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The duration of the award is an important issue for both TSOs and government bodies. It is distinct from, but linked to, the duration of programme.
A short-term award (one year or less) will be appropriate in certain circumstances. For example, if you enter into an agreement with an organisation to run an engagement exercise in a deprived area within the next few months, a short-term award may be appropriate. This is clearly linked to specific purpose.
A long-term award can reduce risk and uncertainty for providers and be more cost-effective for government bodies. In particular, the continuing use of renewable one-year agreements in a multi-year programme can lead to the diversion of valuable resources away from delivering better services. Longer-term financial arrangements are likely to be especially appropriate where finances are to be used either for major capital acquisitions or for long-term services, such as care for adults with learning difficulties.
Because of changes in the way that the Treasury finances government bodies, in particular the switch from annual budgets to three-year budgets and the introduction of accruals accounting, there is no ‘Treasury rule’ that prevents government bodies from agreeing longer-term financial arrangements, if they represent good value for money, and are necessary to achieve the objectives of your programme.
The Treasury’s ‘Guidance to Funders’ advises that “…the length of funding should be tied to the length of the objective, and with regard to the impact on the funded organisation in the interest of securing value for money. Historical tendency to fund for a certain period is not an acceptable reason to maintain short-term funding arrangements. Equally, there is a need to guard against advocating long-term funding for its own sake.”