​​Research the provider community

The social services sector is made up of non-governmental organisations (NGOs), for-profit organisations and individuals.

Provider organisations vary in their size and capability - understanding the provider community will help you decide:

• the options to deliver the services
• what the services are likely to cost
• your approach to engaging with providers
• sourcing models, including evaluation criteria and due diligence approaches
• contract design
• contract management requirements and approach.

Where to go for information

Sometimes the best approach to finding information on the provider community is to talk to providers. You can talk to the provider community at any point in the procurement process provided you:

• are fair, open and transparent
• record discussions
• take steps to ensure your integrity, eg, giving the same information to all suppliers, and
• give equal access to all suppliers and treat all suppliers the same.

If you're using an open process, complete your discussions before advertising the opportunity to bid as at that point all contact with providers must be controlled.

You can also:

• draw on your own and your agency's knowledge and previous experience
• put out a Request for Information
• talk to umbrella organisations
• search the internet, the charities register and the Social Sector Contract Register.

Charities register

What to research

Find out about:

• the capability and capacity of the provider community (both commercial and technical), including any workforce development strategies in place
• the number of buyers and their influence on the provider community
• the degree of competition or cooperation between providers
• current prices and costs
• the ownership, size and geographic coverage of the key providers
• changes and trends in the area, as well as local or regional differences
• challenges, tensions and constraints
• the provider community’s perceptions of government and your agency.

One approach is to analyse the provider community by looking at each of its key components:

• structure
• nature of competition
• availability of substitute services
• industry impact assessment
• long-term provider strategy.

Structure

Things to consider when analysing the structure of the provider community:

Relevant provider community

• Identify the provider community segment relevant to your procurement. This will help to focus your analysis and target the right providers.
• Determine the key characteristics of the services.
• Determine whether the provider community is divided into areas of expertise, groups meeting particular needs and/or geographic segments.

Size of the provider community

• Determine the size of the total provider community in terms of dollar value and volume/turnover.
• If the data is available, further analyse by private sector/public sector split.

Key providers and their influence

• Analyse how government expenditure on social services is distributed across the provider community, and what share key individual providers possess.
• This may indicate how influential a provider is, and may also hint at potential dependency issues.
• The number, size, and distribution of providers in a provider community affect your negotiating power.

Concentration of providers

• Find out what number of providers account for a large percentage of the provider community.
• Provider influence is a measure of the strength of a brand, product, service, or organisation, relative to other providers.

Existing ownership structures

• Understand governance and ownership structures among providers. For example, you may think that you are dealing with competing providers in a provider community when in fact one is a subsidiary of the other.
• Knowing whether a provider is purely local or part of a larger national or international organisation may indicate whether major decisions are made in-country or overseas.
• Find out if there are any existing ownership structures or changes on the horizon.
• Possible tools include a Companies Office, Incorporated Societies Register or Charities Register search.

Financial viability

• Investigate the viability of providers, for example by reviewing annual financial statements. Your finance team can help with this. For providers which are charities financial information may be available through the Charities Services website.
• Look at the likelihood of a provider withdrawing from the sector, leading to a more concentrated provider community.

Nature of competition

Understand the ways in which providers compete and work together. This provides essential information about the dynamics of the provider community, including the availability and costs of services now and in the future.

Where providers compete it is typically in relation to:

• types of services
• geographic coverage
• clients (relationships, networks, engagement models)
• specialised expertise whether in services or clients’ needs.

Analysing the market