This page is part of our successful commissioning toolkit.
Ministers ask a central government department to establish a scheme to improve safety on the road for cyclists. A policy manager is put in charge of this. She holds a meeting with internal stakeholders, including those responsible for service delivery, finance and legal advice. From this initial meeting it is clear that a wide range of external stakeholders will have to be involved in policy development and delivery.
Stakeholder engagement and communication
The policy manager sets up meetings with the same internal stakeholders and a range of external stakeholders, including: cyclists’ organisations; public roads bodies; public health campaigners; safety campaigners; motoring organisations; the emergency services; and environmental organisations. From these discussions it is clear that the new policy will have multiple outcomes (e.g. improved health, better safety, and reduction in CO2 emission), and that there will be tensions between different stakeholder groups with different interests. It is agreed that there will be a further meeting with stakeholders to decide on outcomes.
Meanwhile the team in the department works on some background issues. First is the need to establish a legal power for the new scheme. The policy manager and legal manager identify an existing power in statute that will allow the Secretary of State to run the new scheme himself or to grant fund it. Second, the policy manager and the finance manager identify a block of money in the department’s budget.
The meeting on outcomes with stakeholders has identified outcomes around: road accidents; fear of road accidents; health; and the environment. These are expressed in SMART terms. The policy manager and the finance manager agree the outcomes and budget with ministers.
Choose grant and/or procurement
The policy manager hands over the lead for the new scheme to a service manager in the department. Together they examine the provider market and establish that there are many competent potential providers. They therefore decide to use procurement. They will set up nine contracts, one for each region; this will keep the providers on their toes with respect to performance. They establish that the service in question is a Part B service. This means the procurement process needs to meet less full and stringent rules than a Part A procurement.
Competition and efficiency
The competition between potential providers will tend to promote efficiency. This will be important in an era of ‘more for less’ across the public sector.
The department identifies one main risk. This is that the scheme fails significantly to change cycling behaviour on Britain’s roads. This is because patterns of cycling are ingrained long term in national culture. (Compare cycling in Britain and the Netherlands for example.) It is agreed that the government and providers will manage this through rigorous performance management. In addition, the department will hold back some money for an advertising campaign to change attitudes.
The policy issue is clearly long term. The department therefore decides to issue a three-year contract.
[In this case study the contracts have now been awarded for all nine regions. In five of the regions private sector companies won the contracts; in four they were won by third sector organisations (TSOs).]
It is important to the department that the providers should survive financially for the length of the contract. Before awarding the contracts, therefore, the department checks that the bids contain a sufficient allowance for management and other overhead costs (a form of full cost recovery).
When the department set up the procurement it was aware that TSOs might win one or more of the nine regional contracts. It therefore did not specify in the procurement documents what the payment model would be. It explained that the payment model would be negotiated after the providers had been chosen, on a provider-by-provider basis.
The department and the winning TSO providers agree that a proportion of the money will be paid upfront to cover the providers’ set-up costs. Thereafter, the department will pay providers periodically in advance for anticipated performance. This will subsequently be reconciled against actual performance.
The department and the providers agree they do not wish to see a large part of the budget spent on unnecessary monitoring. They therefore agree to base monitoring firmly on the scheme’s outcomes. (Fortunately these have been clearly established for this scheme.
The department decides to evaluate the scheme. The outcomes of the scheme will provide a clear basis for the evaluation. The department will hold a competitive procurement process to select the evaluation provider.