DWP Commissioning Strategy 2013 consultation: Shaw Trust response
DWP Commissioning Strategy 2013 consultation
Response from Shaw Trust, 27th September 2013
About Shaw Trust

Shaw Trust is a leading national charity with a thirty year history of supporting disabled,
disadvantaged and long term unemployed people to achieve sustainable employment,
independent living and social inclusion. Last year Shaw Trust delivered specialist services
to over 50,000 people from 200 locations across the UK, supporting its beneficiaries to
enter work and lead independent lives. 2012 saw Shaw Trust merge with fellow welfareto-work charity Careers Development Group (CDG), forming a new entity under the Shaw
Trust brand.

Shaw Trust has extensive experience in the welfare-to-work sector at both a prime and
subcontractor level. We are the largest third sector provider and fourth largest overall
provider of contracted services to the Department for Work and Pensions. We benefit
from extensive experience of delivering the Work Programme’s predecessor contracts –
New Deal, Pathways to Work and Flexible New Deal – as both a prime contractor and
subcontractor, and are one of only two voluntary sector prime contractors of the Work
Programme, operating in the London East Contract Package Area (as CDG). We further
deliver services as a Work Programme subcontractor in seven different CPAs.1

As the main provider of Work Choice we deliver 16 prime contracts, six subcontracts and
an additional prime contract through the special purpose vehicle CDG-WISE Ability,
providing specialist support for people with severe health problems and disabilities across
the UK. Shaw Trust also delivers direct contracts for the SFA, and further operates a
range of social enterprises and retail shops which generate stepping stone employment
opportunities for those furthest from the job market.

Shaw Trust’s extensive track record of delivering DWP programmes as both a prime
contractor and a subcontractor, combined with our experience of managing large supply
chains, ensures we are well placed to respond to the issues raised in this consultation.
Our response: key points
Our response to the consultation questions is laid out below. In particular, we would like to
highlight the following:

Improving support and outcomes for those furthest from the job market requires both
accurate needs assessment and sufficient investment in place to draw in the right
specialist support early on in their journey to employment.
1
London West; Thames Valley, Hampshire and the Isle of Wight; Surrey, Sussex and Kent;
Gloucestershire, Wiltshire and the West of England; Coventry, Warwickshire, Staffordshire and the
Marches; and North Yorkshire and the Humber
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response

Placing social value at the heart of DWP’s commissioning strategy will ensure that
services are delivered by organisations committed to promoting the wider economic,
social and environmental well-being of communities.

Relieving financial risk from the wider supply chain will be central to diversifying the range
of providers delivering welfare-to-work services.
Response to consultation questions
Q1: How should DWP balance its responsibility to strategically manage and steward a
large, developing market with our desire to maintain and develop the right specialist
capability throughout the supply chain? Please consider contracting arrangements in
your answer.
1.1
A collaborative, inclusive approach to market stewardship will ensure that services are
delivered by those best placed to provide support to customers based on their needs. By
building on existing relationships and reaching out to the industry more widely, DWP can
work alongside external partners to break down barriers to market entry through its
contracting arrangements (see Q2). Actively consulting providers throughout contract
design, tendering and implementation will help to open up the market, promote the
inclusion of a wider range of organisations and ensure the right specialist capability is
drawn in.
1.2
Limiting the extent to which contracting arrangements impose financial demands upon
providers is an important means by which specialist capability can be increased.
Tailoring contracting arrangements to reduce working capital requirements (see Q2) and
incentivising providers to work with those furthest from the job market (see Q6) are
central to this aim.
Q2: How can we make competition more effective? How can we break down the barriers
to market entry through our contracting, for both our larger and smaller contracts?
How could we increase competition through the procurement process? What role can
Open Data play?
2.1
As a registered charity that operates in partnership with a range of organisations from
the third sector to deliver successful outcomes, Shaw Trust demonstrates that the
voluntary sector can deliver outcome-based contracts at both a prime and subcontractor
level. However, barriers to the market remain. As such we welcome DWP’s commitment
to promote more new entrants at a prime and supply chain level.
