Commissioning Care: Policy Context

Derren Hayes
Tuesday, June 26, 2018

Demand for most types of care provided by children's services has been rising since 2008, making it harder for commissioners to source sufficient high-quality provision.

Meanwhile, funding is failing to keep pace with the growing numbers of children coming into the children's social care system, increasing pressure on councils to find efficiencies.

Statistics published by the Department for Education last year show that the number of children in care is rising at its fastest rate in five years, with 72,670 looked-after children in the 12 months to the end of March 2017, compared with 70,440 the year before.

Rising demand can be seen in most parts of the children's social care system, but it is the rise in looked-after children that poses the most significant challenge for councils. Analysis by the Institute for Fiscal Studies published in June shows that nearly half the £8.6bn annual children's services budget is spent on children in care. This is putting pressure on other parts of children's services, with early help provision being hardest hit.

Analysis last year by consultants Impower found that in some areas demand was out of control and resulting in children experiencing long delays to receive a service or being placed in a care setting that didn't best meet their needs. Its review of looked-after children cases in some local authorities found that on average 40 per cent could have avoided going into care. There were also too many referrals being made to children's social care inappropriately.

A recent survey of commissioners by the National Centre of Excellence in Residential Child Care (NCERCC) shows the impact of the recent rise in the number of children in care. Half of the 60 council commissioners reported a rise in the number of children being placed, while 85 per cent said it was becoming harder to find an appropriate placement (see graphics).


Commissioner responses

With so much of children's services spending going on looked-after children, councils have focused on findings ways to commission foster care and residential child care services more efficiently. In some cases this has seen councils close their own provision and place more children with independent providers because of the lower overheads involved.

Figures from Ofsted show that the proportion of children's homes run by councils has fallen to 20 per cent from 27 per cent in 2012. Twice as many council commissioners that responded to the NCERCC survey reported a reduction in capacity or closures of homes than reported a rise. Conversely, 15 per cent of councils reported plans to boost in-house provision. In Lancashire, a specialist team has been set up that searches for in-house and independent placements concurrently, streamlining the commissioning process (see practice example, p42).

In foster care, the proportion of children placed with independent providers remained the same last year - of the 52,005 children and young people in a foster care placement on 31 March 2017, two-thirds were in local authority fostering places (34,410), and the remainder (17,595) were placed through independent fostering agencies (IFA).

Meanwhile, outcomes for looked-after children still lag well behind their non-care peers. To make services more responsive to children's needs some councils are recruiting young commissioners to influence the provision offered (see practice example, p40). In addition, care commissioners are thinking more about the support put in place for young people when they leave care (see practice example, p40).

Children's homes

The amount councils pay for placing children in independent homes is highly contentious. Fees have been largely flat for many years, and a 2016 survey by the Independent Children's Homes Association (ICHA) found fragile confidence among providers and dwindling financial reserves, despite rising referrals. While many reported rising income, profit was down due to the rising cost of meeting new regulatory requirements and the increased support needs of children. However, in the NCERCC survey, around 80 per cent of respondents reported prices rising, some by more than 10 per cent.

Another problem is that a large majority of placements currently take the form of spot purchasing at the time of need. Spot purchasing is more expensive for the authority and a less predictable source of income for the provider so a market dominated by it "has built-in inefficiency and risk", concludes Andrew Rome of Revolution Consulting (see expert view).

Consortia of councils have developed framework agreements with residential care providers. These provide longer-term commitments on the amount councils will pay for a residential care place over a number of years, in return for providers meeting specified quality standards. These were established with the aim of providing more security of income for providers - as those within the framework are meant to be prioritised by councils for commissioning placements - and of minimising the number of high-cost places commissioned.

However, Rome says there is evidence that the approach isn't working. Four out of five councils in the NCERCC survey were members of a regional framework, but 85 per cent said they bought placements from providers that were not part of it.

Rome is also sceptical that moving to dynamic purchasing systems (DPS) is the solution to the sector's problems. Many councils see DPS as a way of providing more flexibility to tailor care packages, and deliver cost savings through increased competition (see expert view). However, Rome says DPS fails to address the fundamental flaws in the commissioning system.

