Work Programme provides 'an important opportunity'

---

Graham Hoyle OBE, chief executive of the Association of Learning Providers, discusses the potential pitfalls of the government's new welfare-to-work programme.

Work Programme needs a diverse and sustainable chain of providers

With unemployment rising, the Association of Learning Providers (ALP) believes that the Work and Pensions Committee's inquiry into the new Work Programme is an important opportunity to influence the final design of a vital element of the coalition government's welfare-to-work reforms.

No less than 8 of the top 10 DWP welfare-to-work providers are members of ALP and combined with the extensive number of DWP subcontractors in membership, we expect ALP members to be heavily represented in delivery of the Work Programme.

However ALP is picking up growing concerns from potential prime contractors that the package currently presented represents far too many risks. There is undoubtedly the possibility that some otherwise highly suitable players will not actually bid and a risk that those, who feel they must participate, will be signing up to an unsustainable model.

Since the original proposals for the Programme were published, ALP has also warned against the dangers of a drift into monopoly situations, whereby ‘mega-providers' monopolise welfare-to-work supply in any given contractual area. We believe this may lead to the limitation of choice by the customer and possibly to less innovation in the type of provision on offer.

These concerns remain following the introduction of the DWP's Framework Agreement which limits prime contractors for the Work Programme (and other welfare-to-work strands) to a turnover in excess of around £20m. Taking into account the potential for market failure within the provider payment models under consideration, it would not be easy to replace provision quickly in monopoly situations, should a prime contractor voluntarily or involuntarily exit the market.

We are therefore reassured by a suggested move towards pluralistic Work Programme contracting (ALP considers that in the light of the financial models being proposed, about three prime contractors per area would be appropriate) and we would warn strongly against any possibility of returning to monopolistic models.

Ensuring participation of third sector providers

The government has recognised that smaller specialist and third sector providers have a major role to play at a community level in successfully delivering the Programme. While ALP very much welcomes the introduction of the so-called DEL/AME switch as a way of increasing welfare to work funding, we are concerned that its implications for subcontractors must be properly taken into account when devising financial models.

For example, subcontractors have concerns about their positioning regarding risk transfer. With the relative lack of regulation coming from DWP as regards to the issue of financial top-slicing of contracts by prime contractors, there is anxiety that a programme that bears considerable financial risk for the prime contractor may also transfer an inappropriate amount of that risk down the supply chain.

We are also concerned that a payments by results ratio as high as that being considered may promote the demonstration of a commitment to outputs at the expense of building a sustainable, viable and diverse chain of providers. Providers are also concerned that payments will be reduced as the term of the contract progresses, which adds to the risk. Furthermore employers and unemployed individuals may lose out because procurement is heavily predicated on geography rather than industrial labour market sectors.

Linking to skills training

With a membership that trains the majority of 236,000 apprentices in England, ALP believes that the integration of the employability and skills agenda still presents a significant omission in any meaningful way in the strategic planning for the Work Programme. We feel that the county will be better served by an independent agency that delivers procurement solutions for employment and skills across the whole of government.

The Commons Work and Pensions select committee will discuss 'the Work Programme: providers and contracting arrangements' at 9:30am on Wednesday 12th January.

Article Comments