Are transaction costs sufficiently accounted for in efficiency calculations?
There is potential for transaction costs to be lowered under the DWP’s new commissioning model. The department will have to manage fewer relationships, and prime contractors ought to be able to take a lighter approach to their relationships with smaller providers (who will often be third sector organisations, some of them very small community groups). However, this potential is not being realised to the extent that it could, because of the inefficiency of the way in which potential prime providers and potential subcontractors currently interact. Potential subcontractors have to deal with a large number of potential prime contractors, each with different processes for selecting delivery partners. One ACEVO member had to write 21 expressions of interest to subcontract in just 3 phase 1 flexible New Deal areas, all asking for similar information in different formats. Another ACEVO member estimated that one expression of interest required around 4,000 words. Streamlining different prime co
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