Memorandum submitted by Association of
Learning Providers (ALP) (EP 12)
INTRODUCTION
— The Association of Learning Providers
(ALP) represents the interests of a range of organisations delivering
State-funded vocational learning. The majority of our 472 member
organisations are independent providers holding contracts with
the Learning and Skills Council (LSC), and Department of Work
and Pensions (DWP), for the provision of a wide-range of work-based
and work-related learning. Amongst our members we also have a
number of consultants, regional networks, and Colleges of FE in
membership, alongside nearly 50 charities, giving ALP a well
rounded and comprehensive perspective and insight on matters relating
to its remit.
— With regard to DWP provision, we estimate
that ALP members account for around 20% of all DWP-contracted
organisations in England, including half of the Flexible New Deal
(FND) Prime Contractors (PCs), nearly half of the New Deal and
several Pathways to Work Prime Contractors.
— We have built up strong relations at
a wide range of levels within both JCP and DWP and have aimed
to place ourselves as a "critical friend", ensuring
that provider views are adequately represented but also ensuring
that DWP perspectives are accurately passed back to our membership.
We hold two places on the DWP Provision Forum, with a number of
our members also independently attending. Our Chairman and Chief
Executive have had meetings with Secretaries of State within DWP
over a period of time as part of our ongoing high-level interaction.
— Comments from our members pertaining
to your inquiry were invited at an early stage. A draft version
of this paper was circulated to them for comments prior to its
submission, and their responses have informed this final version.
— We believe therefore that we are in an
excellent position to pass comment on the aspects of your current
inquiry that fall within our remit, and we would be delighted
to give oral evidence to the committee should this be required.
SUMMARY
1. The Committee's inquiry comes at a timely
point in the provision of welfare to work services.
2. Although DWP's new commissioning strategy
has been in the public domain for some while, the current introduction
of Flexible New Deal (FND) is its first large-scale manifestation.
Whilst its introduction inevitably brings with it change and uncertainty
in the system, it also brings about an opportunity to do away
with the "old" way of doing things and introduce more
innovative and more effective methods that may have previously
have been inhibited from being embedded because of historical
factors. To take an overview of the approach of contract management
and administration at this point is therefore not unhelpful.
3. In essence, ALP is positive about FND
and the potential for improvement and effectiveness that it brings.
Any change however engenders doubt and uncertainty, and we have
therefore set out in this submission both to highlight where fears
exist amongst the provider base, whilst at the same time taking
a balanced view on whether these may be justified and ameliorated.
We have also suggested some items for further consideration by
the Committee on the back of very recent developments in preparations
for FND's "go-live."
4. The big positive with FND generally is
that it opens up the market and gives an unprecedented level of
flexibility to providers to innovate and deliver what is needed,
rather than being limited by proscribed boundaries. ALP has long
argued for this sort of freedom in the employment and skills delivery
markets, and believe there is a strong possibility of a step change
in the quality and effectiveness of delivery to customers as a
result.
5. We are particularly heartened that some
PCs, in particular A4e and STUK, have as part of their preparations
for FND established robust quality management and continuous improvement
regimes within which their subcontractors will work. The provider
base as a whole has long argued that it is in a better place than
the many outside agencies who have been given this sort of remit
in previous years to understand, establish and implement the changes
necessary to make viable operational improvements to their business.
The fact that PCs are assuming this role on behalf of the many
is a welcome development.
6. Inevitably though with change of such
scale, there are many members of ours who are involved in FND
that harbour reservations and concerns. From the Prime Contractor
(PC) perspective the shift in the payment splits from 20% service
charge to 40% service charge was welcome, as any programme—and
particularly such a new model—requires a high degree of
upfront investment. Given the current economic situation, outcomes
also become that much harder to come by, meaning that the PCs
are taking a fair degree of risk onboard in putting the necessary
levels of investment up to begin with. Therefore for programmes
such as this to be viable to run it is important that a proper
balance is struck between the desire to encourage and incentivise
the attainment of the outcomes required (sustainable work), and
the proper maintenance of a flexible supply base able to respond
to such demand in an efficient manner. At 20%, there were severe
worries about this—at 40% these worries have eased, though
given the state of the economy and the increased difficulty of
finding work for some of the customers that will be feeding into
FND, financial concerns remain paramount.
