The Work Programme: Providers and contracting arrangements

Written evidence submitted by the Association of Colleges

The Work Programme: providers and contracting arrangements

Introduction

1. The Association of Colleges (AoC) represents and promotes the interests of Further Education Colleges, as established under the Further and Higher Education Act 1992, and their students. Colleges provide a rich mix of academic and vocational education. As autonomous institutions they have the freedom to innovate and respond flexibly to the needs of individuals, business and communities.

2. The following key facts illustrate Colleges’ contribution to education and training in England:

· Every year Colleges educate and train over three million people.

· There are 1.7 million adults on FE provision in Colleges in 2008/09

· There are 53,000 adults studying an apprenticeship through their local college in 2008/09

· FE Success Rates (a combination of results and retention) for adults in Colleges were 81% in 2008/09

· Apprenticeship Success Rates for adults in Colleges were 74% in 2008/09

· Two-thirds of large employers who train their staff do so through a College

· Two-thirds of people say their local College has a good reputation for the quality and range of courses it provides

For more information on Colleges please see www.aoc.co.uk

Colleges are delivering flexible programmes to thousands of learners across the country including;

· Information Advice and Guidance (IAG) prior, during and on completion of pre-employment programme.

· Continuing IAG and support when a learner progresses into work to ensure employment is sustainable

· Motivational, team building and communication skills

· Job search, CV writing and interview techniques

· Short qualifications that enhance employability

· Specific technical skills to enhance employability in areas such as security, health and social care, catering and hospitality, lean manufacturing, retail and warehousing.

Colleges also deliver specific employer led programmes that are targeted to meet the local labour market needs and skills requirements/gaps of JCP claimants.

The College sector has been providing people from disadvantaged backgrounds with the skills and training needed to find – and keep – sustainable employment. To the College sector, the Work Programme does not simply offer the latest profitable outsourcing opportunity; it is our core business, drives our values, and has been doing so for over 100 years.

How is the Work Programme different from existing contracted employment programmes

1.0 The Work Programme will differ from existing contracted employment programmes in that it is likely that training payments will be limited and that sustained job outcomes will provide the majority of payments. Some commentators argue that historically training organisations have relied on training payments without putting sufficient emphasis on securing the resultant job outcomes. In areas where jobs are available it is arguable that public money should be spent on getting individuals into work and supporting them into further training. The reality of the current UK economic climate however means that this is not the case across the country and in some areas the level of the expected Work Programme outcomes will mean a huge investment of resources will be required from providers, with many having to provide services beyond their individual areas of expertise.

The relationship between prime contractors and sub-contractors

2.0 The Department has adopted a commissioning strategy which uses a small number of large prime contractors to manage its programmes. We have reservations about the effectiveness of this approach because many small and medium sized employers find large national organisations unresponsive to their needs but given that this decision has already been made, the key to the success of the Work Progrmame will be the relationship between prime contractors and sub-contractors. The DWP must award contracts and oversee this relationship to ensure that that the Work Programme supply chain has members who can provide all of the relevant support required in a timely, cost effective manner and can work with employers to provide a level of service that is fit for purpose. DWP must ensure that perceptions of the service do not fall into the categories of either being purely commercially or politically motivated or wasting money on a scheme to falsely reduce employment figures, as has been the public perception with some previous employability skills provision.

2.1 Whilst the track record of some of the private sectors organisations involved in current employment programmes show credible results, in other cases, especially where a partnership ethos has not been apparent in their practice, there have been failures and the withdrawal of contracts. We are also concerned that by adopting a prime contractor, private sector approach, the DWP has effectively reduced the level of resource available to directly support DWP customers with a managing agent top-slice of 30% not being unusual, unlike the Department for Business, Innovation and Skills which pushes for top slices of no more than 10% in its training programmes. We also believe that the general approach appears to be at odds with recently publicized attempts to open up opportunities for smaller businesses with Government. It is worth noting the recent Public Accounts Committee report on Pathways to Work [1] , which was critical of current Prime contractors and the example of Carter and Carter, a large private organisation that overstretched itself and had to go into administration in 2007and was taken over by Newcastle College in order to make a success of the company's activities

2.2 We feel that the way in which bidding process has been designed disadvantages multiple partner Special Purpose Vehicles (SPVs) relative to single ‘commercial’ bidders by the amount and level of documentation required. Although some Colleges have bid as Prime contractors in their own right, for example Newcastle College, where Colleges have pulled together complex, but necessary partnerships with providers of all types and other stakeholders to respond to the potential needs that will be displayed by recipients of Work Programme support and have tried to meet the demands of the DWP bidding process, they have found the process to be unnecessarily bureaucratic.

2.3 Recipients of support under the Work Programme are likely to present new challenges to providers. Successful interventions that allow an individual to progress from incapacity benefit all the way to sustainable employment will result from close collaboration between a range of different providers in a local area, ranging from third sector organisations to Colleges. Colleges have a strong track record in managing such relationships and working with other providers to ensure that vulnerable individuals are fully supported along their path to employment. It is important that all Prime contractors have this expertise or that the management structures that Prime contractors put in place will take advantage of these existing supply chains.

