2 Performance of providers delivering
Pathways to Work|
8. All the contractors employed to deliver Pathways
have performed well below their contractual targets despite the
Department paying service fees earlier than planned in order to
The target job rate agreed with contractors was to move, on average,
more than one in three of the claimants required to participate
in the programme (37%) into work over the life of contracts.
To date, on average, providers have found work for 12% of mandatory
9. Reed in Partnership Limited and A4E told us that
while performance has improved over time, for mandatory participants
they have achieved on average less than half what they promised
in the contracts they signed with the Department.
Against an average target of 36% of participants into work, A4E
has to date found work for 15% of mandatory participants.
Reed in Partnership has so far found only 9% of mandatory participants
work against its
target of 32% (Figure
10. Provider bids for the work were based on a limited
understanding of how mandatory participation in the programme
would affect the client group. The assumptions that providers
made at the bidding stage about the support needs and work-readiness
of this group have proved inaccurate.
In particular, providers were surprised by the number of mandatory
claimants referred to them who had a history of previous claims,
who presented additional challenges.
The assumptions made about claimants who volunteered to participate
in Pathways (longer-term claimants) have proved more reliable
because they were based on experience of delivering a similar
scheme for this client group, the New Deal for Disabled People.
Providers reported that voluntary participantswho tend
to be easier to helphave made up a much bigger proportion
of the claimants they have worked with than was anticipated at
the Pathways bidding stage.
11. To date, contractors in provider-led Pathways
areas have performed worse than Jobcentre Plus, despite, in general,
operating in parts of the country with lower incapacity benefits
numbers and unemployment levels, and relatively strong demand
for labour. While
Jobcentre Plus' Pathways performance is still slightly ahead of
the providers, the Department reported that more recent performance
data showed that the differential has narrowed.
Providers also suggested that performance in helping people into
work is not simply a function of the vacancies available or the
amount of economic activity; other factors relating to individual
claimants and housing costs may, for example, be important.Figure
3: Provider performance for mandatory participants
|A4e (Surrey and Sussex)
|A4e (South East Wales)
|A4e (West Yorkshire)
|A4e (North and Mid Wales)
|A4e (Devon and Cornwall)
|Reed (London South)
|Reed (London West)
|Reed (London North)
|Reed (Cambridgeshire & Suffolk)
|Average Performance across all Providers (to date)
*The average across all the Reed districts, as
reported by Reed at the hearing
12. A number of inflexibilities in the programme
may have contributed to poor provider performance. The rigid requirement
to have Pathways mandatory work-focused interviews at monthly
intervals and poor service continuity at the handover of claimants
to providers by Jobcentre Plus staff has impeded performance.
A delay in the average time it takes for Jobcentre Plus to complete
the initial work focused interview, compared with initial Departmental
planning assumptions, has also reduced the opportunity for providers
to work with claimants in the very early stages of their claim.
Providers felt that the recent decision to put Jobcentre Plus
staff in their premises to conduct the first work-focused interview
has helped them to establish a relationship with participants
earlier in the claim process. On the other hand, because of initial
delays in the administration of the new medical assessment for
the Employment and Support Allowance, providers are working with
claimants who were subsequently found to be not eligible for their
support. The Department
said that it intends to learn from the Pathways experience, recognising
the innate difficulty of the claimant group, and intended to give
future providers delivering the forthcoming Work Programme a more
flexible payment structure which allowed them to develop a longer-term
relationship with participants.
13. Providers also referred to the difficulties associated
with the recession but they and the Department both accept that,
while it has meant that competition for jobs has increased, poor
contractual performance by providers is not explained by the recession
alone. Factors such as the underestimation of the complexities
of the claimant group, which led to overly optimistic bids, are
14. 70% of payments to providers are linked to performance,
with the remaining 30% paid monthly as a service fee. As a consequence
of poor performance, providers are not finding the contract profitable.
Reed in Partnership reports that it has not made a profit on any
of its Pathways contracts to date. From an investment of £3
million in Pathways contracts, it is currently £1 million
out of pocket, with
the actual cost of supporting mandatory participants into work
estimated at two and half times the level assumed when it bid
for the contract.
Had they achieved their contracted target, Reed expected to make
a return of about 10% on capital invested.
Providers got their contracting model for Pathways wrong insofar
as they priced their bid on the basis that they could deliver
a high volume of job outcomes for only limited investment per
15. The Department's systems for assessing provider
bids proved ineffective in Pathways and it did not challenge over-bidding
by contractors with no bid being ruled out solely because its
proposed targets were unrealistic.
The Department reported that it has now strengthened its approach
and requires suppliers to give a much more detailed rationale
for the performance levels they offer.
In the meantime, the Department reported that it had so far not
terminated any contracts despite poor performance, but that two
providers were subject to contract 'breach notices', which may
lead to termination.
15 Qq 109-113 and 176 Back
Q 144 Back
Supplied to Committee by Department via NAO Back
Q 24 Back
Q 10 Back
Q 25 Back
Qq 19-65, 73 and 74 Back
Qq 1, 12, 71-72, 96-97, and 110-111 Back
Q 11 Back
Qq 2-7 Back
Qq 9 and 131 Back
C&AG's Report, para 2.16 Back
Q 191 Back
Qq 13-16; C&AG's Report, para 2.16 Back
Qq 68-69, 103-106, 114-117, 196 and 200 Back
Qq 175-177 Back
Qq 69, 111 and 196 Back
Qq 78-81, 83-84 and 93-95 Back
Q 87 Back
Q 86 Back
Qq 88 and 118-122 Back
Qq18 and 124 Back
Ev 22 Back
Q 144 Back
Q 147 Back