In the UK outcomes based contracting models lead to the issuing of larger contracts which primarily benefit large corporate prime contractors.
Outcomes based contracting has the effect of forcing smaller agencies out of public procurement processes.
This report is from the UK online publication Third Sector
Heather Wilkinson, chief executive of Striding Out, which provides career support and training, told Third Sector her organisation had been affected by changes to the way government departments commissioned contracts for the Work Programme, the Skills Funding Agency and the National Citizen Service.
"The challenge is that these departments are now only looking to work with large corporate prime contractors with a view to only issuing bigger contract values, and they are paid-by-results models."
Striding Out had been in talks with a prime contractor about NCS services, she said, but "due to its profit margins, the money it offered us for delivering our element of work was unviable".
"The money is there and the contract opportunities are there, but the problem is that we cannot get to them," she said.
"I don’t feel there have been fewer opportunities, but our ability to bid competitively and fairly has been reduced."
James Allen, head of public services and partnerships at the National Council of Voluntary Organisations, said the introduction of payment-by-results contracts, such as those offered to charities under the Work Programme, had proved particularly problematic.
"Payment-by-results is a significant barrier to organisations bidding for contracts in the first place," he said.
"The problem is moving from a model of upfront payments and grants straight to payment-by-results without the transition being skilfully managed. Organisations are already under pressure and margins are tight. They won’t bid because they cannot take the risk."