Annex D
Leeds and Suffolk One Pilot Operations
Introduction
This paper sets out Deloitte Consulting's concerns
regarding the performance and funding regimes for the Leeds and
Suffolk ONE PVS pilots. Our experience indicates that the current
performance requirements may, in fact, militate against the overall
objectives for the pilots.
Our concerns are described in more detail below.
In the latter part of the paper we make some suggestions for alternative
approaches.
Observations
Our main observations can be summarised as:
— Pilot or Live Service: the pilots
are unable to operate fully as pilots for the delivery of innovation.
This is because they are in reality being treated as part of the
live operation in terms of both the performance targets and the
approval process for innovation.
— Governance: the approvals process
is severely inhibiting the implementation of innovation. The absence
of any direct control by the Employment Service or Benefits Agency
over the Local Authorities is causing increasing problems with
the implementation of innovation. This issue arises form differing
priorities in place within the Local Authorities. This problem
will not be fully resolved by putting in place a supplemental
contract.
— Contract Management: the contract
management function is directed towards the measurement of all
outputs, as opposed to sampling of outcomes. This is onerous,
costly and adds little value to the quantitative analysis of performance.
The contract management teams in several instances have not delivered
items where there are shortcomings on the part of the core operation.
The estates issues are a good exemplar.
— ORIF Regime: the proposed Output
Related and Incentivised Funding Regime (ORIF) will further inhibit
change and will introduce a punitive payment regime.
— Outcome or Output: the core objectives
of improved job placement performance and improved service to
the public are being eroded by the current regime. This is because
the current regime is focussed on benefit administration. The
homogeneous targets that have been applied are also producing
an impersonal and therefore sub-optimal service.
For the avoidance of doubt the proposals that
we make in this paper are based on the following principles:
— Deloitte Consulting are not seeking
any additional funds for the pilot operations in their current
format. Furthermore, we are not seeking to reduce the risks we
adopted when we entered into this contract.
— Our understanding is that the vision
for ONE is that of a world class welfare-to-work programme with
a strong emphasis on improvement of the outcome for the public
who are served by the programme; work for those who can and accurate
and timely benefit administration for those who are not able to
be placed directly into work.
— Control of change needs to be appropriately
managed to avoid disruption to the live service within the pilot
areas operated by Deloitte Consulting. We understand that it is
essential that service to the public is assured and that discriminatory
or selective service is not introduced.
Pilot or Live Service
The members of the public that we serve in Leeds
and Suffolk are entitled to receive a level of service which is
comparable to that which they would receive if they resided in
a part of the country not served by a ONE pilot. The thank you
letters received by our staff provide evidence that the service
we are delivering exceeds the expectations of some of its customers.
Operating the pilots within the same performance regime as non-pilot
areas fails to recognise the improvement in customer service delivered
by ONE, the reason being that this is not currently measured.
Going forward we would like to see some monitoring
of customer satisfaction. We believe that this will provide a
more accurate and balanced view than simply transferring the Employment
Service, Benefits Agency and Local Authority standard targets
for throughput and output to the pilot areas. The current performance
targets have been applied to the ONE pilots in such a way as to
focus our management of the pilots on maintaining the stability
of core Agency performance, rather than encouraging all partners
in the delivery of ONE to seek to satisfy the customer's needs
in an innovative way. The absence of any customer satisfaction
measure in the performance regime means that there is no counterweight
to this tendency.
The Agency and Local Authority targets are also
vired to the pilot operations without recognition of the impact
of the changes introduced by the pilot. This is likely to produce
aberrant performance data, as implementation of innovation brings
with it the risk of some degradation of service. The approvals,
monitoring and proposed payment regimes militate against the introduction
of innovation by imposing strong financial disincentives. We would
like to see some amelioration to this regime through the understanding
that performance in one area could be vired for delivery of agreed
improved outcomes in another. Whilst some provision has been made
to allow for the amendment of targets to take account of operational
issues and changing priorities, no such easement is proposed for
the core operations. This provides little latitude for local Employment
Service, Benefits Agency and Local Authority management to agree
to rebalancing of performance targets.
Governance
There is not a clear governance structure for
the ONE PVS pilots, with a consequent erosion in the value of
the pilots. The issues have manifested themselves to Deloitte
Consulting in three ways:
— Strong, separate governance structures
are in place in the DSS, DfEE and the Local Authorities. In some
cases, for example the introduction of an integrated web-enabled
electronic claim form, it is necessary to get in excess of fifteen
different teams to agree to a simple innovation for a limited
pilot exercise. A comparable level of approval would be required
for a national roll-out. This process is onerous and places Deloitte
Consulting in the unfortunate position of having to broker agreements
between various Central and Local Government entities. This is
beyond the scope of our obligations and is inhibiting the implementation
of innovation.
