UK Regional dissemination workshops
Marlow Research Dissemination Workshop 22nd May 2007
INFLUENCING THE DEMAND SIDE
- INTRODUCTION
The Sustainable Development Research Centre (SDRC) is the research partner to the Benefiting the Economy and Society Through (BEST) Procurement programme, which is part funded by the European Social Fund under the Equal Community Initiative Programme. Action three of the programme is to disseminate the research undertaken through a series of dissemination workshops in each region of England, one in Scotland and one in Wales. Each of these will discuss one of five themes: Agents for Change; Health Markets and Social Enterprise Development; Influencing the Demand Side; Resource Capacity and Future Social Enterprise Development and Business Effectiveness. Each workshop will bring together BEST Procurement Programme development partners and local people involved in the supply and demand sides - providing a forum for them to discuss their experiences of social enterprises and procurement.
- THE MARLOW WORKSHOP
The Marlow dissemination workshop was held on the 22nd of May 2007 at the Court Garden Leisure Complex in Marlow. The theme for the workshop was Influencing the Demand Side. Speakers and delegates at the workshop included representatives from SDRC, the public sector (local government) and local social enterprise.
The workshop consisted of two sections – the first comprising a series of presentations on various issues pertaining to the theme of Influencing the Demand Side. Delegates listened to presentations on the demand side from the perspective of the BEST Procurement Programme in the East Midlands. They also heard from a local representative who discussed the relationship between the public sector and social enterprises in the area from the perspective of local government. Delegates were also informed of the research carried out by SDRC and presented with a case study from the East Midlands of a social enterprise that sells to the public sector.
The second part of the workshop comprised an open discussion involving all participants and focused on the theme: Influencing the Demand Side. As a primarily participant led discussion, this provided an opportunity for delegates to share their good and bad experiences and discuss issues important to them.
- ISSUES RAISED – INFLUENCING THE DEMAND SIDE
The remainder of this report summaries the main issues that emerged from both the presentations and the group discussion at the Marlow workshop. Although the delegates were predominantly from the South East, both local- and nationally-relevant issues emerged. Delegates discussed, in particular, the ways in which attitudes within the public sector can be, and to some extent have been, changed in order to recognise the added-value of social enterprises within procurement policies.
3.1. THE DEMAND SIDE – LOCAL AUTHORITY PROGRESS
In relation to the theme of Influencing the Demand Side, delegates discussed the progress that has been made by local authorities so far, as well as what can still be improved, in relation to public sector recognition of the added-value and needs of social enterprises.
3.1.1 RECOGNISING LOCAL VALUE
The progress made by local authorities in the East Midlands was discussed as an example of best practice because particular councils within the region have made a concerted effort to offer social enterprises advice on how to do business with them. Like other local authorities across England, councils within the East Midlands are promoting social inclusion and want to increase local jobs for local people. In fact, the contribution of social enterprises to local economic development is one of the key drivers of such organisations’ success. Social enterprises can take advantage of such initiatives by highlighting that contracting to them can increase the money flowing into the local economy and lead to local community regeneration. This kind of income generation is particularly important in areas of poverty and deprivation where it is estimated that locally produced income often goes straight out of the local area whereas in more affluent communities it circulates around seven times.
Some local authorities have already recognised that such generation of local income is a key benefit of contracting to social enterprises. Within the East Midlands, for example, it was pointed out that councils have launched a number of plans, policies and a manifesto which have been developed to help them promote social inclusion and local income generation. Many of these include an awareness of the value of social enterprises.
This has led to particular instances in which social enterprises have won contracts with the public sector. Delegates discussed, for example, an instance where a private company had been supplying a local council with Information and Communications Technology (ICT) training but subsequently went out of business. The council recognised that a local social enterprise was delivering ICT training in their own premises and the council now send all their staff to the organisation for ICT training. Another example was given regarding a contract between a local authority and a social enterprise to dispose of waste office furniture – this social enterprise not only provides added value in terms of disposing of the waste in an environmentally friendly manner but has the added benefit of employing local people to do so. Local representatives at the workshop intimated that one local authority in the area estimates 20% of their expenditure is with local social enterprises.
Overall, delegates felt that social enterprises should be recognised for the added benefits that they provide in terms of their underlying social and environmental principals but also in terms of their role in local income generation. It was suggested that local authorities could set aside a specific proportion of their budget to be spent locally, which in turn may provide more opportunities for social enterprises to win public sector contracts.
