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This article titled “Centralised procurement shuts out social enterprises” was written by Jane Dudman, for The Guardian on Wednesday 25th May 2011 06.45 Europe/London

What’s the connection between a plastic bottle of Aloe Vera handwash and a lack of joined-up thinking in public services?

The answer is that the handwash is made by a small, London-based manufacturer that is providing financial benefits for the government – but which is finding it almost impossible to bid for work from public sector bodies.

Clarity is a social enterprise that enables people with complex disabilities to get training and employment and move on into the wider workplace. Its products – including that bottle of handwash – are manufactured in a factory in central London, which employs 80 people.

Clarity’s products are competitively priced and good quality, but the customer gets the added benefit of knowing they are supporting the organisation’s social aims. “We want to get Clarity synonymous with high-quality, socially responsible cleaning products,” explains Jeremy Robinson, the enterprise’s chief executive.

In a market familiar with Fairtrade, there’s little difficulty in convincing consumers to buy such products, and the launch yesterday of a retail initiative, Just Buy, to promote products from 180 social firms employing some disabled staff, will further raise awareness. But the government is yet to be persuaded, despite the savings to the public purse, which come from getting people who would otherwise be on benefits into employment. Of course, in the retail market, a small organisation such as Clarity is never going to compete on the same terms as the likes of the Body Shop. So the really big possibilities lie with the public sector market – and that’s a different story, according to Robinson. “The issue for us is that the public recognises what we do, but the government and public bodies don’t,” he says.

On the face of it, this seems to run contrary to the government’s stated aims. The big goal, of course, is to cut public sector spending and get people off benefits. The government also says it wants to support smaller organisations and ensure they are not cut out of government contracts. This isn’t a new policy – it was originally introduced more than 20 years ago, based on evidence from the US that SMEs create more employment than established large players. It has also been argued that they are more innovative than major companies. This government brought in a commitment that 25% of government spending should go to small and medium-sized enterprises. Since January this year, Whitehall departments have been required to publish details on the Contracts Finder website of all new contracts over £10,000, including whether it is an SME. In addition, cabinet office minister Francis Maude has said that he doesn’t want to see wholesale outsourcing of public services to private firms, and wants to encourage social enterprises and employee-owned bodies to run more public services.

Yet the 60-odd SMEs in England that have more than half of their workforce registered disabled feel completely overlooked by public sector procurers. Clarity has just one government contract, supplying toiletries to Kent county council. There, nestling among soap dispensers and nailbrushes in Kent County Supplies’ online purchasing catalogue is that 300ml bottle of Aloe Vera handwash.

So why isn’t Clarity winning more such contracts? Take a look, says Robinson, at London itself, where his factory is based. There are 33 boroughs and they all buy their handwash from a single organisation. This centralised procurement is what the government’s procurement guru, Topshop’s Sir Philip Green, recommended in his review last year of government spending.

But this huge centralised spending cuts out small organisations. In theory, the firms which win these deals could subcontract. But Robinson believes little more than lip service is being paid to that idea. “No one is prepared to insist on socially responsible procurement,” he says.

It is not as though there isn’t provision for supporting such enterprises. EU directive article 19 specifies the right of public bodies to reserve some contracts for supported businesses such as Clarity.

Things are different in Scotland. Kath Walker at the British Association for Supported Employment points out that it is Scottish government policy that every public sector organisation should place at least one contract with supported businesses. There are 16 such organisations in Scotland and their annual contribution to the Scottish economy is about £75m.

Once again, the Westminster government is failing to see through its own policies and join up different bits of its thinking.

• This article was amended on 25 May 2011. The original referred to Just Buy’s promoting products from 180 social enterprises. This has been corrected.

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