A paper about children’s homes commissioning
Introduction
The Department for Education has two work groups that are due to report in
September and December. One is a Task and Finish group looking at ‘Out of Area’ matters arising from current placement practice. The other is looking at Quality and will address matters such as workforce development.
These work groups were initiated following the high levels of media interest regarding children’s homes that have prevailed throughout 2012.
'Facts' in headlines and stories have been presented as though they are a complete and unassailable in their veracity.
Reflecting even for a few moments is a hard task when faced with such reports of lurid content. However to do so is to quickly come to see them as at least contestable, often loose use of statistical methods or data, extrapolations, or interpretations. Important contributory knowledge and experience would have provided another wider and more helpful practical insight through being from a context rich understanding.
There is danger in any of us thinking that currently any of us have the view or the solution. This may emerge over time through dialogue. At this stage we must resist the comfort of becoming very focused on one way of looking at things. Work with one part, or with a partial piece, and we will not be successful in the total task. If we do a partial job we should not be surprised if it unravels sooner than later and we have to return to the same issues again.
This paper has been prepared solely to attempt to contribute to the dialogue to take us to the development of a comprehensive understanding. It does not seek to offer solutions to all of the issues but seeks to add to the body of knowledge. It does not take it that we already have all the issues already known so it raises yet more.
The major focus of this paper is on matters such as the operation of the Children’s
Home marketplace, financial considerations and a commercial view of the sector. In doing so it also addresses residential child care practice issues as they are affected by these other factors.
 Why are so many Children’s Homes in the private sector?
 What are the costs of Children’s Homes services?

Is fair value for money being gained from Children’s Homes services?

Why are so many young people in care placed so far from the local authority area where they originate from?
 Why were the Children’s Homes involved unable to keep the young people safe from the perpetrators?
 Why are outcomes of looked after children in Children’s Homes poor compared to the wider cohort?

Structure

Looked After Children and Young People

Size of the market

Supply and Demand

Costs

Market Dynamics

The Law and Munro

Return to the questions posed

Potential for Improvement

Looked After Children and Young People
At the centre of this discussion are a group of young people who have started their lives at a disadvantage to the majority of young people in the country of the same age. Life experiences may be have been traumatic, abusive, neglectful, providing many obstacles to be overcome, challenging resilience even for young people who may have had a more usual upbringing.
This introductory section aims to offer a little insight to any reader who perhaps has not had much previous experience of children and young people who live in
Children’s Homes. I would like to apologise to anyone with social work or other professional training for the simplicity of the descriptions that follow. They are offered in the spirit of setting the scene for someone who comes to the field without such knowledge or experience maybe from a commercial, commissioning or policy making background.
Becoming a ‘Looked After Child’ involves a new relationship entering your life. The local authority responsible for receiving the young person into care becomes a critically important “corporate parent”. Cross this threshold and the life of the young person may be subject to the influences of the policies and practices of the local authority, its officers, and its budget priorities.
At the same time the local authority will be responding and reacting to changing national priorities handed down via legislation and guidance from central government. This too influences the life of the young person.
Increasingly local authorities are not able to meet the needs of all young people using their own services and settings. They look to purchase a service provided by a voluntary sector or private sector provider.
The ‘team around the child’ as it has become known maybe large. The pressures on the network of people around a young person may be very different for each person and inevitably there is potential for conflicting views to be taken by those involved. It is perhaps easy to see how the involvement of so many people in one young person’s life can lead to situations where their own voice can get lost amongst the differing policies, agendas and budgets.
For people new to this area of life it might be helpful to provide some real life examples. These three vignettes are derived from actual cases. As you read them please reflect on the breadth of needs and challenges that arise for the young person, the people as individuals and as a network.
A is a 15 year old boy. After several years of neglect (and suspected abuse) he had been excluded from schools and pupil referral units as a result of physical and verbal assaults on staff and other pupils. A has become involved in drugs and alcohol misuse and is subject to a full care order. He has had several foster placements that have also broken down, for example when he caused significant damage to the carer’s home and property and took a carer’s car without permission. He has also

been investigated for the possible abuse of a carer’s younger son. He is approaching the end of a three month placement in a secure training centre and his social worker is looking for a Children’s Home placement. During his secure placement he began to engage with a CAMHS professional and the Children’s Home placement is requested to continue with this work.
B is a Deaf 14 year old girl. She also has a diagnosis of Autistic Spectrum Disorder.
As she has matured and grown her parents and siblings and schools have struggled to cope. She uses British Sign Language as her only form of communication. A recent special boarding school placement has broken down and B’s levels of self harming have escalated to weekly visits to A&E. The school is employing 3 members of staff to subdue and restrain her to try to prevent increasing violence against staff and her own self harming. Engagement with education has ceased due to the behaviour, although earlier in her school career B seemed bright and intelligent when able to access lessons. Parents are pressing professionals hard and they are seeking a Chil dren’s Home placement to stabilise her behaviour, and perhaps to begin to rebuild education engagement.
C is a 10 year old boy from a single parent family. His mother has struggled to parent
C who has been considered at risk since referral to social services partly by his primary school several years ago. His mother has admitted to an increasing drug problem and is about to enter full time rehabilitation. There are no appropriate friends or family who can care for him. The local authority has been granted an interim care order and wants to find a foster placement locally to maintain contact with mum and his school placement. However, due to high demand there are no foster carers with available places. Residential options are being considered.
Even without any social work training, it is easy to see from just three examples the unique needs of every Looked After Child. Taking this uniqueness across all Looked
After Children requires a matching uniqueness of provision, each children’s home needs to be unique, with its core of expertise but adapting to meet the needs of the young people residing there at that moment. In such a way we can appreciate that children’s homes should not be seen as a homogeneous marketplace of need.
To make the point clearly and to begin to see the complexities, if all three were from the same local authority, it is highly unlikely that A, B and C could be safely or logically placed together in the same home.
Considering separate homes for each requires consideration of the needs of the existing residents of homes being considered.
For example:
Should A only be placed where there are not younger children? Or where staff can supervise him continuously? Could A be placed with other boys of a similar age and background? If so, how many? When does the risk of having too many boys living together increase the risk of incidents where one leads others into destructive

