Payment by Results
National Framework Event
1 August 2011
Welcome
Helen Judge
Director, Sentencing and Rehabilitation
Ministry of Justice
Today’s event
•To set out the strategic context and rationale for payment by
results
•To update you on the payment by results programme
•To discuss with you what we are trying to achieve through the
community and public sector prison pilots
•To set our plans for establishing a National Framework for
delivery of the payment by results pilots
What have Ministers committed to:
•
The coalition Agreement stated the Government’s intention to:
“pay independent providers to reduce reoffending, paid for by the
savings this new approach will generate for the criminal justice system”
The Green Paper outlined what this will mean in practice:
• New approach paying providers to reduce reoffending
• Ambition to apply the principles to all providers by 2015
• At least six new pilots – with innovation pilots on top of this
• Supported by wider reforms over the next two years
Why are we doing this?
To reduce reoffending and increase public safety we must reform the offender management system. This will
mean significant changes in the way the Ministry of Justice commissions offender services in partnership with
others, and a range of reforms to the delivery system.
The critical change we will make to the commissioning system will be to ensure that public money spent on
reforming criminals is spent effectively. We will do this by paying service providers for the results that they
achieve in reforming offenders.
If they are successful, this reduction in crime and reoffending will allow us to make savings in the justice system.
Improved outcomes to reduce crime and re-offending should result in fewer victims and safer communities.
These reforms are also a central part of the Government strategy to improve public services, deliver the Big
Society and ensure that services are more locally focused and accountable to the public. In the justice
system this will see us empower communities, open up public services to different types of provider, and
encourage social action.
The MoJ and NOMS are committed to opening up our public services and creating a more diverse and
vibrant market both for rehabilitation services and across our delivery system.
What won’t we be able to do today…..
…..is answer all your questions.
This is new policy for Government, the Criminal Justice System and the providers
delivering in the sector
We need to develop our thinking together, and today is not just about ‘process’ for
procuring services, but to focus on a joint outcome – delivering pilots that reduce
reoffending and learning together about what works
Without working together across all sectors it will be difficult to harness the
expertise and innovation that it will take to be successful……
……today you will hear more about how you can continue to engage with us
Payment by Results Programme
Ian Poree
Director, Commissioning & Commercial
National Offender Management Service
Overview
• Provide an overview of the Payment by Results programme
and an update on progress;
• Highlight links with the wider NOMS’ work on competition for
offender services;
• Provide detail on how some of the financial models currently
work within the pilot programme (Lucy Bogue)
We have defined 4 pilot types:
• Prisons
• Offenders on community sentences
• Local financial incentives
• Innovation
Progress to date ….
Launched
• HMP Peterborough – Social Impact Bond
• HMP Doncaster – Private Sector model (to launch October 2011)
• Local financial incentive projects – Based on ‘justice reinvestment’ principles in
Greater Manchester and across a number of London Boroughs.
In progress
• We are working with public sector prisons to consider a payment by results pilot;
• We are working with probation trusts to consider a pilot working with offenders on
community sentences;
• We will also consider innovative proposals from the market and explore where best to
pilot those ideas.
Payment by Results – Wider Context (1)
‘Competition Strategy for Offender Services’ published last month outlines,
as well as Payment by Results, further competitions in the first year include:
•Custodial competitions. Further nine prisons to be competed this year
• Community Competitions. Underway is the competition for community
payback services in London. We will hold a competition to replace the existing
Electronic monitoring services contracts due to expire in March 2013.
Payment by Results – Wider Context (2)
The Payment by Results pilot programme is fundamental component of the strategy. It
will support us to:
• Move away from focusing on how providers deliver a particular service, and
concentrate on what outcomes are required from a particular service;
• Deliver better outcomes for the taxpayers for less;
• Develop a diverse market of potential providers of Offender services
• Stimulate providers from all sectors to innovative and better value services.
