• ClaireLouise

Contracting with the Voluntary, Community and Social Enterprise Sector (VCSE)

A big part of Social Value is about building relationships with, and buying services from, the VCSE sector. Indicator NT14 (TOMS) reports the total amount of spend with VCSEs in your supply chain, while NT15-17 consider equipment, advice and resources donated to support VCSEs.

Advice and equipment support is a topic for another day. In this blog we consider the implications of contracting services from VCSE partners. Should you approach this differently to how you buy services from a commercial partner?

The short answer is Yes. It’s important to have some understanding of the complexity of the VCSE sector and its operating structures so you can get the best from the relationship.

There are some Social Enterprises out there that are run with an entirely commercial operating structure. They were set up to generate income which is then distributed to support social causes. You should find working with these organisations comparable to contracting with a commercial provider.

But many Voluntary and Community organisations have completely different ways of operating, and if you want to effectively contract with them, it’s helpful to appreciate:

1. VCSEs are not the same as SMEs (Small Enterprises) though they share many of the same characteristics. They’ll have the same basic administrative structure – usually a manager and an administrator (and maybe a finance person if they’re lucky) multi-tasking to deliver the usual business structures – finance, HR, operations, communications. But the resemblance stops there. A VCSE manager is also concentrating on ‘Social Mission’, making sure that the vulnerable clients of that organization are supported safely and effectively. Its likely, as a result, that a VCSE manager is not solely pre-occupied with contracted service delivery in the same way as the owner of a commercial business will be. Instead, they will be dealing with a multitude of calls from a diverse range of ‘customers’ with very different needs.

2. VCSEs will have different core delivery principles. As explained, VCSE organisations have, at their heart, Social Mission. As a result, the service you’re contracting from them will often be a ‘by product’ of that main Social Mission. To explain this, here’s an example:

You contract a catering service from a local VCSE organization which supports people with learning disabilities. The core purpose of the charity’s existence is to support learning opportunities and employability for their beneficiaries (people with learning disabilities). They create these opportunities by offering a catering service, within which beneficiaries can develop their skills, confidence and independence in a supported environment.

You can see that the creation of a sandwich platter is secondary to the core purpose of the organization, and sometimes (not often, but sometimes) if a beneficiary is having a difficult day, it becomes really difficult to also service a commercial order. I’ve known staff pull long hours to both ensure a beneficiary is supported well, and service a customer order.

3. VCSEs have a complex income structure. In the example given, the charity might be employing 3 times the number of staff a commercial catering service would employ, because supporting people with learning disabilities requires that level of staffing. This means that in a purely commercial sense, these sandwiches are expensive to produce and you’re likely to be paying market rate rather than full production cost. As a result, charity income structures are much more diverse. VCSEs will ‘earn’ a percentage of their income (and this is really important for their financial stability), but most of the time they’re dependent on charitable grant – and the charitable donor might be asking for completely different set of activities to be delivered!

4. VCSE culture tends not to be commercial. VCSE organisations are learning. They’re learning to combine Social Mission with commercial contracts, and sometimes the simple fact is there will be a direct conflict which makes decision making extremely difficult.

Ok, so I’ve pointed out how VCSEs are different. Does this mean that you should expect lower quality? Absolutely and resoundingly not. VCSEs deliver the most amazing quality of service and product, and we should be seeking out opportunities to contract with our VCSE partners as widely as possible.

But if there is learning to be had here, it is around relationship building.

Talk to your VCSE partner, ask them how they operate. How much of their income do they generate from contracts and how long have they done this for? Get a feel for the type of VCSE you are contracting with and their experience of contracting.

If your partner is a Social Firm (i.e. involves beneficiaries in its service activities) and has little experience of delivering a commercial service, then your contracting relationship will need to be supportive. You’ll get a great service, but there may be the odd occasion it’s a little rough round the edges. Provide encouragement and praise, build confidence but give constructive feedback if quality slips.

See your VCSE relationships as long term. Don’t purchase piecemeal from the sector. If you can make a commitment for a longer period of time, this provides stability and reassurance, enabing a social firm to develop systems and practices to manage their dual social and commercial priorities. Pay at least some of the contract up front – it tells your partner you’re serious, you trust them and that you’re reliable.

Play fair. If you’ve received a quote from a VCSE organization that significantly undercuts any commercial provider, talk to them. Ask how they costed the service or product. Share your commercial expertise – don’t assume a VCSE organization knows something that is bread and butter to you. Would you know how to support a young person with significant learning needs?

The value of these relationships is in a knowledge share which benefits both organisations. You’ll receive a better service, and you’ll know you’re making a real difference to your local community.

Go forth and seek out your VCSE suppliers. You will not be disappointed, and I have a strong suspicion that even the most hard-nosed of you will find joy in the relationship.

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