behaviours and the breakdown of multiple placements at the same time? Should A be placed on his own for a while, or is that too isolating and retrograde?
For B, are there special services where British Sign Language is used all of time and where the staff have experience of working with autistic behaviours? Could B be placed with boys or girls? If so, are there residents already in place who may be distressed or negatively impacted if they see B self harming? How can special education be accessed? Mental health support? Are parents likely to challenge any proposed placement? How can they be involved to support the decision?
For C, does the authority face placing the boy with a foster carer further afield and therefore need to find a new school with the potential disruption that may bring? Or is there a home locally that could be considered? How would C mix with the current residents? If they are older teenagers and likely to be staying longer can C be insulated from potential risks?
In addition to all of the factors about the individual child and about the other children they may be placed with then professionals also need to consider the capabilities and experience of the manager and staff group, the resource levels and education and health service accessibility of the provider organisation as a whole, and the ability they have to apply all of that to any new placement.
These examples intend to give a short reminder that, for every child, at every moment that a Children’s Home placement is being considered for them, there are a multitude of human factors to consider. Decisions as to how to meet the needs of the young people require experience, knowledge, training and know-how.
Indeed a lot of emphasis in policy in recent years has been placed upon comprehensive, multi-agency assessment of need, with the results of such assessment being the key driver of placement decisions. As Munro concludes we need to support social workers’ ‘authority’ and ‘autonomy’ and to back our social workers in making these difficult decisions.
All things being equal then the matching of need to provision can be made. However the diversity of needs and fluidity of demand can lead to the need for quick decisions based on imperfect information. At any point in time there is unlikely to be the perfect placement vacancy, and prioritisation of objectives and risk management will enter the scene. It is not difficult to conclude that many vacancies in many homes can be quickly excluded from consideration at the point the placement is needed on many different grounds. Decisions in such circumstances can be shaped more by performance indicators, policy or systems approaches or an out of date inspection report.
Learning points
 The Children’s Home market is not one single market as some of the data collection might seem to suggest.


It is a highly complex aggregate marketplace of a wide spectrum of needs.

Every young person and their situation at any point of placement, is unique.

The marketplace of demand is made up of as many young people and situation combinations as can exist.

The marketplace of supply is already demonstrating that it is possible to provide services for certain cohorts of demand.

No one provider (yet) can claim to provide the best solution for every possible need.

Some providers attempt to offer a breadth of services for a breadth of needs and these can be appropriate for some cohorts/localities.

Other providers concentrate on more defined cohorts of need or specialisation.

Size of the market
It is worthwhile to have some context as to the scale of the task.
The DfE and other sources (including PriceWaterhouse Coopers, Deloitte, and most recently, Laing&Buisson) have researched the available data. Several have commented that the available data is sometimes limited, of an aggregate nature, and sometimes does not compare like with like.
This paper will not dwell on the data in detail as these other sources are already exposing the need for more depth and intelligence in the data collection, and greater robustness and verification of that data. The need for this was exemplified by the wide gulf in figures reported by local authorities and the police about the numbers of incidents of absconding behaviour recorded when the media were trying to ascertain facts related to the Rochdale situation. The government and DfE programmes have stated that information requirements are one of the priorities in their work.
In terms of the overall scale then the often quoted numbers from public sources are:

As at 31 March 2011 there were 65,520 children looked after in England. The population sees a significant number coming and going during a given year.
During the year to 31 March 2011 91,920 children were looked after at some point during the year.

As at 31 March 2011 5,890 childr en looked after were in Children’s Homes,
Secure Units or hostels, 1,050 in other residential settings (care homes, NHS nursing care homes, mother and baby units, young offender institutions), and
970 were in residential special schools.
Of these totals only 4,840 children looked after were placed in specifically registered Children’s Homes.
 Ofsted data identifies 1,960 registered Children’s Homes in England, with some 11,300 places. There is some evidence that these figures are capturing the capacity of large residential special schools that accept young people who may have special education needs but who are predominantly do NOT have looked after status. Overlaps of placements between England, Wales,
Scotland and Ireland also muddy the data.
The independent sector provide 7,200, some 64% of all registered places in
England.

DfE data for England reports an aggregate spending of £1,028m. Greater clarity is required as to the content of this figure and how it relates to the volume measures.

It could be argued that, ideally, work should be carried out to break down the volume and value figures above into sub-segments of the totals so that the data becomes more informative the user. Certainly at an aggregate level the data must be used with caution. The challenges faced in re-analysis of the data are:

Deciding on a framework of sub-division that most or all in the sector are both willing and able to use.

Resources to analyses the data across new parameters.

Further complexity when sub-segments overlap and how this is dealt with.

Verification and consistency.

Intelligent and informed interpretation of results.
The following Conceptual Framework for the use of Residential Child Care comes from the partnership work of NCERCC and Revolution Consulting (for which there is introductory training ranging from half day ‘What makes a good children’s home’ to an assessment tool for identifying and needs and matching them to the following matrix) is offered as a potential starting point for such work.

