The public sector constructs and maintains many financial relationships with third sector organisations (TSOs). Commonly, the public body pays the TSO for the provision of a service [Note 1] specified by the public body [Note 2].
Practical example: Service specified by public body
In one area, the local strategic partnership (LSP) identifies a need for a service to turn a former industrial site into a park, including a lake for sailing and a skate park. This will remove the current unsightliness of the area and will contribute to people’s health and general well-being.
The council agrees to lead on the commissioning on behalf of the LSP. Working with other partners on the LSP and with wider stakeholders, including residents near the site, sports groups and young people, the council draws up a specification for the service. It then puts this out to a competition.
A regional TSO wins the work. Among the main reasons for this are its ability to:
- Work with local communities to ensure the design of the new park meets their needs;
- Ensure high standards in sustainability and biodiversity are used throughout the project;
- Use volunteers to contribute to a wide range of the work, while also contributing to those volunteers’ health.
In a variation on this, the public body funds the TSO to deliver a service specified by the TSO. ‘Service’ in this sense could include a TSO’s contribution to the health of third sector.
Practical example: Service specified by TSO
Meanwhile, in a neighbouring area, a cultural TSO comes forward with a project for local artists to work with groups of children in primary schools. The focus will be on the schools with the most disadvantaged children. It will increase their involvement in creativity and help raise their self-esteem.
The project has some money earmarked from one of the major arts foundations but needs a similar financial contribution from the local public sector.
The TSO has thought the project through thoroughly, having run it in other parts of the region. The council makes some important checks, such as:
- The contribution the project will make to the children’s accessing of the national curriculum;
- The project’s systems for safeguarding children from harm.
These checks are satisfactory. The council therefore agrees to contribute to the costs of the project, as specified by the TSO.
Commissioning often presents a choice of ways of working with the third sector.
Practical example: Commissioning
A Primary Care Trust (PCT) wants to increase the amount of exercise taken by adults in its area. It studies the current problem, such as lack of facilities and smoking. It also talks to local groups about these. Having done this, it draws up a specification for the service.
The PCT then examines three ways of securing the service:
(a) Procuring it from an organisation that might be in the private, public or third sectors;
(b) Paying a grant to a local TSO to provide the service;
(c) Employing a new team within the PCT to do the work.
After careful consideration of the total costs and benefits of each option, including the costs of running any competitive process, the PCT decides to do (b) and pay a grant to a local TSO. This is judged to be the most cost-effective option. The TSO is considered best placed to deliver the required outcomes due to its existing closeness to the population of the area and understanding of the cultural barriers to better health.
However, to ensure accountability for the delivery of the service and for the use of public money, the PCT inserts relevant clauses into the grant agreement. It is made clear that this grant is not a gift without strings; it is conditional on delivery and good financial management.
These examples are only part of a complex and varied pattern.
Commissioning can lead to a relationship with third sector and other organisations that is more than, or not even, a financial one and that achieves better value for money for taxpayers. For example, some form of partnership or collaboration, which may lead to more and better outcomes for service users, without any exchange of money. Effectively forming and maintaining such relationships can be complex and is beyond the scope of this guidance. A useful starting point is ‘Effective local partnerships – a checklist for local practitioners in the public and voluntary sectors (pdf – 765KB)’.
Note 1: Here ‘service’ includes ‘good’ as in ‘goods and services’. In some organisations, ‘activity’ may be used instead.
Note 2: The public body should normally draw up this specification in consultation with the TSO.