Access to ESF by sub-contracting to DWP prime contractors
Transcript of Access to ESF by sub-contracting to DWP prime contractors
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ACCESS TO ESF BY SUB-CONTRACTING TO DWP PRIME CONTRACTORS
Summary
Prime contractors compliance with DWP Code of Conduct obligations in their dealings with sub
contractors was generally good, with third sector sub contractors responding that compliance was
generally adequate or better. Compliance was rated better, on average, with regard to pre-award of
contract obligations (89%) than compliance with post award of contract obligations (79%).Compliance was rated particularly good in areas of Competition and Advertising at the pre award of
contract phase and particularly good in areas of communication (...very open to sharing best practice
and documentation) and support in the post award of contract phase.
Examples of poor compliance were, however, cited with regard to most Code of Conduct obligations.
Areas in particular need of improvement were those in the post award of contract phase. With regard
to monitoring, one respondent remarked that monitoring changed on a weekly basis over 6 months. A
further area of particular concern for third sector organisations is poor compliance of the Prime in the
provision of funding that reflects the relative ability to bear risks. One organisation remarked that the
prime had little understanding of specific client groups needs and the costs required in helping clientsovercome barriers to employment. Another referred to the prime requiring changes to the process of
delivery in order to receive a payment.
These areas of poor compliance are a concern for small third sector organisations given the
difference in bargaining power between the Prime and small third sector organisations. We therefore
welcome the introduction of the Merlin Standards1 which aim to foster professional sub contractor
commissioning and management of sub contracts, mirroring public sector standards. It is hoped that
the standards will scrutinise the Prime provider and reduce examples of poor compliance with Code
of Conduct obligations. The introduction of an ombudsman to act as a mediation and arbitration
service is particularly welcome, providing small third sector organisations an alternative route forresolution in areas of poor compliance with Code of Conduct obligations.
Introduction
Prior to policy changes during the latter stages of the 2000-2006 European Social Fund (ESF)
programme, third sector organisations accessed ESF through direct bidding. Under this process,
organisations would submit project applications to the Government Office2 and would be responsible
for finding their own match. Following the introduction of Co-financing ESF was channelled through
Co-financing Organisations (CFOs) such as the Learning and Skills Council and the Department for
Work and Pensions. In the current (2007-2013) programme ESF is mainly channelled through CFOs
and is subject to competitive tendering. Fewer contracts of a larger scale are awarded compared to
previous programme. DWP has the largest allocation of ESF for Priority 1 Extending Employment
Opportunities (around 300 million). The main objective of this Priority is to increase employment,
reduce unemployment and inactivity whilst tackling barriers to work faced by disadvantaged groups3.
1For further information seehttp://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtml2
See section 4 of the TSEN commissioned report (2009)Evidence Review of the Impact of the ESF on Those Furthest From the Labour Marketfor
allocation of funding for 2007-2010.
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http://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtmlhttp://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtmlhttp://www.tsen.org.uk/TSEN%20Evidence%20review.pdfhttp://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtmlhttp://www.tsen.org.uk/TSEN%20Evidence%20review.pdf -
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DWP Procurement and the Third Sector
The providers awarded large regional or sub regional contracts (contracting directly with DWP) are
known as Prime providers. Smaller third sector organisations do not have the capacity to access ESF
through large regional or sub regional contracts. Instead, small third sector organisations can access
ESF through securing smaller contracts (otherwise known as sub contracts) with Prime providers to
deliver a portion of the larger regional or sub regional contract.
This method of administering ESF (through prime providers and sub contractors) is set out in the
DWPs Commissioning Strategy. The strategy sets out a Code of Conduct 4 which stipulates the
values and principles DWP expect prime providers to comply with in their relationship with sub
contractors. In November 2009, the DWP launched a two year pilot of the Merlin Standard 5. The pilot
involves the publication of the Merlin standard itself (used as a measure of Prime Provider
compliance with Code of Conduct obligations), Mediation and Arbitration Service, and a web portal to
share information. It is envisaged that these three strands will lead to subcontracting opportunities
commissioned through a common industry process.
