With the Social Value Act coming into force on 31 January, here's some valuable advice for social enterprises and charities.
The third sector press is ablaze with talk of increasing possibilities for charities and social enterprises to start delivering public services. The Public Services (Social Values) Act, coming into force on 31 January 2013, is adding further excitement. For the first time public bodies in England and Wales are required to consider how services which they commission might improve the economic, social and environmental well-being of their relevant area. Procurement law already enables public bodies to take factors other than cost into account, but many believe this legislation will make it easier for voluntary sector organisations to compete with the commercial sector when tendering to take on functions from the public sector.
Whether your organisation is sharpening its pencil to start writing bids or taking an interest from afar, there are important issues to consider when tendering and contracting for such services.
Can you do it?
Ensure that any activities are within your area of expertise - this is particularly important for charities, but may be relevant to others. For instance, if you are established to benefit children, you might not be able to take on services for 19-25 year olds.
Plan ahead
Ensure that you understand the arrangements. If something is not clear, the contracting body may not have thought about it. Producing a comprehensive business plan will help minimise problems. Be particularly aware of overheads, transitional costs and tax (including VAT).
Structure
If this is a significant contract, consider your organisation's structure, perhaps with your accountant. For example, do you require a trading subsidiary? If you are not a charity, would charitable status lead to significant savings? Also be aware of maintaining your independence in light of controls that the public body may require.
What is the public body doing?
You may think that what the public body does is not your concern, but it may affect you. For instance, is a local authority allowed to transfer particular services and, if so, is it complying with procurement requirements? State aid may also be an issue.
Income streams
Will you be paid only by the public body or are you reliant on third party income streams? If the latter, how can you minimise possible risks (eg competition, popularity). Will the public body pay you in any event or are you required to meet targets? Payment by results has grabbed headlines this year - broadly, these can be divided into output and outcome-based. If your payment is based on outcomes, there may be a delay before money starts flowing.
Staff
If staff will transfer to your organisation, carry out appropriate consultation and checks and ensure that you have protections in case problems arise. Ensure that you can provide access to an appropriate pension scheme as required.
Premises
If premises are part of the arrangements, will there be a lease or licence? If premises are shared with other organisations, understand how the arrangements will work - you may need separate joint use arrangements. Ensure you have the access that you require.
Assets and liabilities
In short, consider which assets and contracts your organisation will require, and ensure that you are receiving them - preferably without any historic liabilities.
Hannah Kubie is associate solicitor at Stone King LLP, a leading firm in the areas of charity & social enterprise and education law. For more information contact Hannah here.
Hannah Kubie
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