New research highlights need to diversify UK business

Katharine Sutton is Chief Executive of Aspire Community Works, a social enterprise provider of public services whose #BetterForUs campaign advocates a wellbeing approach to the economy. The vast amounts of public funds allocated through procurement can shape community well-being, support fair employment and strengthen local economies – yet all too often, this potentially transformative spending is reduced to a technical purchasing process. At best, the cheapest price is prioritised over the quality of public services, but at worst it can mean large-scale corruption and the collapse of get-rich-quick companies such as Carillion. A new mission-led government, a new Procurement Act (due to take effect in February 2025) and new National Procurement Policy Statements (in England and Wales) provide opportunity for bold reform to ensure the system is people-led rather than profit-led. This blog explores various practical ways in which public procurement can be made to work for the public, not against it. Make fair wages and good working conditions the standard Every public contract should include a commitment to paying the Real Living Wage. Workers deserve fair compensation that enables them to support themselves and their families. Setting fair wages as a standard can reduce poverty, lessening reliance on health and welfare services. Fair pay fosters health, stability and productivity, creating a more resilient and engaged society. All public contracts should also promote decent working conditions through the inclusion of Good Work standards certified by independent bodies. This will ensure workers have security, dignity and opportunities to develop, ultimately supporting the well-being of employees and wider communities. This is particularly important in sectors with low pay and high turnover to improve staff satisfaction and retention,  in turn generating higher quality services that the race to the bottom simply cannot sustain. Support local economies with targeted investment At least 1% of public procurement budgets should be allocated to organisations committed to supporting people facing barriers and disadvantage in the labour market. Directing procurement funds towards these “Good Works” organisations could help stimulate alternate local economies, create sustainable employment for individuals who might otherwise be excluded from the workforce, and tackle existing labour shortages. Aspire estimates that such an investment could generate over £3.9 billion for local economies, strengthening communities and fostering inclusion. Align procurement with wider values and goals Public procurement can and should be aligned with the UN’s Sustainable Development Goals (SDGs), leveraging each contract as an opportunity to support sustainable development and addressing issues such as inequality, inclusive growth and climate change. We consider these to be the golden thread linking procurement to community, domestic, international and corporate goals. While social value is an increasingly common part of procurement, we recommend a shift towards public value - linked to the SDGs - with the purpose of maximising public benefit. Social value often becomes a checklist, narrowly focused on short-term results, whereas public value encompasses a commitment to addressing long-term issues like inequality and resilience as well as mission-led public policy. Reframing procurement with a public value approach would enable public funds to support sustainable, community-centred, people-led goals. Such a shift would require contractors to align their objectives with government priorities, creating a more cohesive and impactful procurement strategy both at a national and local level. Put the public back in public procurement We must move beyond just listening to really actively involving local communities in the commissioning and procurement process, using the voice of lived experience to co-create services that are relevant and resonate with the people who will be relying on them. Investing in people-led procurement is a crucial part of investing for our future. Inclusive growth may be a buzzword for those who have wealth – but for those of us without, it is a necessity. As businesses and investors look for models of sustainable growth, the principles of social procurement align with a growing demand for economic resilience and accountability. This is an opportunity for the UK to lead, not just in fiscal responsibility but in responsible, impact-driven investment of public funds. At a time when economic value and social value need not be mutually exclusive, public procurement could become a cornerstone of the UK’s economic renewal. Over the next couple of months, our new government has the opportunity to direct public procurement to work for the public benefit and not against it. Will it seize the opportunity? We can only hope so.

