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Quality of Employment Services Now More Crucial Than Ever

14/07/2016 15:16 | Updated 14 July 2016

The Bank of England reiterated its warning this week that Brexit poses the "biggest near-term risk" to financial stability. For ordinary people, this may well mean job losses. This is tough enough for those in work; for those unable to find work during the last six years of economic growth, it will make life still tougher. With a contraction of the jobs market looming, it is vital that the Government ensures people struggling to find employment have access to high-quality support programmes.

It is people with disabilities and the long-term unemployed that the Government is focusing on in its new Work and Health Programme. The Department for Work and Pensions recently began the year-long bidding process for contracts to deliver these services; how it does so is critical to the programme's success.

Government has a commitment to removing barriers to competition during the bidding stage. Reform research, however, identifies a number of obstacles which government must remove to ensure the new Work and Health Programme is as effective as possible. In order to do this, government needs to attract participation from the full range of suppliers. As the National Audit Office has shown, over-reliance on a small number of providers leads to consolidation of markets; this is anti-competitive and can undermine the quality of services by stifling innovation.

Unfortunately the Government is not giving prospective providers enough time or information to prepare the best possible bids. In past programmes there have been cases where potential suppliers have gone through expensive and time-consuming processes to prepare bids, only to discover late in the day that they don't even meet entry criteria. This deters future involvement, by charities in particular, who can no longer justify such risks to their trustees, narrowing the base of potential suppliers.

This lack of communication has persisted into commissioning of the Work and Health Programme - one experienced provider we spoke to lamented "the least amount of clarity I have seen at this stage in the process". Prospective bidders for the Programme were at the time of interview still unclear on contract size, funding streams, and even geographical boundaries. Lack of time and information also hinders the ability of smaller organisations to collaborate, and advantages larger organisations with the manpower to construct bids under constrained timeframes. Government must do more to engage with the market before formal tendering takes place; this will foster higher-quality bids and can also contribute to the final design of the programme.

Another issue is the payment model government uses. The present use of 'payment-by-results' rightly rewards providers for the outcomes they achieve. The precise form this takes, however, is crucial to which types of organisation can take part. If too great a proportion of fees are paid for outcomes, smaller organisations may lack the cash flow to invest in services, leaving the market open only to those with very large balance sheets.

A particularly onerous financial hurdle has been the so-called 'parent company guarantee'. This requires bidders to guarantee a proportion of the contract value in the event of failure - usually exceeding the net assets of all but the largest charities. None of our interviewees could cite an instance in which government had actually needed to invoke one. These requirements are excessively cautious and should be reduced; government should also explore alternative protections to the public purse such as social finance.

As Frank Field MP notes in his foreword to Reform's paper, "behind the so-called 'jobs miracle' lies a group of people who have repeatedly been failed - those with a disability or health condition. Despite successive welfare-to-work programmes aimed at helping this group, millions have been left parked on benefits in a system that conflates disability with inability to work." By taking measures to ensure greater quality of bids - and not simply rushing to secure the cheapest contracts - government can make longer-term public savings, while also taking strides towards its aim of halving the disability employment gap.

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