There are different ways to fund social services procurements. You may be able to give grants, use standard contracts or tie payment to results or outcomes.
Government agencies have several funding options to put in place with social service providers. These include:
The choice of funding arrangement will depend on the:
The appropriation type authorised by Parliament for the public funding will also determine the type of funding arrangement. The type of funding to be used will often be decided during the policy development.
An unconditional grant is financial assistance paid by the government to an eligible organisation. The recipient has no obligations to perform in return for the money except the expectation that the funds will be used for the purpose stated.
Unconditional grants are mainly used to help develop a provider’s capacity, support particular community activities or pay for particular one-off projects.
Gifts, donations and unconditional grants are not procurement activities and the Rules do not apply.
A conditional grant is financial assistance from the government to an eligible organisation. The recipient undertakes to perform specific obligations in return for the money. The provider is entitled to payment once it satisfies the eligibility criteria.
Conditional grants are mainly used to help develop a provider’s capacity or pay for particular one-off projects.
A conditional grant might be used when:
Conditional grants are considered a procurement activity. The majority of the Rules apply, but an opt-out for some of the Rules (such as open advertising) may be available.
Specified contracts for services are put in place. Payments are made by instalments against pre-set milestones or after the required services have been delivered.
Contracts are used to pay for the provision of services. Payment can be either for services, or for results or outcomes.
As part of the planning process consider the price of the services. This should match (where possible) the:
The agency and provider must agree the payment structure. Consider:
There are a number of ways in which the payment can be structured, including:
No payment should be made until the contract is signed. This is equally important for a conditional grant.
As part of your planning consider how to deal with any surplus that remains when the agreed outputs have been delivered. The ability of a provider to retain part of any surplus can be an important incentive to achieve efficiencies and to innovate.
Government agencies also need to seek value for money, avoiding providing for large, easily earned surpluses. (In this context, surpluses do not include a moderate return on capital or expenses necessary to cover infrastructure costs such as depreciation.)
On the other side of the equation agencies negotiating a lower price will need confidence that this will not put service quality at risk of falling below agreed standards. The Government agency will also need to keep the price under review when contracts are renegotiated in the light of knowledge gained during the contract about costs and surpluses.
There are a number of possible approaches to a surplus:
Deciding on the most appropriate approach to dealing with surpluses may also depend on an assessment of risk. The basis for these assessments should be documented.
This may be particularly relevant when the provider is a not-for-profit organisation. Government agencies should assure themselves ahead of time that the provider has appropriate internal controls or governance structures to ensure that any agreed surpluses are applied by the provider appropriately. Agencies should verify how the surplus has been spent by the provider.
Instead of paying for the delivery of services (outputs) or for resources (inputs like staff time) some or all of the payment under a contract can be made for client results or outcomes.
Although the concept is simple, it can be challenging in practice - you'll need to know:
Successful implementation is likely to require consultation and negotiation, testing, adjustment and refinement. You'll need to seek further advice from your procurement, legal and finance teams.
The majority of the Rules apply, but an opt-out for some of the Rules (such as open advertising) may be available.