Creativebias Helpsheet: Procuring Service Contracts for a Social Enterprise

Procuring Service Contracts for a Social Enterprise

A Guide for Creative Industries Entrepreneurs

What is a service contract and what does it contain?

As a social enterprise, a large amount of your work will come from bidding for service contracts offered by other organisations. This will involve competing with other social enterprises to win contracts for the work.

You are likely to be bidding for service contracts from both the public and private sector.

The public sector is the part of the economy that deals with the delivery of goods and services by, and for, the government, whether national, regional or local.

The private sector consists of those entities which are not controlled by the state - i.e. a variety of entities such as private firms and companies, corporations, private banks, non-governmental organisations, and individuals.

A government body or private company will seek quotes for a particular project to be carried out by a social enterprise.

This may be called an invitation to tender.

The invitation to tender will detail in exact terms:

• The service you will provide - what the work involves
  
• The timescale for the project - how long you have to do the work
  
• The suggested fee for the project - how much you will be paid for the work, although if your application is successful the fee may be open to negotiation.
  

It is the bids for the work themselves, including company information, a project outline, and a price quote, that are known as tenders.

Certain tenders are known as sealed tenders, this means that the company offering the work will look at them all during the same period rather than on a first come - first served basis.

If your application is successful you will be issued with a service agreement which confirms the terms of the agreement and will be signed by both parties before the work begins. It should also contain all the legal specifications for your agreement.

This helpsheet will explain the benefits of entering into relationships with other businesses as well as offering advice on some of the intricacies of finding, and tendering for, contracts.

How could winning a service contract be beneficial to my social enterprise?

For social enterprises, there are various advantages to be gained from entering into partnerships with established businesses:

• Generation of new, sustainable, income streams:
  

Regular work with the private sector or a government body can provide social enterprises with greater flexibility to plan for the future and solidify the sustainability of their businesses. This is because many collaborations involve either fixed-term or fixed-price contracts, or both. The extra income offers a means of strengthening social enterprises' market position which may lead to:

• Reduced grant dependency:

New partnerships, and the income streams they provide, can offer a shift from dependency on grants as your main income source to a more self-sustained business model, relying on your own profit to fund the business.

• Offer access to finance and capital for specific projects/developments:

Collaboration can enable social enterprises to increase their chances of obtaining both public and private funding by combining their social purpose with a private sector partner's business skills. Increased business involvement with, and investment in, the local community, can lead to more opportunities for government funding.

• Provide access to management expertise from the private sector and improve business skills:
  

Having a business partner can allow your social enterprise access to high-level management advice, which can help your business become more professional and focused.

Even if you don't win the contract that you are bidding for, preparing a tender may be useful for your business by clarifying your aims as well as highlighting strengths and weaknesses.

The client will also be aware of you for any future work which they think may be more appropriate for your social enterprise. You should ask for feedback if your tender is rejected and work on any areas which are highlighted as weak.

How is winning a service contract beneficial to the business employing my social enterprise?

It will benefit the business to strike a deal with a social enterprise by:

• Presenting new business opportunities they could not realise without the social enterprise partner.
• Providing access to new markets, and supply lines, expertise or services they cannot find elsewhere, offering access to and knowledge of, a particular community.
• Allowing the business to pursue both contracts and major project funding that would not otherwise be available to them
• Offering value for money. Social enterprises are likely to provide value for money, as they are less profit driven, therefore less likely to compromise on quality of delivery.
  

Where do I find service contracts?

There is no single organisation that buys on behalf of the government as a whole. Each department, including local councils, is responsible for their own purchasing needs, and the best way to approach the government is to bid for advertised contracts and regularly check the council website. Follow the links at the end of this document for more information.

Opportunities and tendering procedures can vary considerably from sector to sector. It is important to understand the specialist issues relevant to your sector.

Find out what is going on in the market, find out whom the competition is, talk to other social enterprises that have successfully tendered for service contracts and ask them for their advice.

You should research which service contracts have been awarded in the past in your area of business, look out for news and events in newspapers and industry magazines, journals and websites that are relevant to your field and social enterprises in general, and find out if those contracts are coming up for tender again.

There are also a number of websites that provide listings of opportunities for tender. You should be aware that some will charge for the service and should perhaps be used as a last resort rather than as a first port of call. See the 'links' section at the end of the document for more details.

"Finding work opportunities for a small creative social enterprise involves a number of things. It is important to network as much as possible. A lot of the time finding work is a case of being in the right place at the right time and being prepared enough to bid for contracts when the opportunity arises. If you work hard and provide businesses with an excellent service which they couldn't find elsewhere, they're likely to come back to you for more work in the future."

John Ekubia - director, Black Music Academy.

Tendering for service contracts

Before you start work preparing a tender you should decide:

• Do you have the capacity for the contract processes; both for bidding and if/when you win the contract?
• Does the contract undermine or support your social objectives?
• Will a new contract still be viable after spending time and resources on winning it?
• Have you thought through, and planned for, the potential risks to your organisation: over-expansion, performance failure, workforce issues and cash flow?
• Will you make enough money from the contract to justify taking it on? Estimate the costs of fulfilling the contract including all fixed costs such as staff wages and premises hire.
• How will you minimise the risks of 'contract dependency' after concluding a contract - can you diversify enough or win enough business to avoid this? Will you be able to bid for other contracts to guarantee future work, whilst completing this one?
  