7. From the subcontractor perspective, they
acknowledge the benefits of not having direct contracts and therefore
accountability to DWP, and the ability to work commercially with
an organisation probably structured much more like themselves.
However there is an abiding concern as to whether they are receiving
a "fair deal" at the hands of PCs, given that it is
actually they who are delivering a very significant part—if
not most—of the actual front line delivery. The question
therefore arises as to what role DWP should play in stewarding
the supply chain to ensure that there is fair play all around
and that delivery is not adversely impacted, and we examine this
a little more in our response. The Code of Conduct, it is felt,
goes some way towards mitigating behaviours between contracting
partners but as yet there is not much evidence that it has enough
"teeth" to resolve serious problems.
8. This therefore leads us to the main theme
underlying our submission—particularly in its early stages,
it is important for DWP to offer reassurance and thereby stability
to the system by staying initially reasonably close to the supply
chain to broker solutions to any disputes or perceived unfairness.
We understand that one of the ultimate aims of DWP is to actually
distance themselves to some degree from supply chain arrangements
below PC level, seeing them as purely commercial agreements, and
they are correct in this to a large extent. However, it is understandable
that all providers are concerned as to how viable and workable
the system will be, and we feel that DWP would be ill-advised
to take this sort of step back at too early a stage until the
system becomes more embedded, effective and familiar to all concerned.
A key way of doing this would be to ensure not only that the Code
of Conduct reasonably covers all points needed to ensure fairness
and stability in the system, but to ensure that DWP's contract
management approach can "police" it and more importantly
be able to act on any breaches in an effective manner.
9. This theme underlies the six broad summary
points that we would like to put forward in relation to this inquiry
in answer to the specific questions put. These are summarised
below and expanded upon in the main body of this document:
(a) The law relating to whistleblowers is reasonable
and fair. We do not feel there is evidence from the welfare to
work sector of a particular need to strengthen it at this time.
(p.7)
(b) Individual customers will have noticed little
as a result of DWP's centralisation of contract management as
it is largely a "wiring move". Although DWP's commissioning
strategy has raised concerns amongst some providers at its implications
for companies at subcontract level, we feel that there are probably
sufficient checks and balances in the system to ensure these fears
do not ultimately materialise and impact upon standards of provision.
(p.9)
(c) Particularly in the early stages of FND,
we feel that DWP would be wise to stay relatively close to the
supply chain in order to give reassurance and stability, with
a view to pulling away (should they wish to do so) as the provision
becomes more embedded and familiar to those in the training infrastructure.
(p.9)
(d) The Customer Charter helpfully brings together
and restates fundamental good practice in an accessible and clear
form. That said, the Code of Conduct, albeit indirectly, will
probably be more important in terms of a positive effect on the
customer experience as by providing business security it will
free resource for front line services. (p.11)
(e) Whilst there are concerns about the system
that must not be overlooked or discounted, we are reasonably confident
at this stage that the format of FND, and the way it has been
procured, will over time mean that the worst of these can be remedied
or found to be baseless. (p.12)
(f) The Committee may like to consider the implications
on delivery of having a supply chain whose terms and conditions
of business are not visible to DWP via its contract management
procedures.(p.12)
(g) ALP would like to see a single, professional
Procurement Agency operating on behalf of a range of Government
departments, and we would suggest that ultimately any Financial
Audit Management activities should fall within the remit of such
an agency. (p.12)
(h) ALP is supportive of the PRaP system which
we believe on balance, and subject to its proper implementation
and use, will be of immense benefit to not only providers but
ultimately customers as well. (p.12)
Is there sufficient protection for employees who
raise concerns about their employers' delivery of a contracted
employment programme?
— The law relating to whistleblowers is
reasonable and fair. We do not feel there is evidence from the
welfare to work sector of a particular need to strengthen it at
this time.
10. The law provides some protection for
whistleblowers and is obviously designed to encourage the use
of official channels within the employer's organisation to raise
concerns rather than having them raised externally at what may
be an inappropriately early stage. To this extent the law is reasonable
and fair.
