Price is what you pay, value is what you get
There is a consensus that the Work Programme contracts were primarily awarded on price with the consequence that, so far at least, all providers are under-performing – to say the least.
The other main consequence was that a number of voluntary sector providers either went out of business or withdrew from the programme.
This is something that the Justice Secretary Chris Grayling, architect of the Work Programme, acknowledges himself; although he puts it slightly differently, saying that voluntary sector organisations should never have signed the contracts with Prime Providers and that they need to get more commercial savvy.
Mucking up PbR
Two of these eight were:
- Set the maximum outcome payment at or below the value of the previous revenue contract
- On a price focus rather than quality focus procurement process
I’ve recently heard MoJ officials talk about the impending procurement process for the outsourcing of the probation service in a way that seems to make it clear that they are expecting price to be a significant factor in the decision to award contracts.
The price is right?
To my mind, this is overambitious to say the least.
The new reducing reoffending contracts will be very demanding on new providers for a number of fairly obvious reasons:
- The overall MoJ budget will be substantially cut in order to meet the deficit reduction targets.
- This budget will also have to allow for the new mentoring service to be delivered to more than 50,000 short term prisoners per year.
- The contracts will be awarded on a least a partial payment by results basis, transferring risk and impacting on cash flow.
- There will be inevitable start-up costs for providers with no history of working in this area.
Even private providers with global reach and very big pockets are biding their time, waiting to see whether the contract details are financially viable.
The prospect of contracts being awarded to organisations offering a discount of a few million pounds within this incredibly tight budget makes me very concerned that we may be heading for the worst sort of rehabilitation revolution.