Buying Quality Performance

(A version of the following piece first appeared on Guardian Comment on the 20^th February 2013. In response to a recent research report, the piece returns to themes we have covered before regarding fundamental design flaws in the Work Programme contracts and procurement.)

The Third Sector Research Council (TSRC), part-funded by the Cabinet Office, have published a thoughtful and thorough report on the Work Programme (http://www.tsrc.ac.uk/Research/ServiceDeliverySD/Thethirdsectordeliveringemploymentservices/tabid/873/Default.aspx). The report provides an excellent background to the Programme and explores whether or not third sector organisations who are engaged as subcontractors are finding it a positive or negative experience. They conclude that there is nothing inherent in their sector status to determine the nature of their experience. However, they are sharing the wider challenges of all subcontractors.

It is evident, the TSRC report, that the prime contractors of this service are ‘creaming and parking’, ie helping jobseekers close to work and ignoring everyone else. This cherry picking is having a negative impact on any subcontractors (up to 50% of whom may be third sector), particularly specialist providers best equipped to help people with more complex needs.

The TSRC offer some explanations for this and also report that a number of the subcontractors feel unable to talk about their predicament as a result of gagging clauses in their contracts. In discussing this with providers direct, I find they are suffering for a number of reasons:  they simply aren’t getting any jobseekers referred to them; the people referred all require very intensive, expensive support, since the primes are keeping all the ‘cream’ to themselves; and if they do help someone, the primes don’t pay enough to cover the costs.

ERSA, the industry body which lobbies on behalf of all but one of the prime contractors, says that it is unfair to criticise the primes in this way. As reported yesterday in The Guardian, ERSA observes that, “most Work Programme advisers, regardless of sector, are motivated by helping those furthest from the labour market into a job.” (http://www.guardian.co.uk/society/2013/feb/19/vulnerable-jobseekers-work-programme-providers)

This certainly used to be the case when I ran welfare-to-work offices across the country, my advisers constantly seeking ways to reach more people trapped more deeply in unemployment. It was, indeed, an attitude prevalent across the industry.

Unfortunately, such motivation is no longer relevant given the design of the Work Programme contracts which the primes have signed. The only way in which these Work Programme contracts can be delivered viably is to cream and park.

Of course, prioritisation of limited resources is evident in many public service areas. Ian Mulheirn of the Social Market Foundation has noted how it is actually “hardwired into Jobcentre Plus.” (http://www.publications.parliament.uk/pa/cm201213/cmselect/cmworpen/uc835-i/uc83501.htm) On the Work Programme, however, this creaming and parking must be rigorous and cynical.

This was evident from the outset, as soon as DWP initiated the tendering process. But since this programme replaced virtually all other contracts, it became the only game in town. Welfare-to-work organisations either offered DWP untenable terms, and won, or went out of business. The organisations which offered no (or limited) discounts in the price competition of the tenders were those with substantial business elsewhere. Those who had to win, offered to do it cheapest, and won the most contracts.

(In Chapter 4 of his paper, Diversity and Contestability in the Public Service Economy, Gary Sturgess explores this ‘winners curse’ and other limits to competition: http://www.nswbusinesschamber.com.au/NSWBC/media/Misc/Policy%20Documents/120615_Contestability-Paper.pdf)

The behaviour of the Work Programme primes two years on is rather odd to say the least. Despite the fact that they are delivering unviable services and are forced to compromise on any commitment to the ‘hardest to help’, they continue to defend the contracts. Though the scant data which DWP allows into the public domain clearly indicates overall performance is poor, and those who are furthest from work are being ignored, the primes continue to call it all a big success – http://ersa.org.uk/documents/ersa-job-start-data

One of the primes more outlandish claims is that this is the cheapest welfare to work programme that there has ever been. If the primes hit all their targets, the programme is expected to cost the government about £300 million less per annum than previous provision.

The reduced cost will come mainly because there will be fewer outcome payments to the primes. They are giving all their advisers much larger caseloads to deal with: as a result, fewer jobseekers get and keep jobs, and those that do, find work with less spent on them because they were cherry picked. Above a certain threshold of ‘distance from work’, no money is wasted on ‘difficult cases’.

On the basis of the modeling I undertook when tendering for these contracts, given the discounts widely offered, about 30% of the jobseekers might find and keep jobs. For the other 70%, there will be little or no assistance.

This represents a short-term saving. It delivers, however, very poor value for money. With every day of unemployment, your chances of getting stuck there increase, and other associated problems start to appear, such as poor mental and physical health. The 70% who are parked will go on to cost far more, in basic benefits as well as across a whole range of other public services.

It is to be hoped that the lessons emerging in the Work Programme, highlighted by reports like this from the TSRC, will be heard loud and clear in the Ministry of Justice. It is the stated intent of the Justice Secretary, Chris Grayling, to apply to probation what he did as Minister for Employment in introducing the Work Programme. I’m not sure quite what creaming and parking will look like when applied to ex-offenders leaving prison on probation orders.