Procurement ~£150billion 4 The University of Northampton

5. Publicly listed companies Sodexo £12bn revenue 380,000 employees 80 countries 8 client segments: Corporate, Health Care, Seniors, Education, Defense, Remote Sites, Justice and Sports & Leisure. 6% operating margin Serco £3.9billion revenue provide and operate two new prisons in the UK, at Belmarsh West, London, and Maghull, Liverpool, with a combined value to us of around £600m over 26½ years. formed a new partnership, GSTS 4 Pathology LLP, with the Guy’s and St Thomas’ NHS Foundation Trust, to pursue opportunities in this substantial market, which is valued at approximately £2.5bn. signed three contracts under the UK Government’s Flexible New Deal initiative worth £400-500m Running schools and inspecting schools for Ofsted Social enterprises are just not competing with these publicly listed companies They are competing with SME & privately owned businesses 5 The University of Northampton

6. Privately owned companies 6 These are not known for their public contracting- except construction Note the complex mix of ownership types, inc EBT

7. SME’s There were an estimated 4.81 million private sector enterprises in the UK at the start of 2008 Small and medium-sized enterprises (SMEs) together accounted for 99.9 per cent of all enterprises, 59.4 per cent of private sector employment and 50.1 per cent of private sector turnover. http://stats.berr.gov.uk/ed/sme/smestats2008-ukspr.pdf Average turnover £215,000 http://www.publications.parliament.uk/pa/cm200506/cmhansrd/vo050615/text/50615w10.htm Therefore, rule bound procurement environment The University of Northampton 7

8. Not untypical LA expenditure The University of Northampton 8 One local authority (A) reports a spend of £331m. The top 10 spending categories account for £226m (28% of the total spend) Curtis 2005

9. Progress in Procurement The way it was Non-transparent opportunities & leads Councils knew their budgets but not their spend (BEST Procurement) Incumbents had the advantage Lowest cost v best value Fragmented supply chains Grant/SLA/Short-term contracts Liability foisted on contractor The way it is The Compact LM3/e-procurement OGC portal(s) Whole-life costing Consortia/supplychain development Full cost recovery Longer/larger contracts Customer more active in risk mgt RELATIONSHIP CONTRACTING 9 The University of Northampton

10. The problems of procurement Rule bound but does not recognise social construction of contract development Justice Holmes commented one hundred and five years ago: "Nothing is more certain than that parties may be bound by a contract to things which neither of them intended, and when one does not know of the other's assent” Poor understanding of wickedness of social issues Poor understanding of the inefficiency of ‘overhead’ in providing services The value added by ‘good’ participants (like volunteers) is lost to the value calculation Requires and implies centralisation, professionalisation, risk avoidance and individualism (Young & Temple 2010) Perverse outcomes: cherrypicking of easy to reach targets, focus on contract terms rather than what is really going on, unstructured supply chains (NAO 2010) inefficient duplication of procurement overheads (see later) “Market logic applies to narrow deliverables, but misses out the crucial dimension that allows doctors to heal, teachers to teach and carers to care: the relationship with patient, pupil or client.” NEF 2006 Essentially ‘untrusting’ & ‘uni-directional’ 10 The University of Northampton

11. Chapter 1 of Dialogue Mapping: Building Shared Understanding of Wicked Problems, by Jeff Conklin, Ph.D., Wiley, October 2006. The problem with social issues 11 The University of Northampton lets take a diversion for a minute “Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them” Dr. Laurence Johnston Peter

12. Wicked Issues The problem is not understood until after the formulation of a solution. Wicked problems have no stopping rule. Solutions to wicked problems are not right or wrong. Every wicked problem is essentially novel and unique. Every solution to a wicked problem is a 'one shot operation' Wicked problems have no given alternative solutions. Horst & Rittel and Conklin 12 The University of Northampton lets take a diversion for a minute

13. lets take a diversion for a minute Tamed Problems PS, the trick is not to tame an issue, but to keep it wicked Chapter 1 of Dialogue Mapping: Building Shared Understanding of Wicked Problems, by Jeff Conklin, Ph.D., Wiley, October 2006. 13