Groundwork is a federation of 15 charitable organisations operating across the UK. It runs programmes and activities to help people improve their prospects, working with communities facing multiple challenges, in places that lack social infrastructure and economic opportunities. It combines environmental and social impact, building the green economy while supporting communities to connect with nature and adapt to the climate crisis. From creating green jobs to supporting people with energy bills and retrofitting homes, it works to build a fairer and greener future in which people, places and nature can thrive. Working with government departments Groundwork UK (the national body of the federation) distributes grant funding for the UK Government, acting as an intermediary to make sure public money is invested in communities at a grassroots level. This involves bidding for contracts with central government departments and acting as an outsourced intermediary provider of grant management services. It’s worked with the Ministry of Housing, Communities and Local Government to get groups  such as parish councils involved in local planning, and with the Home Office to support charities tackling extremism. It’s also been contracted by the Department for Culture, Media and Sport to run the Voluntary Community and Social Enterprise (VCSE) Energy Efficiency Scheme - a £25m programme, largely distributed through grants. So far it has funded 1,100 organisations to carry out energy assessments to help them improve the efficiency of their buildings. The benefits of working with a VCSE organisation Groundwork UK’s position of having national grant management capability but also being able to leverage connections through its federation members allows it to promote grant programmes at a local level, supporting organisations to navigate through complexity and access funding they may not have been aware of. Chief executive Graham Duxbury states that government outsourcing this kind of work aims to ensure grants are accessible to smaller, local organisations that are often volunteer-run. He said: “Having knowledge of that sector and that space is hugely important in terms of designing the service. You’ve got to be aware of capacity restraints and limitations, you’ve got to understand how volunteer-led organisations work and how to communicate with them as well as what to expect in terms of their capability to manage due diligence processes.” This close knowledge of the VCSE sector has allowed Groundwork UK to develop a good understanding of what’s proportional when it comes to distributing money, which means it can give the contracting body a clearer idea of what money can deliver when directed to organisations of various sizes and capacities. The second major benefit of working with Groundwork is that it’s “really good at bringing together partnerships”, as it knows where the “deep pockets of expertise are in the sector”. Graham points out that the energy efficiency programme would not have been possible without the support of specialist organisations such as the Centre for Sustainable Energy, the Energy Saving Trust and Locality. Thirdly, working with a VCSE provider helps create broader impact, with “cross fertilisation being what you get from the sector”. Combining the social and the environmental is at the heart of Groundwork’s ethos, and the funding it distributes  can create other opportunities for VCSE organisations. As Graham phrases it: “A grant programme may allow them to do one thing, but we may be able to communicate to them other opportunities and provide them with added value; so when we’re managing grants focused on a social issue we can signpost local grantees to other forms of funding and provide advice that might encourage them to think about their environmental impact too.” What were the main challenges in applying for a central government contract? One of the main challenges Graham identified was bidding timescales, with it being tricky to “be able to drop everything and jump on a bidding process for sometimes as little as three weeks”. This can make forming partnerships to deliver contracts difficult because “partnerships take time to develop, build and form - and very few VCSEs have those bidding resources, even relatively large ones like us”. Other challenges identified are issues around negotiating risk levels on contracts, as government contracts involve public money, with Treasury rules to “rightly focus on money being sensibly spent and looked after”. When it comes to grant management services, like those managed by Groundwork UK, these can lead to there being an over-specification on the part of the ultimate recipient of the money: “We’re sometimes caught between government machinery which wants all this assurance and protection and risk management, and a small voluntary sector organisation which doesn’t have the capacity to do that. If you put too much on them, they won’t engage - and that’s counter to the purpose of the grant programme, which is to get small-scale voluntary organisations funded to deliver.” The biggest challenge Groundwork faces on some grant programmes is down to annualised budgeting within Government, which can affect frontline organisations if delivery time slips and “potentially means that money disappears if delivery needs to extend into the next financial year”. Before VCSE organisations even get to bid to run a government service, the department in question has to bid to the Treasury as part of a Budget or Spending Review process. Once granted, “there’s a clock ticking”, with the design work and procurement exercise needing to be carried out - so the actual window for the delivery of the services can be “really concertinaed at the back end”, especially if the funding is only secured for a year.  As Graham puts it: “As an intermediary in the process you know sometimes you’ll have to put pressure on organisations to deliver in a less than ideal timeframe because funds can’t easily be moved from one year to the next.” Graham acknowledges that it is “hard to get the right balance between due diligence and not overburdening VCSEs”, but feels there could be solutions around “expanding those timeframes; thinking about multi-year commissioning processes to bring about more long-term certainty.” Another challenge faced by VCSEs is the still significant weighting on price as a deciding factor in who is awarded a contract, which can skew the process towards organisations able to offer the biggest discount, which may not be beneficial to the service being delivered. Graham asks: “If a department has secured funding from the Treasury for a particular piece of work, they’ve secured the money, so why put the additional stretch in there in terms of who can do it the cheapest?” Based on a conversation with Graham Duxbury, chief executive at Groundwork UK groundwork.org.uk

