Study Finds Welfare Tenders Favor Private Firms Over Nonprofits
A new study by the Yessodot Institute, commissioned by the Ministry of Welfare, reveals that current tender structures for social services may unfairly benefit private companies over non-profit organizations (NPOs). The research, authored by Nui Brint, Liron David, and Shiran Reichberg, highlights that tenders do not adequately account for the differing goals, operational methods, and legal constraints of these entities.
Israel has undergone privatization in many sectors, including social welfare, since the 1980s, with the state now primarily acting as a funder and supervisor. However, the study argues that the social welfare sector has unique characteristics, such as the difficulty in measuring service quality and the potential conflict between long-term care or client well-being and private companies' profit motives, which do not fit a standard competitive model.
Currently, tenders do not significantly differentiate between NPOs and private firms. The research emphasizes the distinct advantages of NPOs, including higher motivation for social change, reliance on donations and volunteers that reflect their social commitment, and legally restricted assets that must serve their mission. In contrast, private companies face fewer restrictions regarding salaries, investments, and loans, and have more lenient accounting requirements, giving them a competitive edge.
The study also points out that tender structures often favor short-term contracts, undermining continuity of care for service recipients and job security for professionals. The rigidity of tenders can hinder the rapid, adaptive responses needed in emergencies, and they often fail to incorporate the principle of "nothing about us without us," which mandates the involvement of service recipients in decision-making.
Drawing on practices in the UK, Sweden, and the Netherlands, the study suggests adopting "strategic procurement" to advance social goals alongside service delivery. Recommendations include favoring NPOs in certain tenders, restricting private companies from specific service areas like child placement and adoption, and implementing profit limitations, leverage restrictions, and greater involvement of service recipients and social organizations in the procurement process.