3.1.2 ASSISTING SOCIAL ENTERPRISES
The workshop demonstrated that within the East Midlands and other regions, local authorities are starting to work towards helping social enterprises understand the procurement process. Within the East Midlands, for example, a Small and Medium sized Enterprises (SME) concordat has been developed, which is aimed at encouraging a mixed range of suppliers to engage with public sector procurement and develop a varied and competitive marketplace. It does this by setting out the actions that local authorities will take to make their contracts more assessable to SMEs. It is focused on SMEs and small businesses of less than 50 employees and is designed to lead to a better understanding between the parties. There is also a Voluntary Sector Compact (VSC) which is a code of practice that sets out the principles which the local authority and voluntary and community sector partners will follow in their dealings with each other. This kind of progress is occurring in other areas of the country as well as all local authorities are encouraged to develop a concordat and VSC as part of the National Procurement Strategy for Local Government.
Local authorities are also generally working towards simplifying their documentation. This includes, in particular, a simpler pre-qualification questionnaire and a move to generally standardise documentation through the Regional Centres of Excellence. Many local authorities have developed guidance documents on how to do business with them which act as a guide for contracts, giving information about what is expected of organisations that work with the local authority. Local authorities are starting, therefore, to produce guidance documents for social enterprises on procurement rules and regulations and giving advice to them on how to find out about tenders and contracts.
It was mentioned that the public sector needs to be seen to be fair and get the best service that they can from their suppliers. However, this can be done whilst at the same time offering support to social enterprises that allows them to understand the procurement process.
3.1.3 CHANGING PROCUREMENT PROCESSES
Delegates learned that particular councils within the East Midlands are looking to change their procurement processes in order to include notions of corporate social responsibility in their pre-qualification questionnaire. If such concepts are included then it may provide social enterprises with the chance to demonstrate their added value.
Delegates also discussed the DTI funded scheme called ‘Community Mark’ which intends to use the buying power of local authorities to encourage SMEs to undertake social and environmental accreditation. This ensures the supplier base engages effectively with environmental and social issues. Such accreditation could also provide social enterprises with a way of demonstrating the value of their underlying social or environmental objectives. However, delegates highlighted that there is still a lot of work to be done in order to make the procurement process more accessible for social enterprises (see section 3.2 below). They suggested that legislation and guidance emerging at the European Union (EU) level could continue to be a main policy driver for local authorities to work with social enterprises.
3.1.4 CHANGING THE WAY CONTRACTS ARE ADVERTISED
The workshop highlighted that the public sector is increasingly moving towards e-procurement and the use of websites to advertise contracts and other opportunities. Delegates discussed to what degree this change is beneficial to social enterprises looking to sell to the public sector.
The ‘supply to government’ (www.supply2.gov.uk) website, for example, advertises lower value contract opportunities, usually below £100,000, available with the public sector. However, the website charges organisations to use the facility. Delegates discussed that all regions are being encouraged to develop their own locally-focused versions of this website in the manner of, for example, www.sourcenorthamptonshire.co.uk. The contracts placed on such regional sites are also put on the www.supply2.gov.uk and www.ukplc.net sites. Although councils generally put the majority of their contracts on such websites, not all opportunities are advertised as some are not deemed appropriate to open to the market. Delegates suggested that more than half of some local authorities’ spend is not advertised but it was estimated that in the future around 85% of all council contracts will be advertised.
Delegates discussed that such websites are good at raising the visibility of opportunities with the public sector to social enterprises, but at the same time they also make the opportunities visible to bigger organisations that may be able to out bid social enterprises in the tendering procedure. It was also pointed out that the lowest value contracts are often not included on such websites even though these would provide a good starting point for social enterprises looking to sell to the public sector. Delegates felt that most contracts that social enterprises gain with the public sector emerge as a result of networking, rather than successful tenders. As a result it was postulated that more effort needs to be placed into helping social enterprises sell to the public sector in a non-tendered manner. Therefore, changing the way contracts are advertised does not necessarily increase the degree to which social enterprises sell to the public sector.
3.2 THE DEMAND SIDE – FURTHER WORK FOR LOCAL AUTHORITIES
3.2.1 INTEGRATION
It was pointed out that a greater degree of communication and integration between local authorities with regards to tendering and procurement processes would be beneficial to social enterprises because, at the moment, organisations have to register separately with each council for work. This means that for each local authority that a social enterprise wishes to work for several long, and often complicated, forms need to be filled out as part of detailed pre-qualification questionnaires.
Some local authorities were reported to be working towards a standardisation of their documentation. This would hopefully result in social enterprises being able to ‘cut and paste’ information after filling in an initial set of forms. Therefore, it could be beneficial for forms to be standardised across different local authorities, although the practicality of such a move was questioned by some delegates. Any such standardisation would also need to be designed as user-friendly for new entrants to the market place in order for social enterprises to be able to complete them.