Groundwork is a federation of 15 charitable organisations operating across the UK. It runs programmes and activities to help people improve their prospects, working with communities facing multiple challenges, in places that lack social infrastructure and economic opportunities. It combines environmental and social impact, building the green economy while supporting communities to connect with nature and adapt to the climate crisis. From creating green jobs to supporting people with energy bills and retrofitting homes, it works to build a fairer and greener future in which people, places and nature can thrive. Working with government departments Groundwork UK (the national body of the federation) distributes grant funding for the UK Government, acting as an intermediary to make sure public money is invested in communities at a grassroots level. This involves bidding for contracts with central government departments and acting as an outsourced intermediary provider of grant management services. It’s worked with the Ministry of Housing, Communities and Local Government to get groups  such as parish councils involved in local planning, and with the Home Office to support charities tackling extremism. It’s also been contracted by the Department for Culture, Media and Sport to run the Voluntary Community and Social Enterprise (VCSE) Energy Efficiency Scheme - a £25m programme, largely distributed through grants. So far it has funded 1,100 organisations to carry out energy assessments to help them improve the efficiency of their buildings. The benefits of working with a VCSE organisation Groundwork UK’s position of having national grant management capability but also being able to leverage connections through its federation members allows it to promote grant programmes at a local level, supporting organisations to navigate through complexity and access funding they may not have been aware of. Chief executive Graham Duxbury states that government outsourcing this kind of work aims to ensure grants are accessible to smaller, local organisations that are often volunteer-run. He said: “Having knowledge of that sector and that space is hugely important in terms of designing the service. You’ve got to be aware of capacity restraints and limitations, you’ve got to understand how volunteer-led organisations work and how to communicate with them as well as what to expect in terms of their capability to manage due diligence processes.” This close knowledge of the VCSE sector has allowed Groundwork UK to develop a good understanding of what’s proportional when it comes to distributing money, which means it can give the contracting body a clearer idea of what money can deliver when directed to organisations of various sizes and capacities. The second major benefit of working with Groundwork is that it’s “really good at bringing together partnerships”, as it knows where the “deep pockets of expertise are in the sector”. Graham points out that the energy efficiency programme would not have been possible without the support of specialist organisations such as the Centre for Sustainable Energy, the Energy Saving Trust and Locality. Thirdly, working with a VCSE provider helps create broader impact, with “cross fertilisation being what you get from the sector”. Combining the social and the environmental is at the heart of Groundwork’s ethos, and the funding it distributes  can create other opportunities for VCSE organisations. As Graham phrases it: “A grant programme may allow them to do one thing, but we may be able to communicate to them other opportunities and provide them with added value; so when we’re managing grants focused on a social issue we can signpost local grantees to other forms of funding and provide advice that might encourage them to think about their environmental impact too.” What tips would you have for other VCSE organisations looking to work with government? A key tip Graham has for VCSE organisations is to “be visible to the departments to whom you think you’re relevant”, with an important part of this being to get on a government procurement framework. These are pre-procurement portals through which organisations enter their credentials and effectively write a bid to showcase what they provide and their ability to deliver. Groundwork is on a government framework on grant management services. Many departments use frameworks - with some, like the Department for Work and Pensions, referring to them as dynamic purchasing systems (or DPS). Often, if you are not on a framework, you cannot bid; they are effectively a pre-qualification process, so prospective VCSE suppliers should “find out if there are relevant frameworks for the kind of service that you look to offer”. The second main tip for VCSEs wanting to work with central government departments is to not forget that you can negotiate around certain terms of a contract. Groundwork has successfully had things amended in the terms and conditions of contracts, such as questions around payment. As Graham puts it: “Big businesses do this all the time, and we forget that, so we should have confidence that we can negotiate too and get a deal that’s right for us. Some things will never change but some things can and do.” Finally, Graham emphasises the importance in building a human relationship with the contracting department: “Remember that when dealing with government you are dealing with people. All good contracts are built on relationships so once you start to get to know the people on the other side of the fence and understand the pressure they’re under, such as managing public money and the finance and risk committees they need to report to, you get a better understanding on why things are done the way they are and what can and can’t be pushed back on. Never forget that any government contract is just a bunch of individuals trying to get something done.” Based on a conversation with Graham Duxbury, chief executive at Groundwork UK groundwork.org.uk