2.2
Although it is important to ensure that prime contracts are delivered by providers with
sufficient capacity to manage large supply chains, high working capital demands tied
into contracts – such as the £8 million required of CDG to bid for the Work Programme’s
London East prime contract – can create a barrier for new entrants at a prime level.
Whilst a smaller number of contractual relationships can help DWP maintain better
oversight, it is important that contracts are not of such a scale that new entrants are
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
unable to compete. DWP could work with the industry to identify the right balance
between these competing factors.
2.3
Outcome-based payment models offer a strong incentive for providers to drive up
performance via high quality services, representing better value for money for taxpayers
compared to previous approaches. However, shifting the balance too far towards
payment by results (PbR) can present a barrier for many organisations, particularly in
the voluntary sector, for whom gaining access to working capital can be more
challenging. A high PbR weighting for prime contracts can also increase financial risk
throughout the supply chain, creating an additional barrier on a subcontractor level.
2.4
As such, although outcome-based payments are an important way to drive performance,
there is also a need to ensure sufficient investment is available to providers up-front.
This will allow a wider range of organisations with limited working capital to compete in
the market, and ensure that the most appropriate specialist interventions can be
purchased early on in a customer’s journey to employment. This is particularly important
for the most disadvantaged customers (see Q6).
2.5
DWP’s recent evaluation of the specialist disability employment programme Work
Choice2 highlighted that a higher attachment fee compared to the Work Programme
facilitated ‘the participation of some smaller specialist providers in the programme’, and
resulted in smaller caseloads and fewer reports of ‘creaming and parking’. Variation in
performance is also evident: 33% of Work Choice participants who joined the
programme between July 2011 and June 2012 subsequently entered employment,3
compared to a job start rate of 11.4% amongst ESA customers starting the Work
Programme in the same period.4 Although this is an imperfect comparison due to limits
on available data and other differences between the programmes, it nonetheless
suggests a link between higher attachment fees, the greater involvement of specialist
provision and improved outcomes.
2.6
Where outcomes payments are utilised, broadening their scope to take into account not
only sustainable jobs but also ‘distance travelled’ targets would encourage primes to
make greater use of organisations who specialise in tackling barriers faced by those
farthest from the job market (see also our response to Q6). It would also allow DWP to
improve the incentive for providers to move harder to help customers closer to
employment whilst maintaining a focus on payment by results. DWP could seek to learn
lessons from the use of progression-based targets in the DWP/ESF Troubled Families
contract.
2.7
Encouraging prime contractors to engage in responsible, inclusive supply chain
procurement and management is another way that access to the market can be
widened. Assessing prime contract bids with reference to the Merlin Standard and other
2
DWP, Evaluation of the Work Choice Specialist Disability Employment Programme: Findings from the
2011 Early Implementation and 2012 Steady State Waves of the research (July 2013)
3 DWP, Work Choice: Official Statistics (August 2013), p.17
4 ERSA, Work Programme Performance Report - 2013 Quarter 2 (September 2013), p.10
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
inclusive practices – such as capacity building of supply chain partners – could work to
promote such behaviour.
2.8
Sufficient bidding and implementation timeframes will also help prevent the exclusion of
organisations with strong delivery records but limited spare management and
organisational capacity. The timescale for implementation of DWP’s largest contracts
(Work Programme) was only two months, whilst a DWP evaluation noted that a
reduction in the timescale for implementing Work Choice contracts from six to three
months rendered it a ‘complex task involving significant risks’. Requiring large contracts
to be implemented within short timeframes can exclude many organisations whose
provision may otherwise improve services. This is not only because of capacity issues,
but also because charities must work within their own governance processes, many of
which can take longer than only a few weeks.
2.9
Although competition between providers can drive performance, it is only by
organisations working together to establish the most effective, personalised approaches
that more success can be achieved in getting people back to work. The Work
Programme’s best practice working group represents a good start; however, DWP could
do more to provide open, accessible forums in which providers can engage in
constructive dialogue. It is important that competition does not discourage providers
from sharing information and working together to achieve shared goals.
