access to esf by sub-contracting to dwp prime contractors

7/28/2019 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.

1
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

2
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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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


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?


5


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AGREE TERMS OF DELIVERY AT THE OUTSET, AND AGREE HOW RISK IS ALLOCATED?


PROVIDE FUNDING THAT IS FAIR AND REFLECTS THE RELATIVE ABILITY TO BEAR RISKS


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


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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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.


PROVIDE REASONABLE EXTRA SUPPORT TO NEW ENTRANTS TO THE MARKET?

PROVIDE ADVANCE PAYMENTS WHERE NECESSARY TO ACHIEVE VALUE FOR MONEY?

9


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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.


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


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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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


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

13


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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 %

access to esf by sub-contracting to dwp prime contractors

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