(NB This blog contains no references to Christmas or to making a donation to charity on your behalf)
Health Secretary Andy Burnham recently announced that the NHS itself remains the preferred provider of health services, less than 18 months after the Prime Minister wrote that “in the next decade we will see a growing role for independent public service providers, voluntary organisations and social enterprises”.
It does strike me that most contracting verges on the antithesis of what the Sector is about and what it generally does so well.
Reasons not to contract:
- Margins are low and, if you’re not organised around contract delivery with very low overheads you probably wouldn’t be competitive anyway
- Contracts are rarely Compact compliant
- Services tend to be standardized, not person-centred
- Contracts are driven by targets that need to be achieved by a statutory body, rather than being based on the needs of the individuals receiving the service
- Financial, performance, insurance and other risks are often disproportionately transferred to the contract holder from the commissioner
- Too much of your income could be coming from a single client creating an unacceptable risk to your organisation
- Monitoring is often onerous and rarely done with real proportionality.
Additionally, advice about how to manage in the current economic climate suggests we should maintain maximum flexibility in order to reallocate resources as and when needed – how can you do that when you are delivering services under contract?
Given all of the above I am still surprised to see so many Not-for-Profit organisations turn to contracting as the new alternative to grant funding, whilst few seem to be considering other trading activities as a priority. But why not? Just as there are so many reasons not to contract, there are so many reasons to undertake trading, or social enterprise; some of the most important being that you can set your own margins/ costs, there is no monitoring or unfair risk transference and the income is absolutely unrestricted – and can be used to address real need, not statutory targets.
So why don’t we look at social enterprise more? It does take some thought and planning – a business case needs to be made, the financial risks are different though they may not be any greater. Trading or developing social enterprise activity does not even mean you have to form a separate governance structure (CAH remains a charity and a company limited by guarantee, even though it delivers some of its projects as social enterprises) – though this may not be sufficiently well understood. Whilst the phrase social enterprise is now ubiquitous, those with a real understanding of it and able to give accurate and informed guidance remain as rare as a bad Clash song. However they are out there, CAH’s own Cris Jezard being one, I would urge you to give up the contracts and start trading.