— At present the Local Authorities
do not have a contract explicitly covering ONE. Pre-existing service
level agreements with the Benefits Agency have been used as a
proxy arrangement. This has, in the case of Leeds City Council,
exacerbated the difficulties in reaching agreement on issues such
as the introduction of innovation. It has also complicated the
process of reaching agreement regarding secondment and lease arrangements.
In many cases Leeds City Council have felt the need to regard
these items as direct contractual documents, and have conducted
their discussions accordingly.
— The division of responsibility between
the local signatories and the central team in Sheffield is unclear.
Assurances that common requirements for the IT solution would
exist for Leeds and Suffolk have not been borne out. Separate
and costly approvals processes have been necessary for each area.
Responsibility for achievement of consensus with the eight Local
Authorities within our pilots has been unilaterally transferred
to Deloitte Consulting. The Local Authorities are not signatories
to the contract and are asking for separate and conflicting arrangements
in several instances.
In order to overcome these difficulties we suggest
the appointment of an individual—an innovation champion—with
clear authority over all entities involved. This will maximise
the potential to gain operational insights and test innovation
concepts prior to the roll-out of a successor programme throughout
Great Britain.
Contract Management
Local contract management functions have been
established, but are only partially effective. Although the greater
experience of the Suffolk contract manager has been helpful in
improving the effectiveness of the role, there are clear difficulties
in both areas:
— There is a lack of clarity regarding
the role of the contract manager, particularly with respect to
the interface with the ONE Pilot Management Unit and the ONE Expert
Domain in the Commercial Policy Unit (previously the ONE PVS strand).
Although we understand that the Contract Managers have been given
terms of reference, these have not been shared with us and do
not always appear to be clear to the individuals concerned.
— There is a lack of separation between
the functions associated with delivery of auditable and agreed
measurement of Deloitte Consulting's performance and the implementation
of innovation.
— The contract management function
has not been empowered to deliver the Authorities' responsibilities
and issues such as estates and infrastructure present continuing
difficulties some eight months into the operation.
Looking to the future, we suggest the contract
management process is defined in more detail so that a repeatable
and auditable measurement of performance is achieved. Statistically
valid sampling against understood and unequivocal criteria would
enable the contract managers to focus on delivery of value from
the pilot. In the case of Leeds, this could also be expected to
reduce significantly the contract management staffing levels,
from the current arrangement where some 10 staff are involved
in managing a contract which has 120 FTE staff serving the public.
This group is made up of seven members of the Contract Management
Team and three full time co-ordinators, employed by the Employment
Service, the Benefits Agency and Leeds City Council respectively,
all of whom monitor the operation of ONE.
Output Related and Incentivised Funding Regime
The proposed ORIF regime will further inhibit
change and will introduce a punitive payment regime. The funding
regime for the ONE PVS pilots is based on a 15 per cent top-up
of the PSC cost base. The majority of the personnel working in
the Leeds and Suffolk pilots are seconded Civil Servants or Local
Government employees. The staffing levels and concomitant cost
base for the pilots have been set at approximately 100 per cent
of the available funding. We believe that this level of funding
is necessary to achieve the level of service required within the
enhanced model delivered in Leeds and Suffolk.
The proposed ORIF regime will introduce an environment
for the contractor in which short-term operational shortfalls
will leave the salaries of seconded staff unfunded. There is no
reciprocal upside potential due to the cost base and funding regime.
The logical response to the proposed regime will be cost minimisation
through degradation of service and minimisation of innovation.
There will be strong incentives not to implement change, as doing
so will incur the costs associated with the resulting, although
temporary, reductions in operational performance. This environment
conflicts with our understanding of the objectives of the ONE
PVS pilots.
The adoption of more than 15 separate measurements
for performance, along with the passporting approach, will place
a significant burden on the local contract management teams and
the contractor. This will further reduce the possibility of implementing
innovation.
We would like to suggest the adoption of an
open book financial regime with a balanced scorecard approach
to performance management. The open book regime would provide
assurance that there was no unacceptable profit being made within
the pilot operations. This approach would also provide some insight
into the cost base as part of the overall evaluation process.
A measure of delivered service hours' might also provide assurance
that the public are being served by the contractor.
The balanced scorecard approach would allow
the trading of performance in one area for delivery in another.
For example delivery of improved job placements could be offset
against a reduction in the timeliness of completion of benefit
claims, within de minimis limits. This would preserve the overall
strength of the passporting approach.
We would suggest underpinning these two contract
management structures with statistically valid surveys of customer
satisfaction with the ONE service. To date inclusion of a direct
customer satisfaction measure has been considered prohibitively
expensive as an in toto approach has been considered.