Anti Social Behaviour,
Violence, Aggression, SEBD,
Absconding, Self Harm,
Substance Use, Sexually
Inappropriate Behaviour
HIGH
Mainstream
Children’s Homes
Youth Offending
Secure Units
Secure
Psychiatric
Specialised
Children’s
Homes
Medical &
Nursing
Care
MED
LOW
Adoption
Kinship
LOW MEDIUM HIGH
FREQUENCY Autistic Spectrum Disorders, Aspergers,
ASPD, Tourettes, ABI, Physical Disability
There is evidence that the Children’s Homes market does indeed break down into many overlapping sub-segments. Local authority placement and commissioning officers openly refer to specialist provision for certain needs, most often because of difficulty in finding the particular specialism.
It is also clear that there is a wide spectrum of prices being paid for Children’s
Homes services. Whilst this will be influenced by several factors, it is not unreasonable to suggest that specialist services may be achieving a premium to those services that deal with the larger cohorts.
Applying the framework above to the suggestion that market information needs to be developed at a more detailed sub-segment level leads to a further suggestion.
With limited resources at play and with the need for an agreed sub-segmentation that is consistently applied, it would perhaps be most efficient to start by defining specific, definable specialist sub-segments. By carving out these segments first insights will be gained as to the practicality and inference of the data gathered. It also saves a larger, expensive, and potentially slower project.
Learning points

Caution with any current data. It can be of limited use in giving an insight aggregate nature, and sometimes does not compare like with like.

The need for more depth and intelligence in the data collection, and greater robustness and verification of that data.

Break down the volume and value figures above into sub-segments of the totals so that the data becomes more informative the user.

A Conceptual framework helps


Define specific, definable specialist sub-segments. By carving out these segments first insights will be gained as to the practicality and inference of the data gathered

Supply and Demand.
I have referred throughout to the Children’s Homes sector as a market. The significant role played in the supply of services by the non-statutory sector is just one indicator that we can think of the activity of purchasing and supplying services as operating under the types of rules and behaviours that economists have long described for all markets.
Amongst the simplest economic models is that of supply and demand. For any particular market this is often best illustrated via the below graph
In appl ying this model to the Children’s Homes sector, there is again evidence that it is not one homogeneous marketplace. The aggregate statistics quoted earlier suggest a market where supply significantly exceeds demand. This would place the market to the right hand side of the model, and there would be reduced pricing, all around the same level.
However, the DfE and other studies have shown that there are a wide variety of prices paid. Some of this could be a regional effect (anecdotally for example, the
North West appears heavily supplied and tends to see some of the lower prices being paid), and indeed there are questions as to the comparability of some of the available statistics. However, it is a strong hypothesis that in fact there are multiple sub-markets operating.
For example, in parts of the country where tenders have been held for preferred provider status in generic or “mainstream” Children’s Homes, then interest has been high and responses have often indicated lower then spot-purchase market prices. i.e. the market is operating towards the right end of the supply-demand model.
However, where specialist, lower-incidence needs are being met then often local authorities can struggle to find suitable placements. When they do, they may be

some distance from the home authority and often are at higher prices. All of which indicates a left hand side position on the supply-demand model.
Additional evidence of multiple sub-segments is from the tenders that have issued in the area in the last few years. Several of these have recognised explicitly in the invitations to tender that there is not one generic Children’s
Homes market. Tenders have sometimes attempted to describe two or three subsegments, however, they still group a wide variety of needs in each.
Finally, research into what works in residential care (quote ref) clearly describes 3 different cohorts and 3 different service types.
http://www.ncb.org.uk/media/521176/whatworksinrccsummary_ncbhighlight.pdf
1. Children with relatively simple or straightforward needs
These children need either shortterm or relatively ‘ordinary’ substitute care.
Why are they a child in care?
Their families may be stable and supportive but there has been a crisis or difficulty and they need short term, days or weeks, of support.
What do they need?
Good quality daily care and support.
How will they behave?
There can be a reasonable expectation that the child will return home and resume their usual lifestyle.
Where will they be placed?
Usually fostering, but there are many children who have preference for residential child care or are unsuited for fostering and so can go to a short break or short stay mainstream children’s home.
What is a short break children’s home?
Short breaks are often part of a wider package of care, which can involve health and education services and other agencies and are for children with learning disabilities and allow carers and families to ‘take a break’. The children will have permanent and substantial physical and /or learning disabilities but will not be very challenging in their behaviour or require expert

nursing care.
Short stay mainstream children’s homes
Short stay mainstream children’s homes provide time-limited care for children.
These homes may serve different purposes; a child may need looking after because of unplanned or unforeseen events; or they may be waiting for a long-term place to become open; or it may be for assessment.
2. Children or families with deep rooted, complex or chronic needs with a long history of disability, difficulty or disruption, including abuse or neglect
These children require more than simply a substitute family care.
Why are they a child in care?
There may be longer times when these children need stabilising, from weeks and months to years. They may have been a child in care before.
What do they need?
They need individualised care in a safe and containing environment, provided by grown ups who are consistently thoughtful about each child’s care. There will be clear boundaries and limits with some negotiated flexibility.
How will they behave?
Their behaviour may be unsafe, self-harming or unpredictable and need to be managed in order to stabilise their lives.
Where will they be placed?
Long term mainstream children’s homes
These homes provide care for a child for a substantial period of time, possibly until the child reaches adulthood. Most homes provide children with a key worker who will work with a child to ensure that their needs are being met in line with their Care Plan. This will include how a child’s emotional, educational, social and health needs will be met. There will also be

consideration given to the contact a child will have with their family and friends. These homes tend to provide care for groups of children and a key task for workers within the home is balancing the needs of each individual child with the needs of the group.
Children’s homes for children with disabilities
Some children with disabilities have complex needs resulting from disability rather than a lack of parenting capacity. They require specialised long-term care that can provide care, education and health needs often in one place.
Residential Special Schools
Residential Special Schools provide an enriched educational experience but also address children’s disability, and/or social, emotional psychological and behavioural needs. Residential Special Schools can be children’s homes too if young people live there more than just term time. There will specialist staffing and provision.
3. Children with extensive, complex and enduring needs compounded by very difficult behaviour who require more specialised and intensive resources
These children with ‘high cost: low incidence needs’ require particular care and specialist settings. The children have serious psychological needs and behavioural problems that can overshadow other goals.
Why are they a child in care?
Their needs may have been obvious from an early age and be the result of physical or sexual abuse. They may be involved with Youth Justice or mental health teams.
What do they need?
Intensive support and treatment with care, education and health all on one site and directed to creating a change in the child’s and families

