West Lakes Research Dissemination Workshop 26th June 2007
BUSINESS EFFECTIVENESS
1.0 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.
2.0 THE WEST LAKES WORKSHOP
The West Lakes dissemination workshop was held on the 26th June 2007 at the Westlake Science and Technology Park in Moor Row, Cumbria. The theme for the workshop was Business Effectiveness. Speakers and delegates at the workshop included representatives from SDRC, the Development Trusts Association (DTA), local social enterprise and the public sector.
The workshop consisted of two sections – the first comprising a series of presentations on various issues pertaining to the theme of Business Effectiveness. Delegates listened to presentations on the demand side from the perspective of the BEST Procurement Programme in the East Midlands. They also heard from representatives of local social enterprise. Delegates were also informed of the research carried out by SDRC in their capacity as research partner for the BEST Procurement Programme.
The second part of the workshop comprised an open discussion involving all participants and focused on the workshop theme. 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.
3.0 ISSUES RAISED – BUSINESS EFFECTIVENESS
The remainder of this report summaries the main issues that emerged from both the presentations and the group discussion at the West Lakes workshop. Although the delegates were predominantly from the South East, both local- and nationally-relevant issues emerged. Delegates discussed, in particular, issues surrounding the recent shift towards a more market-orientated social enterprise sector that looks to engage with public procurement.
3.1 BUSINESS EFFECTIVENESS AND CONTRACTING/ PROCUREMENT PROCESSES
It was pointed out by delegates that contracting practices and tendering processes can have a direct effect on the business effectiveness of social enterprises. It was felt that social enterprises are being asked by the public sector to do more and more work in order to secure contracts. In addition, contracts are becoming larger and more generic. This can result in social enterprises failing to be competitive and losing their niche value in terms of the provision of specialised services. It was suggested that some social enterprises may be able to work most effectively below the ‘threshold’ of advertised/ tendered contracts or sub-contract from other organisations holding contracts with the public sector.
Delegates also felt that social enterprises can sometimes lack the appropriate entrepreneurial skills in some areas when they attempt to move into an effective procurement relationship with the public sector. This can lead to a general perception within the public sector that there is a lack of social enterprises that can meet their tendering requirements. It was postulated, however, that this may be related to a lack of knowledge within the public sector of the social enterprises operating in their local area.
It was felt that it would be beneficial for social enterprises if the public sector hosted meetings to explain their tendering requirements for each individual opportunity. It was felt that local authorities in particular need to be more prepared to speak to businesses in advance about upcoming market opportunities. However, it was pointed out that sometimes the public sector wants, or needs, the organisations responding to a tender to generate innovative ideas and, therefore, there are often limits to the level of briefing that the public sector can deliver. It was also suggested that the public sector could write tenders in a more social enterprise-friendly way by reducing the amount of paperwork and highlighting community benefit. It was also suggested that social enterprises could be consulted by the public sector at the point of specification writing. However, the public sector needs to be sure not to be biased in favour of any particular suppliers who help develop specifications.
However, it was stressed that the effectiveness of a social enterprise in terms of contracting will be higher if they know how to write good tenders and pass pre-qualification questionnaires. Social enterprises were urged to keep in mind specifically what the public sector is asking for when preparing tender applications. It was suggested that to ‘cut and paste’ information between tender applications may save time but is not necessarily a successful strategy for winning public sector contracts. In the view of the public sector, applications that are personalised and tailored to each contract opportunity are more likely to be successful. Overall, it was felt that although social enterprises may not necessarily have a great deal of experience of writing tender applications, one of the most effective ways of being successful is to concentrate on making applications look professional.
3.2 SOCIAL ENTERPRISE AS BUSINESS
Delegates discussed that social enterprises are businesses and must operate as such. This also implies that the public sector must treat social enterprises as businesses and not as charities. It was suggested that the term ‘third sector’ is confusing because it places voluntary, faith and social enterprise organisations into the same subdivision. Social enterprises may need to look, therefore, towards more effective ways of marketing themselves as unique businesses. This may require a shift in rhetoric from talking about a social enterprise sector to discussing social enterprise as a business model.
However, it was felt that the public sector sometimes misunderstands the meaning and nature of profit for social enterprises because in this respect they are not like a business or a charity. It seems hard for the public sector to realise that social enterprises need to generate a profit in order to remain in business but do not distribute a profit to shareholders.
