Select Committee on Works and Pensions Minutes of Evidence

Annex D

Leeds and Suffolk One Pilot Operations


  This paper sets out Deloitte Consulting's concerns regarding the performance and funding regimes for the Leeds and Suffolk ONE PVS pilots. Our experience indicates that the current performance requirements may, in fact, militate against the overall objectives for the pilots.

  Our concerns are described in more detail below. In the latter part of the paper we make some suggestions for alternative approaches.


  Our main observations can be summarised as:

    —  Pilot or Live Service: the pilots are unable to operate fully as pilots for the delivery of innovation. This is because they are in reality being treated as part of the live operation in terms of both the performance targets and the approval process for innovation.

    —  Governance: the approvals process is severely inhibiting the implementation of innovation. The absence of any direct control by the Employment Service or Benefits Agency over the Local Authorities is causing increasing problems with the implementation of innovation. This issue arises form differing priorities in place within the Local Authorities. This problem will not be fully resolved by putting in place a supplemental contract.

    —  Contract Management: the contract management function is directed towards the measurement of all outputs, as opposed to sampling of outcomes. This is onerous, costly and adds little value to the quantitative analysis of performance. The contract management teams in several instances have not delivered items where there are shortcomings on the part of the core operation. The estates issues are a good exemplar.

    —  ORIF Regime: the proposed Output Related and Incentivised Funding Regime (ORIF) will further inhibit change and will introduce a punitive payment regime.

    —  Outcome or Output: the core objectives of improved job placement performance and improved service to the public are being eroded by the current regime. This is because the current regime is focussed on benefit administration. The homogeneous targets that have been applied are also producing an impersonal and therefore sub-optimal service.

  For the avoidance of doubt the proposals that we make in this paper are based on the following principles:

    —  Deloitte Consulting are not seeking any additional funds for the pilot operations in their current format. Furthermore, we are not seeking to reduce the risks we adopted when we entered into this contract.

    —  Our understanding is that the vision for ONE is that of a world class welfare-to-work programme with a strong emphasis on improvement of the outcome for the public who are served by the programme; work for those who can and accurate and timely benefit administration for those who are not able to be placed directly into work.

    —  Control of change needs to be appropriately managed to avoid disruption to the live service within the pilot areas operated by Deloitte Consulting. We understand that it is essential that service to the public is assured and that discriminatory or selective service is not introduced.

Pilot or Live Service

  The members of the public that we serve in Leeds and Suffolk are entitled to receive a level of service which is comparable to that which they would receive if they resided in a part of the country not served by a ONE pilot. The thank you letters received by our staff provide evidence that the service we are delivering exceeds the expectations of some of its customers. Operating the pilots within the same performance regime as non-pilot areas fails to recognise the improvement in customer service delivered by ONE, the reason being that this is not currently measured.

  Going forward we would like to see some monitoring of customer satisfaction. We believe that this will provide a more accurate and balanced view than simply transferring the Employment Service, Benefits Agency and Local Authority standard targets for throughput and output to the pilot areas. The current performance targets have been applied to the ONE pilots in such a way as to focus our management of the pilots on maintaining the stability of core Agency performance, rather than encouraging all partners in the delivery of ONE to seek to satisfy the customer's needs in an innovative way. The absence of any customer satisfaction measure in the performance regime means that there is no counterweight to this tendency.

  The Agency and Local Authority targets are also vired to the pilot operations without recognition of the impact of the changes introduced by the pilot. This is likely to produce aberrant performance data, as implementation of innovation brings with it the risk of some degradation of service. The approvals, monitoring and proposed payment regimes militate against the introduction of innovation by imposing strong financial disincentives. We would like to see some amelioration to this regime through the understanding that performance in one area could be vired for delivery of agreed improved outcomes in another. Whilst some provision has been made to allow for the amendment of targets to take account of operational issues and changing priorities, no such easement is proposed for the core operations. This provides little latitude for local Employment Service, Benefits Agency and Local Authority management to agree to rebalancing of performance targets.


  There is not a clear governance structure for the ONE PVS pilots, with a consequent erosion in the value of the pilots. The issues have manifested themselves to Deloitte Consulting in three ways:

    —  Strong, separate governance structures are in place in the DSS, DfEE and the Local Authorities. In some cases, for example the introduction of an integrated web-enabled electronic claim form, it is necessary to get in excess of fifteen different teams to agree to a simple innovation for a limited pilot exercise. A comparable level of approval would be required for a national roll-out. This process is onerous and places Deloitte Consulting in the unfortunate position of having to broker agreements between various Central and Local Government entities. This is beyond the scope of our obligations and is inhibiting the implementation of innovation.

