The Work and Health Programme
Do you remember when the papers were full of the failings of the Work Programme?
Media coverage dropped off as attention moved to other issues and the Programme itself started to perform better. Overall, it achieved comparable results to previous welfare-to-work programmes for mainstream jobseekers and was £41 million cheaper than its predecessors. However, it mainly failed those with more complex needs or barriers to employment. For many smaller, voluntary sector providers, it provided a very harsh lesson on how not to outsource public services, particularly for vulnerable people.
The Work Programme’s successor, the Work and Health Programme, will be much smaller (£130m per year compared to £500m + for the original) and will focus on people with disabilities and health problems and those who have already been out of work for 2 years or longer.
Last week (13 July 2016) the Reform Think Tank published an interesting report aimed at influencing the design of the new programme. The report is interesting for two reasons in particular. Firstly, Reform have close associations with the Conservative Party and it’s quite common for Reform to advance views in keeping with the latest thinking among Conservative-minded politicians and thinkers. Secondly, the report was commissioned by Big Society Capital, the organisation dedicated to driving up social investment, particularly Social Impact Bonds.
Not a level playing field
The report highlights the fact that the original Work Programme procurement processes erected a range of barriers to market entry. Poor contract design – including onerous financial-health requirements – made it very difficult for smaller organisations hoping to bid for ‘prime’ contracts.
The programme’s heavy emphasis on payments by results also created cash-flow issues for smaller providers, which – if replicated in the Work and Health Programme – would discourage bidders entering the market. A heavy focus on the price, rather than quality, of bids may have favoured large organisations capable of leveraging economies of scale to undercut competitors. Such a focus is indicative of a short-term approach to market creation by government, which encourages immediate gains over creating a healthy market, with a wide base of providers, to ensure value for money in subsequent programmes.
Readers familiar with the recent changes to the probation service may recognise many of the same factors which plagued and impeded the Transforming Rehabilitation competition.
Payment by Results
The Reform report identifies many of the key PbR issues related to the Work Programme:
- Over-aggressive PbR contracts likely to deter many bidders and shrink the market;
- With the result that it’s possible to end up with a small number of large providers who are considered “too big to fail”;
- In this situation, competitions often become a “race to the bottom” with very large providers promising big discounts to secure market share before realising that they cannot deliver their promises; and
- Incentives have to be realistic — while the original Work Programme did provide a premium payment for helping people with disabilites into work, that premium was nowhere near enough to reflect the much higher levels of resources needed.
It goes on to recommend that the new Work and Health programme is also commissioned on a PbR basis with PbR payments making up between 60%-90% of total contract value with the proportion of PbR increasing over the life of the contract.
The Reform paper makes a number of sensible recommendations urging
- government to engage in a constructive dialogue with suppliers throughout the procurement process;
- that contracts should be varied if there are big changes in the economy (a big issue with the original Work Programme with demand soaring and plummeting over the life of the contract following the global recession and recovery)
- that contracts should be small enough to encourage medium-sized providers to bid for prime contracts;
- government to guarantee minimum referral volumes to allow a broader range of providers to bid (in the Work Programme many small voluntary sector providers had to withdraw because did not receive the number of referrals promised as Prime Providers focused on easier to help people rather than those with more complex needs); and
- commissioners should place a heavier emphasis on the quality of bid, with a quality weighting of around 70% recommended.
If you’re thinking of bidding for a Work and Health Programme contract and need to understand the main risks and benefits of PbR, check out my (free) interactive PbR tool.