3.3 NEGOTIATING RISK
Representatives from the public sector were keen to explain why social enterprises often view them as risk averse. It was thought that if social enterprises could understand this then they would be able to negotiate it more effectively. It was suggested that the perception of a risk averse public sector is related to their tightly controlled procurement processes that oblige them to justify their choice of contractors because they are dealing with public money. It was felt that this does not necessarily warrant the label of ‘risk averse ’. Therefore, the way to deal with this may not be to try and change public sector attitudes but to help social enterprises negotiate the procurement processes.
It was intimated that the public sector are sometimes surprised at the low standard of tender applications submitted by social enterprises. The public sector felt that below standard applications were submitted despite clear instructions from them on what they were asking for in the tender. It was felt that the public sector will never feel confident in contracting to social enterprises if such organisations fail to meet tender deadlines and send in incomplete applications. In was pointed out that incorrectly filling in forms will lead to the ultimate rejection of a tender application regardless of the quality of service that the social enterprise would have been able to provide.
Public sector representatives encouraged social enterprises to approach them with questions at any time if they did not understand anything in the course of responding to an invitation to tender. However, other delegates questioned how far the local authority would actually go in terms of giving advice. It was suggested that most social enterprises do not understand how much support is available to them from the public sector as the level of support is not transparent.
3.4 ISSUES OF VALUE
Delegates discussed that some social enterprises lack business clarity because they experience difficulties in valuing their service or product. This results in social enterprises often undervaluing their services in tender applications. This can lead to a spiral of decline where social enterprises are involved in contracts that are not paying them enough for the work that they are carrying out.
Such a spiral can also occur when social enterprises only apply for small contracts. This can lead to a ‘small contract treadmill’ where organisations are trapped in a cycle of constantly applying for small contracts in order to survive. It was suggested that it may be beneficial for social enterprises to enter into partnering arrangements with larger companies in order to get larger contracts and escape such a cycle.
3.5 PARTNERING WITH THE PRIVATE SECTOR
It was pointed out that social enterprises could take advantage of the experience of the private sector by entering into partnerships with them in order to secure public sector contracts. It was felt that social enterprises need to introduce the private sector to the ethos of social and community goals and in return the private sector can help bring the skills to make the business side more effective. Together they can meet the community aims and the business aims of a public sector contract. One strategy for social enterprises to increase their business effectiveness would be therefore, to partner with the private sector as a route that may ultimately lead to a procurement relationship with the public sector.
3.6 LOCAL ISSUES
It was mooted that social enterprises are particularly effective agents when it comes to spending local money locally. Delegates felt that this has wider community benefits. Therefore, public sector procurement can be a way of investing in local community organisations that have added-value. Thus, contracting from a social enterprise can aid economic and social renewal in the local community.
3.7 ASSET BASE
Delegates discussed the asset bases of social enterprises in relation to the ability of organisation to function as effective businesses. It was debated whether social enterprises need to have an asset base in terms of property to fall back on. However, it was also suggested that property can also be a liability if social enterprises do not know how to manage it properly.
4.0 CONCLUSIONS
The discussions that took place at the West Lakes workshop suggest that the business effectiveness of any particular social enterprise can vary depending on their particular set of circumstances. The effectiveness of some organisations, for example, can be placed under strain by contemporary public sector tendering processes. It seems that social enterprises can work at their most effective within public procurement when the contracting processes are kept simple and accessible.
Effective social enterprises are those with a clear understanding of public sector procurement processes and how to write effective tenders and pre-qualification questionnaires. A better understanding of what is often called the ‘risk adverse’ tendency of the public sector may help social enterprises to effectively negotiate tendering processes.
Sending in completed and presentable tenders would be a first step towards generating public sector trust in social enterprises as suppliers. The public sector felt the onus on doing so lies with social enterprises themselves. However, if social enterprises are unable to develop professional tender applications, then this may be where their immediate training needs lie. In order to be effective businesses, however, social enterprises also need to be clear about the value of the goods or services that they provide.
The workshop also highlighted that the public sector needs to begin to recognise social enterprises as distinct from charities – as businesses – for their relationship to be more beneficial for both sides. Overall, delegates concluded that it is vital for social enterprises to have a clear understanding of their social goals as well as a clear business focus. Otherwise, social enterprises may lose out on public sector contracts on the basis of their added-value and community benefits as the private sector increasingly turns to Corporate Social Responsibility.
AUTHOR
Sarah-Anne Munoz (MA; MSc; PhD)
Researcher
Sustainable Development Research Centre
Horizon Scotland
The Enterprise Park
Forres
Moray, IV36 2AB
01309 678111
Sarah-Anne.Munoz@SDRC.uhi.ac.uk
