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Ending Tendering in Social Care

Author: Simon Duffy

This is the second in a series of short essays from Finland. Here Simon Duffy explores the damage to human rights done by competitive tendering and procurement practices in Finland and England. He argues that shifting to a system of managed personal budgets could be used to end these damaging systems. 

I have now begun my fifth week working in Finland. Although there are many differences between England and Finland there is certainly one shared problem - competitive tendering.

This problem began in Finland in 2007, after Finland introduced a law on tendering which applied EU procurement principles to health and social care. This means that Finnish municipalities must tender and re-tender services regardless of the views of the people who use those services. So people and families find that their support provider is being replaced, without their agreement.

This policy is supposed to encourage markets, choice, competition and innovation. But in reality the consequence of this policy is very different. When a municipality purchases services it is not creating a market. A true market has multiple purchasers and providers. A municipality purchasing services is not creating a market but a monopsony - a market with only one buyer. This may seem like it is a good thing - government as the one purchaser can use its power to pick the best option. However monopsony inevitably tends to monopoly. As support organisations understand the new situation they change their behaviour:

  • Many go out of business altogether, reducing choice and innovation
  • Many merge with others to make themselves bigger, centralising services
  • Larger organisations buy up smaller organisations
  • Organisations specialise in winning tenders, not by offering the best services, but by successfully completing the relevant paperwork

This policy has certainly not led to innovation or empower in England. Instead we have seen fewer, larger organisations, dominate a phoney market. Winning tenders kills innovation and encourages compliance. The need to grow or repay private investment or loans then forces organisations to maximise profit by cutting the salaries of direct support staff.

It is interesting to note that while England shares exactly the same problems there is much greater concern about the problem in Finland. Today in England most support organisations, charities and advocacy organisations have simply accepted this state of affairs. [Although there are some notable exceptions, for example Children England, lead a campaign to protect the idea of grant funding.] Even worse we are now seeing government using its vast control over services to ban NGOs from speaking out against government policy.

The explanation for this is that England has been using this deathly tendering system for much longer. As my colleagues Chris Howells and Chris Yapp explain in Commissioning and Community Sourcing, since the 1980s, when Mrs Thatcher’s government chose to interpret EU rules in the most extreme way possible. The authors also demonstrate that EU rules themselves allow much more flexibility and local discretion. It is national governments, not the EU, who are encouraging these damaging practices. However, as larger and more commercial organisations dominate the sector they have no incentive to challenge Government or to challenge practices from which they have benefited. In the end tendering kills off innovation and advocacy.

It is encouraging to see that Finnish organisations are working hard to reverse this system and have challenged the inclusion of health and social care services within the tendering system. Families and self-advocates, like Sami Helle, have made their case directly to the EU itself. Speaking to the EU Parliament Sami said:

“We are obliged to surrender to the will of the strong. Big companies, cities and municipalities decide what is best for us. This is about power. Why do I feel a lack of power in my own life?”

My old colleague Peter Kinsella correctly described the current tendering system as a 'reverse slave auction' - people are being sold off to the lowest bidder. In my view this is the central injustice we must address. The problem is not that municipalities are selling off people in the wrong way - the problem is that nobody should be sold off. It is people and families who should be in control of their own lives and their own support. This is a human rights problem.

As I recently explained to the Kvank-network, in England over the past few years, we’ve started to see another way of rejecting tendering. At first some people and families opted out of these contracts, because they did not like the choice government had made. Instead they demanded a personal budget that they could use to purchase their own support. Today we have begun to see that whole contracts can be converted into a system of personal budgets. For example Choice Support converted their own block contract into 85 personal budgets. This led to major improvements in life and efficiency.

If everybody can choose their own support, if everybody has the right to leave any service they do not like, then there is nothing to tender. Instead municipalities (or the new regional authorities that are being established) must simply establish a contract framework where all suitable organisations can offer their support to local citizens.

I think this different way of working could be achieved very quickly in Finland. It was interesting to meet Johanna Mätäsaho, of Kuntien Tiera, who is leading a major national project to create the technology to link together all the commercial contracts and voucher payment systems for health and social care in Finland. It was clear that this system is already designed in such a way that citizen choice could overrule government tendering. The technology now exists to move quickly away from the world of the reverse slave auction.

This article has been translated into Finnish and is available to read on KVPS's website here.


The publisher is The Centre for Welfare Reform.

Ending Tendering in Social Care © Simon Duffy 2016.

All Rights Reserved. No part of this paper may be reproduced in any form without permission from the publisher except for the quotation of brief passages in reviews.