Responding to the Ministry of Justice’s consultation on transforming prisoner rehabilitation, New Philanthropy Capital has urged the government to ensure non-profits have an equal chance of bidding for contracts and not to rely solely on payment-by-results.
The think tank has advised the government “not to repeat the mistakes of the Work Programme” which it says squeezed smaller charities out and reduced diversity in the supply chain through the use of large contracts and a reliance on payment-by-results.
NPC says that while payment-by-results can provide an “important incentive for improving performance” there is a significant feeling in the charity sector that the capital required to compete for contracts in the Work Programme was prohibitive. It advised instead to include payment-by-results as a portion of payment, suggesting around 10 to 15 per cent, and allowing charities to charge a “reasonable margin” in order to build reserves for investment, resilience and growth.
“Understanding the underlying costs and pricing their services appropriately may be a new process for many charities. Charities should be able to charge a reasonable margin – just as private providers are expected to build in a ‘profit’ margin – so that they build reserves for investment, resilience and growth. Without doing this, charities that rely on public sector contracts will not be able to grow or survive shocks,” the think tank advises.
Collaborate for greater impact
NPC advised that creating the conditions where charities can collaborate and form consortia would create a fairer playing field for the charity sector and allow the sector to have a greater impact.
“Simply opening up contracts to bids from charities is unlikely to achieve this level playing field,” said Dan Corry, NPC’s chief executive. “The government needs to take a lead role in encouraging dialogue between charities and establishing the right conditions for the voluntary sector to compete effectively. In practice this means creating the right conditions for charities to collaborate and form consortia,” he said.
Other recommendations made by NPC include making social finance available to charities entering into rehabilitation contracts. It suggests the government work with Big Society Capital and other social investment providers to do so. It adds that reducing the size of contracts would help charities who do not have the reserves to absorb the risks of being prime contractors.
The government’s consultation on transforming rehabilitation, aiming to provide more effective and better value offender rehabilitation services, closed on Friday. “Transforming rehabilitation is my top priority,” said the minister for justice, Chris Grayling.
In January social enterprise 3SC was awarded £150,000 to help voluntary groups play a leading role in cutting crime and reducing reoffending. The funding is to be used to review the current systems and engage with the voluntary sector and current and potential providers in rehabilitation support.
