“Do social enterprises have the right expertise, or is it just a nice bunch of people who all wish us well?” Housing association commissioner
“Commissioners can accept [social enterprises] and think they’re great but if they’re still incentivised on what is the cheapest option, how will the situation ever change?” Employment social enterprise
These were just some of the views we came across in a recent project looking at the issues facing social enterprises wanting to contract with the public sector. The coalition government has made a particular commitment to “support the creation and expansion of mutuals, co-operatives, charities and social enterprises and enable these groups to have much greater involvement in the running of public services”. With an annual spend of £230 billion, public sector procurement has the potential to create significant business and growth opportunities for social enterprises. But how easy is it for social enterprises to actually bid for and win public sector contracts?
In order to shed light on this issue, we conducted interviews with 18 individuals, drawn from social enterprises, commissioning bodies and social enterprise support organisations. We uncovered four distinct challenges:
- Knowing me knowing you: social enterprises find it difficult to navigate public sector systems and contacts and to position their offer so that it responds to commissioner objectives. But equally, commissioner also have a poor understanding of the capabilities of social enterprises.
- Demonstrating impact: It can be very challenging for social enterprises to demonstrate the additional value they can provide. This might be because they tend to be more focused on delivery than evidencing impact, that they lack expertise and resources or simply that it is intrinsically difficult to establish the value of preventative services.
- Mismatched priorities: The context of austerity and public sector cuts means there is pressure on commissioners to award contracts based on short term costs rather than longer term value. Some of our interviewees felt the disconnect went deeper, with many social enterprises motivated to fill needs that have not always been the focus of the public sector.
- Lack of capacity and ability to absorb risk: Being able to apply for public sector contracts successfully requires significant resource along with documentation and policies social enterprises may not readily have. A lack of working capital also presents problems is taking on risk that may be required with payments-by-results contracts. Our interviewees also talked about a catch-22 situation whereby unless they’d had a contract previously, they were unlikely to win a new one.
In the second part of the report we note some of the initiatives that can help alleviate these challenges, including the work that has been done by our colleagues with the Young Foundation in Residence programme.
We’re grateful to all the social enterprises, commissioners and other experts who informed this research. You can download the full report here