The Department for Work and Pensions (DWP) is currently designing Work Programme 2.
Based on our experience of: facilitating investment for three (unsuccessful) bidders in the Ministry of Justice's (MoJ) Transforming Rehabilitation (TR) Programme; and investing in over ten social impact bonds; and investing in a social impact bond fund, our recommendations to DWP for optimal design are:
1. High level market design choices
- Separate contracts for hard-to-help groups. This will maximise focus on outcomes, aligns with charities’ motivations, and will help limit contract size (see next point)
- Limit contracts to around £10m annual value if strong service delivery charities are to participate at ‘prime’ level. This will be easier if separate contracts for the harder to help groups are let separately
- Outcome payments for the hard-to-help groups need to reflect full cost of supporting those groups. DWP can partner with LAs and other departments (e.g. DH) to “top-up” outcome payments. Payments on interim outcomes (e.g. attitudinal change, completing a training programme) would also improve investability
- Commit to the full publication of major sub-contracting workflows (anything more than circa 5 - 10% of annual contract value) within each contract package area
2. Procurement process and specific contractual terms
- If commissioners have minimum requirements for financial health, these need to be made explicit at the Pre-Qualified Questionnaire (PQQ) stage
- Normalise Price and Quality scores. Also, consider setting a standard price against which bidders are asked what they can deliver for that price
- Re-think the role of PCGs, the degree of risk government is seeking to transfer, and whether that compromises other VFM objectives, such as market plurality and outcomes. Consider whether there are alternative incentives to guard against bad-faith bids, e.g. exclusions for future contracts. Publish the terms of any PCG requirement early, so that bidders can withdraw from process if they do not meet requirements
For those interested in finding out more, we would recommend the following reading:
We co-wrote a report with recommendations for DWP that draws upon the experience of the social investment market in relation to a number of recent Government programmes, including the Work Programme, DWP Innovation Funds and transformation of the probation service. The report was produced by Bates Wells Braithwaite, Big Society Capital, Bridges Ventures, Charity Bank, Impetus PEF, Social and Sustainable Capital, Social Finance and Triodos Bank.
Our submission to the Work and Pensions Select Committee inquiry into the Work Programme.
Our guest blog on Russell Webster outlining considerations for the MoJ after TR