Analysis by Tussell on behalf of Social Enterprise UK on public sector contracts awarded to Community Interest Companies (CICs) has found the number of social enterprises winning contracts has fallen to its lowest level for two years.

This comes on the back of a speech to the Business Services Association by the Minister for the Cabinet Office, David Lidington, when he said the government would do more to level the playing field for social enterprises and remove barriers to them winning contracts. In the wake of Carilion, the government has announced a number of measures to diversify the market for public services but this research indicates that far more needs to be done to realise this ambition.

According to official procurement notices analysed by Tussell, in Q2 2018, just 41 CICs won contracts compared with 57 – a fall of 28% from the previous quarter. This is the lowest level since Q2 2016 when 32 CICs won public sector contracts. Moreover, one health and social care contract accounted for 90% of the total value of all contracts won by CICs in Q2.

The proportion of contracts won by social enterprises was also lower than the previous quarter with only 0.3% of all public procurement contracts are won by CICs. Even those contracts deemed suitable for social enterprises and charities were not being won by them on a large scale. Only 11% of contracts deemed suitable for VCSEs (voluntary, community and social enterprise organisations) are won by VCSEs – again down from 12% in the previous quarter.

Central government continues to lag behind local government working with CICs, with only 10% of contracts won by CICs coming from central government. Local government, by contrast, performs better is responsible for 60% of all the contracts won by CICs. This repeats the pattern from the previous quarter.

Although only 20% of social enterprises are registered CICs, according to Social Enterprise UK, this report is indictive of the challenges reported by social enterprises across the country. Lack of knowledge of social enterprises by procurement teams, risk aversion and the poor use of social value procedures are all factors which are frustrating social enterprises which want to deliver public services. 

This research reinforces concerns about public service markets concentration, with the Public Administration Committee’s investigation into Carillion finding that public service markets are dominated by a handful of big companies which are at risk of collapse.

Beyond social enterprise, the policy to promote inclusion of small and medium sized businesses (SMEs) in the government’s supply chain leaves room for improvement as well. Separate analysis from Tussell shows that the proportion of public sector contract award value going directly to SMEs was only 13% in Q2 2018. This metric has been broadly flat since 2015 and suggests that the government is not currently on track to hit its target of spending £1 in every £3 of its procurement budget with SMEs by the end of 2022.

This is this second piece of research by Tussell on behalf of Social Enterprise UK which will be published every quarter to monitor inclusion of CICs in the government’s supply chain in a consistent and comprehensive fashion.

Commenting on these findings, Charlie Wigglesworth, Deputy Chief Executive, Social Enterprise UK said:

“We are pleased that the government has recognised the important contribution that social enterprises can play in improving the quality and diversity of public service markets. But as this data shows, we have a long way to go if we want to see social enterprises as a major force.”

“Measures to improve the use of social value in central government are helpful, but this alone will not address the cultural barriers facing social enterprises in the market place.”

“More needs to be done by the government to signal to procurement teams that social enterprises should be taken seriously when they are bidding for contracts. This will also influence major suppliers and encourage them to do more to work with social enterprises.”

 “At a time when the public is concerned about the involvement of businesses in public service markets following the collapse of Carillion, the government has an opportunity to ease these concerns through working with social enterprises. We will work with government over the coming months to see what more can be done.”

Gus Tugendhat, Founder of Tussell said:

“Only 1 in 10 contracts published in the first half of 2018 were flagged as suitable for VCSEs in Contracts Finder. Of those contracts with the VCSE flag, only 11% were actually won by a VCSE. This tells us that there is plenty of room for improvement. The first step to addressing this challenge is having consistent data to measure it. This is why we are pleased to work with SEUK to bring more visibility to the topic of VCSE inclusion in public procurement.”

NOTES TO EDITORS  

  • Social Enterprise UK is the largest network of certified social enterprises in the UK and the leading global authority on social enterprises. Together with our members we are the voice for the sector. We raise awareness through our advocacy and campaigns and build the evidence base for social enterprises through our research. We have led public policy for 15 years, helping pass the Social Value Act, and are a strategic partner to government. We exist to increase the profile of the sector and build the markets for our members - working with some of the UK’s biggest companies to support them to bring social enterprises into their supply chains. Our members reflect the diversity of the sector ranging from local grass-roots organisations to multi-million-pound businesses. We see social enterprise as the future of business.
  • Tussell is a data provider with a mission to unlock the value of public procurement. It aggregates disparate sources of open data on public contracts into a single searchable database, empowering suppliers of all sizes with the business intelligence they need to make informed and impactful bids. Leading media publications rely on Tussell’s insight into government outsourcing, generating more than 150 citations so far in 2018. For more information, please contact Miranda Evans, Senior Researcher, on[email protected].
  • Social enterprises are business which trade for a social purpose that reinvest or donate over half their profits to further this social or environmental mission. There are 100,000 social enterprises contributing £60bn to the UK economy and employing nearly 2 million Research carried out by Social Enterprise UK, the membership body for the sector, shows they are outperforming traditional businesses when it comes to start-up rates, turnover growth and innovation. They are also ahead of the pack when it comes to workforce diversity and pay. For more information and statistics see Social Enterprise UK’s Hidden Revolution report - https://www.socialenterprise.org.uk/the-hidden-revolution
  • A copy of the research can be found on the Social Enterprise UK website: https://www.socialenterprise.org.uk/Pages/Category/research-reports
  • Please contact Andrew O’Brien, Director of External Affairs, for more information (Andrew.o’[email protected] or 07889129971)