    —  At present the Local Authorities do not have a contract explicitly covering ONE. Pre-existing service level agreements with the Benefits Agency have been used as a proxy arrangement. This has, in the case of Leeds City Council, exacerbated the difficulties in reaching agreement on issues such as the introduction of innovation. It has also complicated the process of reaching agreement regarding secondment and lease arrangements. In many cases Leeds City Council have felt the need to regard these items as direct contractual documents, and have conducted their discussions accordingly.

    —  The division of responsibility between the local signatories and the central team in Sheffield is unclear. Assurances that common requirements for the IT solution would exist for Leeds and Suffolk have not been borne out. Separate and costly approvals processes have been necessary for each area. Responsibility for achievement of consensus with the eight Local Authorities within our pilots has been unilaterally transferred to Deloitte Consulting. The Local Authorities are not signatories to the contract and are asking for separate and conflicting arrangements in several instances.

  In order to overcome these difficulties we suggest the appointment of an individual—an innovation champion—with clear authority over all entities involved. This will maximise the potential to gain operational insights and test innovation concepts prior to the roll-out of a successor programme throughout Great Britain.

Contract Management

  Local contract management functions have been established, but are only partially effective. Although the greater experience of the Suffolk contract manager has been helpful in improving the effectiveness of the role, there are clear difficulties in both areas:

    —  There is a lack of clarity regarding the role of the contract manager, particularly with respect to the interface with the ONE Pilot Management Unit and the ONE Expert Domain in the Commercial Policy Unit (previously the ONE PVS strand). Although we understand that the Contract Managers have been given terms of reference, these have not been shared with us and do not always appear to be clear to the individuals concerned.

    —  There is a lack of separation between the functions associated with delivery of auditable and agreed measurement of Deloitte Consulting's performance and the implementation of innovation.

    —  The contract management function has not been empowered to deliver the Authorities' responsibilities and issues such as estates and infrastructure present continuing difficulties some eight months into the operation.

  Looking to the future, we suggest the contract management process is defined in more detail so that a repeatable and auditable measurement of performance is achieved. Statistically valid sampling against understood and unequivocal criteria would enable the contract managers to focus on delivery of value from the pilot. In the case of Leeds, this could also be expected to reduce significantly the contract management staffing levels, from the current arrangement where some 10 staff are involved in managing a contract which has 120 FTE staff serving the public. This group is made up of seven members of the Contract Management Team and three full time co-ordinators, employed by the Employment Service, the Benefits Agency and Leeds City Council respectively, all of whom monitor the operation of ONE.

Output Related and Incentivised Funding Regime

  The proposed ORIF regime will further inhibit change and will introduce a punitive payment regime. The funding regime for the ONE PVS pilots is based on a 15 per cent top-up of the PSC cost base. The majority of the personnel working in the Leeds and Suffolk pilots are seconded Civil Servants or Local Government employees. The staffing levels and concomitant cost base for the pilots have been set at approximately 100 per cent of the available funding. We believe that this level of funding is necessary to achieve the level of service required within the enhanced model delivered in Leeds and Suffolk.

  The proposed ORIF regime will introduce an environment for the contractor in which short-term operational shortfalls will leave the salaries of seconded staff unfunded. There is no reciprocal upside potential due to the cost base and funding regime. The logical response to the proposed regime will be cost minimisation through degradation of service and minimisation of innovation. There will be strong incentives not to implement change, as doing so will incur the costs associated with the resulting, although temporary, reductions in operational performance. This environment conflicts with our understanding of the objectives of the ONE PVS pilots.

  The adoption of more than 15 separate measurements for performance, along with the passporting approach, will place a significant burden on the local contract management teams and the contractor. This will further reduce the possibility of implementing innovation.

  We would like to suggest the adoption of an open book financial regime with a balanced scorecard approach to performance management. The open book regime would provide assurance that there was no unacceptable profit being made within the pilot operations. This approach would also provide some insight into the cost base as part of the overall evaluation process. A measure of delivered service hours' might also provide assurance that the public are being served by the contractor.

  The balanced scorecard approach would allow the trading of performance in one area for delivery in another. For example delivery of improved job placements could be offset against a reduction in the timeliness of completion of benefit claims, within de minimis limits. This would preserve the overall strength of the passporting approach.