circumstances.
How will they behave?
They will find it hard to sit still, often easily be verbally and physically aggressive, unpredictable, irrational, or unable to reason and show little concern for others. They can be out of touch with their emotions and show little or no sense of guilt or apology.
Where will they be placed?
These children need a place with a therapeutic community, an adolescent mental health unit, a small ‘intensive care’ residential setting, secure unit or occasionally a place that is just for them on their own but still residential child care.
What is a Therapeutic Community?
Within a clear set of boundaries concerning time, place and roles there will be very close relationships between children and grown ups with frequent sharing of information and open resolution of problems, tensions and conflicts.
Daily life will be purposeful tasks
– therapeutic, domestic, organisational, educational
– and there will be a shared commitment to the goal of learning from the experience of living and/ or working together
What is an adolescent psychiatric unit?
The focus here is on health and they are often close to or part of hospitals.
The staff are mostly nurses and doctors, but there are social workers and teachers too. Young people will have needs such as a psychiatric illness, eating disorder, suffering from post-traumatic stress, or complex conditions that may include learning difficulties and behavioural problems. Some have experienced abuse or have difficult family and social circumstances.
What is a secure children’s home?
Secure Children’s Homes are specialist residential resources offering a high quality of care, education, assessment and therapeutic work. These are the

only children’s homes allowed to lock doors to prevent children leaving. Such restriction of liberty is a serious matter and entry is only by having a legal order from a Court made to protect the child or the community.
What is a onebedded children’s home?
Some homes are specifically registered and designed to have just one child living in them. For some children, living with a group of other children is not the best way in which to meet their needs. They need to have the opportunity to have the specialist support that residential child care can provide, but without the complexities that group living might bring. Their placement will follow an assessment and be meeting a specific treatment or care need. A key difference between foster care and a one bedded home is that a team of staff are employ ed to work with the child in the children’s home. The staff members do not live on site and go home at the end of their shift

The message from a longstanding economic model is clear.
In each sub-segment of the market if demand outweighs supply then activities that look to increase supply will simultaneously increase competition which in turn leads to the market reducing prices.
This automatic market price correction mechanism requires purchasers to have good visibility of the whole marketplace of supply and how it develops. Clearly without knowledge of new competitive entries a purchaser will not be able to gain a choice of placements which in turn can lead to lower prices being offered by suppliers.
There is a mechanism that also prevents prices being forced too low. Providers who cannot sustain a business at too-low prices will exit, which in turn reduces supply and reduces choice and thus prices will rise.
Hence it is a reasonable suggestion that purchasers be encouraged at local, regional and national level to carry out activities that maximise information flow about provision.
There is therefore potentially a direct tension with tender processes that look to restrict and limit choice. This is resolved through the intelligent application of tenders. It is suggested that tenders only be applied to segments where aggregate demand is relatively substantial, and that the tender is only used as part of a wider commissioning approach that ensures visibility of all the other specialist segments as well.
Learning points

It is a strong hypothesis that in fact there are multiple sub-markets operating.

In each sub-segment of the market if demand outweighs supply then activities that look to increase supply will simultaneously increase competition which in turn leads to the market reducing prices

This automatic market price correction mechanism requires purchasers to have good visibility of the whole marketplace of supply and how it develops.

It is a reasonable suggestion that purchasers be encouraged at local, regional and national level to carry out activities that maximise information flow about provision
There is therefore potentially a direct tension with tender processes that look to restrict and limit choice. This is resolved through the intelligent application of tenders. It is suggested that tenders only be applied to segments where aggregate demand is relatively substantial, and that the tender is only used as part of a wider commissioning approach that ensures visibility of all the other specialist segments as well.

Costs
These next sections bring together professional knowledge applied to personal experience to offer an insight.
Inherent in the consideration of the supply and demand model is the suggestion that commissioners wishing to influence the markets should do so via techniques that affect market dynamics, such as stimulating supply in geographical and functional segments where choice is currently low and prices at a premi um.
However, the last few years have also seen buyers looking to apply detailed cost calculator models in the sector. It is understandable that a stressed local authority budget will lead to officers being challenged to know what it is they are buying, with the implication that the greater knowledge may lead to an ability to negotiate better deals – either through defining more narrowly what is being purchased, or through robust challenge to cost items and playing one set of assumptions off vs another.
Appendix 1 attached is a short paper written in 2011 when cost calculators were already appearing in the market. It discusses the issues which in summary are:

Cost calculators have been adapted from adult services markets. The evidence that they have been successful in terms of value for money is, in my experience, questionable.

Unlike some adult services markets where it is possible to identify some areas of homogeneity of demand, the children’s sector is much more fragmented.

Cost calculators deal only with one element of the value for money calculation. They fail to deal with the most important element, that of the outcomes achieved and quality provided.
 Children’s Homes are generally much smaller in size than adult homes or special schools, and occupancy rates are vastly more variable. The occupancy assumption is therefore the parameter which generates the greatest sensitivity in cost calculator mathematics. Its dominance as a factor is so great that all other assumptions are rendered virtually irrelevant. This again supports the view that commissioners would perhaps be better advised to expend their own efforts and resources on activities that look to increase sustainable supply in every segment of the market.