11. However, one needs only to look at the
internet to find that there is a good deal of concern within the
industry at some of the practices that take place. This might
be seen as an indicator of reasonably widespread unhappiness amongst
the workforce that is perceived to still require a cloak of internet
anonymity to protect the informant. In itself this is because
despite the law's intention to prevent (for example) missing out
on promotion as a result of whistleblowing activity, the feeling
is that this still happens, and resorting to the use of the law
to remedy it is expensive, stressful and time-consuming.
12. This view, whilst containing more than
an element of truth, does need to be heavily qualified however.
Looking at the messages posted by disaffected employees on websites
such as Indus Delta does often give the impression that many are
the result of individual grievances and prejudices rather than
evidence of any material or significant institutional wrongdoing.
It must also be borne in mind that despite the sector being the
subject of repeated, extensive (and often duplicatory) audits
by a variety of bodies, the instances of fraud are still relatively
speaking extremely low. Recently two instances amongst high-profile
companies were highlighted by mainstream media in fairly sensationalist
terms, but it only took a fairly cursory look below the surface
of the story to find that they related to specific individuals
in a specific place at a specific time; that the problems were
actually detected as a result of the proper audit processes working
as they should; that the activities had taken place around two
years previously; and that DWP had already investigated and found
no evidence of any systematic and/or institutional fraud being
undertaken.
13. The question here is whether such activities
could or should have been exposed earlier as a result of whistleblowing,
and whether the current legal protection did enough to encourage
that. It is difficult to say without reference to a good deal
more facts about these particular cases, but what can be said
is that the inbuilt audit processes can be evidenced in this case
to have done their job and found what needed to be found at a
major contractor and that no wider problems have been exposed.
This would tend to lead to the conclusion that in this case the
malpractice was probably reasonably well-concealed from any wider
circle of employees.
14. In short, the protection afforded to
whistleblowers is seen as reasonable and fair, but well-intentioned
rather than being particularly robust. There does not however
appear to be any evidence in the welfare to work sector at present
that strengthening it would be either an appropriate or desirable
move, as the levels of fraud relative to the size of the contracts
involved are very low, generally self-contained, and do generally
seem to be picked up as a result of audit processes working as
they should. There will always be grievances held by individuals,
and disagreements about the approach of a company to its customers—but
it tends to be these sort of complaints that find their way on
to the internet under its cloak of anonymity, and these are a
very different thing to the sort of malpractice that whistleblowing
is generally designed and understood to relate to.
How has the centralisation of contract management
in DWP impacted upon the role of Jobcentre Plus and both provider
and customer experience of outsourced employment programmes?
— Individual customers will have noticed
little as a result of DWP's centralisation of contract management
as it is largely a "wiring move". Although DWP's Commissioning
Strategy has raised concerns amongst some providers at its implications
for companies at subcontract level. We feel that there are probably
sufficient checks and balances in the system to ensure these fears
do not materialise and ultimately impact upon standards of provision.
— Particularly in the early stages of FND,
we feel that DWP would be wise to stay relatively close to the
supply chain in order to give reassurance and stability, with
a view to pulling away (should they wish to do so) as the provision
becomes more embedded and familiar to those in the training infrastructure.
15. There is certainly a difference in approach
between DWP centrally and JCP in their contracting processes as
a result of the Commissioning Strategy. In particular, the movement
to a strongly Prime Contractor-centred approach means that much
more provision will be of a subcontracted nature as opposed to
being directly under the hand of DWP. However from a customer
perspective this would be a very subtle difference and at an individual
level would probably be virtually undetectable, as it has largely
been a "wiring move" rather than anything particularly
customer-facing.
16. This does however mean that actual delivery
of provision takes place at more of a distance from DWP than was
the case in previous CEP incarnations. Whether or not this is
a good thing is a matter of some debate amongst the provider base.
On the one hand it can be argued that given a robust procurement
regime that selects strong and suitable Prime Contractors who
are ultimately held accountable for this delivery, there is no
reason why this should be a problem—many providers would,
if directly asked in these terms, probably prefer to be contract
managed by an independent company than by the State. On the other
hand there is a danger that such "distance" from the
front-line can mean that DWP begins to lose first-hand experience
of delivery of their own provision in some cases. Certainly some
subcontractors—particularly those who do not also hold Prime
Contracts—have expressed fears at being left at the behest
of, and commercially exposed to, their direct competitors with
little apparent recourse to dispute mediation.