2.4 Whilst Colleges recognize the obvious efficiencies that can be realized within the Government Departments that manage the small number of large Prime contractor tenders, we wonder whether this might be to the detriment of the individuals who will be reliant on the training and support that will be supplied. Regardless of contract size, ultimately all delivery will be at micro local level to individuals who will display a wide variety of needs and vulnerabilities. Almost by definition the Prime contractor will be far removed from these local realities, but yet will have ultimate control over that delivery. We would seek assurances that the management of Prime contractor will ensure that the needs of individuals take precedent over the needs of the Prime contractor.

The Role of Job Centre Plus

3.0 We believe that the role of Job Centre Plus will evolve from being a benefits service into being a centre that provides information, advice and guidance at the earliest intervention for individuals. Advisers must be perceived by individuals as knowledgeable about their local area and have exemplary customer service skills. Too often, the public and employers alike perceive the JCP as not being fit for purpose. This does not mean that the service itself is bad, but that the JCP structure must change to reflect the needs of today’s society.

3.1 The Work Programme may dictate that JCP will be the frontline for employment, housing, childcare, health and welfare advice. The JCP will also have to provide an increased level of support in encouraging individuals and employers alike to make the most of opportunities for work.

3.2 The recent Skills Strategy [2] places an expectation on Colleges to work with Job Centre Plus to provide additional courses to people on Job Seekers Allowance and Incapacity Benefit outside the Work Programme and further education funding rules have been made more flexible to ensure this can happen. These arrangements will be helpful but only if JCP staff take a flexible approach and trust the judgement of professionals in Colleges.

The implications of a migration from Incapacity Benefit and Employment and Support Allowance

4.0 The expected increase in the volume and change of Jobseeker’s Allowance (JSA) claimants arising from the migration from Incapacity Benefit (IB) and Employment Support Allowance (ESA) will have a massive impact on the Work Programme. Employers and individuals will have a number of issues around working and unprecedented levels of investment of resources will be required to offer an effective service to these individuals. DWP must be willing to offer extra support to organisations and employers engaging with this group as in many cases they are the furthest from the labour market. Even after successful intervention, employers will be wary in many cases, making sustained job outcomes extremely difficult.

Payment by Results

5.0 In order to ensure that a procurement programme of the size and complexity of Work Programme is managed effectively, the DWP must have the correct supply chain model in place. The organisations that have bid to be included in the new DWP Framework have done so having had no definitive evidence of what will eventually be included in Work Programme contracts, other than that sustained job outcomes will trigger payments. Colleges would welcome the opportunity as a Framework partner to discuss the optimal balance between risk allocation and value for money.

5.1 As a principle we welcome the emphasis on payment by results, and the College sector already manages significant elements of its current business on this basis. We note however that the working capital requirements implied by the Work Programme are likely to be beyond the internal resources of all prime contractors, whether public, private or the voluntary sector, meaning that third party funding will be required. On this basis the programme is likely to be significantly financed by bank debt, which will require lenders taking a view both on the credit worthiness of the prime contractors, and their ability to deliver successful outcomes so as to be able to repay interest and capital.

5.2 Banks view the College sector favourably, reflected both by the greater availability and lower cost of debt than offered to all but the very strongest of corporates, including many of the household names on the long list for the DWP framework agreement. Such facilities, with appropriate security provided by Colleges, could be made available throughout College supply chains to increase community participation in the programme, and at lower cost to the public purse. The use of bank loans to fund contractors will place pressure on DWP and JCP to administer their payment rules in a way that is consistent and predictable.

5.2 By nature of the expected ‘differential’ payment model, high quality outcomes will only be achieved where training organisations have robust financial backing and excellent employer engagement strategies. The communities that are hardest to engage with quite often have limited resources. DWP must ensure that contracts are distributed fairly among a mix of private companies, Colleges and community based trainers. This will ensure that the necessary financial support will be in place in the supply chain while project management fees and bureaucracy do not hinder the quality of outcomes for individuals.

5.3 The likely effects of a differential payment scheme may be that commercially minded organisations opt to work with the individuals that are perceived as easiest to work with. This could lead to a lack of provision for those who require the highest levels of intervention. The payment scheme must reflect this and we suggest that clauses be introduced into contracts to prevent prime contractors from taking the easiest options. It is also worth noting, however that were there to be a flat rate, it would be hard to see how providers could afford to support the most vulnerable and needy. Such a payment scheme would need to recognise that effective support for an individual may require the input of more than one local provider, so a single payment per individual would require an ability to allow this payment to be broken down.

5.4 Regional variations in the labour market should be reflected in the differential payment arrangements for example high unemployment rates may exist in areas where there are a lack of job opportunities. Other factors should also be taken into account including the need for a ‘living wage’ and housing costs. In areas such as London, the costs associated with living in the capital can be prohibitive to individuals taking up employment.

Local Authorities

6.0 It will be necessary for providers to work with local authorities and other local agencies and this should be encouraged by DWP with other central Government departments. Where spending cuts are being made in the public sector, the importance of the Work Programme needs to be stressed and resources guaranteed.

Conclusion

7.0 The Work Programme contracts must be awarded in a way that does not encourage supply chain managers to ‘top slice’ payments to the detriment of smaller organisations who provide the ‘real’ services to communities. Prime Contractors must be engaged in a way that they utilize their necessary financial reserves and resources to support the supply chain. JCP services must be improved to refer the individual to the correct service and some training providers need to improve current levels of employer engagement activity.

November 2010