Government procurement practices 'squeezing out' charities

Will Green is news editor of Supply Management
4 April 2014

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5 April 2014 | Will Green

UK charities claim government procurement practices have contributed to a £1.3 billion drop in their income.

The National Council for Voluntary Organisations (NCVO) said “overly-large” contracts; payment by results, which requires “potential providers to hold very high levels of capital reserves”; and “overly bureaucratic procurement practices” were preventing charities running public services.

The NCVO said the “vast majority” of government income to the sector came in return for providing services and it wants a review of the way contracts are awarded because “charities are often squeezed out by larger companies”.

The total value of government contracts with charities fell in real terms by almost £900 million to £11.1 billion between 2010/11 and 2011/12, according to the NCVO. Grant cuts over the same period amounted to £400 million, contributing to an almost 9 per cent drop in total income to the sector. Charities’ spending fell by £450 million.

Sir Stuart Etherington, chief executive of NCVO, said: “Given the government’s deficit reduction priority, it was inevitable that charities would feel the impact of public spending cuts. But these figures show that charities bore more than their fair share of these cuts.

“The government has set out an ambitious agenda to open up public services, but there is a long way to go before reality matches the ambition. Unfortunately, most charities simply can’t compete with the financial muscle of large outsourcing companies. Our members tell us they are at risk of being squeezed out of public service provision as government contracts grow larger, meaning only big companies can afford to bid.

“The taxpayer could be getting better value for money in public services. Charities can provide high-quality services tailored to local needs, and do so with a human touch. But the government must take action to ensure charities can compete on fair terms when services are commissioned.”

A Cabinet Office spokesman said: “We recognise that it is a difficult environment for charities. We have long said that the sector cannot be immune from cuts and we are providing a comprehensive support package to help the sector to adapt to challenging times. We have also done a great deal to make it easier for charities and social enterprises to compete for contracts, and help us deliver better public services.”

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