House of Commons - Management and Administration of Contracted Employment Programmes

Management and Administration of Contracted Employment Programmes - Work and Pensions Committee Contents

4 Vulnerable Groups

Creaming and Parking

100. Providers are increasingly being paid by results, on the basis of the number of customers moving into work, rather than a flat fee. There are two particular risks associated with this approach. The first is that of 'creaming', where contractors who are paid by results are likely to concentrate their efforts on those participants who are closest to the labour market and more easily placed in a job. The second is that of "parking" where participants who are deemed furthest from the labour market will receive a bare minimum of services and are unlikely to make any progress whilst participating in a programme. In this way providers seek to maximise their profit, focusing on customers who will earn them outcome payments, while spending as little as possible on customers who will not.

101. There is evidence that creaming and parking is taking place in the Pathways to Work programme. Research by the Department found that provider staff felt that the focus on performance targets influenced their behaviour with clients, to the extent that they spent less time than required with people with multiple barriers to work (and perceived as harder to help). They also felt that they needed to encourage job ready clients to take jobs that would enable a swift return to work, rather than take lengthier routes towards jobs that they wanted.[102]

102. In addition, most providers who took part in the research perceived that clients were, on the whole, harder to help than they had anticipated and some staff expressed concerns that this had also led to job outcome targets being prioritised ahead of clients' wellbeing and ability to sustain employment.[103]

103. Contracts are designed to allow providers to make a profit when they meet targets. While providers are not paid for meeting targets, a provider that is not meeting targets will be receiving fewer outcome payments than they had anticipated. This can lead to pressure to cut costs, for example by offering less help to those unlikely to move into work and gain the provider an outcome payment. Our previous report noted that "FND targets would require a 37.5% improvement in job outcome performance over what has been achieved by DWP contractors in the past, and this is to be done with a significant reduction in funding compared to the best performing DWP programmes".[104]

104. In oral evidence, the Minister, was asked about creaming and parking in general (rather than specifically in Pathways to Work). He said that tackling the problem was complicated by those customers who might be happy to be parked:

It is very important to listen to customers, but because of precisely the point that you raise, that there is the potential for a bit of comfort on both sides—that there might be some customers who will be quite happy to be parked and there might be some contractors who will be quite happy to park them—we need to ensure that is not happening, […] the customer charters and all that are not going to expose that particular problem because there is an area of complicity about that. [105]

105. We were disappointed, but not surprised, to hear of evidence of "parking" on Pathways. We also note the evidence that this was linked to pressure from managers after it emerged that previously agreed targets were unrealistic. As we noted in our previous report the targets for FND are very challenging. The Department needs to focus on ensuring that this pressure does not result in customers being parked.

The "accelerator model"

106. The FND payment structure consists of a service fee and an outcome fee. However providers get the same outcome fee for every customer who moves into work, even though some customers are much closer to the labour market than others. An alternative payment structure is the "accelerator model". Under this model the provider receives increasingly large payments per customer as they move more people into work. The idea is that, although it gets increasingly difficult to move people into work (as those who are closest to the labour market will move first) the increasing payments mean it should always be in the provider's financial interest to provide the additional help that the next customer needs. If the payments accelerate at the correct rate it should not be in the provider's financial interest to "park" anybody. In our previous report we welcomed the Department's commitment to pilot the "accelerator model".[106]

107. In oral evidence to this inquiry, the Minister told us that alongside robust contract management he saw the "accelerator model" as the solution to creaming and parking, particularly for those customers who were happy to be parked and would not complain.[107] The Department had previously told us that it was looking into the feasibility of piloting the "accelerator model" in the Personalised Employment Programme Pilot.[108] The Minister told us that that the Personalised Employment Programme Pilot would include the accelerator model and would start in 2011.[109]

108. The Department has told us that it will try and prevent "parking" through the contract management system. However we believe that incentivising contractors to work with all customers is crucial. We again welcome the Department's plan to pilot an accelerator model of payment and call on it to keep the Committee updated on its progress.

