The myth of multiple contractors

If A4E’s position as a prime contractor of the Work Programme becomes untenable amid the current fraud furor, the Minister, Chris Grayling, has said he will terminate their contracts and take all their jobseekers away.  As of last week, according to the Department for Work and Pensions figures, A4E are currently responsible for just over 41,000 Work Programme jobseekers. The impact on these individuals, and their chances of securing employment, could be immense.

The UK is split into 18 Work Programme regions. In each region, there are at least two and sometimes three prime contractors. As jobseekers become eligible for the programme – because they cross a threshold of long-term unemployment – they are referred on a random basis between the contractors.

Having multiple contractors in this way is intended, by DWP, to serve a number of purposes. It allows them at some point down the track to introduce ‘choice’, with jobseekers able to select their preferred contractor. DWP can also reward success, by diverting higher referrals to the contractor with the best performance. Multiple contractors in an area can also mitigate the risk of one failing.

There are six other contractors sharing A4E territory. So if the A4E contracts were to be terminated and all their jobseekers were to be redistributed, each of the other six primes would suddenly be asked to take on around 7,000 new people. However, DWP’s figures of last week were accompanied by a statement from the providers industry body, ERSA, in which they note that referral figures for the first five months of the Work Programme were significantly higher than those previously predicted. Kirsty McHugh, ERSA’s Chief Executive said: “The much higher than expected number of referrals has presented a significant challenge to welfare to work providers.”

The contractors are all already swamped, with caseloads per advisor in some places at up to two or three times the level of previous welfare to work programmes. Another 7,000 would simply detract further from a service already bursting at the seams, however aggressively some providers try to ‘cream and park’.

Putting A4E’s issues to one side, the existence of multiple contractors anyway fails to deliver on any of its objectives and actually adds unnecessary cost into the system.

Wherever programmes have attempted to offer jobseekers choice in this way before – most notably in the Australian Job Network that was outsourced in its entirety in 1998 – it has been exercised only in a very limited way. Jobseekers, when questioned, have admitted to choosing their provider mainly on the basis of geography; the closer to the benefits office, the better.  And, to be fair, they are being asked to choose between virtually indistinguishable services, differing only in their branding. It’s not as if one provider is offering a special kind of training or other magic key that no one else possesses.

The value for money of such multiple contractors is also highly questionable. In one Work Programme region it might seem like you have a really big contract with hundreds of thousands of jobseekers to be seen, justifying the mitigation of three contractors. Straight off, however, you are adding on the cost of three sets of overheads. The logic of it being a particularly big contract is also flawed. In any one locality within that region, the number of jobseekers is obviously much smaller – in a particular village or a borough or just a few streets. Across the whole region there may be 20,000 jobseekers anticipated each year. Here in our small subregion it is just 1,000, and yet the same full service has to be delivered, in triplicate. Now down to 333 jobseekers per contractor per year and the service is barely viable. Size is relative to the delivery area, not the contract area.

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