Sheffield Children & Young People’s Consortium
Specification of Management Services
Background
Over the past few months a grouping of third sector organisations involved in work with children and young people (8 to 25 years) across Sheffield has been meeting to discuss the feasibility of establishing a consortium.
At a business strategy workshop on 24/25 October, a number of possible models for running the consortium were reviewed and evaluated:
- Formal Consortium(established as a new legal entity and based on a hub and spokes structure)
- Managing Provider (existing legal entity)
- Managing Agent (existing legal entity)
To inform and facilitate the process of arriving at an effective decision on which model to adopt, it was agreed that a specification should be drawn up of the central management services that would be needed to ensure that the consortium is able to meet its objectives and can run effectively.
The Consortium Working Group intends to use this specification as the basis for inviting proposals from prospective Managing Providers/Managing Agents
to provide those management services. These proposals can then be compared to the pros and cons of a hub and spokes structure within a formal consortium. In this way it is envisaged that an informed and objective decision on the most appropriate model for the consortium can be arrived at, based on a full and comprehensive appraisal of the available options.
Consortium Purposes
The primary purposes of the consortium are to:
-Form a single point of contracting that can help secure larger, global contracts that can then be sub-contracted to the consortium member organisations
-Shape the design of tender frameworks
-Develop tender-writing expertise and capacity
-Ensure contract compliance by implementing rigorous contract management and accountability systems and processes
-Maintain and improve standards of quality across the consortium, especially relating to the delivery of front line services
-Build capacity within member organisations, linked to improving quality in service delivery but also relating generally to expanding skills and enhancing overall organisational effectiveness
-Encourage joint working amongst consortium members, leading to innovation and new ways of doing things at the frontline
To achieve these purposes the consortium will require a ‘management unit’ to undertake a range of executive functions. This unit can either be internal to the development of new corporate infrastructure (as a central hub within a formal consortium structure) or lodged within an existing legally constituted body (operating as a Managing Provider or Managing Agent within a loose consortium structure).
Estimated Scale
It is difficult at this embryonicstage in the consortium’s development to make realistic and reliable forecasts of the scale of the consortium. The following quantitative estimates need to be viewed with this caveat in mind:
No. of consortium member organisations 15-25
Aggregate annual beneficiary throughputc. 5,000-10,000
Aggregate annual financial turnoverc. £1m-£2m
Max no. of separate global contracts held at any one time3-5
Development/Set-Up Process
Currentlyno spare capital has been identified for set-up purposes. Therefore, it is anticipated that the development process for getting the consortium up and running will involve trying to source some seed corn funding/venture capital. This would fund the first phase of consortium development/management(i.e. phase 1 of the management unit) and will probably be profiled to taper down over a period, on the assumption that the exit strategy would revolve around the top slicing of contracts as these came on stream and the delivery credentials of the consortium became established.
This set-up strategy may involve a bid for 100% grant funding but is more likely to entail a ‘patient capital’-type investment approach involving a mixture of grant and (predominantly) loan finance from the likes of Future Builders and possibly other Community Development Finance Institutions (CDFI’s). The aim would be to repay any loan through subsequent contract revenue.