Cost of helping disabled people

109. RNIB and the National Autistic Society (NAS) both submitted evidence that raised concerns about the needs of disabled people. NAS was concerned about the parking of people with autism. They felt that given the high cost of moving people with autism into work it was "crucial that there is rigorous monitoring of prime contractors".[110] This monitoring would have to include monitoring results by impairment. RNIB agreed that contracts which were let on a regional level for all disabilities tended to lead to people with disabilities like sight loss missing out, because they were a small group who needed specialist help which was often expensive. RNIB quoted figures from a range of DWP programmes showing poorer outcomes for people with visual impairments.[111]

110. NAS were also concerned that prime contractors would not offer enough money to sub-contractors to allow them to help people with autism:

[...] whilst many prime providers rely on specialist sub contractors to deliver support to those with more complex needs we are concerned that the price offered will lead to specialist providers being forced to either deliver support at a loss or leave the market. These concerns are based on the fact that those prime providers motivated by profit will bid for the contract using costings based on the profit margin that would occur through supporting the minimum number of clients into work.[112]

111. BASE said that its members had already experienced problems with money, particularly in the new Work Choice programme, which is still out to tender. Work Choice (previously the Specialist Disability Employment Programme), will replace WORKSTEP in providing specialist employment support for severely disabled people:

We are aware of prime providers offering subcontracts with a 30% management fee deduction. […] The new Work Choice programme anticipates a higher level of outcomes despite reduced funding. This is compounded by the new contract management costs being taken from delivery funding rather than DWP management budgets. We believe that this will drive provision away from the harder to help clients.[113]

112. BASE also has evidence that prime contractors are not aware of the needs of, and their duties toward disabled people:

An event in the south east of England found that only one shortlisted prime provider knew what PSA16 was about.[114] Indeed, some said that they would refer such customers to local authority provision. This is extremely worrying for a programme whose primary focus should be to meet the needs of the PSA16 disability groups. Indeed, DWP has just issued a note to prime providers to remind them about PSA16. BASE is concerned that the shortlisted prime providers do not fully understand the needs of the PSA16 customer group and that their anticipated outcomes and costs may not be wholly realistic.[115]

113. However, we also heard that some prime contractors were offering more money to subcontractors working with the hard to help than they were receiving from the Department. Mr Lester, Vice Chair, ERSA, and Director of Operations, The Papworth Trust. said:

I know a number of providers who deliberately and explicitly stream the customers. […] they will identify customers in different levels of support and they pay for that accordingly. In the Papworth example, Papworth are paid by a couple of our prime contractors at a rate which is greater than they receive from DWP because Papworth is only dealing with those people who are further from the labour market than others.[116]

114. Mr Murdoch, Chair, ERSA and Executive Director, A4e told the Committee that prime contractors understood they were expected to offer subcontractors more than the Department's outcome fee for moving the hard to help into work:

You need to understand that within the programme that FND was designed for there will be customers that you pay far more than the average as well as others you invest less in. That is the nature of the prime contractor within that so picking partners where you invest in their services to move those people into sustainable jobs.[117]

115. We were very pleased to hear that some prime contractors were offering subcontractors these higher outcome payments. However, we have heard evidence of parking on employment programmes. We do not believe that the Department can rely on the altruism of these prime contractors to ensure that these customers are not parked.

116. We were very pleased to hear that under Flexible New Deal some prime contractors were offering higher outcome payments for the harder to help than they themselves receive from the Department. However the Work Capability Assessment is leading to more people with health problems on Jobseekers Allowance, and to a higher proportion of the severely disabled on Employment and Support Allowance. This will lead to providers needing to work with customers with more severe barriers than they had anticipated. The Department must work with providers to ensure appropriate support is provided for these customers.

THOSE THAT PROGRAMMES DON'T SERVE WELL

117. Mr Murdoch told the Committee that despite some prime contactors offering higher outcome payments for the harder to help, there were still those that FND would not help:

Those people who have more long-term conditions that are furthest away from the labour market we must look at how we fund the interventions to help those people enter sustainable jobs and that is key. The funding for Flexible New Deal will not be appropriate for those with higher barriers to cross.[118]

118. Mr Lester agreed, telling us:

We are absolutely certain that the employment programmes that exist are good for the people they are designed to serve. We are equally certain there are a whole bunch of people who do not get served by those programmes and that worries us[…]. There are people who do not get the right support. That is a statement of fact; it is not a criticism of those programmes that exist because those programmes that exist work well.[119]

119. Mr Lester said that Papworth Trust had estimated that there were between half a million and one million people who were not properly served by any of the Department's programmes, including FND.[120] The Minister rejected this saying that "I am not sure I do recognise that figure. FND providers have responsibilities to deliver a service according to the individual needs of the customers that are referred to them".[121] He went on to acknowledge that the introduction of Employment and Support Allowance had changed the profile of Jobseekers Allowance claimants "a little" but said that "our expectation is for FND providers to be able to deal with that, at times perhaps working with some of [our]other programmes."[122]

120. Providers have told us that for those with the greatest barriers to work Flexible New Deal funding is not appropriate. One provider told us that there are over half a million people who are not served by current DWP programmes. We call on the Department to investigate the issue, and to supply the Committee with its estimate of how many people are not served by current programmes, and details of the measures they are taking to ensure that FND and other programmes cover all those who need help.

