Will charities and social enterprises be on a level playing field with big private sector providers when competing for public service delivery contracts?
The Big Society agenda proposes to open up public services to ‘new providers like charities, social enterprises and private companies so we get more innovation, diversity and responsiveness to public need.' David Cameron says ‘We believe in paying public service providers by results... It encourages value for money and innovation at the same time.'
But social enterprises and charities face a conundrum as they look to attract further funding and maintain or expand their operations: how to demonstrate positive results to potential investors or grantees. Of course, this thorny issue is nothing new and charities, social enterprises and others in this field have been grappling with it the world over. There is a growing consensus around using social return on investment (SROI) metrics. SROI boasts the ability to ‘monetise' the benefits that a project or intervention accrues to the wider community and society. Check out the new economics foundation's work on SROI
here. What this analytical tool attempts to do is wonderful and to be commended, but it has its limitations. With notable exceptions, such as re-offending rates, many of the problems addressed by civil society and the effectiveness of their solutions are not susceptible to simple objective measurement.
There is a difference between the evaluation of a project by managers, staff and those in direct contact with it, and the conveying of an evaluation to an audience without firsthand experience of the project. This places social enterprises and charities in a series of dilemmas. Firstly, they must demonstrate the “value” of what they do to public service commissioners who may well be still viewing the commissioning process through the prism of economies of scale and well-known outsourcing specialists. For social enterprises or charities to purchase an SROI analysis will cost a considerable amount of money and probably prevent many of them from capitalising on the opportunities that the Big Society offers. Those that do use SROI will be competing against private sector companies who either don't or will have more than enough money to pay for it. Many of these private sector companies will also be able to draw on long-established relations with government and local authorities.
The second issue is this: will payment by results actually increase innovation in areas where it's most needed? Innovation will be needed most in tackling precisely those complex issues that are so slippery to measure objectively. If a charity or social enterprise tries a new approach, this entails a financial risk; how success is defined (if indeed it can be) will determine whether they receive any payment. Payment-by-results also threatens to distort funding priorities. The UK Department for International Development wants more accountability (read “value demonstrated”) in international aid, but
a paper by former USAID employee Andrew Natsios demonstrates that this approach tends to skew investment into programmes that can offer easily calculated benefits (in the international development context: health ones over justice and democracy-strengthening ones for example). To return to tackling social problems in the UK, this would suggest that the Big Society might see the flourishing of a diverse range healthcare provision but a failure to address less concrete problems, such as the lack of social engagement, active citizenship, life aspirations or social connectedness.
There is no silver bullet. How should funding be allocated if not by measurement? Evaluating the impact of solutions and accurately conveying this to people who lack firsthand experience of the solution in action is fraught with pitfalls. But is there a viable alternative?