Can mutuals flourish in public services?

Co-operatives have delivered to the public for generations and pioneered many services that are now provided by the state.

So, it is interesting that the government is promoting, apparently with vigour, the state contracting with “public service mutuals” for more public services as a way of creating better value and more “customer focus” in a range of services. This is happening in local government and central government, especially the National Health Service. Because “public service mutuals” actually constitute a wide variety of legal forms, the extent to which mutuality and employee leadership actually are the modus operandi of these organisations will inevitably vary.

One development that many in the co-operative movement should welcome is the requirement in England, on any organisation that has to comply with the EU procurement regime, to consider the economic, social and environmental well-being of the area that they serve and how improvements in well-being should be built into the procurement process for services. This requirement to think about the place that they are responsible for holds the key to sustainability being embedded in contracted-for services: for some public bodies, especially government departments, their responsibility for people and place is what they have failed to grasp in delivering real value for money. Yes, this is the true meaning of the Public Services (Social Value) Act 2012.

Co-operatives, social enterprises and the voluntary sector have often regarded the application of competition rules as something best to avoid when seeking contracts to deliver public services. Actually, it depends.

Under current EU procurement rules, for some services such as care, health and sport (categorised as “Part B” services), it has been possible for contracts to be awarded without a competitive tender where there is thought to be a lack of “cross-border” market.

New EU rules coming in some time (we think) in 2014 pose new challenges and opportunities. New challenges include the sweeping away of the Part B categorisation – meaning that many services currently under that heading will have to be tendered competitively if the contract is valued above €750,000 (approximately £618,400). But competition, if done well, really can be healthy and does not need to exclude the likes of co-operatives. The skill is in setting up competitions that allow the governance of a mutual to be part of the service solution.

There are also new opportunities because social characteristics in the requirements of a contracting authority will have greater explicit prominence. In addition, there will be the scope to have tendering exercises for a small list of public services limited to competition between, effectively, social enterprises (although the definition does warrant examination!), which will exclude the private sector from such services.

What this means is that any person contemplating setting up a public service mutual must expect to participate in some sort of competitive tendering exercise, certainly from 2015 onwards. The only way that mutuals can flourish in public services is for the co-operative movement (with others of like mind) to give its full backing and resources to create fit-for-competition public service mutuals that can compete effectively with a corporate sector that is struggling to recover its own credibility. This would be a good-news story to build over the next decade.