Another factor affecting care commissioning is that children placed in residential care are generally those with the most complex needs, including behavioural issues, mental health problems and high placements moves due to them tending to be older. This requires higher levels of expensive specialist support.

This was recognised in Sir Martin Narey's 2016 review of residential child care. He recommended commissioners use larger homes as these are sometimes better placed to meet complex needs. Since 2015 however, 100 new homes have been registered with Ofsted, with 43 organisations now running 41 per cent of all children's homes.

Foster care

The picture for foster care is more stable than the one for children's homes. However, there are still significant tensions in the relationship between local authorities and the 300 IFAs operating in England. Local authorities spent £1.7bn on foster care last year, a third of that on buying placements from the independent sector, the vast majority being private companies.

According to DfE data, there were 83,930 approved fostering places in England on 31 March 2017, a one per cent increase from March 2016. This was largely due to a two per cent rise in the number of approved IFA places from 31,510 to 32,235, a reversal of the decline seen the previous year.

Foster Care in England, the review of fostering carried out by Sir Martin Narey and Mark Owers published in February, highlights many of the challenges for the commissioning of foster care places. The review concludes it is a "considerable achievement" that virtually all children are found a placement, but that this can sometimes result in "compromises" over placement location and the skills of the carer.

There is an England-wide shortage of foster carers. Better terms often provided by IFAs have led to accusations by councils of "poaching" foster carers, while the level of fees charged by IFAs for placing a child has seen the Association of Directors of Children's Services warn of agencies making excessive profits.

When assessing the overall cost of foster care placements, a National Audit Office report calculated IFA places to be around 40 per cent higher than a council placement. However, the fostering review cites an Audit Commission study that shows a council placement costing between £15,000 and £57,000 compared with £18,000 and £73,000 for an IFA placement.

The higher costs associated with IFA placements has led to councils looking in-house first when commissioning foster places for looked-after children. IFAs say this creates a two-tier system that does not prioritise meeting children's needs. However, the review concludes it is a "sensible approach" because authorities "cannot ignore" the "very significant" additional costs - sometimes as high as £500 a week - in commissioning an IFA placement.

The review is critical of commissioning arrangements for foster care, concluding that councils are not influential enough.

Commissioning frameworks are now widely used by councils to agree a regional approach to setting fees and processes for placing children with approved IFAs (see practice example, p39). However, Narey and Owers say in practice authorities often go outside of the framework to spot-purchase places.

"Local authorities are not utilising their full aggregated potential purchasing power, have ineffective strategies for market management and have been poor at stimulating competition," the review states.

It concludes by calling for the creation of around 10 large commissioning consortia with "critical mass, better able to understand commissioning requirements, concentrate expertise, discourage authority versus authority competition and negotiate agreements with IFAs [for] placements at significantly reduced costs". This is also one of the conclusions drawn from research by Sellick in 2014 (see research evidence, p35).

National arrangements

Both the Foster Care review and Rome conclude that there needs to be greater national co-ordination of care commissioning. Narey and Owers recommend fostering commissioning consortia appoint national account managers for the larger IFAs, to reduce the risk of consortia competing against each other and to encourage partnership working between commissioners and providers.

They recommend the creation of a Foster Care Leadership Board to, among other things, drive improvement in commissioning practice. A similar role is played by the Residential Care Leadership Board, established last year and chaired by government adviser Sir Alan Wood.

Rome says council commissioners need more regional and national leadership to effectively carry out their responsibilities. Government taking a more active role in managing the residential child care market would also be supported by the children's homes sector - around half of respondents to the NCERCC survey backed national commissioning of children's homes, with the majority saying the DfE was not sufficiently involved currently.

Over the coming months, the government will publish its response to Foster Care in England. The sector will be watching to see if it sets out plans to reform care commissioning at a national level.


By Toni Badnall-Neill, children's services strategic commissioning officer, Central Bedfordshire Council

Local authorities often use preferred provider lists or framework agreements to commission care placements for children and young people. While these arrangements can develop provision that is better quality and better value for money, they can be inflexible, locking in partners for the term of the contract and reducing opportunities for new business outside the framework.

Changes to the public contract regulations in 2015 allowed commissioners to develop electronic purchasing systems which were dynamic - meaning that new suppliers could join at any time. Once accepted into these arrangements, providers bid for individual packages of care in mini-competitions issued through the commissioning organisation's tendering software.

