New approaches to commissioning through consortium working Neil Coulson

Why consortia? Barriers Facing Small Organisations The procurement process (long, complex, expensive) Unable to find out about opportunities Contracts are too big Frameworks (if too complex and too large)

Barriers…cont Pre-qualification Understanding the requirements (anachronisms used, poorly worded specifications) Lack of feedback Cashflow

Consortia – overcoming barriers Scale Development of specialist tendering and contract management infrastructure Greater bargaining power Adding value at the frontline Building capacity

Key Trends Part 1 (deficit reduction and heightened competition) Deficit reduction New forms of private sector competition New forms of social economy competition through ‘externalisation’ of public sector human resources

Key Trends Part 2 (changing dynamics) Radically changing dynamics within the commissioning arena The ‘more for less’ agenda – downward pressure on unit price and greater focus on outcomes Reduction of ‘transaction costs’ through aggregation (joint commissioning, bundling) -> devolved commissioning

Key Trends Part 3 (political reform) Big Society – shift from state to non-state provision Modernising Commissioning Localism Act Social Value Act Personalisation -> Growth of voluntary sector consortia, management companies, special purpose vehicles

Different Contracting Forms Provider Managing Agent Managing Provider ‘Super Provider’

Provider Contractor ProviderProvision of Services

Managing Agent Contractor Managing Agent Sub-contractors Provision of Services

Managing Provider Contractor Managing Provider Provision of Services Sub-contractors Provision of Services

Managing Agent/Provider Contract top slice Percentage of contract to pay for management of sub-contractors:  Performance  Quality  Financial management

‘Super Provider’ Provider

aka Formal Consortium Collaboration Spectrum Networks/ Loose consortia Formal consortiaMergers Partnerships

How does it work? Incorporation to form new legal entity Providers become members of this company Hub and spokes operating model

Hub & Spokes operating model

Ownership & Management Structure

Social ownership Owned and controlled by the members 2 tier governance:  Council of Members  Board

Examples VC Train  Established 2000/operational 2002  120 members  c. £40m Sheffield Well-Being Consortium  Established 2007/operational 2008  62 members  > £1m

Membership eligibility criteria Universal criteria –Sector (not-for-profit organisations and social enterprises) –Provision of services for the vulnerable and hard-to-reach –Area of operation –Commitment to consortium working –Commitment to sharing expertise (via a time bank)

Contract-Readiness Criteria –Financial health –Quality systems –Suitable organisational policies –Suitable governance –Technical capacity

Process Steering group Seed corn/set up funding 3 Year Strategic/Business Plan Membership Prospectus Membership recruitment Incorporation Grant aid/investment finance for ‘baseline’ hub? Win tenders Deliver

Challenges QA and accountability Measuring social return Conflicts of interest – ensuring contestability ‘Investment readiness’ (Investment & Contract Readiness Fund and Big Society Capital)

Critical Success Factors Demand side Commissioner Commitment Commissioners’ Attitude to Change & Risk Market Opportunities

Critical Success Factors…cont Supply Side From culture of entitlement to culture of enterprise Leadership, business skills and entrepreneurial acumen Long-term vision Resilience