In the fourth part of our series on contract management pitfalls, we look at the risks arising out of varying the terms of construction contracts.
Third sector organisations and cooperatives have delivered to the public for generations and pioneered many services that are now provided by the State. So, it is interesting that the current Government has been promoting, apparently with vigour, the State contracting with “public service mutuals” for more public services as a way of creating better value and more “customer focus” in a range of services. This is happening in central and local government, and especially the National Health Service. Because “public service mutuals” actually constitute a wide variety of legal forms, the extent to which mutuality and employee leadership actually are the modus operandi of these organisations will inevitably vary.
One development that many in the wider movement should welcome is the requirement in England, on any organisation that has to comply with the EU procurement regime, to consider the economic, social and environmental well-being of the area that they serve and how improvements in the well-being should be built into the procurement process for services. This requirement to think about the place that they are responsible for holds the key to sustainability being embedded in contracted-for services: for some public bodies, especially Government departments, their link to place is what they have failed to grasp in delivering real value for money. Yes, this is the true meaning of the Public Services (Social Value) Act 2012.
Cooperatives, social enterprises and the voluntary sector have often regarded the application of competition rules as something best to avoid when seeking contracts to deliver public services. Actually, it depends.
Under the current EU procurement rules, for some services such as care, health and sport (categorised as “Part B” services) it has been possible for contracts to be awarded without a competitive tender where there is thought to be a lack of “cross-border” market. New EU rules coming in some time (we think) early in 2015 pose new challenges and opportunities. New challenges because the Part B categorisation will be swept away and for many services currently under that heading they will have to be tendered competitively if the contract is of a value above 750,000 euro. But competition, if done well, can be healthy and does not need to exclude the likes of cooperatives. New opportunities because of social characteristics in the requirements of a contracting authority will have greater explicit prominence. There will be scope to have tendering exercises for a select list of public services limited to competition between, effectively, social enterprises (although the definition does warrant examination!), which will exclude the private sector from such services but, unless handled carefully, could bring out the worst in competitiveness between “mutuals”.
What this means is that any person contemplating setting up a public service mutual must expect to participate in a competitive tendering exercise from spring 2015 onwards. Rather than the prospect of being privatisation by the back door, ironically this may result in more services staying in-house but possibly ring-fenced in a company that is controlled by the public body involved.
The only way that mutuals can flourish in public services is for the co-op movement, and others of like mind, to give its full backing and resources to creating fit-for-competition public service mutuals that can compete effectively with a corporate sector that is struggling to recover its own credibility. This would be a good news story to build over the next decade.
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