Mutuals 0 Markets 1
The government used its Open Public Services update last week to reiterate its commitment to the roll out of public service mutuals. According to the government “this will empower millions of public sector staff to become their own boss – freeing up untapped entrepreneurial and innovative drive”
Those employees setting up their own public service mutuals will hopefully have entrepreneurial drive in buckets, as the track record of public service mutuals in the open market is looking decidedly patchy.
What’s more the government is committed to ensuring that a level playing field exists that enables all qualified providers to compete, with new rights of appeal given to those that feel excluded from the commissioning process. There are to be no favours for fledgling mutuals in an open and competitive market.
We reported before how employee-owned social enterprise and ‘big society’ pin ups Central Surrey Health lost out in their first competitive bidding process to Assure Medical, owned by Virgin.
Earlier this month we also saw DA Partnerships, the employee-owned mutual set up by staff in advance of the abolition of the Audit Commission. DA Partnerships has now folded and become a wholly owned subsidiary of audit firm Mazars as a result of managing to secure only one local audit contract in a market where Ernst and Young, Grant Thornton and KPMG shared the rest between them. Those ex-Audit Commission staff learned the hard way what empowerment means in the market.
Many supporters of mutualisation have argued that specific conditions need to be put in place to develop and grow the sector, a key tool being the use of long term contracts that incubate fledgling mutuals, providing some breathing space to develop sufficient experience and capacity to compete in the market.
In their report of June 2011, the All Party Parliamentary Group on Employee Ownership stated that they favoured “longer contracts for employee led mutuals, such as five to seven years in length, and do not see any conflict if the ultimate aim is increased diversity in supply.”
Several other organisations including Co-operatives UK, the Kings Fund and Association of Public Service Excellence have called for long term commissioning to be used as a way of nurturing the growth of public service mutuals.
I suspect that there is real concern among the mutual sector about the government’s stated commitment to embed open competition across all commissioned services. Providers will be granted rights of appeal where they feel they have been “unfairly excluded from the commissioning process”.
But no doubt this will be music to the ears of large private sector providers looking for an uninhibited access to public service contracts and, I suspect, to the legal teams they employ.