Managing, Monitoring, Value for Money and the Work Programme
15 May 2012
A Select Committee of MPs have reported on the introduction of the Work Programme. The report focussed on two key aspects: securing value for money, and monitoring and managing delivery of the programme.
The Chair of the Committee of Public Accounts, The Rt Hon Margaret Hodge MP, today summed up the Committee's findings:
"The speed with which the Work Programme was introduced was commendable. But the quick introduction threw up risks that have to be addressed.
Major projects of this nature need to be thoroughly planned. In this case, the Programme was not piloted, the design and development phases overlapped and the business case was devised after the decision to go ahead was taken. The Programme was launched before the IT system designed to support it was operational. At the time of the launch, the IT system could not carry out automated checks on whether the people the prime contractors said they had placed in employment had actually stopped claiming benefits.
The Department believes that paying contractors according to results will transfer some of the financial risk to the prime contractors. But achieving value for money will depend on more than whether the contractors meet their contractual targets.
We need to be assured that significantly more people are in work than if the Programme had not existed and that wider social benefits are being delivered in practice.
The Department must also be alive to the impact the difficult economic conditions may have on the Work Programme, and demonstrate that in the face of changes in the number of referrals it can still hold prime contractors to the delivery promises they made.
Fees will be paid by the Department to contractors based on outcomes and regardless of the service individuals receive. Such an arrangement might tempt contractors to pass over those who are hardest to help into employment and cherry pick those who need little support. Contractors should be required to set standards of service for all participants.
Recent press reports have pointed to the possibility of fraud in welfare to work providers, especially A4e. The NAO is shortly going to publish the results of its investigation and we expect the Department to urgently publish the results of its own investigation."
Conclusions and Recommendations
The conclusions and recommendations from the report are below:
1. We commend the Department for introducing the Work Programme (the Programme) quickly. It now needs to demonstrate that the risks of implementing the Programme at such speed and against a background of difficult economic conditions have been effectively addressed. It was a significant administrative achievement that the Programme was introduced in 12 months. However, the Programme was not piloted, design and development phases overlapped, the business case was devised after the decision to go ahead had been made, and the IT system designed to support the Programme was not in place until March 2012. The Department now needs to demonstrate that, in the face of changes in the volumes of referrals to the Programme and changes in economic conditions, it can still hold prime contractors to the delivery promises they made. The Department also needs to demonstrate that payments to contractors are valid and correct.
2. Achieving value for money will need to go beyond a reliance on risk transfer. The Department has transferred some of the financial risk of low performance to prime contractors. Consideration of the Programme's value for money should be wider than whether prime contractors meet their contractual targets. In its on-going assessment of value for money, the Department should include whether the Programme is achieving all its objectives, including whether all participants receive a suitable level of support, and whether the Programme produces the expected wider benefits to society of getting more people off benefit and into work. The assessment should also take into account unintended consequences, such as the risk that participants on the Work Programme are replacing existing workers.
3. Service standards vary between contractors and are not always measurable. The level of support that participants require from the Programme depends on the complexity of their needs. However, prime contractors receive an attachment fee on the basis of the participant's benefit type and the Department will pay this fee regardless of the service individuals receive. This raises the risk that prime contractors 'park' the hardest-to-help within each payment group as these individuals may require more support. Conversely, in cases where little input is required, contractors may get paid for doing very little. The Department currently relies on each prime contractor to set out the standard of services all their participants should expect, but these are not always measurable. The Department should require prime contractors to set measurable minimum standards that all participants can expect. It should monitor the quality of service provided by contractors to make sure that these standards are maintained. As part of this it should seek feedback on the quality of service provided from participants on the Programme and should review the results of this regularly.
4. Reliable data on the performance of contractors in the Programme will not be available before autumn 2012. Accurate and detailed information is necessary to judge the Programme's performance and that of each provider. The Programme will operate for a full 15 months before participants, prime contractors, subcontractors and Parliament are informed of, and able to compare, performance. This is clearly less than ideal, and the information to be published must show performance at the level of individual contractors. This should include the minimum performance levels for each contract and the level of performance achieved.
5. Recent press reports have highlighted the possibility of fraud in welfare to work schemes. Whilst many of the allegations relate to previous schemes, they highlight issues with the Department's control environment. The Department considers the risks of fraud to be low, even in the absence, before March 2012, of its IT system that will carry out automated checks on whether people prime contractors say they have placed into work have ceased claiming benefits. The Comptroller &Auditor General will examine and report to Parliament on the control environment for welfare to work schemes. Prime contractors should not be allowed to exploit subcontractors. In the Pathways to Work Programme some prime providers retained a disproportionate amount of the payment from the Department and 'cherry picked' the easier-to-help claimants. The Department's Merlin standard is intended to regulate the relationship between prime contractors and subcontractors, and the Department plans to accredit each prime contractor against the standard by June 2012. The Department should make sure its audit of performance against the Merlin standard will properly establish whether subcontractors are receiving the agreed workload and that administrative fees charged by prime contractors can be justified by the services provided.
6. There is little transparency over the financial affairs of companies which derive their income solely from government. Where companies depend on public sector contracts for the bulk of their income they can expect their performance, profits and remuneration packages to be subject to proper scrutiny by Parliament on behalf of the taxpayer. In other areas of government spending the Efficiency Reform Group has secured significant benefits, by for instance negotiating rebates from companies that have multiple public sector contracts. The Efficiency Reform Group should extend the scope of its challenge to contracts with companies which have central government as their main source of income. We remain of the view that in the interests of transparency, where private companies provide public services funded by the taxpayer, those areas of their business which are publicly funded should be subject to the Freedom of Information Act provision.
7. The Department must be vigilant to the impact Universal Credit may have on the Programme. Universal Credit is due to be introduced from autumn 2013. It could lead to major changes to the Programme—for example, to the definitions of claimant groups and associated payments to prime contractors and to the number of participants joining the Programme. The Department appears not to have considered how the implementation of Universal Credit will impact on the Programme and how this impact will be managed. The Department should report to the Committee in November 2012 on the key changes to the Programme that will arise from Universal Credit, the risks for the Programme, and the actions it is taking to mitigate these risks.