2.10 Access to timely, accurate data is also important to ensure organisations can assess risk
and viability on the basis of robust information. For example, DWP could work with
Jobcentre Plus to improve predicted referral volumes at pre-qualification questionnaire
(PQQ) stage, and promote more regular transfer of this information throughout delivery.
This would help to instil confidence in a wider range of providers that their financial
modelling and resource planning is based on more reliable data.
Q3: DWP wants to work with the market to improve the effectiveness of subcontractual
relationships. What, if any, changes should be made to the Code of Conduct? What are
your views on the way the Merlin Standard is used? How can we create supply chains
with the inbuilt resilience and flexibility to cope with changing requirements and
circumstances?
3.1
It is still too early to make firm judgements on the effectiveness of the Merlin Standard.
The system appears to have made a good start in highlighting the importance of
effective and fair supply chain procurement and management amongst primes, and
should be monitored closely through collaboration with the sector.
3.2
However, there are steps that DWP could take to foster better subcontractual
relationships. For example, including within Merlin assessments a requirement for
primes to specify the service they offer in return for management fees would help to
promote fees that are fair and represent good value for subcontractors. CDG’s Merlin
Standard self-assessment made clear that our management fee provides subcontractors
with access to CDG’s online support tools, Customer Support Centre, Case
Management System, staff training and HR services. As highlighted in our response to
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
Q2, bidding criteria could also continue to encourage adherence to the Merlin Standard
and other responsible practices related to supply chain design and management.
3.3
Ensuring supply chains are flexible and resilient enough to cope with changing
circumstances requires the involvement of organisations with appropriate capacity and
resources from the outset, together with the right processes in place to build the capacity
of smaller organisations who provide a quality service but lack the resources to manage
the demands of government contracting. It is also important that DWP and primes help
to foster realistic expectations and a strong understanding of contract variables
(especially in terms of referral volumes) and to ensure that smaller organisations have
both the potential and willingness to build their capacity to a level necessary for
delivering commercial contracts.
Q4: What steps does DWP need to take, across its commissioning (from large-scale
national programmes to small-scale local commissioning), to maintain and promote a
level playing-field for providers?
4.1. There are steps DWP could take to ensure that the best providers of any scale and size
are able to compete to deliver commissioned services at their appropriate level within
the supply chain, should they have the desire and potential.
4.2. Measures to break down barriers to market entry and encourage primes to better utilise
specialist providers are included in our response to Q2. In addition to these, DWP could
seek to learn lessons from the approach taken by the Ministry of Justice (MoJ) ahead of
its Transforming Rehabilitation bidding round to support smaller entrants to the market,
such as engaging with prospective bidders before PQQ stage, and working with the
Cabinet Office to provide access to training and support through the Contract Readiness
Fund. Evaluating the effectiveness of this and other initiatives would allow DWP to learn
lessons and build on any good practice. However, it is important that market
engagement is followed up by contracting arrangements that do not prohibit the
involvement of a wider range of organisations, as detailed in our response to Q2.
4.3. There is also potential for DWP to consider how primes could be incentivised, through
bidding criteria, to build the capacity of existing and potential supply chain organisations,
in areas such as financial modelling, contract negotiation, auditing, performance
management and compliance.
4.4. The voluntary sector also has a role to play; a forthcoming joint report by Shaw Trust
and ACEVO will explore the ways by which the sector could build its capacity to increase
its participation in payment by results contracts. By working alongside ACEVO, prime
contractors and others, DWP can ensure that willing voluntary sector organisations are
supported to take appropriate steps. As one of only two voluntary sector prime
contractors in the Work Programme, we would welcome the opportunity to work with
DWP in this area.
4.5. DWP could also further explore the use of single, industry-wide expression of interest
forms, such as that developed by emqc Ltd and by MoJ for its Transforming
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
Rehabilitation reforms. These can help to reduce the burden on potential subcontractors
associated with identifying and approaching multiple primes.
