IfG: Payment by results ‘harming social sector’

Government’s use of payment by results contracts will inhibit its ability to buy services from charities and social enterprises, the Institute for Government has warned.

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By CivilServiceWorld

22 Jan 2014

A report published today says that many voluntary and community sector (VCS) bodies are not equipped to operate in the current outsourcing environment, because they can’t take on the inherent financial risks and lack the necessary contract management skills. The IfG found the vast majority of VCS providers have concerns about the system’s risks – in particular, recovering costs and accessing the investment cash required.

IfG research director Tom Gash said: “This research shows that most public sector commissioners are confident that small private and voluntary sector organisations are capable of providing effective public services. However, commissioners are still worried about contracting with smaller providers because these companies can’t always navigate complex contracting processes.”

He added: “Small companies are also worried about taking on riskier contracts, including ‘payment by results’ deals where payments are not guaranteed. The risk is that these smaller companies are being excluded not because they can’t deliver, but because they can’t take the financial risks that big companies can.”

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