A government report has found that local commissioners have a lack of understanding of the charity sector, which has created a ‘fragmented’ public procurement culture.
The Department for Digital, Culture, Media and Sport (DCMS) commissioned economic consulting firm Perspective Economics to explore the role of voluntary, community and social enterprise (VCSE) organisations in public service delivery.
Its report, published on Friday, found that capacity limitations among local commissioners and their poor understanding of the sector have acted as key barriers to charities, which in turn “can reduce VCSE willingness and capability to engage, alongside sector sustainability”.
It also found that smaller organisations can feel “overburdened” by the complex and time-consuming bidding processes.
Poor understanding of the sector
The report said: “Limited capacity, particularly among local commissioners, has arguably resulted in poor levels of understanding, and an inadequate capacity to facilitate meaningful or consistent engagement with the VCSE sector.
“This has also led to fragmented policy and practice between regions and means that contracts are rarely designed with the VCSE sector in mind. It has also been noted that co-production and co-design are limited due to capacity issues.”
The report noted that local government is an important source of public contracts for VCSEs but that participation remains low.
Out of the 250,000 active VCSE organisations in the UK, only up to 5% (between 9,200 and 12,000) are involved in the delivery of government contracts each year.
Larger charities tend to engage more within public procurement and secure most of the procurement income received by the sector. In 2020, two-thirds of income, or £6.2bn, from government contracts went to charities with annual turnovers of over £10m despite these only accounting for 6% of VCSEs currently engaged with procurement.
“Of the 9,180 charities that have won a contract, 80% (7,339) had an income above £100,000 per annum,” the report said. “This suggests that income can be considered as a significant determinant of participation with procurement.”
Key recommendations
The report urged the government to “further explore VCSE intention to bid or scale using public procurement, potentially through a representative survey”.
“This would enable an assessment of the potential volume of VCSEs currently not engaging with procurement that wish to do so, or the volume that are and want to scale further,” it said.
It called for more strategic, long-term partnerships between commissioners and the VCSE sector to be established and replace the current “ad hoc” engagement between the two, which limits “the ability of the sector to work effectively in partnership, both together, and with commissioners to address long-term regional need”.
The report also recommended central and local government stakeholders to look at “the areas of strategic expertise and VCSE strengths within key markets, and should explore the potential for ‘matching’ skills against contracting opportunities (at a scale which VCSEs can engage with)”.
It said: “This could involve co-production or feedback sessions between commissioners and VCSE bidders.”
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