By Alex Klaushofer
The Department for Work and Pensions is considering offering providers of contracted-out Flexible New Deal services double the upfront fee originally agreed, Public Finance has learnt.
The Department for Work and Pensions is considering offering providers of contracted-out Flexible New Deal services double the upfront fee originally agreed, has learnt.Richard Johnson, managing director of welfare-to-work at Serco, a provider bidding for eight of the FND contracts, said the DWP had last week requested a revised price on the basis of a 40% fee upfront, with the remaining 60% payable on finding someone work.
Earlier this month it emerged that plans to announce the preferred bidders for the FND contracts due to start in the autumn had been put on hold as government and potential contractors renegotiated terms.
The growing numbers of jobless people had caused a rethink of the original arrangement of a 20% fee upfront, with 80% payable when jobseekers found work. No official figures had been previously mooted, although there had been some suggestions that providers would need half the money upfront.
The DWP’s revised deal would be ‘workable’, according to Johnson. ‘It is possible to run a viable programme on 40/60.’
The latest twist in the government’s welfare-to-work strategy follows the defection of the scheme’s architect to the Conservative Party.
Former investment banker David Freud, commissioned by successive ministers to develop the government’s welfare reform strategy, accepted an offer to join the Tory front bench as shadow minister for welfare reform.
The move has prompted speculation that Freud considers the Opposition a better bet for implementing his proposals, should it come to power, than the current government.
Meanwhile, potential FND providers are working out other ways of making revised contracts workable. Johnson said Serco was advocating a banding model, in which the upfront fee payable would increase beyond 40% if unemployment rises, and drop if it falls.
He said that incentives were also needed to encourage providers to get the most difficult cases back to work rather than ‘park’ them. Renegotiating the contracts would not stop the programme going ahead as planned, he added.
