Voluntary organisations are increasingly competing to win service level agreements (SLA) or contracts in order to deliver services on behalf of another agency or authority. This rise in a ‘contract culture’ has recently seen more voluntary organisations becoming involved in public service delivery. (It is most commonly the public sector that contracts the voluntary sector to deliver services).

There are differences between contracts and service level agreements, the main ones include; SLAs generally relate to specific outcomes or outputs in relation to payment and surplus monies can be ‘clawed back’ if not fully spent, whereas a contract places more liability onto the supplier for any failures in delivery but it does provide the opportunity to make a profit or surplus.

Summarised below are some of the issues that voluntary organisations may need to consider when tendering for contracts. Further reading and professional advice is recommended:

Check the constitution or governing document: an organisation must be sure it has the power to be able to enter into a contract, that the purpose of the contract does not conflict with the main objects of the organisation (this could affect charitable status if the service is not related to the purposes of the charity), that there is a power to employ staff if that will be required, that the organisation has the power to effect appropriate insurance cover etc

The contracting agency may want a representative on the interview panel when recruiting staff*, they may ask for a representative to sit on the organisation’s committee*, they may require that an organisation employs some of their current members of staff and the Transfer of Undertakings (Protection of Employment) regulations (TUPE) may apply, some legislative requirements such as complying with the Human Rights Act or the Freedom of Information Act may pass to the organisation once it becomes a service provider.

Services which have been contracted to a charity can be viewed as trading. Charities are not allowed to trade outside of primary purpose trading (where the activity is a way of directly achieving the charitable objects) so they may need to consider setting up a trading subsidiary. Exemptions may be available if all profits will be used to further the charitable objects but further professional advice is highly recommended.

Ensure that include all costs involved in the delivery of the contract are included. For example, premises, utilities, stationery, telephone and internet, staffing costs, travel, training, management costs, recruitment, monitoring, contingency (for sickness, maternity etc), payroll, personnel, marketing, regulatory costs (audits, health and safety, legal advice) etc. The publication 'Full Cost Recovery - can your organisation survive without it?' is available from ACEVO (see link below).

This information is not exhaustive and further advice is recommended to ensure that you fully understand the implications of contracts and/or SLAs.

* Charities should be sure that these provisions will not affect their capacity to act within the terms of new charity law. For example, a charity's independence of action and the duty of the trustees to act in the best interests of the charity should not be compromised.