Q5: How should DWP develop the role of social investment in our commissioning?
5.1. There is potential for social financing to play an important role in supporting DWP’s
commissioning. Recent pilots – such as that implemented by MoJ at HMP Peterborough
– demonstrate the potential for social investment to improve outcomes in challenging
circumstances.
5.2. However, social investment should not be seen as a funding panacea. In Shaw Trust’s
experience, although social financiers were willing to lend to a charity for the delivery of
a DWP contract, the risk associated with DWP’s payment by results terms led investors
to demand a high rate of return that would have rendered contract delivery financially
unviable in our circumstances. As such, social finance may be more viable where risks
are lower, such as for smaller contracts with less emphasis on payment by results.
Q6: How should DWP design outcomes and service standards for the hardest-to-help
within outcome-focused payment models?
6.1. Shaw Trust’s experience is clear that some people with multiple and complex barriers to
employment require more intensive support over a longer time period than others closer
to the job market. We welcome the Department’s move towards differential payments
structures that recognise this diversity of need and seek to target higher investment at
those who require more intensive support.
6.2. However, it is important that investment accurately reflects the intensity of provision
required by customers with severe barriers to work. A strong emphasis on payment by
results can limit the capacity of providers to purchase tailored interventions for the most
disadvantaged customers early on in their journey to employment. This partly helps to
explain the dissapointing performance amongst ESA customers on the Work
Programme, where PbR represents 80% of contract funding (100% in year four),
compared to Work Choice, where outcome payments make up 30%. As discussed in
Q2, ensuring that investment levels are appropriate and supplied in sufficient up-front
quantities is therefore essential.
6.3. As referenced in Q2, DWP could explore the design of outcomes based on a broader set
of targets than sustainable jobs, with a focus on customers’ progression towards
employment. Such an approach, supported by the Work and Pensions Select
Committee,5 would ensure that providers are sufficiently incentivised to invest in
specialist support to help move the most disadvantaged customers closer to the job
market, often through the use of smaller specialist partners. Evaluating the use of
‘distance travelled’ targets in the DWP/ESF Troubled Families contract would represent
a good starting point.
5
Work and Pensions Committee, First Report: Can the Work Programme work for all user groups?
(May 2013)
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
6.4. Underpinning any approach should be the need to accurately identify who the ‘hardest to
help’ are, ensuring that customers are placed on the right programme at the right time
and investment is appropriately targeted through differential payments. Much debate has
centred on the effectiveness of benefit type as a proxy for customer need. A survey of
Shaw Trust and CDG Work Programme delivery staff showed that 60% did not feel
benefit type accurately reflected how easy or difficult each customer is to get into work:
staff commonly reported that barriers such as mental and physical health problems,
homelessness and a lack of access to affordable childcare affected customers across all
payment groups.6
6.5. The introduction of Universal Credit and the removal of individual benefit types
represents an ideal opportunity to reshape how jobseekers’ needs are assessed. We
would encourage DWP to explore minimally disruptive methods by which jobseekers’
individual level of need can be assessed at the point of benefit claim – and, crucially, at
regular intervals thereafter – so that they are referred to the appropriate mainstream or
specialist programme and placed into the most suitable differential payment stream.
Examining best practice from abroad, such as the Australian Job Seeker Classification
Instrument (JSCI) model, would be beneficial.
Q7: How can DWP efficiently and effectively monitor and manage service quality within
the wider framework described in this document?
7.1
Minimum service standards are an important way to ensure customers are guaranteed a
certain level of service from providers. To maintain flexibility in how providers can deliver
services, it remains preferable for DWP to avoid prescribing standards to which
providers should adhere. However, allowing providers to set out their own minimum
service standards should be accompanied by thorough scrutiny at bidding stage to
ensure standards are SMART (Specific, Measureable, Achievable, Realistic and Time
bound); and full auditing at delivery stage to ensure those standards are adhered to and
clearly communicated to customers.