We have committed by 2015 to applying the principles of payment by results
across services which reduce re-offending
Lucy Bogue
Head of Payment by Results Pilot Programme
National Offender Management Service
Payment by Results – Different models for the different pilots
We are keen to use the pilots to explore/test a number of
different PbR models.
Focus on the following two, as examples:
• Social Impact Bond in HMP Peterborough
• HMP Doncaster model
Peterborough SIB
On 10 September 2010, the Government launched a 6-year prototype SIB introducing payment by results into commissioning
offender management services. This is how it works:
6. SIB is ‘proof of
concept’ but it cuts
reoffending and
potential to reduce
demand & bring
cashable savings
for MoJ
5. MoJ pays only
against this
success, to cover
costs and provide
investor ‘return’
4. SIB performance
measure based on
outcomes: to cut
reoffending in
target group by at
least 10%
1. MoJ contract with
Social Finance, who
find investors from
outside Government
2. Social Finance
commission proven
Third Sector providers to
deliver intensive
interventions for target
offender group
3. Target group is u12
month prisoners
discharged from HMP
Peterborough
Pilot example 2: HMP Doncaster
1. 10% of annual
contract value is put at
risk against a
reoffending target –
although the full
payment is received in
each year
Potential
extra
payment
10 % at risk
10 %
recovered
by MoJ
10%
retained
Core budget
2. There will be an
offender cohort for each
year of pilot –four
offender cohorts in total
5. If the 5% point reduction is
exceeded, the ‘at risk’ portion is
retained by provider, AND
additional payments made for
every extra % point achieved,
capped at 10% points
4. If reoffending is NOT reduced by
5% points from the 2009 baseline,
the ‘at risk’ portion for that year
returns to the MoJ
3. If reoffending is reduced within a
cohort by 5% points from the 2009
baseline, the ‘at risk’ portion for
that year is retained by provider
Question & Answer
?
Policy Development
Luke Edwards
MoJ Policy, Deputy Director
Reducing Reoffending: Payment by Results
Introduction
The framework will support the Payment by Results
programme in delivering:
• Public sector prison pilot
• 2 x community pilots
• Potentially future waves
Achieving the Government’s intention to transfer risk away
from the public sector
Creates new opportunities for the public sector to partner
with private and voluntary
Delivering the partnerships
•Will need to deliver these partnerships in a way that has not
been done in our system before
•We will use the framework and engagement process to:
• bring diversity and innovation to our services, creating new
models to more effectively reduce reoffending
• ensure that we have providers who are able to stand behind
the risk; and
• help us think creatively about how this can be achieved
Possible ways to deliver…..
•Joint ventures
•Mutualisation models
•Sub contracting arrangements
•And …
Public Sector selection
•We are also identifying the Probation Trusts and public sector
prisons
•Process includes analytical and leadership criteria
•We are:
• holding discussions with shortlisted prisons and will select by - end
August
• holding regional design groups with Probation Trusts, and an
application and assessment process will follow this – ends
September
Working with you…..
