DWP Work Programme – disappointing results, validation for commercial approach

The Department of Work and Pensions (DWP) announced today figures that show progress in the Work Programme, in which private and third sector providers are paid based on their success in helping unemployed people find and keep jobs.  The figures are, overall, disappointing. Only 3.5% of people on the scheme have found long term jobs, against a target of 5.5%. It’s not even clear that the success rate is better than the baseline – what would happen if the Programme didn’t exist.

This is bad news for the UK – it shows that either or both of the following are true.

a) The economy is dreadfully weak in terms of new job creation

b.) Getting long-term unemployed into work is really, really difficult.

Neither of those is very good news for UK plc or for us as citizens and taxpayers.  And whilst no doubt there will be political angles to this, in reality this programme is an improved version of what the last Labour government introduced, so they can hardly say they oppose the concept – what exactly would they have done differently?

We cover this here because it is an innovative, high prolife and critical programme in which procurement and contract / supplier management plays an absolutely central role. So as well as having huge implications for the financial and social wellbeing of the UK, the contacts are innovative in a number of ways. The incentivisation and risk transfer elements are complex and ground breaking, as is the way in which the DWP encouraged the formation of complex supply chains, involving third sector and similar organisations.  And I still don’t really understand how they got through such a complex and time-constrained procurement in 2010/11 without any challenges from unhappy bidders!

Perhaps most importantly, the commercial model is structured so that contract payments are heavily weighted to successful placements. That drives the right supplier behaviour, saves the taxpayer money, and means that the cost per job, even with the disappointing results, is less than it was for previous schemes. That’s some validation, we’d suggest, for the approach taken here.

But if the average provider is only getting 60% of the income they expected and planned for (based on that success rate of 3.5% against the plan of 5.5%), I assume some are feeling financially stretched. None have pulled out or gone under as yet, although some smaller players at second tier have withdrawn from the scheme. Again, we’d suggest the resilience of the Primes given the difficult circumstances shows DWP in a good light, in terms of the due diligence they carried out on the suppliers’ finances pre contract award. I’d keep an eye on those D&B ratings though….

Performance inevitably varies across providers. As DWP say:

“Some are performing well in helping people back to work, but others are not doing as well. The Department is managing providers vigorously to constantly improve performance. Letters have been issued to all providers expressing concern where their performance falls short of requirements and those providers with the lowest performance to date have been issued with formal contract letters”.

DWP have released a lot of data today – it isn’t in the most useful format however to do supplier comparisons, but I think after some analysis it will show which providers are performing well and which aren’t. I expect to see that analysis made public from someone in the next few hours.

And finally, there are signs that those who have been on the scheme longest have a better success rate, so maybe the “early days” claim we’re hearing today from Ministers has some validity. Let’s hope so, for everyone’s sake.

Comments

  • Cicero:

    This is bad news for the UK – it shows that either one, two, or all three of the following are true:
    a) The economy is dreadfully weak in terms of new job creation
    b) Getting long-term unemployed into work is really, really difficult
    c) There’s still plenty of money available for old rope (especially that big bit which gets sliced off at the top).

    I think you’ll find (the ’2nd Tier’) Eco-Actif didn’t withdraw. It went well & truly bust.

  • tony may:

    you don,t define ” long term unemployment ” ????

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