17. This therefore brings into play the
issue of the effectiveness of the Code of Conduct which governs
relationships between subcontractors and PCs (and for that matter
between DWP and the market as a whole). DWP's proposed "stewardship"
of the supply chain, rather than any active intervention in it
on their part, still gives cause for concern to some providers
who fear the repercussions of a market dominated by a few very
large PCs. As contract management of the supply chain will be
carried out by the PCs themselves, this "distance" from
DWP could, it is feared, lead to inaccurate perceptions of subcontractor
abilities when it comes to recontracting, putting them at a commercial
disadvantage.
18. For example, there have been concerns
expressed at the possible absorption of innovative subcontractor
delivery ideas into overall PC provision, eroding any commercial
advantage that the subcontractor may have held. This may mean
that some innovations do not get implemented fully for commercial
reasons, which of course would be to the detriment of the customer.
19. In general terms however, ALP feels
that whilst such fears should not be overlooked or discounted,
the fact that so many Prime Contractors also act as subcontractors
in other contract areas in itself provides a form of check and
balance to the system. Particularly in the early stages of FND,
we feel that DWP would be wise to stay relatively close to the
supply chain, in order to give reassurance and stability more
than anything else, with a view to pulling away (should they wish
to do so) as the provision becomes more embedded and familiar
to those in the training infrastructure. It is important therefore
that the Code of Conduct is seen to be reasonable to all parties,
and crucially to be enforceable—to "have teeth".
CEP is a vital part of the company's economic management tools
and changes to it should not be undertaken lightly, and we feel
that a strong Code of Conduct will go a long way to stabilise
the system following the changes it is now undergoing, and put
to rest many of the fears currently being aired.
Will the customer charter proposed by DWP ensure
that customers, Jobcentre Plus and contractors know what they
can expect of employment programmes?
— The Customer Charter helpfully brings
together and restates fundamental good practice in an accessible
and clear form. That said, the Code of Conduct, albeit indirectly,
will probably be more important in terms of a positive effect
on the customer experience as by providing business security it
will free resource for front line services.
20. There is nothing inherently wrong with
the Customer Charter, which sets out some clear basic rights and
responsibilities. It is clear, simple and easy to understand,
and the principles it espouses are applicable to DWP, JCP and
its contractor base. Any customer will be able to clearly understand
the basics about what they can expect from DWP (and its associates)
and also what is expected of them.
21. However posters on a wall do not of
themselves facilitate positive behaviours. The output is the real
objective here—to ensure that all concerned know what is
expected and from whom. One respondent noted that "we should
make it obvious from what we do what the Charter is, rather than
having to have it up on the wall to spell it out." This means
that staff themselves should be clear at the outset of dealing
with a customer what any part of a process entails and what is
expected of whom, and that organisational administration and paperwork
also make this clear at every stage. There is of course nothing
wrong with having these basic principles restated in a visual
form in an accessible location, but no-one should get too fixated
on the production of a statement as opposed to actually making
something beneficial happen.
22. Indirectly, it is once again probably
the Code of Conduct that will ultimately be the best enabler of
how well or otherwise programmes are delivered. If the contracting
relationship between DWP, its PCs and their subcontractors is
sound, secure, fair and stable then this enables providers to
better concentrate on all aspects of delivery, and the customer
experience is therefore better. Therefore although the Charter
is not in itself a bad thing, in effectiveness terms it is more
important to get the Code of Conduct right—ie the relationship
between the contracting parties—and to give it "teeth"
to ensure it is taken seriously.
Will contract management in the prime contractor
model be transparent and effective in monitoring quality throughout
the supply chain, and in maintaining a role for sub—contractors?
Does DWP's contract management approach ensure
the quality of service received by customers is commensurate with
the level required under the contract terms?
— Whilst there are concerns about the system
that must not be overlooked or discounted, we are reasonably confident
at this stage that the format of FND, and the way it has been
procured, will over time mean that the worst of these can be remedied
or found to be baseless.