Survey Aims
The broad aim of this survey is to learn about the experience of third sector providers seeking access
to ESF through DWP prime providers by asking respondents to rate the degree to which the prime in
question had complied with the Code of Conduct obligations set out in the DWP commissioning
strategy. The Code of Conduct obligations are divided into pre award of contract and post award of
contract phases.
The survey6reflects this division in the analysis of the results. Responses were restricted to the
following: Exemplary compliance, very good compliance, adequate compliance, poor compliance,
several problems complying, failed to comply.
If the respondent rated compliance as particularly good or particularly bad they were asked to cite
examples of according prime provider behaviour. Examples cited by respondents are reproduced
below if appropriate. In the following, each Code of Conduct obligation is set out, with the distribution
of respondent ratings and according examples of particularly poor or particularly good compliance.
Not all examples are reproduced. Only those which are representative of examples most commonly
made.
Respondents also considered their overall experience of being a sub contractor with DWP, and some
indicated the value of the sub contracts they were seeking to achieve.
Respondents
3Seehttp://www.tsen.org.uk/legregional.aspfor further detail on the Priorities of the English European Social Fund programme as set out by theOperational programme.4See Annex 1 of the DWP Commissioning Strategy, Feb 2008www.tsen.org.uk/documents/DWP_Commstrategy.pdf5
For further information see http://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtml6Seewww.tsen.org.uk/documents/DWP_survey.pdffor the survey
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http://www.tsen.org.uk/legregional.asphttp://www.tsen.org.uk/legregional.asphttp://www.tsen.org.uk/documents/DWP_Commstrategy.pdfhttp://www.tsen.org.uk/documents/DWP_Commstrategy.pdfhttp://www.tsen.org.uk/documents/DWP_Commstrategy.pdfhttp://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtmlhttp://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtmlhttp://www.tsen.org.uk/documents/DWP_survey.pdfhttp://www.tsen.org.uk/documents/DWP_survey.pdfhttp://www.tsen.org.uk/documents/DWP_survey.pdfhttp://www.tsen.org.uk/legregional.asphttp://www.tsen.org.uk/documents/DWP_Commstrategy.pdfhttp://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/subcontractingwithdwp.shtmlhttp://www.tsen.org.uk/documents/DWP_survey.pdf -
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There were 53 responses in total. 34 of these respondents held sub contracts with the DWP. There
are 102 DWP third sector sub contractors (using the LSC definition of third sector).
Table 1: Provider applications by region
Responses Percent
South East 13 24.5
Cornwall 9 17.0London 6 11.3
Merseyside 4 7.5
South West 4 7.5
Yorkshire and
Humberside
4 7.5
East Midlands 3 5.7
East 3 5.7
North East 3 5.7
West Midlands 3 5.7
The rest of the North West 1 1.9
Success in the 2000-2006 ESF programme
Some of the respondents successfully accessed ESF through more than one route in the previous
programme. Therefore the number of responses exceeds the number of respondents 53. 49
attempted to become a sub contractor in the current ESF programme. Analysis focuses on these 49,
excluding the four that did not attempt to become a sub-contractor.
Table 2: Success in application for ESF in last (2000-2006) programme
Response No of Responses
Have never applied before 15
Yes, successful through LSC co-financed tendering 14
Yes, successful through direct bidding 13
Yes, successful through other co-financed tendering 10
Not successful in our own right, but delivered ESF activities as partner or sub-contractor. 7
Have applied but never succeeded 0
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Pre -awarding of contract stage
Respondent ratings of Prime contractor compliance with pre awarding of
contract Code of Conduct obligationsand examples of particularly good or
particularly bad compliance cited by respondents
Figures 1 to 6 show the respondents ratings of the pre awarding of contract Code of Conduct
obligations. Respondents examples of particularly bad or good compliance are reproduced next to
the overall respondent ratings. Note that in some cases no examples of particularly bad or good
compliance were cited. Table 3 shows the proportion of respondents that rated compliance with the
Code of Conduct obligations as adequate or better.