•We don’t have all the answers yet
•We also want to develop the policy with the selected Trusts and Prisons
•We will work with all sectors of the market over the coming months to hear
ideas about how this might work
•We will have all policy detail resolved for the ‘call off contracts’ ready for
formal dialogue in relation to the contracts
Procurement Process - Payment by Results
Clare Maynard
Procurement Unit Manager
Agenda – To Cover
•Procurement Rules and Regulations
•Current Position
•National Framework Agreement – Process
•Mini Competition – Process
•Terms and Conditions
Background – Responsibilities and Initiatives
•Public Procurement Regulations
• EU Public Sector Procurement Directive 2004/18/EC
• Public Contracts Regulations 2006
• The EU public procurement rules seek to ensure that public sector bodies
award contracts based on the principles of transparency, non-discrimination
and competitive procurement, and facilitate the achievement of value for
money for the taxpayer as well as promoting the single European market
•Current Initiatives
• Cabinet Office – Efficiency and Reform Group (ERG)
• Small and Medium Enterprises (SMEs)
• Transparency Agenda - Contract Finder
The Current Position
•Prior Information Notice
• Tenders Electronic Daily (TED)
• Ministry of Justice eSourcing Portal (Emptoris)
• Further details on Flyer
•Market Engagement – consult with recognised market leaders to:
• Canvass opinion regarding what existing or new provision may satisfy potential MoJ
outsourcing requirements
• Establish what options are available to the MoJ/NOMS
• Validate assumptions (risks, issues and timescales) regarding potential change and
implementation timescales for outsourcing proposals
• Understand what key information should be gathered and presented in order to get the
best response from the market
• Appreciate what external investment opportunities exist and how this would alter
commercial arrangements
•Commercial Governance and Business Case
• Financial and Accountability
National Framework Agreement
• A framework agreement is a general term for agreements with suppliers which set
out terms and conditions under which specific contracts (or “call-offs”) can be made
throughout the term of the agreement
• When awarding individual contracts under framework agreement, authorities do not
have to go through the full procedural steps in the public procurement regulations
• It does not mean actual prices will be fixed, rather that there will be a mechanism
that will be applied to pricing particular requirements during the period of the
framework
• Whilst the scope and types of services that will need to be called-off will be set, it
allows for flexibility in adapting and refining them for a particular application so long as
it remains within the general scope of the original specification
• A framework does not represent a contractual commitment, it is the subsequent
agreement from the call off which creates the contractual commitment
• Maximum duration of four years
Procurement Process – Framework
•Issue of OJEU Contract Notice - Open Procedures
•Issue of Tenders for various lots
•Return of Tenders
•Evaluation of Responses
•Appoint to Framework against lots
Key Principles – Mini Competition Process
•Run a fair and open competition
•Treat all Potential Providers equally and “unfairly”
• MoJ and NOMS are fully committed to the principles of competitive neutrality
•The Principle of Competition will be developed and issued with tender documents
•Support the Merlin Standard approach
•All National Framework Providers appointed to a particular lot will be invited to
participate in the call off competition
Mini Competition Process
•Programme will be run by NOMS
•Lots enables NOMS to maximise benefits realisation by optimising
economies of scale/scope against the balance of local delivery
•Gives bidders freedom to innovate, drive down costs and respond to
initiatives in the Green Paper
•Lots structure still to be determine
•Face to face discussion – Our preferred choice
COMMERCIAL - RESTRICTED
Mini Competition Dialogue – Key Points
•Providers will develop their understanding of the requirements over time
•Looking for innovation in proposals
•Evaluation on the basis of the most economically advantageous tenders,
taking into account quality and price
•Equal treatment of all bidders
Introduction to Competition Documentation
•Volume 1 – ITPD Instructions
• Background and Competition Process
• Contracting Principles
• Key Issues
• Evaluation Methodology
•Volume 2 – ITPD Bidders Response Requirement
• Potential Providers Response Requirements
•Volume 3 – Terms and Conditions
• Framework Agreement
• Draft Contract
•Volume 4 – Virtual Data Room
• Location of background documents
•Volume 5 – Site Specific Information
Timetable
August – one to one engagement
September – Issue of OJEU contract notice
Mid October – Submission of tenders
October/November – Evaluation of tenders
December – Award of framework to successful tenders
Jan 2012 onwards – Call off process commences
Question & Answer
?
Closing Remarks
Tony Challinor
Head of Commercial Development Group
National Offender Management Service
Innovation Pilots
•Ambition is for one or two pilots – depending on nature and size of proposals.
• We will be expecting providers to lead on the pilots. Done with and not done
to.
• Aim is to develop innovative models which are likely to require an external
partner/investor;
• We will pay on success. £20m has been allocated for success payments
across the programme;
• August 11th – Innovation Pilots Event