Setting up a consortium – is it worth the bother?

Consortium expert Neil Coulson and NCVO public services senior officer Lev Pedro outline why front-line charities need to keep their eyes open for opportunities for consortium working, whilst remaining vigilant to the risks and challenges.

The problem – bigger contracts

A major driving force behind the trend towards aggregation of contracts is – understandably – the need to reduce the ‘transaction costs’ of commissioning. With ongoing public sector austerity, many local authorities and other public sector organisations see the shift away from holding multiple contracts with a plurality of independent providers as an economic necessity (though research by Locality suggests that there may be in fact be ‘diseconomies of scale’).

The recent EU procurement directives gave national governments the option of requiring contracting authorities to break large contracts down into smaller lots where possible. Although the UK government chose not to do this, commissioners must still ‘provide an indication of the main reasons for their decision not to subdivide into lots’.

What are the solutions?

(1)  Work with a commercial ‘prime contractor’

Opportunities exist for voluntary organisations to work in subcontracting arrangements with private-sector ‘prime contactors’, as we’ve seen with the Work Programme and the recent restructuring of probation services. While this has been beneficial for some organisations, the difficulties, particularly for small providers, have been well documented.

(2)  Walk away

Alternatively, you could walk away from contracting altogether and seek instead to secure money either through grants or income generation such as charging for services. But this can mean staying dependent on multiple short-term funding streams, or potentially drifting away from your core mission.

(3)  Create our own solution

A more compelling idea has come from the sector itself. We can create the scale needed to bid for contracts, reduce the cost of contract management to the commissioner, and at the same time deliver more efficient, better coordinated services to our beneficiaries. This can avoid service users falling through the cracks that typically open up in referral pathways from one service provider to another. Providers, instead, work together to achieve ‘whole system outcomes’. And, rather than having to work within the culture and working models of commercial organisations, we can set the values and ways of working ourselves.

‘Herding cats’ – the challenges

(1)  Culture shift

Voluntary organisations all have different ways of working and divergent operating cultures. We are also used to competing against each other for finite, and increasingly diminishing resources.

(2)  Loss of independence

Independence and autonomy is part of the sector’s DNA and we rightfully do not want our well tested ways of working to be diluted.

(3)  Lack of track record and financial capability

Commissioners can be inflexible in how they view track record, failing to acknowledge the combined track record of consortium members. Also, a new business with no assets and no existing revenue often cannot qualify in a tendering process.

(4)  Cost of building and maintaining the infrastructure

Substantial funding is needed to seed-fund setting up the operating infrastructure of a consortium, and once set up there is an ongoing revenue liability. It is unlikely that consortium members can fund this development, and many of the funding sources that supported this have dried up. The new Local Sustainability Fund might offer support here.

Conclusion

The process of building a consortium will take a lot of time and money, and it will certainly feel like herding cats. There will be successes and disappointments. However, with the continued trend towards larger contracts, as long as the model is right, a consortium can provide a structure that can support smaller frontline organisations to win contracts and deliver services that they otherwise would not have access to.

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Lev Pedro Lev is our public services senior officer. He helps organisations to work out if they want to engage in public service delivery, and to give them practical help if that's what they want to do.

5 Responses to Setting up a consortium – is it worth the bother?

  1. Mark says:

    Hi Lev
    I guess the lottery had their hands tied to some extent by the system they decided to work in. I have a real issue with this direction of travel as there are far too few examples of successful consortia and many charred wrecks of failed ventures. As a general rule the whole Work Programme was a disaster as you mention. Also vast amounts of money were put into learning and skills consortia most of which was wasted as consortia failed or were very short lived. We also saw Capacity Builders and ChangeUp try and forge meaningful partnerships and consortia and again what lasting legacy has come from that?
    Herding cats is easy, just move the food, however it is also pointless, expensive and ultimately likely to breakdown once the initial incentives are removed. Surely the better way forward would be to look at how local organisations could be funded to do what they do the best, this may be looking at how funds could be managed within the sector and what the role of CVSs and community foundations might be. It might also be about local authorities and others realising that impact is more important than cost. Spending a lot of money on a big contract that brings little value added or fails to reach those that need services the most is a waste.
    I do not think things are likely to change for the better, but at some stage we have to say enough is enough if you want quality, local, sustainable delivery then you have to change your funding model.