— The Committee may like to consider the
implications on delivery of having a supply chain whose terms
and conditions of business are not visible to DWP via its contract
management procedures.
— ALP would like to see a single, professional
Procurement Agency operating on behalf of a range of Government
departments, and we would suggest that ultimately any Financial
Audit Management activities should fall within the remit of such
an agency.
— ALP is supportive of the PRaP system
which we believe on balance, and subject to its proper implementation
and use, will be of immense benefit to not only providers but
ultimately customers as well.
23. As outlined earlier, there are some
fears amongst the provider base—particularly amongst those
who are operating as subcontractors only and do not hold prime
contracts—as to whether the contract management approached
opined up to now by DWP will either reinforce the supply chain
or ensure the quality of the customer experience.
24. Whilst DWP's contract management of
its PCs looks workable, the question that consistently arises
is exactly how visible will subcontractors—and therefore
the largest part of actual delivery—be to DWP? How will
they be able to judge whether relationships with sub-contractors
are working to their full potential, and whether they are of the
nature that was initially agreed in the tender that was accepted
and which of course formed the basis of the contract? Certainly
there have been such issues under the existing New Deal arrangements,
and with the enlargement of both contract sizes and areas under
the FND, many providers are concerned that these will recur from
October but on a larger scale.
25. The result of such fears could be a
stifling of innovation, which would be a great pity, as FND gives
providers for the first time the freedom to innovate like never
before. If this freedom is not fully exploited because of structural
fears about the functioning of the system then this would be a
great opportunity lost. It is important therefore that DWP's stewardship
of the supply chain is robust enough to allay such concerns and,
where appropriate, mitigate the worst effects of any such moves
where they might occur.
26. There is also the fact that the vast
majority of supply chain contract management will be, naturally
enough, the responsibility of the PC. There is no particular reason
to doubt that the individual systems of contract management in
each contract area will be effective, but for subcontractors delivering
to more than one PC there potentially could be difficulties in
accommodating differing systems.
27. We are however drawn to the fact that
the overall infrastructure involved in delivering FND (in this
instance) is a mixed bag of providers who are by turns Prime Contractors,
subcontractors, or often both. Therefore all concerned are going
to be subject to much the same range of pressures and difficulties,
which we feel actually gives a hidden strength to the supply chain
by providing an inbuilt balance. Although there are fears that
a very few companies could become totally predominant, in actual
fact if this happens it will be because they have found ways to
economically and efficiently handle the conflicting demands that
the system presents. Over time the worst of these pressures will
be highlighted and addressed because the experience of them will
be coming from a variety of perspectives, allowing better and
more comprehensive solutions to be devised.
28. Therefore, ALP feels that whilst there
are indeed some weaknesses and concerns in the system that must
not be overlooked or discounted, we are reasonably confident at
this stage that the format of FND, and the way it has been procured,
will over time mean that the worst of these can be remedied or
found to be baseless. As far as future CEP goes, it would be wise
for FN Phase 2 to continue to ensure that the infrastructure
is comprised of companies with permutations of PC and subcontractor
contracts and be alert to growth purely on the back of only one
type of contract, which may allow many fears to gain traction
again with concomitant undesirable effects on performance.
29. The recent announcement of reductions
in the projection of referrals to the Flexible New Deal Phase
1 areas of up to 40% also highlighted an interesting development
in the supply chain which may be worthy of the Committee's attention.
One FND prime contractor, with commendable honesty and transparentness,
decided to share the letter they had received from DWP in its
entirety with their subcontractors in order to keep them fully
informed of developments. However they also inadvertently thereby
informed them that whilst the PC's contract with DWP had a tolerance
level of 40% either way built into the projected volumes for payment,
they had only passed on a 15% tolerance to their subcontractors.
Some of the subcontractor base therefore felt they had been somewhat
misled by the PC.
