1. Third Sector Service delivery -
Contracting for Employment Services
and the ‘Work Programme’
Dan Finn, Professor of Social Inclusion,
University of Portsmouth, and
Associate Director, Centre for Economic and
Social Inclusion (www.cesi.org.uk)

2. Role of the third sector in
employment programme delivery
• As a provider
• Service provider (grantee, contractor)
• Specialist provision (client groups; localities)
• Innovator and source of legitimacy
• As source of work experience, voluntary activity and
regular employment (voluntary/mandatory)
• As provider of other services to disadvantaged
people (including accommodation,
rehabilitation/counselling, financial/in-kind supports,
etc.)
• As advocate for disadvantaged groups/service users

3. Contracting for employment services
with external providers – GB in context
• In many countries Ministries, Public Employment Service
(PES), Municipalities contract with other providers, but
mostly on the basis of grants, cost reimbursement, fixed-
price with often highly regulated contracts
• Most ‘purchasers’ have used external providers to:
• buy specialist services
• increase capacity
• More recently ‘benchmark’/drive innovation in PES
• Recent developments include greater use of payment-by
results with replacement of public sector provision in one
OECD country(Aus), extensive subcontracting of job
matching & reintegration services (e.g. some US states,
Netherlands). Others experimenting with private
contractors to build capacity and/or ‘benchmark’ and
drive innovation in PES (S. Korea, Germany, France,
Sweden)

4. GB – purchasers of employment programmes
and ‘boom/bust’ funding cycles
• 1970s/80s mass unemployment - from Youth
Opportunities Programme and Community Programme
(and others, e.g., VPP, Opps for Vols) to Youth Training
• Late 1980s:
• Employment Training and Training and Enterprise
Councils (replaced by Skills Funding Agency)
• Employment Service programmes, such as
Jobclubs, Community Action, etc., and specialist
programmes for people with disabilities
• European Social Fund
• Local Authorities
• Home Office
• Charitable Trusts

5. Types of contracted providers
• National non profits (specialists, such as RNID; generalists,
such as Shaw Trust)
• Regional and local nonprofits, faith based and secular,
specialist and generalist, including also regional/local branches
of national nonprofits (e.g., Groundwork Trusts, Salvation Army)
• Intermediate Labour Markets, Social Enterprises and
Social Businesses - Glasgow Wise Group, Liverpool Create.
• National and local for-profits
• Specialist welfare to work providers (such as A4e)
• Recently larger outsourcing specialists (Serco, G4S)
• Providers from other countries
• For profits – Ingeus (Australia); Maximus (USA); Calder
(Netherlands)
• Non-profits - from Australia, Mission Australia (Working
Links); BEST & Wise ability with CDG; Campbell Page
(North Wessex Training) – from Ireland the Rehab Group

6. The New Deals and Contestability
• The New Deals and contracted providers
(intensive job search and ‘options’ phases)
• Specialist programmes (including ‘Progress to
Work’)
• Contestability phase – New Deal private sector
leads; Employment Zones; Action Teams; the
‘One’ pilots
• Rationalisation (New Deal prime contractors) -
number of for profit/non profit providers down
from over 2,000 under JCP to 438 under DWP
(running 1,153 contracts, Sept 2009). Annual
£1bn plus value

7. The Welfare Market
• Freud Report (2007)
• DWP Commissioning Report (2008)
• Larger and longer contracts
• Prime contractors and supply chains
• Payment by Results
• ‘Black box’ contracts
• DWP market stewardship and ‘code of conduct’
(leading to the Merlin standard)
• Alongside procurement of Pathways to Work,
European Social Fund, Work Choice and Flexible
New Deal from prime providers
• Responses to recession – esp. Future Jobs Fund

8. WP framework and providers
• Pre-qualification - ‘Framework for the Provision of Employment
Related Support Services’ - primes had to demonstrate track
record of delivering large and complex contracts and financial
strength (annual turnover of at least £20 million).
• There were 180 bids from 30 primes to deliver in 18 CPAs – 18
primes selected with at least 2 in each CPA (15 private; 2 VS; 1
public). Each 5/7 year contract estimated to be worth between £10
and £50 million a year (estimated 2.4 million referrals)
• WP supply chains organised into ‘tier one’ (often ‘end to end’
delivery) and ‘tier two’ (call-off contracts), with room for other
purchasing
• August 2011 DWP supply chain analysis reports:
• Total of 1,099 organisations across all tiers - 416 private; 175
public sector; , 508 VSC (about half of subcontractors)
• VCS – 2 primes; 108 in tier 1; 315 (75%) are tier 2. The 423
subcontractors have 699 subcontracts
• Estimated that 20% of referrals/’attachments’ going to VCS
• At end Oct 2011 had been 370,000 WP referrals and 322,000
‘attachments’

9. Work Programme (WP) service delivery
• Different prime provider models
• No direct delivery but act as managing agents/raise
capital for subcontracted supply chain
• Primes who combine direct delivery with
subcontracting
• Varied service delivery models but typically comprise
• A phase of engagement/attachment;
• Followed by job broking/job placement for the more
job ready;
• More specialist provision for those who need more
intensive assistance with barrier reduction/work
preparation;
• An employment retention phase after job placement.

10. WP funding/competition
• Differential payments calibrated with benefit category as
proxy for level of difficulty (maybe profiling when
Universal Credit introduced)
• Payment largely by results:
• Small ‘attachment fee’ (£400) which falls each year
and is zero by year four
• Job outcome payments only after 13 or 26 weeks
• Sustainment payments for up to two years.
• Price competition
• Provider performance measured against a ‘non
intervention’ level (have to exceed by 10% to keep
contracts, exceeding by 30% attracts bonus}
• Two or three competing providers with market share
shifted from worse to better performers from 2014

11. Third sector issues in the welfare market
• Commissioning and actual delivery (from ‘bid candy’ to Merlin)
• Provider (supply chain) consolidation and rationalisation –
within 5 years likely to be fewer, larger, more effective
providers, but with varying roles for smaller specialists
(differential impact on smaller, secular nonprofits)
• Creative adaptations to the market – e.g., international and
sector partnerships; consortia, e.g., 3SC and Disability Works
(8 specialists inc. Mencap, Scope, Mind, ABP, etc.).
• Viability; service delivery quality and variation - tensions
between primes and subcontractors around top-slicing fees,
payment delays, ‘skimming’, risk transfer.
• WP (and JCP) use of other TS services – referral pathways
and/or unpaid service provider (vol activity, work experience)
• Convergence and ‘mission drift’ (esp. sanctions, advocacy)
• Tension between provider and service user interests