Straw Man
The Ministry of Justice procurement team yesterday published its proposed payment mechanism for the new reducing reoffending contracts and invited feedback.
There are three elements to the payment mechanism:
- Fee for service
- Payment by results
- Penalties for underperformance
Fee for service
The MoJ will pay providers for “mandated activities” that deliver through the gate services, the sentence of the court and licence conditions – providing these are delivered on time and to an agreed quality standard.
The annual price will be paid in 12 equal payments made monthly in arrears.
However this price will go down every year via an “annual learning curve discount to drive continuous improvement”.
The MoJ will make allowances for significant fluctuations in the number of offenders/sentences.
Payment by results
Yet again the proportion of the new contracts which will be at risk on a PbR basis is stated nowhere in the document.
This leads me to the inevitable conclusion that providers will be asked to bid both on price and the proportion of contract value they are prepared to risk against PbR.
The MoJ remain bullish in their aspirations for PbR as a way of driving down reoffending rates:
“The PbR element of the payment mechanism is designed to incentivise bidders to continuously innovate and improve performance throughout the life of the contract and, reduce re-offending rates significantly beyond historic levels. This model is designed to pay the provider the profit component of their total cost model only where they achieve significant improvements in reoffending rates.”
As stated in the Transforming Rehabilitation strategy paper, PbR payments will be made on both binary (the percentage of offenders that are convicted of an offence within a 12 month period) and frequency (the rate of offences committed by offenders within a cohort within a 12 month period) metrics.
The proposal states that PbR payments will be allocated on the basis of performance against both measures – “with a percentage of the total funding available linked to each”.
However, the MoJ has very clearly emphasised its preference for the binary measure by the simple method of stating that if providers do not meet the binary targets, they will not receive any PbR payment whatsoever.
Again, it is worth giving you the exact form of words:
“to receive any PbR payment, a provider will have to have improved performance on the binary metric to a point of statistical significance within the given CPA, regardless of performance against the frequency metric.”
Performance penalties
The MoJ makes it clear that it will manage the new contracts robustly and make deductions if orders of the court are not delivered in accordance with quality standards.
Key performance indicators will be used to measure the quality of service delivery and failure to attain these KPIs will “permits MoJ to deduct a proportion of the subsequent payment.”
Failure to meet KPIs will also result in the MoJ issuing Improvement Notices and, eventually, terminating the contract of performance does not improve.
