For the last couple of years, Stepping Out has been helping new and emerging public sector 'spin-out' companies, mainly in health and social care. Most have come from councils and the NHS. They start life with uncontested three year 'starter' contracts but very soon, many will be competing for the 'right to provide' for the first time.
What's this going to be like for them? In two words, 'bloody tough'. At the moment, if you're a public sector spin-out, the market-place you're going into is a bit like a Sunday league football pitch in the middle of winter. There is a hell of a gradient, a lot of mud, and a blowing wind. Limbering up on the other side will be an aggressive physically intimidating outfit — normally either a big public or private sector provider. To make matters worse, the match itself is a sudden-death encounter. Lose the tender and you are out of business overnight.
The match gets underway. You are under immediate pressure. In addition to being bigger and stronger, your opponents can point to public sector estate and zero tax obligations in their armoury of advantage. Or, if it's the private sector you are playing, they will be offering massive new investment or savings to the taxpayer with which you simply can't compete. To pile on the misery, your opponent may well benefit from a sympathetic referee in the form of public commissioners whose decisions appear to favour your opponents.
So what can FC Social Enterprise do in the face of such formidable opposition? Three strategies stand out. The first is to use their smaller size to fox the lumbering giants of the public and private sectors. Physically smaller teams can beat bigger ones through pace, teamwork and skill. For spin-outs, this means relying on their skills in involving communities in delivery, innovating, motivating staff and delivering 'added value'. Such virtues are hard for larger public and private players to replicate.
Of course, this just improves what are very long odds. A second strategy is to seek political remedy for the steep gradients and questionable refereeing. In an era of 'open public services', there should no place for near-monopolies. A team's superior overall resources not be a factor in what happens on the pitch itself. The coalition government itself acknowledges the problem of 'uneven playing fields' but lacks ideas and resolve on how to solve it. Not good enough. Social enterprises spin-outs need to get organized now and lobby hard for change.
A third and final strategy is partnership. Even a fabulous non-league team will struggle to beat a rich premier league outfit: Newish, smallish social enterprise spin-outs are always going to struggle to compete with the big boys. Three years on a starter-contract just isn't enough time for FC Social Enterprise to get trained up to become properly competitive. Hard capabilities are often still missing — financial planning, marketing, tendering and selling in particular.
So what can might partnerships look like? One approach is sub-contracting from a 'prime' provider, as some social enterprises spin-outs are doing in Suffolk, where SERCO recently won the main community healthcare contract. Another is to form joint-venture partnerships to deliver new work in concert with a private provider. One of these is about to start in Kensington and Chelsea to run education support services. A final form of partnership would be to ally the capital of social finance with the operational strength of social enterprise. This would enable them to meet steep capital requirements on the large 'super-tenders' which are increasingly the norm. There is more funding around now to do this but only a few social enterprises appear to be accessing it.
Could partnering with a big player effectively defeat the point of becoming a social enterprise provider in the first place? Possibly, but the critical test is whether, in each particular case, there can be a successful marriage of values and planned outcomes. Not all larger providers are the same and we should avoid rushing to judgment about partnerships in principle.
Back on that muddy playing field, partnership is now a choice for many social enterprise spin-outs. Many will elect to take the field alone and try to win against the odds. Others will choose to line up alongside new players from bigger sides who can complement them in areas where they struggle.
Neither choice will be easy. I wonder which way will the spin-outs will jump?
Craig Dearden-Phillips is managing director of Stepping Out Ltd, a social enterprise which helps public services to become a social enterprise.
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