Management Tasks
Specifically, the tasks that the management unit will need to provide are as follows:
Leading the consortium-wide strategic and business planning process – to include reviewing the operating environment, undertaking joint needs analysis, setting objectives and targets, assessing risks, appraising options, undertaking full cost analysis and determining unit prices
Developing consortium-wide policies – e.g. QA, Health & Safety, Equality & Diversity, Staff & Volunteer Development etc
Influencing the shape and design of relevant service specifications and associated tender frameworks so that these specifications and frameworks are fit for purpose in terms of meeting the needs of the individuals, social groups and communities that are being targeted by the third sector providers that make up the consortium membership
Identifying appropriate tender opportunities for the consortium to pursue by undertaking regular and routine prospect research, scouring appropriate websites and information bases, forging direct links with procurement officers etc
Submitting consortium tenders (including negotiating Pre Qualification Questionnaire [PQQ] processes where applicable); the management unit may take on direct, unaided responsibility for the drafting of a given tender proposal or form a designated tender writing/reference group with representation from key players in the membership (either way, the substantive content of the tender proposal will need to be designed to reflect closely the delivery ambitions and capabilities of the provider network)
Setting up and implementing an appropriate, consortium-approved system for awarding sub-contracts based on the following principles/criteria:
-Contract compliance (including compliance in the following areas: profile of project deliverablesand associated outputs/outcomes against specified statement of need, quality assurance, financial accounting and output/outcome accounting)
-Delivery capacity of providers
-Potential impact
-Fairness
-Equity
-Transparency
Setting up and implementing an appropriate, consortium-approved system for monitoring the performance of sub-contractors – this will need to include an agreed strategy for dealing with under-performing providers
Implementing measures to maintain and improve standards of delivery across the consortium–to include devising a consortium-wide QA policy and strategy, overseeing self-assessment reporting (or some other appropriate form of internal verification/moderation) and improvement/development planning, managing external inspections, where applicable etc
Providing financial management for the consortium – to include:
-Managing the contract income and specific management unit expenditure
-Producing management accounts
-Liaising with external auditors
-Preparing income and expenditure forecasts
-Preparing cash flow forecasts
-Subjecting contract opportunities to break even analysis
-Calculating common unit costs
-Determining pricing strategies etc
Co-ordinating strategies to build the capacity of the provider network – to include use of a range of capacity building methods e.g. training, mentoring, networking etc, and drawing wherever possible on the resources of the provider network itself
Raising the profile of the consortium – this should include the development of a marketing and PR strategy
Ensuring that consortium members are able to input into the running of the management unit and into overall decision making processes within the consortium - this will be a key area of focus if it is determined that either a Managing Provider or Managing Agent should run the management unit on commission (as opposed to a formal consortium founded on democratic governance arrangements)
Some suggested criteria for evaluating prospective Managing Providers/Managing Agents
One way to evaluate prospective Managing Providers/Managing Agents would be to ask them to provide a brief narrative in support of their competence to deliver against each of the identified tasks (the focus here would be on requiring organisations to draw on their past and current experience by providing practical examples of how they have gone about such tasks in other contexts).
Alternatively, organisations could be asked to provide a brief narrative (along with supporting evidence, where feasible) in response to a series of specific questions.
If the latter approach is adopted, then a suggested schedule of questions to form a potential evaluation framework is provided below:
1. Is the organisation financially viable?
-Can it show robust financial accounts over the previous 3 years?
-Do its financial projections for the next 3 years portray a realistic and reliable prospect of financial stability?
-Does it have a sound cash flow forecast for the next 3 years?
-What is the level of its retained profits/reserves?
-Does it have robust and rigorous financial management systems?
-Does it employ a skilled, experienced and qualified finance team?
-Does it have a ‘clean’ record in submitting annual accounts to the relevant regulatory bodies e.g. Registrar of Companies
-Are there any financial risks facing the organisation and, if so, what are the strategies/control measures in place to address those risks?
2. Does the organisation have a systematic and effective approach to risk management?
-What are the risks (strategic, reputational etc) facing the organisation?
-What strategies/control measures does it have in place to manage those risks?
-What is the projected level of residual risk once control measures have been implemented, and does this represent a realistic assessment?
3. Does the organisation have a good track record in contract management?
-Does it have experience of managing large-scale contracts and, if so, how many?
-Does it have experience of managing sub-contracts and, if so, how many?
-What is the highest amount of funding it has sub-contracted?
-What monitoring systems and processes does it have it place?
-How does it manage risk associated with sub-contractor under-performance/failure e.g. does have a claw back policy etc?
4. Does the organisation understand the particular ethos, working practices and technical nuances of the children and young people sector?
-Does it already operate in the sector and, if so, what is the extent of its experience?
-What, in its view, are the key issues facing the sector over the next few years?
5. Can the organisation demonstrate commitment to involving partners in the governance and management arrangements relating to the day-to-day functioning of the consortium?
-Can it provide past examples of how it has led a partnership/joint venture in an inclusive and participative way?
-What specific structures would it put in place to optimise the input of the partners, e.g. steering group with delegated powers?
-Are there any areas of decision-making, e.g. contract top slice rate, which the Managing Provider/Managing Agent would need to deal with unilaterally?
Neil Coulson
1 November 2007
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Sheffield Children & Young People’s Consortium:
Specification of Management Services/NC/1 Nov 07