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NAO Report into the Work Programme

The National Audit Office has today published their report into the Introduction of the Work Programme.

The report focuses on how DWP managed risks to value for money in introducing the Work Programme, using this to predict future success.  NAO recognise that they can't judge the success of the Work Programme so are really looking at the areas DWP need to be aware of to help ensure success.

Performance Prediction

Today's headlines are around NAO's prediction of performance, and it is interesting to see how NAO have applied a reasonableness test to DWP's method of estimating performance:

DWP performance estimates were apparently based on non-intervention figures for 2001-08 using the same claimant criteria as the Programme, additional performance achieved by the New Deal for Young People and the additional performance the Work Programme’s new features should deliver.  NAO's main problem with this is that prevailing economic conditions were more favourable and the methodology relies more on estimates and assumptions.

NAO used Flexible New Deal (FND) performance and uprated this with the new Work Programme features, which they feel most closely resembles the current state of play.  A fundamental question is posed as to why DWP thinks the Work Programme will perform when Pathways and FND didn't. 

DWP don't come out of the report particularly well.  In addition to criticising DWP for not sharing assumption calculations with providers, NAO state:

1.28 The Department does not clearly understand provider costs which carry considerable uncertainties, particularly for Employment Support Allowance claimants. The Department’s own modelling showed providers’ costs would not be covered by the benefit savings generated from claimants entering employment.

A hidden gem in the report states that 16 of the 40 Work Programme contracts are currently subject to a performance improvement plan.

Procurement

While the headlines focus on whether the Work Programme will perform, commentators seem to have overlooked the review of the procurement process.

Those bidding for the Work Programme will be interested to know that NAO found that neither quality nor price predominantly determined the outcome of the contract award, which many will no doubt find difficult to believe.  

DWP did undertake a risk assessment to see whether the bids were economically sustainable eg the bidder wouldn't go out of business.  All winning bids were considered sustainable but NAO warns that if DWP's assumptions and analyses are incorrect, there is a risk that the provider’s cost base is undermined, and they will seek to renegotiate the contract.  In light of the statement at 1.28 above, that is a bit of a concern!

Industry insiders will also be interested to learn that to date the termination of existing welfare to work contracts has currently cost £63 million with two providers still negotiating their settlement.  Ten of the contractors who have been compensated actually won the Work Programme.  Can someone explain the logic?   

IT

The report recognises that the IT required to support the Work 'programme will not be in place until March 2012 at the earliest and also highlights a bit of the "to do" that surrounded the system development which is quite interesting.

So these are the highlights - click here to access the full report and the summary.

 

24 January 2012


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