Commissioning and procurement: step by step

This section introduces commissioning and procurement, explaining the processes, purpose and terminology of commissioning public services from the voluntary and community sector (VCS).

What is commissioning and procurement?

Commissioning is the process of finding out about public needs, then designing and putting in place services that address those needs. In this context, it's a process undertaken by public bodies, like central government department or local NHS bodies. It's a decision making process that most frequently involves the procurement (purchasing) of services by either grant-funding or competitive tendering for contracts (a process of which voluntary and community organisations are frequently a part).

Commissioning is carried out by local and national government and public bodies (like local councils or hospitals) who have a statutory responsibility to commission services to meet needs. Commissioning has grown in significance as more and more public services are delivered by external organisations (like the VCS) and as social needs change.

Commissioning and procurement can seem overwhelmingly complicated at first. These pages aim to take out the element of fear, and give you confidence and knowledge to become involved in public service commissioning and delivery. You can also download our introductory guide, Before Signing on the Dotted Line. (PDF 450KB).

This section explores:

History of the voluntary sector in public service delivery

Starting out

How does commissioning work?
- Principles of good commissioning
- Commissioning frameworks
What is procurement?
Who commissions?
Intelligent commissioning - opens on a new page
- Good commissioning
- Measuring and commissioning outcomes and social value

Want to know more try our recommended reading list.

Stuck on a term? Try our Public Service Delivery glossary

Detailed step by step guides through commissioning and procurement cycle

1. Needs analysis

How to analyse and address needs

2. Market development

3. Procurement and contracting

Development

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Pre Qualification

Tendering

Contract award and challenge

4. Service delivery, contract management and payment

5. Evaluation and decommissioning

Evaluation and monitoring
Measuring impact - takes you to our impact section of the website
Measuring and commissioning outcomes and social value
Decommissioning

Specialist commissioning policy and practice

See also our resources updating you on the latest thinking

You might also be interested in the following sections of the website measuring impact, managing change, and developing innovation.

Return to Public Service Delivery main page or see the links on the left of this page for further, relevant NCVO support.

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How does commissioning work?

You can also download our free introductory guide to commissioning, Before Signing on the Dotted Line. (PDF 450KB)

The easiest way to understand commissioning is always to think upon is as a decision making process. You need to understand what you problem is and then work out and put in place the best way address it within your available resources. This is the role of a commissioner - often a specific job within a statutory commissioning body.

The commissioning process works in five-steps. They aren't always clearly distinguished from one another, and commissioners may carry them out over different time periods. These steps are:

Needs and Policy Analysis
First, you must know what the problem is you are trying to address, and what is causing this issue to arise. This will also be led by currrent Government policy which explains key issues or populations to address.
Market Development
Commissioners need to engage and develop potential providers who will be able to tackle the problem. This also involves working closely with voluntary and community organisations (VCOs) who may not deliver public services, but are experts in the issue (say, Alzheimer's Society or small community groups). Market development might include direct grant funding and support to an organisation to develop, or funding infrastructure, networks and training for potential providers to develop.
All this requires good understanding of the market's structures, strengths and weaknesses, so skills and capacity can be best utilised. This includes engaging with small community groups and user-led organisations (ULOs) to help design the outcomes and structures of services.
Procurement
Procurement is the process of identifying and securing a solution by buying services (through a contract or a grant funding relationship) to address the needs you have identified, from the market you have developed.
Procurement is governed by specific laws that seek to ensure probity and fair competition between all providers - including the VCS.
Service Delivery, Contract Management, and Payment
Once the contract has been signed, the service then must be delivered, managed, and paid for by the chosen provider organisation.
Evaluation and Decommissioning
Ideally, a good service will have changed the needs you are dealing with - although other factors also hugely influence the needs public services address. Evaluation then of how the service has impacted is essential to beginning the process of needs analysis again. And commissioners must work through any necessary process of decommissioning services (ending services) which are no longer needed or most effective.

In this way, commissioning is a cyclical process, looping round and round, always checking and changing services and resources and the market to meet new and changing needs.

Commissioning most often runs in terms of 3-5 years, though that is at the discretion of the public body. Commissioning is a mixture of:

defined periods of assessment, consultation, procurement and service delivery;
and ongoing periods of needs assessment and market development.

Principles of good commissioning

The Office for Civil Society (Cabinet Office) has identified eight Intelligent Commissioning Principles:

Develop an understanding of the needs of users and communities, by ensuring that, alongside other consultees, they engage with third sector organisations as advocates, to access their specialist knowledge.
Consult potential provider organisations, including those from the third sector and local experts, well in advance of commissioning new services, working with them to set priority outcomes for that service.
Put outcomes for users at the heart of the strategic planning process.
Map the fullest practicable range of providers with a view to understanding the contribution they could make to delivering those outcomes.
Consider investing in the capacity of the provider base, particularly those working with hard-to-reach groups.
Ensure procurement processes are transparent and fair; facilitating the involvement of the broadest range of suppliers, including considering sub-contracting and consortia building where appropriate.
Seek to ensure long-term contracts and risk sharing wherever appropriate as ways of achieving efficiency and effectiveness.
Seek feedback from service users, communities and providers in order to review the effectiveness of the commissioning process in meeting local needs.

