The Work Programme: Providers and contracting arrangements

Written evidence submitted by Papworth Trust

About Papworth Trust

1. Papworth Trust is a disability charity and registered social landlord, whose aim is for disabled people to have equality, choice and independence. Papworth Trust helps over 17,000 people every year through a wide range of services including employment, vocational rehabilitation, housing and personal support.

2. Papworth Trust is a sub-contractor to the Department of Work and Pensions in the delivery of employment programmes. In 2009/10, we helped over 6,000 disabled and disadvantaged people to find and retain work.

3. Our employment service focuses on delivering programmes and opportunities for disabled and disadvantaged people to obtain and retain employment, and provide career development services to support them to reach their career goals. In addition we support employers to retain and develop disabled staff. Papworth Trust has over 20 years of experience of delivering employment programmes during which time, we have delivered a range of services including the Supported Placement Scheme, WORKSTEP, Work Preparation Programme, New Deal for Disabled People, Pathways to Work, Flexible New Deal and Work Choice.

4. Papworth Trust welcomes the opportunity to submit evidence to the House of Commons Work and Pensions Select Committee Inquiry into the Work Programme and share our thoughts with you on how to make a single employment programme achieve maximum outcomes.

The Work Programme

5. Papworth Trust supports the principles behind a single Work Programme. We believe the Work Programme will provide a real opportunity to help those who are furthest away from the labour market. It would be much better if there was not such a lack of detail emerging from the Department for Work and Pensions. At the time of writing this submission we are still waiting for information on the contract sizes, the terms and conditions, details of the payment structure and frequency, and the client groupings, which is a risk to the effective bidding and operation of this contract.

Transition arrangements

6. Papworth Trust is certain there are service gaps and operational risks arising as a result of the scant transitional arrangements between existing employment programmes and the Work Programme. We understand that new referrals to existing employment programmes will cease by March 2011. Details of successful providers are unlikely to be announced until March 2011 with the intention to start delivering in the summer. It is unclear what support will be given to customers and providers throughout this period. We understand this may affect up to 50,000 customers [1] and there is a real danger of a postcode lottery where one area experiences seamless employment provision whilst a neighbouring area has less than satisfactory support throughout the period. For providers, it is unclear how they will be supported to retain staff and premises when there is no certainty they will be delivering the Work Programme.

7. We support the proposal set forward by our membership body the Employment Related Services Association (ERSA) which calls for existing welfare to work contracts to be extended to June 2011. We believe this will align provision and should compliment a smoother and more successful transition to the Work Programme.

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

8. Papworth Trust believes there are significant risks associated with the extremely tight implementation timetables, which are likely to mean that providers are unable to deliver quality programmes from the start. As outlined above we believe existing welfare to work contracts should be extended to June 2011 to enable a smooth transition to the Work Programme.

9. The Department for Work and Pensions has a role to play in ensuring that sub-contractors are fully informed so that, where appropriate, they are able to challenge the prime contractors on contract details. For example, it would be helpful if the Department could publish the terms and conditions they have agreed with the prime contractors. Sub-contractors do not simply want the prime contractors to duplicate the terms and conditions, we want to be able to negotiate and agree what is achievable. In the past if the Department imposed a 14-day compliance turnaround on prime contractors, this was reduced to a week when handed down to sub-contractors. This timescale is often unrealistic and places great pressure on sub-contractors.

10. In addition to terms and conditions, Papworth Trust believes that financial penalties should not be allowed to simply roll down from the Department, through the primes and onto the sub-contractors. The system should be designed to ensure that the primes take a fair slice of the financial risk.

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

8. Papworth Trust feels there is a lack of detailed information available to enable judgement on how the Work Programme will differ from existing contracted employment programmes. We are clear about the conceptual differences however until we are informed of the contract terms and conditions, the payment structure and its flexibility, it will be difficult to comment further. That said whilst we believe the payment models under the Work Programme will be very different, we do not believe the impact will be as great from a practical employment advisor level.

9. From the proposal of the Work Programme, we understand it should mean that providers are able to channel people according to their support requirements rather than simply their benefit grouping, and that funding will be based on benefit savings. These are hugely positive steps from previous programmes and we remain enthusiastic that these will enable providers to give better support to those most in need. In addition, we understand the Department intends to give providers total flexibility of how they run the Work Programme. Essentially, if providers are judged on outcomes alone, then the design should be flexible to achieve those outcomes. Past experience of Flexible New Deal shows there were many restrictions contained within the Provider Guidance which substantially limited flexibility. We hope the Provider Guidance in the work programme is less restrictive.