DWP monitoring

121. The Department can collect data on provider's provision for people with disabilities in a number of ways. Monitoring involves regularly collecting management information and collating it to find out how many people with disabilities move into work. It may be possible for detailed information to be collected either on the basis of a customer's specific impairment, or more broadly by impairment group, for example physical disability, sensory impairment or mental health problem. Another option is an evaluation, a one-off study of the quality and impact of service provision for people with disabilities. In addition the Department should use the contract management system to look at what services are on offer for disabled people, and assess whether they are of good quality.

122. NAS thought the solution to ensuring that providers helped all groups was close monitoring by the Department to ensure prime contractors had contracted specialist provision:

Without tighter monitoring of the relationship between prime contractors and subcontractors, those with the most complex needs are likely to miss out on specialist support. If prime providers are to successfully engage with sub contractors it is important that there is a strong Code of Conduct governing this relationship.[123]

123. RNIB was also concerned that while job outcomes were important they should not be the only outcome monitored:

This is particularly true in terms of the progress made by those people who do not obtain a job and even amongst the top performing providers it is likely that these clients may represent the largest single cohort.[124]

124. In oral evidence ERSA said that they welcomed monitoring of outcomes for different groups. Mr Murdoch said that:

from ERSA's perspective, capturing that data and responding to that is going to be key. It is our aim to make sure we do not leave any customers behind […] gathering that data needs to be a core aim for DWP to give us feedback. That is the stewardship role. If there are people being referred to FND who are not getting the service they deserve, are they appropriately referred? Why is the budget not available? Those questions need to be answered.[125]

125. The Department said that its evaluation of FND will include monitoring the outcomes for sub-groups of customers. However, in oral evidence Mr Cave from DWP clarified that there would not be a stream of management information classifying people by impairment or disability. [126] In oral evidence, Mr Davies from BASE told us that Work Choice, despite being a programme specifically for disabled people, may also not have monitoring by impairment:

I have heard talk that it may be resisted as micro-management of providers. Certainly BASE will push very hard, along with some of the national charities, to make sure there is some in-depth evaluation of the Work Choice programme to make sure that specific disability groups are not missing out, people with significant mental health needs and with moderate to severe learning disabilities and so on. There is a concern that we are going to capture that data in enough detail to be able to tell.[127]

126. The Department has told us that it is confident that Flexible New Deal will meet the needs of all customers, including all those moving from Incapacity Benefit onto Jobseekers Allowance. We also note the range of measures it is taking to prevent parking. However, as the Department will not be collecting management information by impairment, it will not know whether these measures are working. The characteristics of those claiming Jobseekers Allowance are changing and there are increasing numbers of people with health problems and disabilities receiving the benefit. The Department must recognise this and ensure that the evaluation of FND examines the impact on different impairment groups. In addition the contract management process must pay close attention to what services providers are offering people with disabilities. If problems emerge then monitoring by impairment should be introduced.

127. We were concerned to hear that there may not be monitoring by impairment on Work Choice. This is unacceptable in a brand new programme specifically designed for severely disabled people. We call on the Department to introduce monitoring by impairment groups for the first two years; progress can then be reviewed.

102 Katharine Nice, Jacqueline Davidson and Roy Sainsbury, Department for Work and Pensions Research Report No 595

Provider-led Pathways: Experiences and views of early implementation, 2009 p 95 Back

103 Katharine Nice, Jacqueline Davidson and Roy Sainsbury, Department for Work and Pensions Research Report No 595

Provider-led Pathways: Experiences and views of early implementation, 2009 p 95 Back

104 DWP's Commissioning Strategy and the Flexible New Deal, Second Report of the Session 2008-09 p 24 Back

105 Q116 Back

106 Second Report of Session 2008-09, HC 59, para 117 Back

107 Q116 Back

108 DWP's Commissioning Strategy and the Flexible New Deal, Second Report of the Session 2008-09 p 34 Back

109 Q116 Back

110 Ev 69 Back

111 Ev 44-5 Back