7.2
As such, an independent quality inspectorate would be the most effective way to monitor
and manage service quality. Independent inspections of all providers and their supply
chains, alongside the use of customer experience surveys, would ensure that quality
monitoring is robust. It would be important to consider how such an approach could be
minimally disruptive to providers, and interlink with and mutually reinforce the Merlin
Standard.
7.3
DWP’s 2008 Commissioning Strategy included a commitment to introduce a Star Rating
system for providers.7 We would welcome the inclusion of this commitment in the 2013
Strategy and for DWP to take the idea forward. Star Ratings could be determined by the
independent quality inspectorate based on their assessments. Reference could
thereafter be made to Star Ratings in future bidding rounds.
6
Shaw Trust, Written evidence submitted to the Work and Pensions Committee inquiry into the
experience of different user groups in the Work Programme (December 2012). Available at:
http://www.parliament.uk/documents/Collated.pdf
7 DWP, Commissioning Strategy 2008 (February 2008), p.25
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
Q8: How should the Department, working with the market, develop its approach to
performance management? For example, should we consider increased use of Market
Share Shifting, focusing on directly performance managing individual providers or
allowing claimant choice within CPAs? How can the market drive performance?
8.1. For performance management to be effective it is important for it to be based on reliable
and robust data. Provider performance can be strongly influenced by a range of external
factors beyond their control, such as regional variations in job markets and customer
demographics, as well as unexpected turns in the national economy. It is important that
performance management takes these variables into account.
8.2. For example, Shaw Trust’s Work Programme prime contract package area of London
East contains eight of the 20 most deprived local authorities in England, and has one of
the highest levels of competition for vacancies in the UK. Comparing performance
between providers within this CPA can be instructive; however comparing these
providers with others based in more affluent CPAs with less competition for jobs can be
misleading unless these variations are accounted for. Moreover, GDP growth in 2012
was 0.2% compared to the OBR forecast of 2.6% upon which the Work Programme’s
Minimum Performance Levels (MPLs) were based, resulting in challenging targets that
left the programme open to misleading attacks on its effectiveness.
8.3. As such we would encourage DWP to explore the use of regionalised minimum
performance targets in future commissioning, and allow MPLs to vary in line with
unexpected economic conditions. A flexible approach to performance management
would help to avoid misleading comparisons and inappropriate targets. It would also
help to ensure that any measures taken to address poor performance are based upon
accurate and comparable data.
8.4. We support the use of Market Share Shift in principle. However, given that the first
realignment of referrals was only made in August, it is too early to make a judgement on
its effectiveness.
8.5. We support the Work and Pensions Select Committee’s recommendation for DWP to
publish official data on referrals and job outcomes at both prime contractor and
subcontractor level.8 This would enable more accurate performance management and
mitigate the risk of high performing subcontractors being penalised for poor performing
primes. We further welcome the Department’s intention to explore cohort-based
performance measurements,9 which would more accurately reflect programme and
provider performance over time.
8.6. Whilst claimant choice, properly informed, may drive provider performance and improve
customer engagement, a Shaw Trust survey of Work Choice customers showed that
8
Work and Pensions Committee, First Report: Can the Work Programme work for all user groups?
(May 2013), p.7
9 Work and Pensions Committee, Government Response to the Committee's First Report of Session
2013-14 (September 2013), pp.1-2
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
only 28 per cent wanted more choice and control over their employability support.10
When asked about the related concept of personal budgets, interviewees expressed
concern that choosing their own support would be complicated, stressful and make
support more difficult to access.
Q9: How, when assessing bids, should we balance price and quality?
9.1. Assessing bids on the basis of price alongside quality can help DWP achieve good value
from its contracting and bring savings to the taxpayer. However, we would encourage
DWP to ensure that quality is given precedence; this will ultimately lead to better
services, improved outcomes for customers and greater savings to the taxpayer in the
long term. A strong emphasis on price risks creating a race to the bottom, compromising
service quality and presenting a barrier to organisations who provide a high quality
service but do not have sufficient capacity to offer large discounts. It can further
encourage prime bidders to promise terms that are difficult to achieve in practice.