  We would suggest underpinning these two contract management structures with statistically valid surveys of customer satisfaction with the ONE service. To date inclusion of a direct customer satisfaction measure has been considered prohibitively expensive as an in toto approach has been considered.


  The current contractual and operational structure is not directed towards determination of the most appropriate way to deliver the stated objective of "work for those who can and security for those who cannot". This is particularly clear in the area of job placements, and is exacerbated by the homogenous targets that have been put in place.

7.1  Job Placements

  The current contractual and operational structure is failing to maximise the potential for substantial improvement in job placements. We observe a series of complex and inter-related reasons for this phenomenon. These include:

    —  Service obligations to complete the benefit process for job-ready applicants rather than focus on interview submissions. The welfare element is placed ahead of the work component of the process. These priorities are also likely to generate some overpayments for clients who move off the benefits register swiftly.

    —  Estates and approvals barriers to the implementation of self-service job search facilities in the ONE sites for use by clients and for the provision of Internet access for staff so that they can expand the range of job opportunities on offer to clients.

    —  Legacy IT systems from which we were effectively denied the opportunity to gain access to data for the delivery of an integrated office-based system for caseload management, claims processing and vacancy searches. Although there were considerable benefits to be gained from use of an integrated system, it was made clear to us during the bidding stage that any requests for development of interfaces between legacy systems and those that we implemented would be subject to the standard approvals regime; they would need to demonstrate a stronger business case than other, national initiatives in order to gain approval.

    —  Contractual obligations that drive staff to deliver a standard service to individuals with diverse circumstances.

7.2  Homogenous Output Based Targets

  At our meeting the issue of homogeneous targets producing a standardised and sub-optimal service was raised. To illustrate this point it is worth examining the three-day interview target, which forms one of the proposed "passport" measures. This target is based around the premise that rapid service is good service. This is undoubtedly true, but with an operation of the complexity of ONE this is only part of the service mosaic. In general terms, the citizens served through ONE in Leeds and Suffolk fall into two groups—those who are job ready and for whom there is work readily available, and those for whom there are more complex barriers to employment. The current performance regime and operation has an output measure at its heart—how many days pass before the individual receives a one hour meeting after their initial start-up meeting. This militates against the work placement and labour market activity targets, which are outcome based.

  Where the individual is job ready, there are substantial efficiencies to be gained by submitting the person for interviews at the earliest opportunity. In many cases the job ready individual is most employable when we first make contact with them. The downstream savings to the Benefits Agency are well understood—if a claim for benefit is not initiated the programme and administrative costs savings are considerable.

  Within the ONE operation we would like to test the hypothesis that diversion of the job-ready individuals will improve the quality of service for the remainder of the customer population. The three-day target, combined with over half of the interview time being spent in benefit claim completion, is preventing substantial improvements in placement performance.

  Our proposed service model would allow advisers to spend more time at the point of first contact with job ready individuals. Given the peak workloads on Mondays we would like to have the option to combine this with late opening on Friday evenings or Saturday morning opening. If the individual is diverted directly into work with less than 80 minutes of staff time being spent with them there will be a net increase in the time available for individuals with more complex barriers. More careful scheduling of appointments with expert staff for individuals who are not job ready will allow the provision of an improved personal service. It will also allow staff to spend more time with individuals who have profiles that show they belong to a population with greater disposition to error prone claims. We would like to test this model in a limited number of sites initially.

7.3  An Alternative Operational Model

  As illustrated, the current operational regime is not well suited to the development of a pilot of a new service. At present we have a contract management and performance monitoring regime designed to be applied to a stable well defined service model, such as delivery of a particular component of New Deal. It therefore focuses on how the service will be delivered, rather than the outcomes that are being sought, and is premised on the assumption that there will be relatively little need for change in the course of the contract. This is not the situation in the ONE pilots. Many of the constraints posed by this approach could be eased by implementing a performance and compliance regime that focuses on the delivery of pilot objectives and recognises the need for agility in responding to opportunities for improved performance, rather than concentrating on the detailed delivery mechanisms that are being employed.


  In this paper we have discussed ways in which the current contractual landscape does not always act in the best interests of a successful pilot, and on occasion acts as an inhibitor to innovation. To address these issues we would recommend the following key changes be introduced:

    —  A simplified performance regime that places greater emphasis on customer satisfaction measures.

    —  Appointment of an empowered innovation champion in each pilot.

    —  Clearer definition of contract management roles and processes.

    —  Adoption of open book accounting alongside performance monitoring, based upon a balanced scorecard.

    —  Streamlined change and compliance mechanisms that focus upon outcomes rather than outputs.

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