  2. Andrew says:

    Well said Mark. How many examples are there of VCS consortia that have been successful, compared with those that haven’t succeeded? In Newcastle we are having some success with smaller, area-based partnerships where people get together to address common challenges to help the community. Initial funding has come through the Our Place programme and it seems to be working. At first for many of those who gave their time it was a labour of love but funding is starting to flow in.
    It was never about joining in to win contracts; I think success has come from people meeting to address issues in the community and support residents, which is what these groups were set up to do in the first place.

  3. Lee says:

    The strategy coming from Government currently promotes a devolution principle with local commissioning of services in a more integrated way. This is right. It makes sense to integrate health, social care, justice, employability, housing and a range of other services around a natural geographical region and decide what should be in every neighbourhood or what should be centralised into a specialist service. If done well, this will lead to greater efficiency, prevent unnecessary duplication and encourages inter-agency work. By implication the benefits to service users are they get joined-up interventions that are better coordinated for greater impact. Most importantly, it is an approach that deals with whole people, not one that tries to define people and their needs and expectations through the organisational silos into which public services choose to organise themselves.

    I foresee the rise of the ‘one-stop-shop’ service, or the ‘service hub’. I think that most service users will welcome this because they also see the waste of going in and out of many doors before they get anything like a real solution to what they rightly believe are their unique problems. An offender with an anti-social drug and alcohol problem may be assisted into employment but if they still live in the same poor accommodation as their dealer and their mental health/drinking problem is not dealt with at the same time then there is little chance of a truly long term successful outcome. The RE-world beckons: – reoffending, readmission to hospital, relapse, revolving-door, re-training, etc.

    The principle of a more devolved integrated delivery of services has been something which Government has pursued as a goal for the last 10 years or more. The question is how to make it work, both in policy terms and as practical delivery of services on the ground. I think that much of the change has to be provider-driven. Supply chains/consortia will need to adapt to this new landscape. Often a financial lead or prime (a large commercial and/or public organisation) will be used to manage cash-flow, overall delivery and infrastructure headline risks of this large scale contracting. And this lead or prime body for efficiency/practicality reasons will want to go through a consortia integrator to sub-contract-in the widest non-profit, local third sector supply chain to achieve integrated delivery outcomes. This form of devolved and integrated commissioning from the prime will increase across many areas over the coming year. No one charity or third sector organisation will have the skills and capabilities to do it all on their own, so the future is likely to see increasing movement towards selected, integrated supply chain consortia with an active directory of services that in combination offers the full solution package (to any and all problems).

    Ultimately, you need to consider whole-system buy-in to the change and mobilising across all service areas to avoid duplication. The commissioning and delivery landscape is changing and most third sector providers involved in service delivery will be part of supply consortia in the future, managing risks and sharing attribution/outcomes is a critical part of the devolved integrated process. One of the things the third sector use to be renowned for was their ability to put competition aside and collaborate in the interests of the service user. Perhaps this welcome spin-off benefit?

  4. Stockton VCS says:

    Support from your local support and development organisation / CVS is crucial. On Teesside, our VCS consortium’s relationship with the CVS was hugely negative.

    The CVS argued for, and established, the consortium in the first place (in some cases mismanaging the process and providing the consortium hub with reputational damage that took a long time for the consortium, once independent, to overcome), as a single point of contracting between the public sector / VCS.

    A year or two down the line and the CVS began to take on this role on itself, in effect competing with – and undercutting – an organisation (the consortium ‘hub’) it had itself established (and one of its own members at that!).

    Levels of trust in the local sector are now at an all time low.