In recent months, notable examples have emerged of the damage that can be caused when funders and public sector organisations enter into inappropriate funding structures. If you believe the critics of these partnerships between the public and private sector then it’s clear why: the private sector is seen to be driven by short-term profits, while the public sector seeks long-term social benefit.
These recent problems around funding partnerships, particularly in social housing, raise the question of how public organisations can attract the right funding partner for them and ensure the partnership has longevity.
The key to getting funding procurement right is keeping social value, something that drives so many public bodies, at the very heart of the process.
The vital starting point has to be a close alignment between a funder’s aims, values and time horizons and those of the organisation seeking investment. Before a public sector organisation such as a housing association selects potential funders, a swift pre-qualification process can be highly valuable. This should include analysis of the motivations and values of long-term prospective investors, and to ascertain their own sources of capital.
Does the funder want to be involved in this partnership long into the future? Is the majority of the capital their own or are they borrowing it from third parties? Will their reputation be at stake if things don’t work out or can they just hand the keys back to the bank?
It’s important to strike a balance between lengthy procurement processes and direct relationships with investors. A financial investment from a trusted party can sometimes deliver more benefit than embarking on a lengthy box-ticking tender process, which arrives at the same point, but delays both the funding and benefit to the community.
Today, procurement is recognised as delivering benefits far wider than cost savings. Sophisticated investors will increasingly want to understand the community impact of your purchasing and any empirical evidence you have to prove the value of social returns. Housing providers are beginning to use objective tools that calculate the financial worth of community impact, such as wellbeing valuation, to measure this social return on investment.
Advanced procurement processes can assist in ensuring the right fit between a funder and your organisation from the outset. In any long-term relationship there will be ups and downs, but a robust purchasing process builds a firm foundation to secure funding that helps you to achieve your long-term goals.
☛ Pete Gladwell is head of public sector partnerships at Legal & General and will be speaking at PfH Live in Manchester on 25 June 2013