Hypocrisy of probation outsourcing
When the Government announced its plans to outsource the probation services some months back, it made positive noises about the part to be played by charities and social enterprises in delivering the new services. It was not going to be just another privatisation with contracts allocated on the basis of buggins’ turn. This time, we were led to believe, it would not be the same old outsourcing faces getting the work, no matter how embarrassing or cynical their failures in earlier attempts to take on services which had previously been run by the public sector.
The third sector was enthusiastic in its turn because since the launch of Big Society Capital a few years ago it has made a big effort to become more professional and commercially savvy. However, although it has delivered with notable success on several small-scale projects, it has never been given a chance nor had the resources to try out its ideas on a broader stage.
These probation contracts which are worth around £450 million a year and involve dealing with around 200,000 medium and low-risk offenders presented just such an opportunity. Being taken seriously for delivering this kind of work would show that the Government was willing to give real support to charities and social enterprises, and was genuinely interested in developing new suppliers.
On the other side, winning these contracts would allow the charities to operate at scale, giving them a platform to develop into significant businesses which could bid for more contracts in the future. So, the excitement felt in the run-up to the Ministry of Justice’s contracts announcement last Friday morning was about as keen as the disappointment felt after. The Government’s Justice Secretary, Chris Grayling, did say the winning bidders represented “a significant diversification of the supply base”, adding that all but one of the private sector winners had formed partnerships with charities and social enterprise groups. But true to form this turns out to be just another example of PR spin where Government’s words do not match what it has actually done.
The reality is that the third sector has been shut out. It is — at best — a bit player, and at worst simply a fig leaf to disguise the fact that these contracts are basically just the same old stuff given to the same old players. In theory, there are 20 contracts where the third sector is involved. Five of these are billed as joint ventures, and the rest are partnerships. The details of how these joint ventures are structured has not been published by Government, but Big Society Capital believes none of the charities has a stake of any significance, and they are certainly nowhere near a level where they could exert significant influence on the direction of the business.
The partnerships might well add up to even less. The charity partners have no economic stake and the role they eventually fulfil is dependent on the supplier honouring commitments to use some of their expertise. Time will tell if their influence will be significant, but I wouldn’t bet on it. Given that more than half the contracts went to only two of the bidders, it is hard to disagree with Big Society Capital when it says that the private sector is in the driving seat and the charities are simply being taken along for the ride.
If Government challenges this view then it needs also to explain why it allocated no contracts to any of the three leading charities dealing with ex-offenders — including CRI and Catch 22 — who were bidding in their own right without private sector partners. It needs also to explain why the entire bidding process was tilted against the third sector by the requirement that there should be a parent company guarantee supporting all bids.
Surely the Ministry of Justice must have known that, whereas parent company guarantees are easy and almost routine for a private sector company, they are profoundly difficult to arrange for charities and social sector organisations since they do not have parents. This means they would have to get the guarantee from a third party which is almost impossible: it is one thing to guarantee the behaviour of one’s own children, quite another to vouch for the children of a complete stranger.
The demand was then made even more extreme by the Ministry of Justice refusing to specify what conditions would make it necessary have a guarantee, and further insisted on the right to change the contracts at a later date without even informing, let alone consulting, the guarantors. Even Big Society Capital — which tried to plug the gap with third party guarantees for some of the charities — could not deliver exactly to the Ministry of Justice’s specification. No one outside the private sector could, nor would any want to take on such open-ended risk. The ministry set the bar impossibly high, then shed crocodile tears when charities failed to clear it.
This is not how Chris Grayling tells it. But no amount of spin can conceal that this was a huge opportunity missed to broaden the pool of outsourcing suppliers, lock in improved performance and deliver a boost to the third sector. It is hard to understand why it was spurned.Someone else writing in the Guardian and not happy about the bidding:-
Probation contracts show the government does not value diversity
Last week, the Ministry of Justice announced the preferred bidders for delivering probation services. Much was made of the charities and social enterprises named in these bids. But what matters is the volume of work they get and the positive impact they can have. And here the picture may not be so rosy.
Only one out of 21 contract areas has been won by a socially-led consortium – ARCC in Durham and Tees Valley, one of the smallest contract areas. Nearly two-thirds of the total value of contracts has gone to bids led by Interserve, US-based MTC and Sodexo Justice Services. And although plenty of charities are named in the bids, they will in most cases be minority partners or subcontractors to private companies. In order to dispel charges of charities being used as social window-dressing or “bid candy”, the MoJ needs to commit to publishing the major subcontracting workflows within each contract area. This would create some transparency on how these private-social partnerships work in practice.
But there has been a deeper, more structural issue with this procurement process: its bias towards organisational size. There are practically no service-delivery charities or social enterprises in the UK that have assets anywhere near the size of the winning bidders. Unless this size bias is addressed, the future for the social sector in the big government outsourcing markets, such as Work Programme Plus and NHS community health contracts, will be limited to being junior partners or subcontracting to big private companies.
Part of the problem was the sheer stamina needed to survive 13 months of formal procurement. Most problematic, though, was the MoJ’s insistence on a “parent company guarantee”, which ranged from £13m to £74m per contract area. This is similar to a parent guaranteeing the mortgage debt of their child so that if they miss a repayment the parent covers it. Here, what the “parent” is covering is service failure.
Companies with large balance sheets can just about stomach this. But bidders with smaller balance sheets had to either “bet the ranch” on one contract, or look to a third party, such as a social investment bank, to provide a guarantee on their behalf. Third parties are not parent companies (by definition) and critically lack the information, control or expertise over service delivery that a parent company has. At Big Society Capital we offered a form of guarantee (as a third party) to two very credible socially led bids by a mutual and a large charity, but they weren’t successful.
If plurality and diversity in the UK public service market is to mean anything, it must include social sector organisations managing primary contracts, and not just being subcontractors to big private firms. The government has to seriously address the bias towards size by removing the parent company guarantee, or stop pretending that it really values market diversity.In view of the above, I think this contribution left earlier today is particularly relevant:-
As the manager of a regional medium-sized homeless charity, I thought I would make a few comments about partnership with CRC. Firstly, our successful under 12 month project with the Probation Service was scrapped on day one of the new CRC taking over. The explanation was “no resources”.
The chances of us developing a partnership with a multi-national billion pound company running a CRC is absolutely nil. Why would this charity expend resources to support a multi-national? How could I go to my trustees, supporters or trusts and ask for money to partner these companies who have vast financial resources?
We will continue to work with offenders but not through the CRC. We will not act as a reporting centre for them so they can achieve their PbR targets. We will also not seek joint funding with them as again, why should a trust support a multi-national company and ourselves?
The basis of all our work with offenders is not driven by profit, it is driven by the desire to offer offenders a basis from which to grow and develop, to start again, to rehabilitate, to reinvest with dignity. Money or financial rewards do not come into the equation, that is what the private companies and national charities do not understand. We do because it is the right thing to do.
Then there's the odious Edward Boyd writing on the Conservative Home website last week. Despite being Deputy Policy Director at the Centre for Social Justice, it strikes me he has little understanding of what he writes about, and by the end admits TR might not work at all. At least we agree on that I suppose.