The Work Programme: Providers and contracting arrangements

Written evidence submitted by Wise Group

Introduction

The following provides the Wise Group’s response to the Work and Pensions Committee Inquiry into The Work Programme: providers and contracting arrangements.

Response

1. The steps the Department for Work and Pensions needs to take to ensure that a procurement programme of this size and complexity is managed effectively and delivers high quality outcomes

No response

2. The extent to which the Work Programme will differ from existing contracted employment programmes

No response

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

3.1 The scale and diversity of customer groups within the Work programme demands robust and effective supply chain management and a diversity supply chain organisations. The Merlin Standard and DWP Code of Conduct provides a clear framework for the standards in which prime and sub- contractor relationships should be managed. The Wise Group welcomes the Merlin Standard and Code of Conduct as part of the process in managing relationships. There has to be recognition however that partnership arrangements between contractors along the supply chain will vary and a standard one-size fits all approach should not be applied. This should be recognised within the Merlin audit process.

3.2 DWP should have a key role in ensuring that all primes and sub-contractors, particularly those of a smaller size, should have an opportunity to be fully briefed on the Merlin Standard, and ensure that there is understanding across the sector on how the Standard should be applied. This could be provided through DWP briefing events and training events at a regional level.

4. The role of Jobcentre Plus in delivering the Work Programme, including the lessons learned from the Delegated Flexibility Pilot

No response

5. The implications for providers of the increase in volume and the change in profile of Jobseeker’s Allowance claimants arising from the migration from Incapacity Benefit and Employment and Support Allowance

5.1 Knowing and understanding the transfer rates is one of the main difficulties in planning not only the future numbers, but also the needs of the customers that may be part of the Work Programme. In particular, the WCA and the transfer rates from IB or ESA onto other groups such as JSA or the ESA WRAG, are relatively ‘new’ numbers. That is, there has only been 12-48 months of the new WCA process and the short timeline for the transfer rates can make identifying possible trends for forward planning unreliable. Similarly, the large numbers of appeals during the WCA process means that the percentages taken from the decision rates can be limited in use for understanding possible future on-flows to the Work Programme group. Recently the DWP has produced more up to date data on the WCA process including the proportion of individuals transferred and what the breakdown is between health categories. Up to date and detailed information such as this is necessary for providers to understand this new customer group.

5.2 Although we have been able to make a number of assumptions and identify approximate on-flow numbers, the changing needs and profile of the Work Programme group (compared to previous programmes focussed on JSA claimants only), means services and supply chains are more complex in their design. Understanding the possible range of barriers and needs of the transferred customers in particular will be key to ensuring that individuals are given the best support and opportunity to access and sustain employment. Having a clear research base for understanding the Work Programme profile, the volumes, and the customer needs will ensure that we can provide high standards of service. We are undertaking a lot of research into this area of Work Programme planning to make sure we are able to design high quality services. However, it is also important that the DWP will be able to provide up to date and detailed information on the customer groups before and during the tendering phase.

5.3 It is important that the DWP continues to publish research on all the groups involved in the Work Programme to ensure that services can be designed on best practice and to the needs of the customer base.

6. The implications for providers of "payments by results" arrangements, with particular reference to the voluntary and social enterprise sector

6.1 The payment by results approach is a risk and a somewhat unnerving prospect for all contractors along the supply chain. It has been regularly discussed with smaller specialist organisations who have not previously managed their finances and business planning in this way. In particular, those organisations who may be working with individuals furthest away from the labour market and previously may not have been paid on a job-outcome basis. It is important that these organisations are able to play a part in the supply chain and that their services can be accessed by those customers who need them. We are working to identify other contracting arrangements with some providers that ensure the risk and payment structure reflects the needs of the customer, the contract and the supply chain. DWP should however consider balancing a ‘payment by results’ model with some element of service fee to ensure all sectors are represented in the supply chain.

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

7.1 Differential payment schemes for the hardest to help groups will ensure that the appropriate services can be procured along the supply chain to assist individuals into employment. Clearly for many individuals in these groups support will be needed for longer, more frequently and often specialist services may need to be accessed. This type and level of support is unsurprisingly more expensive to procure and it is important that payments in the Work Programme reflect the effort and support provided by the contractors in the supply chain. By using a differential payment system for these groups it ensures that those with complex needs can be adequately catered for and helped into employment.

8. The implications of regional variations in the labour market, and whether these will be reflected in the differential payment arrangements

8.1 Differential payment schemes would also ensure that regional variations are taken into account. Depressed labour markets in certain areas in the UK are still experiencing an impact from the recession. Within these areas there are local labour markets where unemployment is high and jobs are limited. As such, for those furthest from the labour market to access and gain employment opportunities, more resources and support may be needed from organisations along the supply chain. As such, the Work Programme will only work nationally if those regions without a buoyant labour market receive higher differential payments than areas where the providers may not need to provide as much support and can provide services for a shorter period of time. Finding suitable employment for those furthest from the labour market in these locations will ensure that long term unemployment is avoided and that local communities across contract areas are all able to access high quality employment services. In areas where job creation programmes need to be created to stimulate employment opportunities, differential payments will be required to make this financially viable for the contractors along the supply chain. Intensive programmes are often more expensive and if payments are by results the risks to suppliers in these areas are intensified without a differential payment structure.

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

9.1 Work Programme delivery needs to respond to local needs and be integrated with other local services. Current budgetary conditions demand that value for money is achieved in all public sector spending. Job Centre Plus local teams could play a role in facilitating localized partnerships with local authorities and other local strategic partnerships to enable a more co-ordinated approach to planning and delivering services.

November 2010