The Impact of Tendering & Procurement on Providers

Transcription

1 looked in detail at the impact of tendering and procurement on the housing and support sector. We know, and you know, that it has been challenging and stressful. It has been necessary for provider organisations to adapt to a very different environment and for Supporting People Teams to try and bridge the very significant cultural and operational differences between public sector procurement systems and practices and the ethos and modus operandi of the provider sector. The Impact of Tendering & Procurement on Providers Michael Patterson reports on how Providers and Supporting People Teams have been affected by competitive tendering processes Much has been said and written in The Briefing and elsewhere about the technicalities of tendering and procurement, the European Regulations which underpins it, how to respond to and how to win contracts that go out to tender. However, we haven t I therefore thought it might be helpful to look at the impact that tendering and procurement is having on the provider sector. I have no wish to emphasis the negative in doing this although it has to be said that SSL, having done a huge amount of training and consultancy on tendering and procurement over the past year, has seldom encountered an issue which evokes such worry from the provider sector. Service User Choice Providers and Supporting People Teams alike are concerned that service users are able to have genuine choice and to meaningfully influence decisions about the services they receive. However, there is an immediate inconsistency between the objectives of pure procurement where a local authority may make a high level decision about the criteria for the award

2 of a tender which bears no relation to the choices of service users or entertains the notion that service users might actually be able to influence such a decision. In practice, one would hope that Supporting People teams might moderate the pure procurement approach, and in some local authorities they have achieved this in favour of a procurement system which goes further towards acknowledging the particular nature of the housing and support sector and the choices of service users. For a variety of reasons, however, this doesn t always happen and high level strategic decisions can then affect service users very directly and significantly, irrespective of their wishes. There are examples where providers and Supporting People teams have endeavoured to involve service users in procurement processes but this has all too often happened once the die is cast. I d like to see examples of where service users have influenced procurement strategies and decisions to the extent that their status as the end user, the point of what we do, should command. Maybe I have a one-sided view of things but it is a view which reflects what I have seen. The Costs of Contracting Procurement is a pre-existing function of local authorities, if not of Supporting People Teams, and as such has been resourced by local authorities for many years. The introduction of competitive tendering for Supporting People services will have had some resource implication for local authority procurement departments but probably not nearly as much as for the Supporting People Teams who must develop and manage the process as a whole, or for the provider sector which has to resource the response to tender opportunities and threats alike. Some recurring economies can be made through the use of Framework Agreements but it is often the case that competitive tendering has the effect of driving down costs and therefore income for providers. It seems to us that there has been a significant financial and operational impact on providers, especially smaller providers which are bidding to retain existing services because of the double whammy of having to allocate scarce human and financial resources to responding to tenders and sometimes having to bid at reduced cost in relation to existing income. When a small provider loses an existing service the consequences can be much more significant than would be the case for a larger provider which might be better able to absorb such a loss.

3 Size Matters Having made the observation that smaller providers can be more significantly affected by the implications of competitive tendering it s worth looking at the size matters issue more widely. The competitive tendering of Supporting People services is not a level playing field and it s hard to see how it can be. It s not as simple a situation as big=beautiful and small=uncompetitive but there is evidence to show that small providers can be significantly more challenged by competitive tendering than is the case for their larger counterparts. Aside from the immediate operational and financial implications of resourcing a competitive tender bid the fact is that small providers are less able to take advantage of economies of scale than is the case for larger providers. All providers, and especially small ones, need to think creatively about how they can respond best to the challenges of tenders both in terms of how they describe the quality of what they do and also how they can think about their unit costs. For example, in accommodation-based services we have assisted many providers to reduce their unit cost for support by reallocating costs into Housing Benefit so that they can offer the Supporting People Team a lower unit cost for support in a competitive tender situation without losing income overall. The pressure on smaller providers is not just about money. It s also about sector diversity and specialism. Increased pressure on the smaller provider sector also means increased pressure on specialism and diversity. It also means increased pressure on the BME sector which is predominantly comprised of smaller, specialist providers. Separately from Supporting People and tendering and procurement processes, the social sector has for some years been in the grip of a kind of merger mania as a response to the demand to rationalise and reduce costs. Some Supporting People providers have found themselves under pressure to merge or collaborate for a variety of reasons, not just associated with cost. Unless a merger is truly a marriage of equals there will always be one party which loses out, perhaps to the point of extinction. But there are ways of proactively collaborating, for example, through consortia arrangements, which may be a way forward particularly for smaller providers. A consortium is not a partnership in a legal sense. It is a collaboration of 2 or more organisations which cooperate in order to combine skills and knowledge, absorb overhead and other costs and give purchasers