3.2.2 BREAKING DOWN BARRIERS
Social enterprises, and SMEs in general, face a number of barriers when attempting to win contracts with local authorities. It can be stipulated, for example, on some contracts that a business must not take on a contract that is worth more than 25% of their turnover, although this does vary depending on the contract. Businesses can also be asked to supply three years of accounts, which many social enterprises are not able to do. Delegates also highlighted that filling out tender documents and pre-qualification questionnaires are tasks that are often time consuming. Thus, social enterprises often cannot afford to spend time on this, resulting in workers putting in unpaid over time and extra hours in order to complete the task. Delegates intimated that this can often be in excess of 120 hours work to prepare each tender. It may help social enterprises if local authorities extended the amount of time allowed for tender submission in some cases.
As a result of the discussion, some delegates questioned whether it is actually worth social enterprises making the effort to submit tenders when so many of their tendering applications are unsuccessful. Yet other delegates felt that resilience and persistence are two key attributes required for social enterprises to be successful. It was discussed that social enterprises need to create capacity, but that this is difficult to do when they are moving from grant funding to a commercial business. It was felt that for a business, track record is very important.
3.2.3 CHANGING CONTRACTS
It was discussed that social enterprises should start to push for contracts because at the moment there are many informal arrangements between the public sector and social enterprises and through gaining contracts social enterprise can better protect their own interests. With a contract, for example, if a social enterprise is asked to do any supplementary work not specified in the original contract, the local authority is obliged to pay them for the additional service.
A barrier to this, however, is that social enterprises can have problems accessing professional services to help ensure the contract is right for them. It was suggested that local authority contracts need to be small in order for social enterprises to work with them initially but also include scope for growth that the social enterprise can fulfil as it becomes more experienced and capable. It was also suggested if local authority contracts encouraged collaborative partnerships between organisations this would benefit social enterprises.
Local delegates noted that any changes to contracting procedures would need to occur within the changing context of local government. The Government produced a White Paper in 2006 entitled Strong and Prosperous Communities. This invited councils to consider becoming Pathfinder councils, which aim to improve services through partnership arrangements between councils. In the area local to Marlow this has led to five councils becoming Pathfinders and forming a partnership. This has implications for the size of contracts that will be offered for tender because all five councils will share IT, finance services and have one waste service. The waste contract will be a major contract worth £750 million over the next 25 years. As joint procurement becomes a major way for local authorities to save money, in a UK-wide context, councils will need to examine how social enterprises can engage with such large scale service provision. However, following the establishment of the pathfinder partnership, there will be strategic resourcing that will involve a consideration of sustainable procurement which may provide opportunities for social enterprises. However, it was highlighted that local authorities will not award contracts to an organisation purely on the basis of their underlying social or environmental objectives.
Local Area Agreements were also mentioned in the Government White Paper Strong and Prosperous Communities. These are designed to work towards creating sustainable communities. Part of this involves Local Strategic Partnerships (LSP) where people discuss social aspects of the community. Delegates felt that social enterprises should try to get involved with these in order to raise their profile and become more involved with local government.
3.2.4 THE DECISION MAKING PROCESS
It was raised that the decision making process in local authorities, and the public sector in general, is convoluted and requires every decision to be passed by a number of different committees, thus often taking a long time. This decision making process can make things very difficult for social enterprises waiting on a decision, as they are often unable to move on with their future plans until a decision has been reached.
It was recognised however, that the process is often necessarily lengthy because local authorities are dealing with public money and therefore tend to be risk averse. The public sector have to make the right decision because they have a responsibility to use public money wisely, but delegates still thought it possible for the decision process to be made much faster. In particular it was noted that it is very difficult for start-up social enterprises to be able to work with local authorities if the process involves a lot of uncertainty, changing decisions and lengthy waiting periods. Instances of social enterprises facing such uncertainty were discussed by delegates and highlighted as examples of why social enterprises may be reluctant to tender for public sector contracts. Therefore, bodies that represent social enterprises need to ask the public sector to reform the decision making processes that surround tendering decisions so that common commissioning decisions occur across departments and councils.
3.3 INFLUENCING THE DEMAND SIDE – FURTHER WORK FOR SOCIAL ENTERPRISES
3.3.1 BUSINESSES MOVING AWAY FROM GRANT FUNDING
Delegates also discussed strategies that social enterprises can use to convince the public sector that it is worthwhile to contract to them. A clear theme that emerged was for social enterprises to become more business-like in their operation and plan ahead as far as possible.
