Commissioning: Heading in different directions
Andrew Rome, director of Revolution Consulting
Tuesday, October 27, 2020
Children’s services providers are getting larger while commissioning arrangements are fragmenting, says Andrew Rome.
Commissioning of services for children is exhibiting a trend towards increased local or sub-regional level activity, with some of the large pan-regional procurement efforts of the last decade beginning to fragment. At the same time, we are seeing the continued consolidation and expansion of some service providers.
Is this divergence important? Why is it happening? What are the implications for children, commissioners, providers and policymakers? This article identifies the trends, while next month we will examine the implications more fully.
Pooling resources
In the years following the initial involvement of private and voluntary sector providers in children’s services, local authority commissioners recognised the potential of pooling their efforts, resources, and, in theory, their combined purchasing power. Collaboration among councils became geographically based – examples of area-wide alliances included pan London, North West Placements and Eastern Region 7.
Almost all of the regional frameworks and dynamic purchasing systems looked to create ways for local authorities to comply with public procurement regulations through access to spot placements on terms agreed through a tendering process.
While initially able to contain prices charged for services by providers those systems have in recent years lost that control. Surveys of both commissioners and providers carried out by Revolution Consulting since 2015/16 have increasingly shown large-scale spot purchasing and price inflation.
The inability of procurementframeworks to contain prices and the continued growth of spending by local authorities with the independent sector may be key factors to have caused councils to consider the alternative of more locally focused purchasing of care placements.
Large-scale regional efforts historically required large groups of councils (for example, more than 20) each with different shapes, sizes and politics to agree on one common approach to procurement. The effort required to reconcile and manage diverse views and interests may be another factor that now inhibits councils from further large-scale regional efforts. Focusing on smaller geographical areas and partnering only with neighbouring authorities may appear a more manageable option from an individual authority’s perspective.
The move away from large-scale procurement was first seen in London where several commissioning groups are now in operation with various levels of activity where once the pan-London arrangement was the single system.
The South London Commissioning Partnership (SLCP) is one example of this recent fragmentation. Backed with funding from the Department for Education’s Children’s Social Care Innovation Programme, the SLCP has seen 12 authorities looking to establish another spot purchasing framework for the participating authorities. Contrast this with the separate West London Alliance that has taken a different path. Recently renamed the Commissioning Alliance, the focus is on tools and support for any local authority that is considering its procurement approach, not just alliance members.
Other recent examples include North West Placements, which is starting to compromise its large-scale and long-term procured frameworks and instead act as separate sub-region through, for example, the Greater Manchester authorities and the Liverpool City Region adopting more parochial approaches. Cornwall, perhaps due to the restrictive nature of its own geography, has been acting increasingly in isolation from the South West peninsula procurement framework. The North East collaboration has also split for some procurement efforts, with the councils in the Tees and Tyne sub regions going their own separate ways for some procurement exercises.
The reasons behind each fragmentation will differ but the overall trend to proliferation of smaller procurement approaches also includes individual councils – especially larger urban councils – increasingly concentrating on procurement for their own purposes.
Aggregation of providers
By contrast, the largest private providers continue to grow, both through organic investment in capacity and through acquisition of other organisations. The latest group financial statements of SSCP Spring TopCo Ltd remind us that large-scale aggregation of the largest providers continues, with Outcomes First joining NFA, Acorn and other brands under common ownership of Stirling Square Capital Partners. The annual fee income of this group, now the largest provider of children’s services, is in the region of £350m. Compared with the annual spend of even the largest local authority, measured in a few tens of millions, this form of provider income aggregation is headed in the opposite direction to the fragmentation of purchasing power into local commissioning efforts.
The consolidation trend was identified in Revolution Consulting’s report Profit Making and Risk in Independent Children’s Social Care Placement Providers for the Local Government Association last February. Since then, further acquisition activity has been indicated with both Priory and Keys Group owners looking to sell their interests in the sector.
In response to the report, the Local Government Association called for greater market oversight. Others, including a parliamentary committee last year, called for an investigation of the provider sector by the Competition and Markets Authority.
A focus only on the provider side of the sector seems incomplete. Understanding the impact of regional commissioning over the last two decades, and the reasons why many councils are now moving their efforts into more fragmented activity in contrast to the concentration of providers should be researched in parallel.