13 February 2009
By Alex Klaushofer
Plans to announce the preferred bidders for the Flexible New Deal contracts have been put on hold while the government and potential contractors renegotiate terms, it has emerged.
The decision by Work and Pensions Secretary James Purnell to create a 'short pause' in the tendering process has prompted speculation that the procurement process will have to begin again if contracts agreed last year are to be workable during the recession.
The bidding process is central to the Department for Work and Pensions' flagship policy of getting 1 million long-term unemployed people back to work by contracting out welfare-to-work services.
Amanda MacIntyre, chief executive of the Employment Related Services Association, which represents welfare-to-work providers, downplayed claims that the tendering process would have to begin again.
But she said that the terms of the contracts – under which contractors receive a 20% fee upfront and the remaining 80% when they place jobseekers in permanent work – needed to be rethought now that more people were chasing fewer jobs. 'We need to be realistic about what constitutes a good outcome in challenging economic conditions,' she said, adding that the definition should be expanded to include temporary work and training arrangements.
'In the short term, the best possible outcome for some people could be a series of temporary jobs,' she added. Potential contractors are also arguing that the government should pay more upfront.
'That would make sense in a credit crunch,' said MacIntyre. 'Our members would welcome that.'
A DWP spokeswoman confirmed that the government was discussing changes to terms with bidders. 'We are continuing to consult with providers to ensure that we have a system that gives real help for the long-term unemployed through the global economic downturn,' she said.
The government was still committed to its welfare-to-work policy and to the programme starting in October, she added.
Some 1.97 million people were out of work between October and December, according to figures released this week – the highest number since 1998.
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