How do I write the tender for service contracts?

You could see each tender as a 'project' for your business, with the focus being on winning the contract, and organise the process as such.

Please see the 'managing creative projects' helpsheet for more information. It will also help to read the 'marketing planning' helpsheet as this explains how best to market your business, focus your aims and emphasise your strongest assets.

The tender should be a series of documents clearly and concisely explaining why your social enterprise is best-suited for the work, including a detailed project plan.

Your plan must show that you are focused on delivering the core requirements of the contract in a cost-effective way. Make your plan easy to read and create a simple contents page so that different people within the organisation can read the parts that are relevant to them.

Include a covering letter that responds to the invitation for tenders, summarises your main message and explain how the documents are organised.

Within your tender you should:

• State the purpose and origin of the bid
• Detail previous, relevant, experience, particularly any work as a contractor.
• Explain exactly how you will carry out the work, and specifically state how and when the client's aims will be achieved and provide a time table. If you are unclear about the client's aims, contact them. It will begin a relationship with them before they read the tender and will show enthusiasm and willingness to adapt to their needs.
• Explain the benefits and value for money of your bid
• Offer the client something that they cannot do themselves, what is your unique selling point? Why can you do the job better than anyone else?
• Explain how you will manage the project. Demonstrate your team's skills, experience of similar work and what their responsibilities will be if you win the contract.
• Give details of your pricing and break down exactly what the client will get for their money, including whether any services are still provided once the contract is finished. At the end of your price break down, quote a figure that you would like to be paid for the whole project. Be realistic with your pricing. See the "Marketing Planning" helpsheet for advice on pricing.
• Be practical and identify potential problems and any demands which you feel are unrealistic. It is best to highlight these at the beginning of the business relationship
• Show that you have considered, have accounted for and can manage potential financial, commercial and legal risks that could cause contract failure.
• Find out if the organisation operates any minimum standards for working with external organisations. This is often set out in a 'pre tender qualification questionnaire' or 'minimum requirements for funding' documents. If the client has provided either of these documents, make sure that you cover each point mentioned within your tender.
• There may also be specific requirements for certain types of services e.g. a requirement to hold a certain accreditation or quality assurance standard or minimum training levels of staff. Make sure these are covered as well.
  

Before you bid for the contract you could make an appointment with the most senior person in the organisation that has responsibility for the service you are interested in bidding for.

This may be the service manager, director, contracts manager, commissioning manager or client manager. Don't assume that they know about social enterprises - explain exactly how your business works and what you are offering.

"When looking for work, creative social enterprises mustn't be shy of finding out as much about the contractor as possible, look at their website, read up on contracts they've awarded before, do as much research as you can."

Frank Titley - Social Enterprises Consultant, Blue Orchid.

How do I get more work once this service contract has finished?

If you complete the work detailed within the contract on time and maintain an honest relationship with the other business throughout, you may be asked to do more work when another contract comes up.

Find out what new services are likely to be commissioned in the near future as well as their long-term plans, including existing contracts due for renewal. Share what you think you can offer as this may influence future plans.

When there is no track record for a particular service, suggest that you help them pilot a new idea.

Don't be shy of making enquiries to public sector bodies about available contracts, word of mouth will spread. If you have done a good job for someone you will start to build a reputation as a reliable firm.

Some local councils publish lists of 'approved suppliers,' businesses who they have worked with before who they recommend for future work.

Links

Tendering Opportunities

• Liverpool Council website has a section dealing with current tenders . Although most of these are not creative opportunities it is still worth checking occasionally. Potential suppliers who wish to have their details added to the council database, should send a letter with brief details of the products and/or services they wish to offer to Liverpool City Council as well as their contact details to: Resources, Procurement Support Unit, Municipal Building, Dale Street, Liverpool L2 2DH. There is also advice on the page about what a tender to the council should contain.
• www.sthelens.gov.uk (search for 'procurement') - Sets out the St Helens council's purchasing procedures. It explains the method of purchasing and provides guidance on some of the key factors which need to be taken into consideration when seeking to understand how to do business with St Helens Council.
• www.wirral.gov.uk (search for 'procurement') - Details of the Wirral council procurement policy.
• www.knowsley.gov.uk - Detailed procurement site for Knowsley council including a list of past contracts awarded and useful tips for winning service contracts. Also includes links to other council websites in the North West.
• Website for the Office of Government Commerce The site provides extensive lists of suppliers for a wide variety of services. Small fee required to register your business.
• Business Link's advice on selling to government (search for 'tendering'), including tips on tendering and the best ways to find more work.
• Office of Government Commerce manages a number of initiatives to open up government markets to competition and encourage private sector organisations to work better with the public sector.
  
  

Funding Sites

• www.euandmerseyside.org - Details of European funding available to Merseyside businesses.
• The Government Office for the North West, the site details how the government can help businesses in Liverpool.
• Details of funding available to business from the European Social Fund.
• A guide for business in the North-West on how to access European Structural Funding.
• Funding Page on UK Arts Council website - occasionally has opportunities to tender, also details on funding for creative businesses

Listing sites

• Free listings service run by UK Trade and Investment. They aim to match up your business with a business aboard who need your service. Once you have registered you will be able to see the latest opportunities matching your profile - and be alerted by email when new opportunities are published.
• Tendermatch charge for a service matching social enterprises with businesses that need their services, as well as running courses on tendering for contracts.