Figure 1: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
ADVERTISE SUB-CONTRACTING OPPORTUNITIES AS OPENLY AND AS WIDELY AS POSSIBLE?
4
Particularly good
They advertised on website. Follow up was very good
Advertised to a number of organisations, received e-mail
advertisements
Particularly bad
Didnt advertise at all spoke to the organisations they
knew
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Figure 2: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
CONDUCT A SUB-CONTRACTING APPLICATION PROCESS THAT WAS OPEN AND FAIR, AS SIMPLE AS POSSIBLE,
CONSISTENT, AND IN PROPORTION TO THE SIZE OF THE CONTRACT?
Particularly good
very well organised in terms of information available and
method for expressing interest
Open to negotiation every stage of the process
Particularly bad
did not conduct a process
Figure 3: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
ALLOW POTENTIAL SUB-CONTRACTORS TO NEGOTIATE WITH THEIR (THE PRIME'S) COMPETITORS? (AND)
OFFER CONTRACTS OF SUFFICIENT LENGTH TO ENABLE LONG-TERM PLANNING AND INVESTMENT?
Figure 4: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
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AGREE TERMS OF DELIVERY AT THE OUTSET, AND AGREE HOW RISK IS ALLOCATED?
Figure 5: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
PROVIDE FUNDING THAT IS FAIR AND REFLECTS THE RELATIVE ABILITY TO BEAR RISKS
Figure 6: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
PROVIDE TIMELY, TRANSPARENT, FEEDBACK IF YOU WERE UNSUCCESSFUL IN BECOMING A SUBCONTRACTOR?
6
Particularly good
Pre contract negotiations set up to discuss programme
criteria and the setting of achievable targets
Partnership approach
Particularly bad
Several cost reductions & non-negotiable outcome
changes; reportedly required by DWP during post tender
discussions but later due to errors in Prime's finance
calculations.
Particularly bad
Little understanding of specific client group's needs orcosts associated in helping clients overcome barriers to
employment; again told funding non-negotiable &
governed by DWP expectations.
..(the prime) had agreed price which they then decided
was 'too much'....(the prime then) decided that (the lead
partner) had been overpaid, some way into the delivery
of the programme, and requested money back. This had
a knock on effect to us
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Table 3: Proportion of respondents rating the prime contractors compliance with the respective pre-award Code
of Conduct obligation as adequate or better
Item %
Contract Length 100.0Competition 96.8
Advertising 94.3
Application 91.9
Provide funding that is fair and reflects the relative ability to bear risks? 84.6
Terms & Risk 81.6
Provide timely, transparent, feedback if you were unsuccessful in becoming a subcontractor? 75.0
Mean 89.1
Compliance with the Code of Conduct obligations was generally adequate or better. On average
almost 90% (89.2%) of respondents rated compliance as adequate or better. Compliance was over
90% in contract length, advertising, competition, advertising and application.
Some respondents were very positive about their dealings with the prime, describing them as very
honest, reliable, and organised. For providing funding that is fair and reflects the relative ability to
bear risks, agreeing terms at the outset and providing feedback , 75% or more rated compliance as
adequate to good. However, with regard to relative ability to bear risks two examples of particularly
poor compliance were cited. One reported that the prime had initially agreed a price with the lead
partner of the consortium and then, under the belief that this was too much, sought to recover the
excess from the partner in question. Another reported that funding did not reflect client group needs,apparently on the basis of DWP expectations.
It is important to note, however, that while there were instances of failure to comply the overall
compliance at the pre award of contract stage was adequate or better.
