OUTSOURCING
have been set up to operate in a competitive environment. We’re looking for people to have a clear understanding of at least some of the principles involved when they go into a situation where an organisation might be starting to struggle and then ultimately fail. You can’t actually ‘support’ those organisa- tions, as that would be unfair and against the state-aid rules and market rules.
“It’s being clear about what it is that they’re actually going to do, and having some sort of contingency plan. What would be the worst sort of situation is where the organi- sation is in trouble but, at the same time, the people at the PCT who are dealing with it have a certain amount of commitment to those in the spin-out, because they are es- sentially NHS staff who have spun out. The PCT can almost fi nd itself in the situation of supporting the spun-out organisation as a default.
“It’s very diffi cult to answer, because we don’t really know what the competitive landscape will be, or who the alternative suppliers will be. In any sort of market, what you want is that if one operator is fail- ing, you have got one ready to take over. But it’s not at all clear what that market will look like. All we’re asking is for people to think it through.
was a threat to the service; and also that the local authority was looking for some sort of cost reduction.
“The context does very signifi cantly affect the result of the spin-outs in terms of what the contract looked like. We would say that feeds back into our rather esoteric point about the importance of objectives – actu- ally, local authorities clearly had objectives around cost reduction and service continu- ation, which were very much refl ected in the way those contracts were set up. The Department of Health didn’t have very clear objectives in terms of this programme – although it is part of a wider programme, Transforming Community Services – and therefore it wasn’t saying in a forceful way that it was looking for cost reduction.”
Not allowed to fail
A key concern for the NAO is the prospect of social enterprises failing – after all, any organisation seeking the rewards of oper- ating more like a business must also deal with the risks, otherwise the NHS could just end up underwriting failure.
Clarke explained: “We obviously don’t yet know exactly what’s going to happen with commissioning and the way that’s going to be done in detail, but these organisations
“Of course these are non-competitive con- tracts which give them a certain amount of assurance. They are assured a certain amount of business for at least a time, which should give them some time to start.”
Short-term?
“The other point that’s of interest,” Clarke continued, “is that the contracts are rela- tively short – three years in length, poten- tially an extra two years subject to compe- tition.
“What we found with the local authori- ties is that they were awarding longer contracts, and that is an issue potentially. When social enterprises spin out, it takes them awhile to change their approach and particularly their culture. It’s a big ask to expect them to turn round completely in just a couple of years.”
The NAO report pointedly refers to the lack of hard evidence for the supposed benefi ts of social enterprises. It lists eight of the benefi ts that the Department of Health ex- pects social enterprises to deliver, but then adds:
“The Department has not indicated which, if any, of these benefi ts are unique to social enterprises but many are also a feature of
other delivery models.” Is the NAO implying that the entire concept is being a bit oversold?
Clarke said: “A lot of things are being said but the amount of evidence available to back them up is actually not very strong yet. That’s not to say that there’s none, because there are lots of things that social enterprises are already delivering that are attractive, but what we’ve got at the mo- ment is a set of ‘stories’. There are examples from say Sandwell, where people are say- ing that Sandwell Community Caring Trust is making savings (reducing staff sick days from 22 days a year in 1997 to 0.34 days in 2008), and that seems fairly well-tested, and there are other individual anecdotes; but what there isn’t at the moment is a consistent, quantifi ed track record of what these benefi ts will be.”
The Sandwell example is a social enterprise formed far before the Right to Request pro- gramme, or the current Government and Cabinet Offi ce push towards accelerating the process, but is a clear example of how running a service in a completely differ- ent way can fundamentally change the way staff approach their work.
Clarke said that the important thing is for the NHS to be specifi c about why social en- terprises should be spun out of PCTs and what they are expected to achieve. “What you’re looking for is not just to have a list of things that social enterprises could pos- sibly deliver, but also prioritised objectives as to what you think they should be deliver- ing. The PCT itself should do this when it sees offers, so it can actually use the list of prioritised objectives to monitor whether they are being achieved.”
Competitive instincts
The NAO report focuses on the long-term risks to social enterprises (and the NHS as their prime funders and often landlord) from direct competition with the commer- cial sector – but some might say that it is actually the spin-outs which have the com- petitive advantage, with no shareholders taking a cut of the profi ts, a good working knowledge of the NHS and important rela- tionships with health service managers and patients.
Clarke admitted: “Yes, in many ways they are in a good position. They’ve got these non-competitive contracts to start with, and they have a good knowledge of the PCT, the market and the people they’re dealing with. They’re set free from some of the restrictive bureaucracy that they suffered from when they were within the PCT, so they have got
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