The Work Programme: Providers and contracting arrangements

Written evidence submitted by Dorset County Council on behalf of CEDOS / ADEPT

Introduction to submitter

This evidence is submitted by Dorset County Council’s Environment Directorate on behalf of the Society of Chief Economic Development Officers (CEDOS) and the Association of Directors of Environment, Economy, Planning and Transport (ADEPT). Local authorities have extensive involvement in the delivery of Welfare to Work and re-skilling programmes, matching strategic development with local need. This memorandum includes evidence gathered in consultation with Economic Development Officers from Hampshire and Somerset County Councils and other local authorities.

1. General Comments

Whilst the concept of a simpler, unified approach to welfare provision is welcomed, the short time frame for development and implementation of such major, costly reform, and ‘commercial’ nature of the proposed Work Programme is of considerable concern to CEDOS and ADEPT Members.

A key issue, the lack of engagement with local authorities, is felt to have placed limitations on the potential for the programme, and fails to recognise local authorities’ extensive experience in delivering economic development functions, and cost effective employment related services. The recent ‘Future Jobs Fund’ demonstrated local authorities’ ability to rapidly develop and deliver high quality, outcome based ERSS / Welfare to Work programmes through extensive networks and community partnerships, generally with very low organisational overheads.

Although many local authorities would welcome the opportunity to develop and deliver innovative Welfare to Work programmes in partnership with local communities, the current Work Programme proposals largely preclude this. The model of ‘regional’ prime providers delivering through commercially driven supply chains favours profit driven national / multi national companies. This places local authorities in a difficult position, particularly as a sub contractor potentially working for a commercial organisation.

There is, therefore, a risk that the extensive network of placement providers built up by local authorities and other providers of the Future Job Fund could be lost and their subsequent disillusionment could adversely affect their commitment to successor schemes. We are particularly concerned that the Government are proposing such a fundamentally different model for delivering Welfare to Work without at first carrying out pilot work to establish the most efficient and effective service delivery solution. This approach appears contrary to other Government initiatives such as the National Citizens’ Service which is being piloted before national roll - out.

2. Management of the Procurement Model to achieve high quality outcomes

Clearly, the development of a procurement model for a programme of this scale and nature is problematic, however greater consultation and engagement with local authorities would have been welcomed, and would, in our opinion, have resulted in a stronger model. Key concerns are;

· Although the programme seeks outcomes, the model rewards outputs and places a strong emphasis on quantity, rather than quality of individual programmes and the outcome of genuine longer term sustainable employment.

· There is a concern that the commercial imperative will result in a ‘bland’ generic approach to training and re-skilling programmes, with limited local value.

3. The Relationship between prime contractors and sub-contractors and DWP’s role in overseeing this relationship

Again, the commercial nature of the model places emphasis on outputs, and a supply chain that can deliver sufficient turnover to achieve Primes’ business models. This raises the following issues;

· Smaller providers may be less commercially attractive to primes than larger ones, reducing (in particular) third sector diversity.

· DWP’s relationship will be primarily with prime providers, and not supply chain organisations. Regular inspection of the supply chain will be required to ensure that quality of service is high and that delivery suits the local market.

· Opportunity to benefit from the wealth of local knowledge, experience and relationships between small organisations and the business community is likely to be lost.

4. Implications for providers of the increase in volume and change in profile arising from the migration from Incapacity Benefit and Employment and Support Allowance.

A key concern is that a considerable influx of individuals with low employability will occur, resulting in difficulty in successful placement. This may;

· Result in these individuals being unattractive to primes and providers, as a result of the lower likelihood of their achieving employment.

· Mismatch between the ambitions of the Leitch report (i.e. ‘upskilling’) and an influx of lower / unskilled workless people into the jobs market, creating further difficulties.

5. The Implication for providers of "payment by results" arrangements

The commercial model and potential delay in payment ‘by results’ is likely to have a major effect on the delivery of the programme.

· Business Failure at ‘prime’ level is likely to result in financial failure of supply chain organisations.

· Primes may favour supply chain partners with a commercial ethic rather than that of delivery of quality services, potentially affecting quality and reducing supply chain diversity.

· The payment by results model is high risk to primes. This risk will inevitably be priced into their bids, potentially resulting in higher management overheads and reduced funding for service delivery and support for the most vulnerable claimants..

6. The likely effectiveness of a differential payment scheme in encouraging providers to support harder to reach groups

Although a differential payments model may go some way towards supporting harder to reach groups, the commercial imperative (low risk / high turnover) will drive primes towards the easier to reach / lower risk groups.

· The nature of the differential payment model is as an incentive, rather than a mandatory element of the programme. If Primes’ business models are profitable without these groups, then they are likely to be ignored.

· Local authority services are suited to working with harder to reach groups, and greater consideration of this should be built this into the model, reducing the potential for failure in this area.

7. The implications of regional variations in the Labour Market

Regional variation is considerable in the labour market, leading to the following issues;

· Rural areas are likely to be less commercially attractive as a result of lack of local work, poor connectivity and information technology. A differential payment will be needed to address this.

· Areas that are more profitable (e.g. high volumes of unemployed + local jobs) are likely to be more attractive to Primes than less ‘profitable’ areas. This favours urban areas at the expense of more rural or isolated communities.

8. How providers will be encouraged to work effectively with local authorities and other local agencies.

Local authorities have a unique role and ability to link sub regional economic need to strategy, and employment and skills programmes. The lack of commercial imperative means that local authorities can develop innovative programmes openly and share knowledge freely to the common good. A close relationship with local communities ensures that issues are understood, and local needs addressed.

There are a number of areas where local authorities can deliver highly effective, low cost , W2W programmes, in particular focussing on the harder to reach, or less commercially attractive groups. It is felt that the Committee should consider this matter, and create the opportunity for local authorities to ‘fill the gap’ delivering via a direct relationship with DWP, rather than as a prime or sub contractor.

Providers will need to work closely with local authorities to ensure that the requirements of local need and employment strategy are met, for example, to ensure that LEP initiatives operate in synergy with the Work Programme.

November 2010