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Post-award of contract phase
Respondent ratings of Prime contractor compliance with post awarding of
contract Code of Conduct obligations and examples of particularly good
or particularly bad compliance cited by respondents
Figures 7 to 15 show the respondents ratings of compliance for the post awarding of contract Code ofConduct obligations. Table 4 shows the proportion of respondents that rated compliance with the
Code of Conduct obligations as adequate or better
Figure 7: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
LIVE UP TO COMMITMENTS THEY MADE AT THE TIME OF CONTRACTING?
8
Particularly good
Open honest, provided training, database
and very open for suggestions for
paperwork and weve been quite
instrumental on paperwork available and
statistically open at meeting
Particularly bad
twice tried to reduce the agreed price
and cancelled contract. ..requirements
for process of delivery in order to receive
payment changed several times.
. Not honoured the contract - ran
courses for the first month then not paid
for this. Therefore service stopped
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Figure 8: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
EMPLOY MONITORING & MANAGEMENT THAT IS NOT OVERLY BUREAUCRATIC AND THAT IS CONSISTENT,
PROPORTIONATE, CLEARLY SPECIFIED AND AGREED AT THE TIME OF CONTRACT?
Particularly good..formal structured fair two way meetings.
Partnership management is very good
Particularly bad
...changed on weekly basis over 6 months
and was recognised by other government
bodies as overly bureaucratic.
..little or none to a lot.
Figure 9: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
PROVIDE REASONABLE EXTRA SUPPORT TO NEW ENTRANTS TO THE MARKET?
PROVIDE ADVANCE PAYMENTS WHERE NECESSARY TO ACHIEVE VALUE FOR MONEY?
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Figure 10: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
ENSURE TRANSPARENCY ABOUT DECISIONS OR REFERRALS?
Particularly good
If we have outcome rejected, full explanation is provided
and help to go forward
Particularly bad
poor referral system was to detriment of customers and
posed significant risk to our reputation.
Figure 11: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
AGREE PAYMENT TIMINGS THAT ARE CONSISTENT AND MINIMISES RISK TO THE DELIVERY BODY
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Particularly good
Clear payment profile with reasonable proportion payment
based on starts
We have agreed a system of monthly invoicing, which
assists our cashflow
Particularly badInconsistency around processing of invoicing and delays in
payment
Initial set-up poor; prime contractors mangers unsure of
own financial accountability limits so agreements delayed;
some payments not made
Figure 12: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
MAINTAIN OPEN LINES OF COMMUNICATION?
Particularly good
New contract manager and admin assistant are
always available and we have regular meetings
..district manager very open, sharing best
practice and documentation
Where there been quality / performance issues
there have been extra staff to support, contact
responsive
Particularly bad
..internal confusion within prime contractorsmeant discussions did not always result in
agreed actions or changes
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Figure 13: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
NOT TO OBSTRUCT PRESENTATION OF REASONABLE STRATEGIC OR OPERATIONAL GRIEVANCES TO DWP?
Particularly good
Along with (name of Prime), we and the other two sub-
contractors have all met together DWP and been
provided with the opportunity to have direct
communication with DWP staff in order to maximisedelivery
Always had opportunity to have meetings with DWP
represented
Particularly bad
Prevented involvement in dialogue / representation to
DWP
Figure 15: How far do you think the Prime Contractor complied with the Code of Conduct obligation to:
AGREE AT THE OUTSET TO - AND IF NECESSARY COMPLY WITH - A SUFFICIENT TERMINATION PERIOD?
Particularly goodVery clear within contract discussed issues involved from
outset
Agreed at point of setting up
Particularly bad
Not discussed
Table 4: Percentage adequate or better for compliance with Code of Conduct obligation
Item %
Support 91.3
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Communication 90.6
Transparency 88.9
Grievances 83.3
Commitments 78.8
Termination 76.9
Timings 75.0
Advances 70.6
Monitoring 59.4
Mean 79.4
Compliance with the Code of Conduct obligations at the post award of contract phase was generally
adequate or better. On average almost 80% (79.4%) of respondents rated compliance as adequate or
better. Compliance was over or near 90% in support for new entrants to the market, Communication,
and transparency on decisions or referrals. With regard to Communication, one respondent reported
that the prime providers district manager was very open to sharing best practice and documentation.