Dynamic purchasing systems (DPS) are frequently used in adult social care but have yet to gain much traction in the children's sector. This is a missed opportunity for both public sector purchasers and providers, as these systems can offer a method for consolidating large numbers of transactions or suppliers (for example individual placements or fostering agencies), while enabling access to new suppliers to compete for business.

The advantages of DPS are particularly apparent in placements for young adults, as the flexibility they offer marries well with the changes in care and support needed for a young person transitioning to adulthood. Criteria for which placements are offered through a DPS need to be clearly defined and communicated to placements officers and social workers, to ensure suitability of provision.

Nottinghamshire County Council implemented such a system in 2016 for young adult placements. It is innovative in that it embeds user voice within the DPS process -commissioners shortlist the three most competitive bids in each mini-competition, which are then evaluated by the person for whom the placement is being made. This supports the principles of choice and personalisation legislated for in the Care Act 2014. The outcomes for each placement are specified as key performance indicators within the mini-competitions, resulting in more robust performance management and improvements for young people.

In Central Bedfordshire, our experience of using a DPS has been similar. In 2016, we began to invite bids onto a system for supported accommodation for care leavers. We combined our system with a specially created quality assurance role and robust supplier engagement both before and after implementation. Quarterly provider forums enable practice-sharing between organisations and professionals, reflected in improvements in suitable accommodation, placement stability, independence outcomes and engagement with education, employment or training for this cohort; and reductions in offending, antisocial behaviour and risk of child sexual exploitation (see practice example, p40).

Learning from these examples suggests that the real value in DPS comes from outcomes. With the element of negotiation removed, competition for placements is not always as extensive as anticipated, resulting in more limited choice and cost savings than expected. However, these savings should be measured more by longer-term outcomes than short-term gains, through a focus on person-centred care and support.


By Andrew Rome, Revolution Consulting

A growing weight of evidence suggests that current commissioning and procurement of services for looked-after children and young people is struggling to deliver the capacity and capabilities that are needed in children's homes and fostering services.

A survey of council commissioners of children's homes services in 2016/17 for the National Centre for Excellence in Residential Child Care indicated:

  • 85 per cent reported increasing difficulty finding appropriate placements.
  • Although over 80 per cent are involved in regional procurement frameworks 85 per cent report going outside of that to find placements.
  • More than 60 per cent of all placements are made at bespoke spot purchase prices.
  • More than half did not feel able to significantly manage or influence the market.

While we await the government response to the fostering review, much regional commissioning effort continues to renew variations of procurement frameworks that have been in place for the last decade. The current round of EU regulation-compliant procurement activity by local authorities, including numerous new regional dynamic purchasing system approaches, fail to deal with the issues identified by the evidence or with report recommendations.

Our experience of these sectors suggests that improved commissioning of children's services will need mature, strategic and commercially astute approaches, including:

  • Recognition that private sector providers are sustainably present or dominant in many of the sectors. Commissioning needs to acquire commercial skills and understanding to deal effectively with mixed economy sectors. Commissioning also needs to take place at the appropriate level of aggregated demand.
  • Commissioners need increased understanding of the economics of supply and demand and new tools to risk share with providers via structures including soft-block contracts.
  • It should be the role of commissioners and providers to design and implement commercial interactions that exist in the background to, but do not impinge upon, the professional decisions made in relation to each child or young person.
  • The way in which the needs of children and young people are described, the types of outcomes experienced, and the specialist nature of services provided all need to be assessed, researched, described and analysed on a common basis. A commitment to data collection and analysis using common definitions is needed to furnish commissioners and providers with information appropriate to different cohorts and need groups.

There are significant challenges in moving to a more strategic approach. Individual local authority commissioners need national and regional leadership, structure and resources to carry out their responsibilities.


  • Foster Care in England, Sir Martin Narey and Mark Owers, DfE, February 2018
  • What Do Commissioners Think About Children's Homes?, NCERCC, July 2017
  • How Well Are Our Services Commissioned? View From the Independent Sector, NAFP, June 2017
  • Children's Residential Care in England, Sir Martin Narey, DfE, July 2016

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