14. Social construction of procurement 14 lets take a diversion for a minute

15. The (hidden) overhead for the Big Society “Perceived need to control the very complex arrangements for delivery of services leads to layer upon layer of indirect activity.” A team to specify what service is needed and to create a bidding specification Several organisations to commit resources to create competitive bids often, in the case of activities that will last over several years, these bids can run into hundreds, even thousands, of pages and cost tens or even hundreds of thousands of pounds to produce The “purchasing” team to negotiate, answer queries, re-specify details and so on, before ultimately selecting one “provider” The provider to set up a democratic structure with Board, committees, procedures to supervise and give legitimacy, and to demonstrate “Good Governance” The committee to be involved with the “purchaser” in setting up a new organisation that meets all the expectations of “good practice”, equal opportunities, financial accountability to the last penny, smooth public relations to let the public know that they are there and so on A building, a phone system, intranet/ website/ customer and back-office systems strong enough to give people the information they need for complete public accountability Sub-contracts for cleaning, food, stationery (lots and lots of paper!), maintenance A Human Resources department, disciplinary and grievance procedures, appraisal and career development system Salaries, bonuses, pension provisions, cars and allowances for indirect staff and senior managers all at competitive market rates And so on and so forth HOW SOCIAL ENTREPRENEURS CAN HELP BUILD A TRUST-BASED BIG SOCIETY By Charlotte Young, Chair of School for Social Entrepreneurs and Nick Temple, Policy + Communications Director, School for Social Entrepreneurs June 2010 15 The University of Northampton therefore: getting back on track

16. Outcomes based commissioning Ignores the equity required in the process of delivery Neutral regarding how the contractor achieves the outcomes- performativity Services cease or don’t expand when fixed outcomes are met Unintended outcome ignored 16 The University of Northampton

17. Social Impact Bond requires the taming of an issue to agree on the metrics of success Secures long-term investment to create short-terms savings in government spending Enticing, but is very close to PPP without consideration of who the ‘social investors’ are, and what return on investment they require 17 The University of Northampton

18. Personal budgets Leads to a ‘retail consumption’ model of service provision and use Individual budgets without mutual support misunderstand the nature of public services. Replaces relationships with market transactions Buying a dog with a personal budget what users need is long-term relationships of mutual trust if they are going to benefit. drift to Maybelline model of services 18 The University of Northampton

19. Mixed provision is no panacea Pathways is led by Jobcentre Plus in some areas but is contracted out to third sector and private organisations in over 60 per cent of the country. The National Audit Office found that there is no evidence that the programme is performing better or costing significantly less in contracted out areas than in those run by Jobcentre Plus. the private contractors were only really any good at the easy bits of the contract - the volunteer particpants in the scheme who were keen to get back into work. When it came to the really hard, time consuming, expensive cases - people who were reluctantly forced onto the scheme - no provider excelled, but the private sector performed even worse than Jobcentre Plus. One third of prime contractors and two thirds of subcontractors expecting to make a financial loss. National Audit Office 28 May 2010 ‘Support to incapacity benefit claimants through Pathways to Work’. The University of Northampton 19

20. Relational contracting Tony knows more than me! increasing the degree of contractual incompleteness can enhance efficiency (Wu & Roe 2007) 20 The University of Northampton

21. Coping with the problems not seeking to propose a ‘one size fits all’ solution that tames the wickedness of this issue The University of Northampton 21

22. Trust Hidden currency of contract success Large number of small interactions Regular interactions Direct transaction Open, transparent sharing of trust feedback Technology now exists to provide for micro-transactions, micro-manufacturing and transacting trust relationships- ebay, paypal, facebook, smart phone apps 22 The University of Northampton

23. Co-production reduce or blur the distinction between producers and consumers of services, by reconfiguring the ways in which services are developed and delivered services can be most effective when people get to act in both roles as providers as well as recipients. 23 The University of Northampton

24. Pro-suming Prosuming is the creation of wealth without being paid for it, doing it for yourself or to give it away. Alvin Toffler, Third Wave 1980 In mental health- peer provision 24 The University of Northampton

25. To develop NEF Define public service clients as assets who have skills that are vital to the (cost-effective) delivery of services. Define work ‘long-term share value’ to include anything that people do to support each other. Include some element of reciprocity. NEF example “engaging disaffected 16-year-olds by using them as tutors for 14-year-olds, and achieving both major academic improvement for both and reductions in bullying.” The value of the engagement, and consequent efficiency, is lost to the system Let the 16-year olds earn ‘sweat equity’ NOT – more ‘procurement with new organisations on the same, old, terms 25 The University of Northampton

26. The University of Northampton 26 Co-own Co-operate co-design co-deliver co-finance co-decide co-assess Co-produce Pro-sume value unpaid labour 3rd job contract purposively develop trust reward reciprocity