Importantly, almost 80% of respondents felt that the prime had lived up to commitments made at the
time of contracting.
Two exceptions were made to the generally positive ratings of compliance with living up to
commitments made at the time of sub contracting. One respondent reported that the prime had not
honoured the contract by failing to pay the sub contractor for the training courses provided. Another
reported that the prime had twice tried to reduce the agreed price and then cancelled the contract.
Compliance with regard to payment timings and advances was rated between 70 to 75% adequate or
better. Some respondents reported experience of clear payment profiles with reasonable proportion
payment based on starts. Others reported that there were inconsistencies around payment timings.
Compliance was worst in monitoring, almost 60% adequate or better. One respondent reported that
monitoring changed on a weekly basis over 6 months and was recognised by other government
bodies as overly bureaucratic.
Overall experience of being a sub contractor
Table 5 shows the overall experience of being a sub-contractor. Respondents could choose more
than one response therefore total responses exceed the number of respondents. Most respondents
(54%) had full and open advance discussions resulting in the shared ownership of the tender with few
(11%) responding that they had been included in the tender with little or no involvement. 43% felt that
involvement at the time of responding had been specified in an equitable and timely way. Many (43%)
respondents had little involvement until delivery and a similar number stated involvement was exactly
as planned.
Table 5: Overall experience as a sub-contractor
Item Number
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Advance discussions were conducted in an proper
partnership fashion with open and full discussion,
resulting in shared ownership of the tender
19 (54%)
We had little or no further involvement until the time
to begin delivery arrived.
15 (43%)
Our involvement with the lead/prime has been exactly
as planned.
15 (43%)
We have been kept fully informed with the progress of
the tender and subsequent contracting negotiations.
14 (40%)
We were canvassed for our involvement but had little
input into the tender.
10 (29%)
Our involvement has now been specified in an
equitable and timely way.
10 (29%)
Our lead/prime has begun discussions again on the
terms of our involvement.
7 (20%)
Our involvement has been, to a significant extent,
"dictated" to us without proper involvement
6 (17%)
We were included in the tender with little or no
involvement.
4 (11%)
Table 6: Time period after the in-principle decision to award a sub-contract
Time Period No of
Resp.
Percent
No delay 3 10.0
< 2 months 9 30.0
2-3 months 14 46.7
4-5 months 4 13.3
Total7 30 100.0
Value of contract sought and awarded
Respondents were asked about the value of the contract which they sought to and the contract value
they were actually awarded by the prime contractor. It is important to note that 18 (51%) of the 35
respondents who obtained a contract with the prime responded to this question. The majority of those
7 Should be 35, presumably 5 respondents did not answer
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responding to this question (55.6%) achieved 100% of the contract value which they were seeking.
Almost three quarters of those responding to this question achieved 75% or above of the contract
value they were seeking. It is important to note however that 27% achieved less than 50% of the
contract value they were seeking, with 22% of those responding to this question achieving less than
25% of the contract value they were seeking.
Table 7: Value of contract sought and value of contract actually awarded to third sector organisation
Attempt Actual % actual of attempt
1,200,000 1,200,000 100.00
750,000 75,000 10.00
600,000 450,000 75.00
221,000 221,000 100.00
130,000 130,000 100.00
120,000 100,000 83.33
62,000 62,000 100.00
60,000 3,000 5.00
51,000 51,000 100.00
50,000 15,000 30.00
38,280 38,280 100.00
35,000 35,000 100.00
33,000 33,000 100.00
30,000 22,500 75.00
30,000 5,000 16.67
11,200 11,200 100.00
4,200 4,200 100.00
4,200 300 7.14
Table 8: Frequency bands and cumulative %
% funded of that applied for Frequency % Cumulative %
=100% 10 55.6 55.6
>=75 and =50 and =25 and
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% funded of that applied for Frequency % Cumulative %