Different accounting approaches, policies, procedures and legislation mean that a huge amount of effort would be needed to produce analyses that are consistent and comparable. Verification efforts would be required to bring about this level playing field across all types of providers. It is my view that the resources for this effort would be more wisely applied in more positive market-economics driven approaches as described above and elsewhere in this paper.
Appendix 2 is a list of cost headings that was produced for a local authority project where the authority was considering how to cost their own internal childr en’s homes services on a comparable basis to those of a typical private sector service. Some additional useful conclusions can be drawn from this list also:

Costs are not static and fixed. Even the core staff group on a fixed rota system will often see changes due to staff turnover, holidays and sickness.
Some providers also alter staffing levels to meet the needs of the particular cohort in the home, and the strengths and weaknesses of the staff members, and the activities of the children at different times of the day. This reflects the complexity of the task and the need to be flexible and responsive to needs on an hour by hour basis if necessary.

Occupancy assumptions have the most dramatic effect on the economics of homes. Extreme examples are solo homes where occupancy oscillates between 0% and 100%. Even 4 bed units can see changes of 25% for any change in just one person of occupancy. The list of costs shows that most of the costs are of a nature that cannot be easily turned on and off in the medium term.
Some commentators (e.g. Laing and Buisson
– Mental Health and
Specialist Care Services 2012) indicate that homes have to operate at 65-
75% occupancy and above in order not to run at a loss. It is therefore easy to see how occupancy rates become the lifeblood of provider organisations.

The list of costs includes an item for shareholder returns. Many providers will attempt annually to target a level of return of sales, or in some cases return on investment. However, the return is essentially the end result after all other factors have influenced the results. Investor perspectives and their influence on Children’s Homes is discussed below
Learning points
 Costs are not static and fixed. The complexity of the task in children’s homes requires the need to be flexible and responsive


Cost Calculators have a questionable evidence base for success seen in adults services where there is less fragmentation; setting s are larger and thus the occupancy assumption is therefore the parameter which generates the greatest sensitivity in cost calculator mathematics; they do not include outcomes achieved and quality provided

Commissioners would perhaps be better advised to expend their own efforts and resources on activities that look to increase sustainable supply in every segment of the market

Resources would be more wisely applied in more positive marketeconomics driven approaches

Market Dynamics
Evolving logically from the preceding sections is a picture that suggests there are alternative ways to view the Chil dren’s Home marketplace and therefore alternative ways to approach it.
Providers have an incentive to understand the pressures on their local authority customer base and to attempt to contribute to solutions that respond to those pressures.
Equally, commissioners and purchasers would be advised to understand the mindset and pressures on their independent provider base. In doing so they may gain understanding that helps their strategies in working towards greatest value for money in Children’s Homes purchasing.
It is a core assertion of this analysis that the current operation of the Children’s
Homes markets contributes to both a lack of measurement of outcomes improvement gained and also to the inefficiency of the economics experienced.
Private providers are the largest group of supplier. Personal experience of setting up a completely new provision highlights some particular areas for improvement:
 Many owners, managers and staff in independent Children’s Homes gained experience working in the public sector. In my personal experience, some of the most experienced social workers in the private Children’s
Homes sector gained their know-how from local authority experience and training before choosing to move to a less bureaucratic private sector environment.
It is clear that amongst the fees paid by local authorities for Children’s
Homes places in the independent sector there is an element that represents payment for access to that know how.

Sources of private investment are available to the private sector. This may take many forms, from the private resources of individuals through various forms of bank borrowing and on to larger investment funds from private equity/venture capital and pension funds. Further comments about the different forms of investment follow later in this paper.

Sources of investment target to make returns on that investment in much the same way as we expect interest on our savings and pension funds to grow across time.

Investment is necessary because of the relative timing of cash-flows involved in setting up and maintaining Children’s Homes. A new home has to be acquired (via purchase or lease) and equipped before the formal registration process can get underway.
Staff groups need to be found, recruited, vetted, trained and inducted to

the provider policy and practice, all before any revenue is received.
Other resources such as vehicles and schools need to be sourced or created.
The cumulative cost over several months before gaining registration is substantial.

Often, providers also invest without any guarantee of placements and revenue to follow. Indeed, attempts at market research are often rebuffed by local authorities who do not feel able to share information about needs without it being done through some sort of market-wide EU procurement compliant process.
This mindset clearly increases the risk to the provider. Increased risk leads to higher prices.
 The cohort placed in Children’s Homes can be volatile, as can be placement practices. Maintaining occupancy levels is often a perpetual challenge for providers, and the demand pipeline can be highly variable and unpredictable.
Again, this inherent variability of demand leads to expectations that high levels of occupancy (and efficiency) will not be sustained for long periods.
Hence again this brings risk to Children’s Homes that largely speaking cannot step up, or down, costs to match rising and falling revenues.
Higher prices have to be charged therefore whenever this picture is experienced.

Many investors (of whatever size) I have met in the sector are clear that the best way to maintain occupancy levels is by investing in the quality of the service. This leads to good outcomes and to local authorities being willing to place again with that provider. This is an increasingly challenging task if the provider faces periods of low occupancy. Cutting costs is not easy and potentially erodes quality and safety hence the provider is more likely to close capacity entirely than to shave away at costs across all homes it operates. For a small provider with just one, or few, homes, that downsizing may equate to exit altogether.
The loss of know-how and expertise in those situations contributes to a sector that perpetually seems to be struggling to find, and give experience to people with a real skill for the work.

Investors seeking to demonstrated sustainable long term value to cofinders such as banks, or indeed to potential buyers of the provider organisation need to show sustainability of returns across several years to argue that values are high. Volatile results are unwelcome and act as a disincentive to investors.