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

10. Papworth Trust urges the Department to ensure it is aware of sub-contract arrangements, in particular funding, and where the performance is delivered so the effectivensss of the DWP Commissioning Strategy can be properly evaluated.

11. At pre-contract level, we believe there needs to be greater two-way transparency. There are two pieces of information that are important to a sub-contractor – the level of management charges they will pay and the security that they will be paid on time. We believe prime contractors should be encouraged to post their management charges upfront, and there should be a way for sub-contractors to gain an understanding of past credit rating history. In the past sub-contractors have experienced delays in receiving their payment. Under the Work Programme funding model, any further delays in payment will prove extremely challenging.

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

12. Papworth Trust believes there should be minimal intervention from Jobcentre Plus. Their role is simply to refer claimants onto the provider as soon as possible.

13. Our experience shows that as Jobcentre Plus’s priorities change, so do their referral patterns, which has generated substantial difficulties for porviders in the past. This makes it increasingly difficult for delivery providers to predict their referral rates and manage their service delivery resource. In addition, we have found there exists a postcode lottery affecting Jobcentre Plus communications. In some areas we have been able to build up a good rapport with our local offices; in other locations it has been more sporadic. There have been instances where referral rates have diminished when a Jobcentre Plus staff member is sick or takes annual leave as the local office has alternate priorities or nobody within the office has responsibility for those referrals. We believe Jobcentre Plus have an obligation to deliver on their part of the supply chain relationship.

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

14. Papworth Trust recognises that the reassessment of previous Incapacity Benefit Claimants will create a new client group which the market has never managed previously other than in very small volumes. It is essential that there is a learning period when there is a lower proportion of payment purely on outcome, and the costs of support are shared with DWP to inform published research.

15. Papworth Trust is very supportive of the review of the Work Capability Assessment conducted by Professor Harrington on 23 November 2010 and hopes the recommendations can be adopted swiftlyThis is particularly important given this assessment will now have far reaching consequences to other benefits, for example housing benefit.

16. Furthermore, failings of the Work Capability Assessment mean providers staff spend more time providing advice and guidance to customers on how to appeal their outcomes than supporting them into work.

The implications for providers of "payments by results" arrangements, with particular reference to the voluntary and social enterprise sector; and the likely effectiveness of a differential payment scheme in encouraging providers to support harder to help groups

19. Papworth Trust is fully committed to a system which is based on payment by outcomes. We believe the Work Programme provides a real opportunity to help those who are hardest to reach, but unless the price for helping that group is proportionately higher there will always remain an issue of providers reaching for the ‘quick wins’ and parking others. There is a danger that the specialist providers, primarily from the Voluntary sector will have inadequate fees or working capital to adequately serve clients who are hardest to reach and find longer to find work. It is for this reason that there needs to be clear transparency on the differing funding levels and the amount paid by Prime contractors to their sub-contractors.

20. In addition, by having a model that is based purely on payment when people are in work, does not take into account those people who are furthest away from the labour market and may take a number of distinct and valuable steps on their return to work, which need recognising as a valid outcome.

21. Through an integrated model we further recognise there will be a proportion of people who are able to find work independently and this reiterates the case that a mechanism needs to be in place for paying providers differently depending on the types of barriers to work they face.

22. In supporting differential and outcome based payments Papworth Trust believes the Work Programme funding needs to adapt to recognise that many specialist providers may not be able to generate the capital investment to fund the substantial cashflow requirements associated with outcome funded contracts.

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

23. Papworth Trust believes it is right and reasonable for the regional labour market to be taken into account in the pricing structure. A lack of buoyancy in the local labour market can form part of a person’s barriers into work and should be recognised in this way. The pricing structure needs to be flexible enough to be able to recognise and adapt to changes. For example, we wonder how the inevitable migration as a result of changes to Housing Benefit will be taken into account within the model.

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

24. Papworth Trust believes that in order for providers to achieve their outcomes, they will need to collaborate with a range of external organisations. If that involves working with local authorities and other agencies, then providers will need to ensure they engage with the appropriate bodies.  We do not believe this should form part of contract stipulation, but determined by whether there is a need to do so.

November 2010