9.2. Where outcome-based contracts are utilised to ensure good value for money, DWP
could consider retaining fixed prices. This would ensure that contracts still deliver good
value for money, whilst making financial modelling more manageable for bidders and
commissioners and promoting wider engagement of new entrants to the market.
9.3. Taking into account past performance by providers would be a valuable means by which
to judge future bids. However, regard must be paid to how this would affect new entrants
to the market. It is also important that performance comparisons take into account
regional variations in job market conditions and customer demographics (see Q8).
9.4. As previously noted, DWP could also consider assessing bids with reference to Merlin
Standard ratings, commitments to responsible supply chain design and management,
and the results of independent quality assessments.
Q10: How can DWP incentivise innovation in future welfare-to-work commissioning?
How can we capture and share practice derived from successful innovations? What are
the barriers?
10.1. Capturing and sharing best practice is an important means by which lessons can be
learnt from successful innovations and service quality improved across programmes.
Introducing an independent quality inspectorate (as recommended in our response to
Q7) would provide an opportunity to collate a central ‘best practice database’ comprising
case studies of the most effective and innovative ways to improve outcomes for
customers. The Department’s introduction of a best practice working group for the Work
Programme is a good start, and more work should be done in this area to ensure that
open forums are available for providers to engage in constructive dialogue and joint
working.
10
Shaw Trust, Making Work a Real Choice: The future of specialist disability employment programmes
for people with disabilities, health problems and impairments (June 2013), p.37
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DWP Commissioning Strategy 2013 consultation: Shaw Trust response
10.2. When assessing the success of innovations, it is important to ensure the accurate
collection and transparent publication of performance data. As detailed in Q8, taking into
account local factors is essential to ensure that comparisons are meaningful.
Q12: Working within the high-level framework articulated in this document, how could
DWP become a more flexible partner, nationally and locally – what are the barriers to
more effective partnerships?
12.1. There is scope for Government departments to engage in greater co-design of services
where intended outcomes are shared and programmes affect similar demographics. For
example, it would be beneficial for DWP to work closely with MoJ to ensure that the
Transforming Rehabilitation reforms are sufficiently linked up to the Work Programme,
building on lessons from the experience of Payment Group 9 customers (people leaving
the criminal justice system). Moreover, DWP could work alongside BIS to ensure that
Work Choice customers can access Skills Funding Agency provision, which would be of
significant advantage to unemployed people with disabilities.
12.2. Joint working to align contract package areas where appropriate would also help to
ensure consistency in local provision, allow services to be joined up more effectively,
and facilitate improved information sharing between providers on a local level.
Q14: DWP recognises the importance of the Social Value Act, but also has a clear remit
to deliver sustainable employment outcomes which offer good value-for-money to
taxpayers. How can DWP best consider Social Value through its commissioning?
14.1. As a charity, we believe that our beneficiaries are best served by continuous reinvestment in the areas in which we operate, ensuring that the benefits of our activities
are felt throughout local communities. Placing social value at the heart of DWP’s
commissioning strategy will ensure that services are delivered by organisations
committed to promoting wider economic, social and environmental well-being, leading to
better outcomes and cost savings in the long term.
14.2. To ensure that welfare-to-work commissioning delivers social value, DWP could
consider scoring bids on the basis of a provider’s demonstrable commitment to reinvesting in community growth and development. For example, criteria could favour the
use of surpluses to fund new innovations and improve service delivery. It could further
reward primes who commit to capacity-building their supply chain partners to deliver
greater social value, and those who promote socially beneficial practices through their
wider procurement including of IT and other services.
14.3. Such an approach would encourage providers to engage in practices that improve wider
economic, social and environmental well-being – as intended by the Social Value Act –
and ensure that services are more likely to be provided by organisations committed to
delivering high social value. Tying a substantial proportion of bid criteria to social value
would ultimately ensure better value for money for the taxpayer in the long term.
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