Customer interfaces can be difficult and not conducive to a sharing of know-how and information on both sides. It can also lead to additional cost and waste in the system overall.
The levels of difficulty vary enormously across local authorities and indeed from officer to officer. There are some quite heroic local authority staff who battle with internal politics, changing agendas and budgets, and yet still engage in positive and creative ways with the provider base with their drive coming from a passion for finding the right solutions for their looked after young people.
However, there are sometimes also deep rooted anti-private sector attitudes at play.
More destructive to creativity and partnerships are rigid and risk-averse approaches rooted in EU procurement approaches that often fail to sufficiently differentiate between needs, fail to address outcomes, restrict information flow and look to reduce choice.
In such a difficult trading environment providers will add cost to try to address the interfaces as best they can, but they will almost certainly add onto prices as a result.
Venture Capital and Private Equity.
Sources of finance from banks have become increasingly difficult to find during the current economic cycle. More funding support is therefore currently being accessed from equity sources.
For smaller businesses owned by individuals, this can create limitations.
Mortgaging one’s own house again and risking personal bankruptcy to establish a service where demand is not predictable would fall into the very definition of highest entrepreneurial risk. Again, price will reflect risk.
It is also the case that private equity funds (sometimes referred to as venture capital) have entered into the market. Opinions are sometimes expressed that such investors are not appropriate to the sector as they can lead to cost reduction approaches that compromise quality.
There is little evidence and research into quality and outcomes differences between larger organisations and smaller, which may be a worthwhile area to study.
What is clear is that investors of all sizes would welcome a greater stability of demand expectation in the markets, a greater level of communication from purchasers and from commissioners.

From a purchaser’s perspective, and for inspectors, there is a requirement to look beyond each individual placement and each individual home, to the ownership structure itself. The ways that the ownership structure, its business aims, and the actual management processes and people involved impact on the ability of the residential managers and staff and the way they work with the young people every day is territory that should attract specific monitoring. The very culture of an organisa tion is displayed in how it performs at the interface of children’s needs and commercial drivers.
Some comfort can be drawn from the fact that most providers know that demonstrating high quality services is what should lead in the longer term to more placements being made with them. Most also believe that avoiding serious errors and flaws is essential so as not to suffer reputation damage and fewer placements. Private equity owners will be looking for sustained levels of demand and occupancy that yield profitable results on a consistent or growing basis. That will lead to higher business valuations at their exit point (typically 5-7 years). In all businesses there will therefore be pressures to maintain or increase occupancy levels. Controls have to be in place to ensure those pressures do not lead to situations where young people are placed or held inappropriately. Again the theme of empowerment of the professionals in the situation and the vesting of the right to do what is best for a young person irrespective of commercial impact has resonance here.
Learning points
 The current operation of the Children’s Homes markets contributes to both a lack of measurement of outcomes improvement gained and also to the inefficiency of the economics experienced.

Experience and knowledge needs to present in every provider recognised by a purchaser and paid for.

Investment capital expects a return
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Costs are incurred before placements and have to be recovered

The demand pipeline can be highly variable and unpredictable.
Occupancy needs to be sustained and periods of inactive investment have to be recovered in order to maintain the viability of the business.

Cutting costs is not easy and potentially erodes quality and safety hence the provider is more likely to close capacity entirely than to shave away at costs across all homes it operates. For a small provider with just one, or few, homes, that downsizing may equate to exit altogether.
Risk, related to needs or to investment, equates to higher costs

Negativity and rigidity are to be avoided as inefficient, wasting time and expertise. Creativity and partnerships are to be maximised.

Quality costs the local authority more, cheapness costs the young person more


To date there is little evidence and research into quality and outcomes differences between larger organisations and smaller, which may be a worthwhile area to study.

Investors of all sizes would welcome a greater stability of demand expectation in the markets, a greater level of communication from purchasers and from commissioners

The culture of an organisation is displayed in how it performs at the interface of children’s needs and commercial drivers. Purchaser’s must look beyond each individual placement and each individual home, to the ownership structure, business aims, management processes and people involved impact on the ability of the residential managers and staff and the way they work with the young people every day. This requires specific monitoring.

The Law and Munro
The Children’s Acts set out clear duties of local authorities in relation to looked after children:
Section 22C(5) requires local authorities to place children in the most appropriate placement available. In determining the most appropriate placement for a child,
Section 22C(7) requires local authorities to take into account a number of factors(such as the duties to safeguard and promote welfare; promote educational achievement; ascertain the wishes of the child and family; and give due consideration to religious persuasion, racial origin and cultural background).
Section 22C sets out the additional factors (in no order of priority) which the local authority must take into consideration when deciding the most appropriate placement:
–– allowing the child to live near his/her home;
–– not disrupting the child’s education or training;
–– enabling the child and a looked after sibling to live together;
–– meeting the particular needs of disabled children; and
–– providing accommodation within the local authority’s area, unless that is not reasonably practicable.
It is striking that the interpretation of what is “most appropriate” is immediately subject to a wide variety of factors. This reinforces the understanding that each case is unique, and there is therefore potential for different conclusions to be drawn by any of the adults involved in a placement decision.
The then Minister for Children Tim Loughton December 2011 responding to a question about progress being made following the Munro review of child protection included a clear summary of the direction the government wants to take:
“We are reducing bureaucracy and making it easier for the front line to use their professional judgment...
.
Government, Ofsted and the Association of Directors of Children’s Services (ADCS) have come together with a range of other partners to develop and agree local child safeguarding performance information that puts professional expertise, rather than process, at the heart of local quality assurance ”
My experience of seeing social workers in practice, both in placement decision roles for a local authority, and from those working for providers in day by day case- and house- management, is that they are the best professionals to make decisions about the young person.
Previous sections above highlight how complex the matrix of influences can be on a placement decision. It has to be the case that those influences must be reduced to the factors that are only directly relevant to the young person concerned. Factors such as reduced choice from commissioners, and budget constraints, must be addressed at a secondary level only.