These principles apply whether services are commissioned from the public, private, or voluntary sectors. If local public bodies implement 'intelligent commissioning' well, this inevitably providers user-focused, diverse services - in which the VCS is a nature providers.

Commissioning frameworks

Commissioning frameworks give the overview of a public bodies intentions: the needs they will be meeting; how they will prioritise and engage with the market; the quality of services they will took to procure. Commissioning frameworks will be on single issues or users groups, for example -

The Joint Commissioning Strategy for People with a Leaning Disability 2010-13 (Dorset)
Mental Health Commissioning Strategy 2009-14 (Manchester Council and Manchcester NHS)
Adult Social Care, Health and Housing Commissioning Strategy 2010-15 (Hillingdon)
National Dementia Strategy 2009 (Department of Health)
Drug and Alcohol Joint Commissioning Strategy 2008-11 (Hounslow)
Sexual Health Commissioning Strategy (Norfolk)
Integrated Commissioning Strategy for Children with Additional Needs 2008-11 (Devon)

Commissioning frameworks usually last for 3-5 years. They are developed in consultation and discussion with communities, indivduals, service providers, and other public bodies. Often they are 'owned' by more than one public body - for example social care (local authority) and health (local NHS body) - and they agree to 'integrate' their commissioning plans.

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What is procurement?

Procurement is the act of buying goods or a service by a competitive process. This process is governed by particular laws, and ends in the signing of a legally binding contract between the commissioning body and the winning provider.

Procurement takes place if a commissioning body has recognised the need for a service, and has the funds to meet it. Alternatives to procurement would be if the commissioning body decided to deliver the service in-house themselves, or decided to award a grant (a more flexible structure) to deliver the service.

Both the process of procurement and the signing of contracts requires voluntary organisations to work in 'business-like' ways. NCVO recommends any organisation undertaking such steps should first of all ensure they are well informed about the risks and responsibilities of entering the process, and are confident that in the end they can deliver excellent services without compromising their core mission. Procurement processes are often very poorly run, and it's important organisations understand their rights in challenging these and encouraging better practice.

Procurement is often confused with commissioning, but it is actually just one step of the commissioning cycle.

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Who commissions?

The role of Commissioners: strategic commissioning

Commissioning organisations - those public bodies and government departments who commission services - have specialist commissioning teams who manage the commissioning process. At strategic level, commissioning is less directly involved with the tendering of contracts and more acutely engaged in shaping the availability of services for the medium-long term, in conjunction with partners and in pursuit of strategic objectives.

Its hard to overstate just how hard it is to be a good commissioner. The five steps of commissioning we outlined above are incredibly complicated, and require huge amounts of local knowledge, indepth understanding of national policy, and a keen ability to develop relationships with large numbers of organisations and communities. Commissioners are the glue that holds the whole process together: they have the oversight, the relationships, and the resources to meet local needs. They have to develop aspirations on behalf of the public sector organisation and communities they serve, and make sure that all the provision in the part of the welfare market they're responsible for (eg the health of older people in their area) is up to standard and delivering what people need. As agents of the state, they also work under political pressures and statute to work in certain ways under certain rules.

Most simply defined: their responsibility is to set outcomes and put in place a process to see that they are met. Our responsibility in the VCS is to be an active partner in helping that happen.

Integrated commissioning

This is the term for the joint commissioning of services by more than one public body. Most common in health and social care, successive governments have been very keen to better coordinate the outcomes and spending of public bodies to create better impact. Current programmes of intergrated commissioning that are of interest include the Community Budgets pilots, led by the Department of Communities and Local Government (DCLG). These build on the New Labour work of Total Place and are co-ordinated commissioning around the needs of 120,000 families who have the most significant levels of use of public services.

Commisioning through supply chains

The commissioning process is clearly dense and complex, making it costly. Some government bodies therefore are outourcing many aspects of the commissioning process in big contracts to 'prime' contractors, who then manage and commission a secondary market of 'sub-contracted' organisations. An example of this is the DWP Work Programme contracts, let in 2011.

Under arrangements like this, prime contractors take on whole or partial responsibility for:

needs assessment
market building and shaping
procurement
managing service delivery
service evaluation

NCVO are particularly interested in the implications of government bodies passing on commissioning responsibilities to other organisations: over the medium-long term wee see this as being as important as direct relationships with statutory commissioners.

Users as commissioners

Recent governments have sought ways to enable individuals to become the direct commissioners of their own services. Both the policy agendas around 'personalisation' and 'choice' have highlighted the power of users controlling and spending their own budgets through direct relationships with providers of their choice. This also involves users being key agents in assessing their own needs - rather than a professional - and setting the outcomes that they want to achieve through services.

This means that the VCS have to work with users directly to understand what they want, and what they will purchase, and how they will choose to make that purchase. More than ever, this drives the demand for good quality services to be effective in involving people.

This agenda has had most movement in health and social care policies, but is extending into education and training support.

See our Personalisation pages for more details.

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