It was raised that social enterprises are often constrained by their grant funding because their activities need to fulfil a specified criteria which the funding is dependent upon. It is important for social enterprises to think ahead about the direction their organisation will take once their funding comes to an end. It was discussed that the transition from grant funding to becoming a commercial business can be a scary process for organisations as it can require a paradigm shift, i.e. a significant change in the structure or function of the organisation. With such a shift also comes the responsibility of operating a business, which many social enterprises, previously grant funded, may not have experienced.
Many social enterprises are worried about the future sustainability of their business once they move away from, or can no longer access, grant funding. It was felt that their future sustainability is about more than running a business because a social enterprise needs to work at capacity building as well. To increase the business capacity of social enterprises, it is important for them to think about their strategic direction and the composition of their boards. This is necessary because if the social enterprise can attract people to move it forward it is likely to be more successful. If social enterprises can achieve such objectives then they may be better placed to prove to the public sector that they are efficient providers of goods and services.
3.3.2 SOCIAL ENTERPRISE NETWORKS
Delegates discussed the importance of social enterprise networks as agents to influence the demand side. It was pointed out that a social enterprise network has now been formed in Buckinghamshire and Milton Keynes, the BMKSEN (Buckinghamshire and Milton Keynes Social Enterprise Network), but they need to attract social enterprises into the network. At the moment it is not known how many social enterprises there are or where they are situated in the area and there is no clear strategy for how to find them (www.bmksen.org.uk/about.htm).
Delegates felt that there is no representation of social enterprises by the voluntary sector in the local area at all. The voluntary sector does not automatically include social enterprises in their mailing or contact lists and therefore there is little information exchange between the two. There is some cross over between the two types of organisation, but at the operational level, it was discussed that they are very distinct. Many organisations see themselves as voluntary community organisations, but are also trading and could be classified as a social enterprise, but do not want to be.
3.3 TOWARDS A MODEL FOR SOCIAL ENTERPRISE AND LOCAL AUTHORITIES WORKING TOGETHER
The workshop highlighted that the procurement process is a dynamic procedure in local authorities and begins well before the stage of purchasing goods and services. The third sector often becomes involved at the purchasing stage in response to advertised contracts but in some cases they become involved at the specification stage. Being involved at the earliest stage possible enables them to work with the local authority procurement officers to include social clauses and work towards delivering the principles in Voluntary Sector Compacts. Through working with local authority procurement officers in this way, the sector can highlight the real added value that it can offer and the officers can begin to build requirements around what social enterprises can provide. It is important for the local authorities to work in partnership with a small number of suppliers from the start in order to get what is needed. This is what has happened with some of NHS Local Improvement Finance Trusts (LIFT), and it is difficult to achieve the same successful outcomes through simply advertising a tender.
It was discussed that the vast majority of social enterprises do not have the critical mass to be first tier suppliers; therefore they need to look at the opportunities to become second or third tier suppliers. If social enterprises are unable to get the public sector to work with them, it may be because they are not offering what the public sector wants to buy. Social enterprises therefore either need to change what they supply or try and create a market for what they supply.
Social enterprises have added value which can help local authorities tick a number of extra boxes that a standard business would not. In order for the added value of social enterprises to be recognised by councils, there needs to be both a top down and bottom up change within the council.
CONCLUSIONS
Influencing the demand side is a key discussion point in relation to social enterprises and public procurement. It is clear from the discussions that took place at this workshop that local authorities have been influenced and are instigating some resultant changes to their procurement processes and offering support to social enterprises who want to sell to the public sector.
However, it is also clear that there is a long way for the public sector to go. Many social enterprises are still not winning contracts, or confident of winning contracts in the future. So much so, that some social enterprises see procurement as a red herring and would like support on how to sell to the public sector in a non-contracted capacity. However, delegates at the workshop have highlighted that the benefits the BEST programme has brought to local authorities in the East Midlands have the potential to be replicated in other areas and in turn help social enterprises in other localities.
Overall, the feeling to emerge from the workshop was that local authorities are beginning to recognise the local benefit of contracting to social enterprises. It was felt that if councils do not chose to work with social enterprises then other businesses will and the public sector will lose the opportunity to work with them. It is perhaps time for the public sector to move on from just making opportunities visible and open to social enterprises towards a consideration of how to work with social enterprises to improve their businesses and capacity. Local authorities may need to contact social enterprises directly to tell them how to procure.
AUTHORS
Sarah-Anne Munoz (MA, MSc, PhD), Researcher
Heather George (BSc), Research Assistant
Sustainable Development Research Centre
Horizon Scotland
The Enterprise Park
Forres
Moray, IV36 2AB
01309 678111