It is my view that commissioning and purchasing on one side, and commercial pressures on the other are a significant risk to finding the best placements.
Hence, in the spirit of the Munro response, and in keeping with the requirements of the Children’s Acts it is a recommendation that social workers or other lead professionals be fully empowered to make the best placement decisions.
Commissioning, purchasing and price negotiations must not impinge upon the professional’s deliberations.
That does not rule out a role for commissioning and purchasing in the sector.
Indeed the role is very important in supporting the lead professionals by giving maximum choice and visibility of all sub-segments of supply.
However there would appear to be a clear need for crystal clear protocols in every purchasing body that empower the lead professional and prevent a commercial or commissioning view holding sway.
Commissioners also have a role in properly mapping the sub-segments of demand and supply, identifying the segments where there are shortages of supply, developing outcomes measures, monitoring performance, ensuring information flow around all parts of the markets, and coming together locally, regionally or nationally to promote market development in different segments.
Learning points

Commissioning, purchasing and price negotiations must not impinge upon the professional’s deliberations.
 The ‘most appropriate placement’ available must be the priority.
Factors such as reduced choice from commissioners, and budget constraints, must be addressed at a secondary level only.

Where commissioning and purchasing is on one side, and commercial pressures on the other, there is a significant risk to finding the best placements
Commissioners have a role in properly mapping the sub-segments of demand and supply, identifying the segments where there are shortages of supply, developing outcomes measures, monitoring performance, ensuring information flow around all parts of the markets, and coming together locally, regionally or nationally to promote market development in different segmentsReturn to the questions posed
 Why are so many Children’s Homes in the private sector?
Local authorities and some charities have reduced their own positions, or vacated supply side entirely.
Despite the challenges, the private sector is to be applauded for trying to fill

the gap in supply, often utilising at best scant market data on real detailed needs.
However, businesses have developed what they have in response to actual demand experience, and have clustered homes in ways that are both economic but also manageable for quality and know-how sharing purposes.
Better partnership with private sector offers the opportunities of a “best of both worlds” solution. Freedom, innovation and capital of the private sector allied to governance and ethics and safeguarding imperatives of public sector.
 What are the costs of Children’s Homes services?
An endless piece of work, which misses the key occupancy parameter and therefore heads down a blind alley.
Recommend that competitive market dynamics should be engaged to bring efficiencies.
Aims in managing markets should firstly be to secure best outcomes (and a measurement system is needed for that), and then to promote competition in every sub-segment whilst not driving know-how out of the sector altogether.
 Is fair value for money being gained from Children’s Homes services?
Need for national and consistent measurements to even consider answering this. Open accounting could assist across providers and local authorities. An ethical profit margin that would do much to allay concerns from both providers and local authorities could be established but will need extensive work and a a great deal of cultural change work.
More recent years have seen the predominance of commissioners and a squeeze on prices and margins allied to a huge push to fostering as the preferred care option, but there is little or no evidence of quality protection and outcome impact. Outcomes of cohorts remain low. Cost calculators add nothing to the measurement of value.
Munro drives to re-empower the professionals – they will concentrate on outcomes and therefore drive up value. Commissioners need to adopt a more strategic and supportive role.
Why are so many young people in care placed so far from the local authority area where they originate from?
Local authorities have not conducted any audits of need to progress the
Sufficiency and Diversity Duty. A single methodology is to be used such that results can be aggregated and plans made for what homes meeting what needs needed to be situated where – locally, adjacent, sub-regionally, regionally and nationally
Need to gain understanding that this is a many sub-segmented market. Hence potential mismatch of demand and supply in many sub-segments.

Widespread failure of commissioning to properly profile markets, demand and supply and to begin to commission for gaps.
Hypothesis is that there are some sub-segments of lower incidence where regional or national level commissioning is the only logical solution.
Hypothesis is also this. If every local authority always wants an available and appropriate local bed for every combination of needs, then the capacity required to ensure this is many times greater than today. Payment for the costs of vacancies would drive prices through the roof.
 Why were the Children’s Homes involved unable to keep the young people safe from the perpetrators?
Investigations will no doubt identify specific actions required to prevent recurrence. Expect these to include greater focus on monitoring and inspection, and an increased challenge to commissioners and purchasers to manage markets more locally.
The culture and operation of the purchaser-provider interface should not be undervalued and overlooked. Developments needed in this relationship are explicit throughout this paper.
The ethic of this relationship must be that of relational working. This is underpinned by interaction, negotiation, flexibility and mutual trust builds the
‘community of interest’ and requires

an appreciation that personal, professional and social values influence the nature and process of the working relationship

the importance of building relationships over time, trust has to be established or anticipated - there has to be a history and a future.

mutual trust is greater than individual self-interest
A strategy for the achievement of the above

Shifting from product to learning;

Developing explicit skills, attitudes, and abilities as well as knowledge;

Developing appropriate assessment procedures;

Rewarding transformative practice;

Encouraging discussion of practice of both commissioner and provider;

Providing transformative learning for all commissioners and providers

Fostering new collegiality;

Linking quality improvement to learning;

Auditing improvement.

Commercial imperatives must not impinge on professional practitioner decision making. This needs to be made more explicit on both sides of the relationship.
 Why are outcomes of looked after children in Children’s Homes poor compared to the wider cohort?
This needs an appreciation of the cohort and the diversity, complexity and extent of needs.
Needs measurement systems, consistently used and applied.
Needs an assessment that can provide linkage across identification of need, matching need to placement, monitoring and evaluation, such that there can be a baseline that describes the point that young people are at on entry to
Homes and can outline the development that is to be undertaken.
Needs consideration of use of Homes much earlier in the lives of looked after children.

