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Your current market may not contain enough potential providers with sufficient capacity. You may therefore wish to develop a stronger provider market. For example, currently you have only one weak organisation available to provide a certain service. But you want, in a few years, to have a choice of five or six organisations of much better quality.

You can develop a stronger market in two main ways. You may seek to attract more high-quality providers into your market. For example, you may advertise outside your area or engage actively with potential providers in the run-up to the commissioning round. Second, you may wish to target individual third sector organisations (TSOs) for capacity building.

Generally, a strong market provides competitive tension between potential providers, which tends to increase value for money. You can exploit this situation through either a competitive grants programme (in which potential providers have to bid to the public body for grants) or competitive procurement process.

But there are also cases where a public body may be content to have a provider market that contains only a small number of organisations – or even just one. And the NHS Principles and Rules for Cooperation and Competition (PRCC) remind Primary Care Trust (PCT) commissioners that the rules should not be interpreted as meaning that all services should be tendered in all circumstances. For example, a public body that funds a renowned museum that is managed by a TSO may not want to make that TSO compete for funds. Without any real, viable ‘competitor’ the costs of competition would be a waste for both the public body and the museum. But without competition to act as a spur to value for money, the public body should have some other mechanism to ensure that it gets value for money. This may be built into the regular review of the performance of the organisation.