The view from the middle: motivations of a prime contractor

Fiona Sheil was responsible for co-ordinating NCVO’s programme of seminars, training and advice work on public service commissioning and procurement. Fiona left NCVO in October 2013 but we have retained her blog posts for reference.

Supply chains, so Government is telling us, are the future delivery model for public services. Most famously of course this is the structure for the Work Programme (a piece on commissioning on which NCVO and many others have been vocal critics). The problems in this particular programme don’t mean the method of supply chains is itself doomed to fail – it means we need to try harder to understand what works and to avoid repetition of those mistakes.

In an effort to understand the reasoning and reality of supply chains from the lead’s (prime contractor’s) perspective, my colleague Ruth and I have been speaking to primes/leads from the private sector.

Here’s some first observations on the motivations and perspectives following a discussion with Sean Williams who leads work on employment (ie the Work Programme etc) for G4S.

Driven by results

This particular organisation is driven by results. Because what – and who – get the best results get them the best financial return.

This is great but has a number of implications:

• G4S are ‘sector blind’ or ‘sector agnostic’: that you are a charity gives you no advantage, no dispensation if others outperform you. This is harsh, but this is the reality of a ‘market’ efficiency model of public services. If you achieve the best results for users, it doesn’t matter who you are to the state.
• The ‘result’ G4S are interested in is that set out in the contract (ie relatively short term, and absolute). If you’re working towards having an impact, or an impact which isn’t tangible by the terms of the contract, there isn’t any commercial reason to support or develop your work.
• Except… when it’s clear a little investment of time and support could turn you in to a high-performer, and where their current supply chain is weak and needs to be challenged or replaced by new entrants. But from their perspective there would need to be a clear return on their efforts – so again, a clarity that you’ll deliver the commercial rewards is essential.
• Data is king. This isn’t just about getting results but about proving them. Something we’ve seen to not always be easy, and not always be honest.

This is not a sympathetic environment, and there’s no covering for that. These are different terms (more competitive, higher-stakes, less tolerant) than many charities delivering public services are used to. What is difficult is the sudden nature of the change and that our sector has to a large extent been helpless to influence the way it happens. The potential lack of support for emerging organisations is a significant barrier to diversity of innovation, user-voice, and competition.

The focus on results though is right. Public services should be funded to achieve results for individuals and communities, not to prop up providers of any ilk. The challenge we have – and one we will really struggle to overcome – is making sure the results are the right ones, both for now, and for future sustainability.

Performance Management

The process by which G4S manage their supply chains is highly appropriate for an efficient, competitive market. The rule is this: the best performers get more business; the weakest get kicked off.

There are two parts to this:

1. Picking the right providers to start with. This is key. G4S don’t base their decisions on which subcontractor submits the best tenders, recognising that tenders just indicate how good you are at writing, not at delivery. Instead they focus on site visits as the means to evaluate and decide on subcontractors. Within this of course sit certain stipulations on capacity etc forced by the contract terms itself – ie PQQ measures on capacity and size.
2. Performance management requires sacking. G4S are unrepentant – and I find their argument entirely compelling – in sacking underperforming organisations to make way for the higher performers to expand, or new organisations to be brought into the supply chain. Sacking (expensive and unpleasant) is obviously the last resort of a stepped process of performance management.

When describing what does and doesn’t work, Sean was absolutely clear: good management leads to successful organisations. Where management is weak, the subcontractor is unlikely to succeed.

The shackles of commissioners

The purpose of a prime/lead model supply chain is to bring efficiency and expertise into managing relationships, to brush aside some of the bureaucracy. Prime-led supply chains should be about taking the management role away from commissioners who are perhaps now recognising they aren’t the best experienced or skilled in this area. However, what we’ve seen in many cases – and the Work Programme is again an example – is the commissioner retaining such a tight rein on the prime/lead that it stifles the very advantages of their expertise. After all, you will only ever be as good as your funder allows.

Looking at a lot of the Work Programme’s problems (bad referral systems; gagging clauses) these are the fault of poor commissioning rather than poor supply chain management. Until Government recognises sensible limits to the interference of commissioners in supply chain management, the bureaucracy won’t decrease – it will merely be double layered and problematic. The extent to which this will ever change is questionable. As this prime pointed out, the system is written from the customer perspective (the state) and not that of the supplier.

See further NCVO support and advice on whether or not you should take on subcontracts, the different models of partnership structures, and information on the way the Work Programme has impacted on the voluntary, community and social enterprise sector.