Potential for Improvement
So how can we set about improving the way the sector operates?
So that it works for best outcomes for looked after children and young people?
And fundamental to that, so that young people are kept safe and away from
Rochdale-type incidents as far as is possible.
And at the same time efficiency of sector is improved without compromising the previous two statements?
The core messages in the preceding sections have been that we must avoid generalisation. We need the sophistication not simplification that appreciates all young people are unique and the market is actually made up of multiple (sometimes overlapping) sub-segments.
Serious and detailed efforts are required to properly map needs, through
Sufficiency and Diversity work, in order to properly create an informed market and understand supply and demand in each sub-segment. Data collection and interpretation needs to reach much levels of sophistication.
A step-by-step approach is recommended beginning with the more discreet and separable segments to gather intelligence and learn how that can be usefully and efficiently gathered and utilised. Take learning from that and consider wider application.
Include in that exercise the gathering of real outcomes information that seeks to consistently give information on true value added.
However, data collection and interpretation is only one element of potential improvement.
It is the contention of this paper that a significant change is required in the ways in which public and private sector operate together in the marketplace.
This interface needs to operate with less confrontation, less distrust, more openness and longer term sustainable development of know-how as a key objective.
It is my contention that better and more frequent monitoring, including by independent inspectors and IROs and social workers will potentially decrease the
Rochdale style incidents. However, it is also my hypothesis that if the whole culture and economics of the purchaser-provider relationship is changed so that providers do not feel that they are forever sailing close to the wind of changeable demand, then a dramatically changed partnership can be achieved. That

partnership will have shared interests in ensuring that Rochdale style incidents are avoided wherever possible and certainly dealt with immediately and not repeated. Quality and safety of delivery must be shared issues, and economics must never drive a placement or removal decision on either side.
Local Authorities
To achieve the above we need to see changes in the ways local authorities control purchasing in the markets. Cultural change is necessary. One view of current procurement practice is that ‘command and control’ of old when local authorities were both provider and purchaser still operates and all we have done is change ownership.
Related to the above points, firstly there needs to be acceptance throughout the officers involved that this is not one market, it is about multiple and complex needs.
Professionals, especially social workers who hold case level responsibilities have to be empowered by commissioners and purchasers and given access to all possible resources.
The professional responsible for a child has to be able, along with the young person, to choose the placement
– free from any commissioning or purchasing hindrance.
That approach does not however mean that the purchaser and commissioner are redundant. However, they must cast off the predominance of EU procurement stances, which in any event are not a legal requirement in this sector. The
Cabinet Office view is that simple, less bureaucratic procurement approaches are both legal and desirable, and that much greater consultation with the providers should be carried out before any formal activity begins. This view is to be the foundation of the work of the forthcoming Commissioning Academy and will be the ethic of all work in the near future.
Their first role is to support professionals with information about the market and services available.
They should then concentrate on identifying cohorts locally, or regionally, or nationally where demand is such that a safe level of commitment could be given and guaranteed to providers. Partnerships should then be devised in which know how is developed and shared with those providers. Tenders should only be considered in segments where aggregate demand is relatively substantial, and that the tender is only used as part of a wider commissioning approach that ensures visibility of all the other specialist segments as well.

Commissioners should further ensure that monitoring of placements is actually carried out, in sensible, efficient ways, in conjunction with their professional colleagues.
This must include the development of a sophisticated understanding of the financial structures and pressures on a wide variety of different providers. It must include ways of identifying and testing the critical ways in which professionals and carers within the provider’s organisation are able to maintain a position where they can always prioritise the needs of the young person above those of purely commercial considerations. And it should include examination of the sensitivity of the contingency buffer (see below).
Commissioners should use the evolving information to identify shortages in supply and develop strategies to commission new services for the related demand. This is the route to real efficiency. If each sub-segment of the market can be made competitive then the markets themselves will find the lowest price points that allow providers to act responsibly, make sustainable returns, and to avoid being driven to low quality or out of the market.
Commissioners also need to look to contract terms that promote a sustainable market. Clearly if they are aiming to incentivise providers to make significant investment in new capacity and services then they need to work to contract timescales and conditions that allow the provider to avoid unsustainable losses, and reward high quality performance and outcomes. There are few examples of such approaches but readers are referred to the Cross Regional/Thames Valley project tha t has overseen the establishment of 20 new Children’s Homes places for the more challenging and complex end of the spectrum of needs in the
Buckinghamshire area. I can recommend to commissioners to view the case studies of this project via IESE or the NCCTC websites. Alternatively please contact Revolution Consulting or Jonathan Stanley.
Providers
On the provider side there is simply no place in the markets for organisations that put short term profit motives ahead of the needs of young person. Providers must accept that in a marketplace where the needs of each young person are of paramount importance that sometimes there will be costs and loss of occupancy as a result. Therefore sometimes profits will not be at the level budgeted or aspired in the short term. Investors in the sector must be resilient to this and seek to ensure there is sufficient contingency at all times to buffer the provider against short term swings.
I would promote to providers that they should take a proactive and leading role in development of the coherent sub-segmentation of the market and in development of intelligent, efficient and consistent outcomes measurement and self-monitoring systems.

Following on from the early indicators of Action for Children (
“Backing the Future” in conjunction with nef) and Demos we need an independent long term study of the whole of life impact of Children’s Homes, and of the alternatives such as fostering and residential schools. Again this needs to recognise sub-segments of need. It should include the relative costs and whole of life impact compared to the oftenquoted European models which see different cohorts placed in Children’s
Homes at earlier ages to those in the UK.
Government should also consider re-entering the market on the supply side.
However, this would need to utilise models that get away from the local authority being both a provider and purchaser. A level playing needs to be created.
The proposal here is to take leaf from the book of private equity.
Some of the central government funding to local authorities could be diverted
(voluntarily) into a fund that is used to acquire or develop services. It would operate as a quasi-private sector entity or private equity fund. Returns and profits would however accrue to the public sector investors and could be re-invested as commissioning identifies more gaps in provision. An actually existing and successful example is BNDES in Brazil. Here is the economics of innovation, making productive rather than speculative investment
Consideration could be given to mixing the funding from public sector with that from venture philanthropy, and/or from public sector pension schemes and/or from social impact bonds.
There should be no barrier to consideration of mixed private and public sector investment fun ds in this area to promote the “best of both worlds” concept.
Jonathan Stanley Andrew Rome