Tendering vs Partnerships – the credit crunch extends government power over charities?

I’ve always preferred partnerships to competitive tendering as a model for supply to not for profit organisations, or for their relationship with their funders.  The relationship horizon with competitive tendering is a few years, not long enough to develop real, deep and trusting relationships between supplier and supplied.  You certainly cannot develop a system such as Toyota’s famous JIT (just in time) that relies on integrating suppliers, or M&S’s relationship with their suppliers (or that of Zara, or a host of others) when every 3 years you know it all might change due to an imperfect and cost driven tendering system.

This is not anti-competition and value for money: the appropriateness of competitive tendering versus partnerships depends on the type of service you are buying.  If you buy a commodity you search for the cheapest price.  If you are buying something complex that takes situated knowledge and commitment to deliver, such as a mental health support service, you might want to use other criteria.  While you might argue that such knowledge and commitment can be bought, I’d argue that the situated knowledge required to run such services is better developed over time.

To give some examples from the supported housing sector.  The search for staff to cover shifts in hostels is endless, and normally organisations go to employment agencies for this.  Some are specialised, and many of those working for them are skilled, but often the reverse is the case.  The agency staff employed lack knowledge specific to the sites they are asked to work at or the organisations they are asked to work for.  However, a longer term partnership between agency and organisation can develop, with specific training and better knowledge of the sites by all concerned, including those at the agency responsible for placements.  The result is improved quality of service to clients.  It can even keep costs down.

Perhaps my biggest beef with the current state of Supporting People services, is that we have a competitive market where all the power lies with the one purchaser (the local authority) while many potential suppliers compete.  This makes the charities involved mistrust each other, spend a lot of time on complex tendering, then spend time on taking over services, remodelling them, TUPE, re-budgeting and negotiating, and then going through it all again.  Until the 3 year settlement, the funding horizon was year by year, hardly a safe environment to encourage investment in services by charities.  It means constant reorganisation, taking on services or staff with different cultures and practices.  This works against any organisation learning how to run a particular type of service, and sees some larger charities tendering for everything in sight.

The up side to this is that quality has improved and poor performers have been driven out of the market.  It promotes flexibility and the ability to adapt quickly to change.  The down side is the slow consolidation of organisations, as smaller more specialist ones are driven under, with the local authorities able to call the shots and specify what they want, sometimes to a crazy level of detail (considering they often lack specialist knowledge of the services they are commissioning).

The credit crunch can only make this worse – donations to charities can enable them to undertake ground breaking and specialist work that local authorities won’t initially buy.  As voluntary donations dry up, those charities that contract with Supporting People will increasingly rely on those contracts, which are continually squeezed.  Slowly some sectors will turn into extensions of local authorities, with all the ills that led to the government outsourcing to charities in the first place.

The private sector has proved that both competitive tendering and long term partnerships have their place in business.  My fear is that the supporting people regime, and what is to follow through Local Area Agreements, will focus only on tendering.  However, I am grateful that in some places relationships still count and there is learning and development that circumvents the “lets tender everything” approach of some local authorities.

The rhetoric of “lets work together” can be lost somewhere between a tender and a hard place.  Where complex services are concerned, more partnership development and less tendering might work better.