Published on 14 July 2016
- Our Work
- The Reformer Blog
13 July 2016
When Stephen Crabb became Work and Pensions Secretary, he identified the challenge of helping millions of long-term sick and disabled people into work as one of his greatest. To help those “parked” on benefits, Crabb told the Work and Pensions Committee in May, he would “push the reset button” on government’s use of third-party providers to deliver welfare-to-work services.
Crabb has an opportunity to do this immediately. The Work and Health Programme, which aims to help long-term unemployed and disabled people into work, has recently begun competition for contracts. To deliver the level playing field government has identified as capable of paving the way for the best services, Reform points to a number of areas on which government should focus, in research published today.
Commissioners must get competition right from the start. Poor sharing of information on contracts – including numbers of service users, contract value and even geographical boundaries – makes it difficult for organisations to prepare their bids. This is particularly the case for smaller organisations, with less ability to mobilise large bid teams. Early feedback on pre-market engagement in the Work and Health Programme suggests government is failing to do this: one prospective supplier lamented “the least level of clarity I have ever seen in this stage in the process”. Government should not only share this information at the earliest possible stage, but also be transparent about the calculations underpinning referral assumptions and forecasts to ensure confidence – currently lacking – in government figures.
Contract size also affects the ability of providers to bid for public services. Across the European Union, size is one of the biggest barriers to small and medium-sized enterprises (SMEs) competing for contracts. Work Programme contracts were so large as to require providers to have an annual-turnover of at least £20 million, prohibiting a number of voluntary-sector organisations from bidding. Commissioners should use this opportunity to limit contracts to £10 million per annum to involve medium-sized charities capable of holding the prime contract.
Similarly, ministers should be alive to concerns about payment-by-results (PbR) funding. PbR can encourage innovation in delivery by specifying outcomes, not processes, and delivers cost-effectiveness through paying for successful interventions. Yet, as Frank Field notes in his foreword to the report, PbR models that do not ease cash flows with some upfront fees threaten to shut out some providers. Government should, as Field argues, reintroduce an upfront fee: Reform suggests thereafter creating a ‘bid area’ of between 70 and 90 per cent of contract value for outcomes payments as a basis from which to negotiate.
Government should also focus more heavily on the quality of bids. Price is a critical component for achieving value for money. The advantage of welfare-to-work services, however, is that taxpayers save money when people return to work. Commissioners should therefore weight price less heavily than quality when assessing bids – on a 70-30 split in favour of quality. Increased dialogue during the bidding process can help this: interviewees explained that proactive assessments allowed providers to get under the skin of bids and mitigated the power of skilled bid writers. Government should also cap price discounts to 10 per cent to avoid an over emphasis on price.
When pushing the reset button, the Government should focus on these issues. The technicalities of these processes are easily overlooked, but are vital to ensuring effective services for helping disadvantaged people into work. As Stephen Crabb noted in May, “Behind every statistic there is a human being, and perhaps sometimes in government we forget that.”
Alexander Hitchcock, Researcher, Reform