Research report Work Programme Evaluation Procurement, supply chains and implementation of the commissioning model by Pippa Lane, Rowan Foster, Laura Gardiner, Lorraine Lanceley and Ann Purvis Department for Work and Pensions Research Report No 832 Work Programme Evaluation Procurement, supply chains and implementation of the commissioning model Pippa Lane, Rowan Foster, Laura Gardiner, Lorraine Lanceley and Ann Purvis A report of research carried out by the Centre for Economic and Social Inclusion on behalf of the Department for Work and Pensions © Crown copyright 2013. You may re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit http://www.nationalarchives.gov.uk/doc/open-government-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected]. This document/publication is also available on our website at: http://research.dwp.gov.uk/asd/asd5/rrs-index.asp Any enquiries regarding this document/publication should be sent to us at: Central Analysis Division, Department for Work and Pensions, Upper Ground Floor, Steel City House, West Street, Sheffield, S1 2GQ First published 2013. ISBN 978 1 909532 21 2 Views expressed in this report are not necessarily those of the Department for Work and Pensions or any other Government Department. Contents iii Contents Acknowledgements .................................................................................................................................. vi The Authors ............................................................................................................................................... vii Glossary of terms .................................................................................................................................... viii Abbreviations ..............................................................................................................................................x Summary .....................................................................................................................................................1 1 Introduction .........................................................................................................................................5 1.1 Background and policy context ............................................................................................5 1.1.1 Payment by Results ...................................................................................................5 1.1.2 Payment by results in employment programmes ..............................................6 1.1.3 The New Deals, Employment Zones and Pathways to Work ...........................6 1.1.4 The ‘Commissioning Strategy’ and the Flexible New Deal ...............................7 1.1.5 The Work Programme ...............................................................................................8 1.2 Evaluating the Work Programme ........................................................................................9 1.3 The programme strand ....................................................................................................... 10 1.4 The commissioning strand ................................................................................................. 10 1.5 Scope and structure of the report ..................................................................................... 12 2 Procurement of the Work Programme and the provider market ........................................... 14 2.1 Procurement process ........................................................................................................... 14 2.1.1 Speed of procurement ........................................................................................... 15 2.1.2 Transfer of Undertakings (Protection of Employment) .................................. 15 2.1.3 Forming supply chains ........................................................................................... 17 2.1.4 Evidence of ‘bid candy’ .......................................................................................... 18 2.1.5 Opting out of procurement .................................................................................. 19 2.2 Current supplier market ...................................................................................................... 20 2.2.1 Characteristics of Work Programme supply chains ......................................... 22 2.3 Summary ................................................................................................................................ 23 iv Contents 3 DWP contract management .......................................................................................................... 24 3.1 Relationship management ................................................................................................. 24 3.1.1 DWP-prime contractor relations ........................................................................ 25 3.1.2 DWP-subcontractor relations ............................................................................... 27 3.2 Performance management ................................................................................................ 28 3.3 Summary ................................................................................................................................ 30 4 Supply chain management ............................................................................................................ 32 4.1 Referrals and payment terms ............................................................................................ 32 4.1.1 Referrals .................................................................................................................... 32 4.1.2 Payment terms ....................................................................................................... 35 4.2 Relationship management ................................................................................................. 35 4.2.1 The Merlin Standard ............................................................................................... 36 4.3 Performance management and improvement ............................................................ 37 4.3.1 Relationships between subcontractors ............................................................. 38 4.4 Changes to supply chains ................................................................................................... 39 4.4.1 Supply chain leavers .............................................................................................. 39 4.4.2 Summary .................................................................................................................. 40 5 Impact of the commissioning model ......................................................................................... 41 5.1 Minimum service prescription – the ‘black box’ ............................................................. 41 5.1.1 Managing the black box ........................................................................................ 42 5.1.2 Black box within supply chains ............................................................................ 44 5.2 Outcome payment model .................................................................................................. 45 5.2.1 Impact on delivery ................................................................................................. 46 5.2.2 Differential pricing .................................................................................................. 47 5.3 Minimum service delivery standards and performance management .................... 49 5.4 Impact on the supplier market ......................................................................................... 50 5.4.1 Future intentions .................................................................................................... 51 5.5 Summary ................................................................................................................................ 53 Contents v 6 Conclusions and implications ........................................................................................................ 54 6.1 Speed of procurement ......................................................................................................... 54 6.2 Involvement of the voluntary sector ............................................................................... 54 6.3 Managing the black box ...................................................................................................... 55 6.4 Agreeing and adapting minimum service standards ................................................... 55 6.5 Differential pricing ................................................................................................................ 56 6.6 Impact of the economic climate ...................................................................................... 57 6.7 Contribution of this report and next steps ..................................................................... 57 Appendix A Work Programme contract package areas (CPAS) and providers ........................ 59 Appendix B Methodology .................................................................................................................... 60 Appendix C Raw survey data.............................................................................................................