Public sector staff considering ‘spinning out’ into a mutual or social enterprise are faced with almost endless hurdles to overcome: cultural, technical, practical, personal, legal, financial and more. But whilst there are lessons to learn, experiences to pass on and expertise to share from those who have lasted the course, one of the most significant outstanding issues for many groups is the question of an uncontested contract.

Under DH’s Right to Request, the department simply decided that a ‘dowry’ initial uncontested contract for new spin-outs was just fine and above board.  As Sir Humphrey might say, this was a brave and courageous move. But it did the job. Now, and despite even more ambitious rhetoric from Ministers, we have no direction from the centre on when an open competition might be avoided. Without this clarity, the journey is far less inviting and the rhetoric sounds empty. 

So can we try to fill the gap?

Can budding spin-outs avoid the uncertainty of an open tender? Well yes, under certain circumstances, and if the political will is strong. So (massive disclaimer!) while many of the following suggestions may even be illegal, immoral or unfair, here are some suggestions in the absence of any from the powers that be:

  • If it’s a so-called Part B service, then just go for the uncontested contract. If DH can take that risk, then why can’t you?
  • Even if it’s a Part A service, then you might be fine too. The risk probably comes down to the potential for legal challenge. In practice, is anyone going to mount such a challenge? If not, why not take the risk?
  • Is it below the procurement thresholds? Then go for it.
  • Run a bona fide open competition, but to establish a framework ‘call-off’ agreement with a number of suppliers, including the staff owned organisation. Then simply call off services only from the staff group. Done.
  • Run a competition for services with a specification which rewards bidders who guarantee high staff engagement and ownership, and investment in the local community. All bidders have a chance to make their case but this is more likely to deliver what you’re looking for.

Finally, and this could even be the golden key which Francis Maude could reach out for - if the will was really there - there may be a way to legitimately endow a staff spin-out with a dowry contract, even with the likes of IT services and back office functions, where the competition is fierce and likelihood of challenge high if you don’t play by the rules. How about: 

  • The services are transferred first into an arms-length, but wholly public sector owned business, which remains within public sector and allows for the award of an uncontested contract (known as TECKAL) say, for 5 years.
  • Crucially, however, this vehicle has mutual and social enterprise characteristics enshrined for perpetuity in its legal constitution - along the lines of a CIC or IPS-like structure perhaps, an asset lock, a dividend cap, powers for staff to influence the day-to-day running of the business, a workers’ council, etc. While the public body still retains ultimate control.
  • Then you open up to the market – but putting the business (including contract) up for sale, rather than just the contract out to tender. Anyone can come forward to bid – but with the scale of staff influence, the asset lock and the restrictive constitution, no-one will come forward.
  • Except the staff – who can bid a notional £1 to take control. This leaves you with a staff-owned, asset-locked mutual and social enterprise with a 5 year uncontested contract. Bingo!

Of course, this may be utter nonsense, made up as we go along. But if Francis Maude isn’t going to help us fulfil his vision, then what other choice do we have?