7. OUTCOME OR
OUTPUT
The current contractual and operational structure
is not directed towards determination of the most appropriate
way to deliver the stated objective of "work for those who
can and security for those who cannot". This is particularly
clear in the area of job placements, and is exacerbated by the
homogenous targets that have been put in place.
7.1 Job Placements
The current contractual and operational structure
is failing to maximise the potential for substantial improvement
in job placements. We observe a series of complex and inter-related
reasons for this phenomenon. These include:
— Service obligations to complete the
benefit process for job-ready applicants rather than focus on
interview submissions. The welfare element is placed ahead of
the work component of the process. These priorities are also likely
to generate some overpayments for clients who move off the benefits
register swiftly.
— Estates and approvals barriers to
the implementation of self-service job search facilities in the
ONE sites for use by clients and for the provision of Internet
access for staff so that they can expand the range of job opportunities
on offer to clients.
— Legacy IT systems from which we were
effectively denied the opportunity to gain access to data for
the delivery of an integrated office-based system for caseload
management, claims processing and vacancy searches. Although there
were considerable benefits to be gained from use of an integrated
system, it was made clear to us during the bidding stage that
any requests for development of interfaces between legacy systems
and those that we implemented would be subject to the standard
approvals regime; they would need to demonstrate a stronger business
case than other, national initiatives in order to gain approval.
— Contractual obligations that drive
staff to deliver a standard service to individuals with diverse
circumstances.
7.2 Homogenous Output Based Targets
At our meeting the issue of homogeneous targets
producing a standardised and sub-optimal service was raised. To
illustrate this point it is worth examining the three-day interview
target, which forms one of the proposed "passport" measures.
This target is based around the premise that rapid service is
good service. This is undoubtedly true, but with an operation
of the complexity of ONE this is only part of the service mosaic.
In general terms, the citizens served through ONE in Leeds and
Suffolk fall into two groups—those who are job ready and
for whom there is work readily available, and those for whom there
are more complex barriers to employment. The current performance
regime and operation has an output measure at its heart—how
many days pass before the individual receives a one hour meeting
after their initial start-up meeting. This militates against the
work placement and labour market activity targets, which are outcome
based.
Where the individual is job ready, there are
substantial efficiencies to be gained by submitting the person
for interviews at the earliest opportunity. In many cases the
job ready individual is most employable when we first make contact
with them. The downstream savings to the Benefits Agency are well
understood—if a claim for benefit is not initiated the programme
and administrative costs savings are considerable.
Within the ONE operation we would like to test
the hypothesis that diversion of the job-ready individuals will
improve the quality of service for the remainder of the customer
population. The three-day target, combined with over half of the
interview time being spent in benefit claim completion, is preventing
substantial improvements in placement performance.
Our proposed service model would allow advisers
to spend more time at the point of first contact with job ready
individuals. Given the peak workloads on Mondays we would like
to have the option to combine this with late opening on Friday
evenings or Saturday morning opening. If the individual is diverted
directly into work with less than 80 minutes of staff time being
spent with them there will be a net increase in the time available
for individuals with more complex barriers. More careful scheduling
of appointments with expert staff for individuals who are not
job ready will allow the provision of an improved personal service.
It will also allow staff to spend more time with individuals who
have profiles that show they belong to a population with greater
disposition to error prone claims. We would like to test this
model in a limited number of sites initially.
7.3 An Alternative Operational Model
As illustrated, the current operational regime
is not well suited to the development of a pilot of a new service.
At present we have a contract management and performance monitoring
regime designed to be applied to a stable well defined service
model, such as delivery of a particular component of New Deal.
It therefore focuses on how the service will be delivered, rather
than the outcomes that are being sought, and is premised on the
assumption that there will be relatively little need for change
in the course of the contract. This is not the situation in the
ONE pilots. Many of the constraints posed by this approach could
be eased by implementing a performance and compliance regime that
focuses on the delivery of pilot objectives and recognises the
need for agility in responding to opportunities for improved performance,
rather than concentrating on the detailed delivery mechanisms
that are being employed.
8. SUMMARY OF
PROPOSALS
In this paper we have discussed ways in which
the current contractual landscape does not always act in the best
interests of a successful pilot, and on occasion acts as an inhibitor
to innovation. To address these issues we would recommend the
following key changes be introduced:
— A simplified performance regime that
places greater emphasis on customer satisfaction measures.
— Appointment of an empowered innovation
champion in each pilot.
— Clearer definition of contract management
roles and processes.
— Adoption of open book accounting
alongside performance monitoring, based upon a balanced scorecard.
— Streamlined change and compliance
mechanisms that focus upon outcomes rather than outputs.
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