30. The details of why this is important—and
potentially disadvantageous—to the subcontractor are technical,
and would require reasonably lengthy explanation to unpack, none
of which would ultimately help to illustrate the overall strategic
point which is more pertinent to this submission. Suffice to say
that subcontractors feared that as a result of these arrangements
there was a possibility that their PC would not be technically
required to pass on the payments they had received from DWP for
work actually undertaken by the subcontractor. Some have pointed
out that as the DWP Code of Conduct states that "Funding
should be on a basis that is fair to the different organisations
involved and reflects relative ability to bear particular risks",
they believe that the PC is therefore working in contravention
of this clause. This has bred mistrust of the PC's motives and
doubts as to exactly how involved in FND some subcontractors want
to be.
31. The overarching point that this particular
situation illustrates is that it is doubtful whether these arrangements
would have come to the notice of DWP, and therefore been flagged
up as a potential risk to front-line delivery, without a well-intentioned
but inadvertent slip on the part of one of their Primes—certainly
subcontractors we have spoken to do not believe that DWP's contract
management structure would have identified it as things currently
stand.[51]
A further concern is that even if it had identified it, there
seems to currently be no third party mechanism in place to actually
resolve the issue. Considering the amount of front-line delivery
that the subcontractor base is responsible for, the fact that
some believe they have been misled into accepting a disproportionate
amount of risk should be of concern; and yet the Code of Conduct
looks a little toothless as a means of redress.
32. The fact that the contract management
structure would probably not pick issues like this one up is of
concern to some, and illustrates the distance between DWP and
its supply chain. The central question here is therefore whether
DWP ought to be more heavily involved in overseeing or in some
way mediating in such arrangements.
33. The overriding argument used to distance
DWP from such intervention is that PC/subcontractor terms are
a purely commercial agreement between two independent companies,
and that DWP's concern is purely about whether or not the PC delivers
on its contracted promises. However, the issue does have echoes
of long-running disputes between independent providers and some
Colleges of Further Education who, when franchising courses, passed
on disproportionate and disadvantageous terms of delivery to the
subcontractors. Whilst this did have the effect of reducing unit
costs to the College and thereby increasing surpluses, it is not
at all clear how much benefit accrued to the State, and indeed
many good providers withdrew from, or never entered, the franchise
market because of the reputation of such agreements.
34. Whilst occasional instances of such
problems still arise from time to time, it is now nowhere near
the level it once was, and delivery of skills programmes have
benefited as a result. It would be regrettable to see such problems
being inadvertently introduced into the DWP supply chain, where
the importance of subcontractor delivery is absolutely central
to the delivery strategy, when experience so clearly warns against
it. The Committee therefore may like to consider the implications
on delivery of having a supply chain whose terms and conditions
of business are not visible to DWP via its contract management
procedures.
35. The recent movement of Financial Audit
Management (FAM) responsibilities into DWP does however look encouraging,
with its proclaimed intent to move away from a "tick box"
approach to auditing with a more refined systemic analysis approach.
The move to have a fixed team allotted to each provider, as opposed
to organising on a regional basis, is also to be welcomed as it
will give a closer understanding of the contractor base, its structure
and its operation. Of course, the ultimate success of such a move
will depend on the expertise of the DWP staff concerned with each
provider but DWP do appear to be investing suitable time and resources
to ensure these are of a suitable standard. That said, the ALP
policy is to move to having a single, professional Procurement
Agency operating on behalf of a range of Government departments,
and we would suggest that ultimately any FAM activities should
fall within the remit of such an agency.
36. The development of the Provider Referrals
and Payment (PRaP) system is also widely welcomed in the provider
community as being long overdue. However there is some concern
that a lot is being expected of it in a short time, especially
given the size and complexity of contracts about to be introduced
into the system that it will be expected to handle. Some subcontractors
are also unhappy that they will have no access to this program,
but will instead have to depend on the PC's own systems in order
to administer referrals and payments. This may well mean that
although the evidential collection burden on PCs is reduced, this
may not in some cases fully pass down to the wider provider base.
This is an important point on several levels as regards the customer
experience, as unnecessary administrative burdens and costs will
divert resources away from front-line delivery. We are however
supportive of the PRaP system which we believe on balance, and
subject to its proper implementation and use, will be of immense
benefit to not only providers but ultimately customers as well.
October 2009
51 That said, work is underway via the Merlin proposals
to build a robust contract management structure which may look
more closely at commercial arrangements with subcontractors. Back
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