4 the confidence in knowing that the sum of the whole may be greater than its constituent parts. The recent Value Improvement Programme run by the DCLG has provided a boost to the consortium model as have subsequent announcements from DCLG. It is important, however, that providers proceed carefully along the consortium path. One of the more high profile and successful consortium arrangements is C4 in Wiltshire (though of course there have also been a number of more recent examples), the members of which had an extended and detailed planning process in the run up to the formation of the consortium. Sufficient time to prepare and deliver a consortium approach is important. Consortia form in response to specific service opportunities so there needs to be agreement over which agency does what, whose premises, staff and resources are used, who will be the lead agency in contractual terms, what the service s operational shape will be and the size and split of the budget. Crucially, agencies involved in consortium arrangements need to ensure they have a cultural fit - that they share a compatible ethos and way of doing things. Experience of mergers in the commercial and housing and support sectors show that cultural differences are the prime cause of failure in such arrangements. We have heard of local authorities allowing 3 weeks for providers to form a consortium for bidding purposes. That s just not realistic. Employment Insecurity The public sector union Unison recently commissioned a report on the impact of tendering and procurement or provider organisations. One of the many conclusions of the report is that employees are feeling the pinch of uncertainty as a consequence of tendering and procurement and the retrenchment of the Supporting People budget. There are a number of elements to this. One of them is job losses as a consequence of service decommissioning decisions and of tendering processes where TUPE has not applied to a service transfer. The same combination of Supporting People budget retrenchment and the need for providers to reduce unit costs (80% of which are typically staff costs) has led to providers not being able to pay RPI increases to staff who therefore take real term salary cuts as a consequence, in some cases year-on-year. The competitive pressure of tendering and procurement regimes has also tempted providers away from the old certainties of the NJC payscales and towards remuneration arrangements which reflect the revenue uncertainties of the current competitive arrangements.

5 Added to this, according to the Unison study and our own anecdotal experience from the work we have been doing, there is an issue of work intensification. This takes the form of: worsening staff to client ratios, which can at least in part be attributable to competitive pressure; an intensification of service user need which perhaps has wider causes although the needs level bar is being continually raised and competitive tenders are used as vehicles to drive this process of intensification of need; A significantly greater administrative burden being placed on providers in general and on provider staff as a consequence of this. Supporting People itself has placed a significant and often unfunded administrative burden on providers and a competitive tendering exercise, for those providers which are not resourced or structured to respond to them, can mean that staff have to drop everything in order to deal with the tender submission. Financial Pressure Throughout this article I have referred obliquely to financial pressure whilst examining other implications on providers of the tendering and procurement regime. It is worth looking at the financial implications separately, however. Those of you who have read our article on the recently announced 3 year Supporting People settlement will know (at least if you re in England) that the settlement effectively amounts to a 33% reduction (from to ) in budget when inflation is factored in. There has been consistent downward pressure on Supporting People budgets and therefore providers unit costs since 2003 and tendering and procurement has played its part as a vehicle by which costs can be driven down. Another catchphrase of recent years has been Best Value, a concept which depends for its proper meaning on the right balance between cost and quality, as indeed should tendering and procurement processes. The problem is that when budgets are under pressure the balance between cost and quality becomes skewed. Tendering and procurement becomes a means by which local authorities can manage the budget rather than the market in its fullest sense and Best Value can be used as a means of justifying that approach.

6 Full cost recovery is one of the commitments of the Third Sector Compact but whenever I mention the notion to providers they tend to react with disbelief. The fact is that full cost recovery is a commitment that cannot be kept and neither can the balance between cost and quality be maintained in the context of budget retrenchment. It s not as if 1.8b in 2003 was enough to meet the needs presented to providers nationally, let alone 1.636b (minus 7-8 years inflation) in michael@supportsolutions.co.uk The Unison report also makes the observation that there appears to be a failure on the part of the public sector procurement experts to understand the culture and economics of the Third Sector within which the bulk of providers are to be found. One might add that if you are going to manage a market you need to understand it well. Local authorities might say that it s just as important for the sector to understand how public procurement works. Supporting People Teams must play a crucial role in mediating between the two cultures. In a time of financial retrenchment the likelihood of procurers and providers understanding each other s priorities is more remote than it otherwise might be. Never has the role of Supporting People Teams as bridges across the divide been more crucial.