At this point it might just be worth mentioning a recent article in Private Eye and picked up on by the 'Watching A4E' website. Apparently Chris Grayling met with A4E directors last July when still at the DWP and it was obvious the Work Programme was failing and A4E was enmeshed in a wave of bad publicity. It seems he told them "In 6 months it will all be forgotten" and he was grateful for what they were doing. I just thought I'd mention that Chris because we haven't forgotten!
Anyway, Chris Graying moved on to the MoJ and the same suspects and the same PbR payment methods are to be introduced for the privatisation of the bulk of probation's work. So it's fascinating to see what the current privatisation industry thinking is. Richard Johnson was managing director of Serco's Welfare to Work and in a recent article on his blogsite 'Buying Quality Performance' outlines in stark detail how probation contracts will be won and operated in order to make a profit. He takes an example of one contract area currently costing £30 million after stripping out the cost of assessment and high risk offenders:-
If we are to win this contract, our tender will have to meet a quality ‘threshold’. But we are old-hands at this outsourcing game and know how to tick all those boxes. It comes down to price.
We know that the MoJ is looking for a 30% cost saving. We are going to have to bid at around £20m per annum. For this, we will take on all court-directed activity, including new supervision orders for people receiving sentences of less than 12 months. It is not going to be easy! But our Board are very keen indeed for us to secure this contract. They have, after all, agreed with the shareholders some stretching growth targets that can only be achieved through new contract wins.
We will inherit in Area F the ‘newco’ of transferring probation staff. In order to make it work, we will have to: strip out overhead; look for significant redundancies on the frontline; take the remaining staff through a radical cultural change programme, rolling out a new rigour in performance management; and also find ways to deliver some of the court orders differently (for example, using call centres instead of face-to-face contact). This transformation programme is going to cost us a lot of money, which is obviously going to have to come out of the £20m too.
To say the challenges are enormous is to understate the position as the article goes on to make clear:-
If we win the contract, the £20m will be paid to us in monthly instalments. Only, it won’t be fixed at £20m for every year of the ten-year contract. It will be reviewed each year to take account of any fluctuation in volumes of offenders. It will also be reduced year-on-year, to make sure we keep improving and growing in efficiency.
If we fail to deliver what the courts require, then MoJ will claw money back. If re-offending rates increase in Area F, then MoJ will claw money back.
In an attempt to focus us closely on rehabilitation, we will only be able to earn profit, i.e. anything over and above the agreed service fee of £20m, if we demonstrate a reduction in re-offending. If we have a massive impact on re-offending, they will even let us earn “super profit”, though it will be capped. MoJ are calling this the Payment by Results (PbR) element.
So. We have to take the existing service, plus some extra supervision orders, and deliver it for 30% less money. The MoJ drive us to find efficiencies and to maintain effectiveness with the risk of clawbacks. Additional interventions, over and above the core court-directed service, will have to be funded either out of the money for that core activity or be investment we make at risk, in order to generate a return from profits.
Our initial focus must be just the core contract. We have a massive transformation to achieve. Let’s get the ‘newco’ knocked into shape. Let’s drive for a much smarter core service, targeting a small reduction in recidivism to mitigate the risk of clawback. If we can deliver this for less than the £20m agreed, then that’s our profit.
To show willing to MoJ, we could propose investing some money at risk. But our Board aren’t going to like it. We’ll try to hand that risk down to subcontractors, offering purely outcome-based payments, but after the Work Programme debacle, MoJ are discouraging this. We could try to draw in social investment, but that’s not particularly cheap money and there is, to be honest, insufficient potential return in the PbR element.
I think it's fairly clear that what is being proposed is most certainly not a safe route to assured riches for any potential bidder, in fact it looks pretty much like a recipe for financial ruin to me. The article acknowledges that some bidders might pitch their bids too low and indeed lose money or go bust even, but most significantly makes the following point:-
What this certainly is not is a rehabilitation revolution. It is not a mechanism to deliver a big decrease in re-offending. In order for that to be the case, real returns would have to be possible from the introduction of entirely new services over and above court orders. This conflicts with the objective of cuts. Payment by Results or outcome-based funding does not necessarily mean additional results – when combined with simple cost-cutting it generally just means de-risking public expenditure through shifting to cash-on-delivery.
The message from this source, that must be regarded as sympathetic to the notion of public service 'reforms', appears to me to be that we really do indeed have the making of an omnishambles here. You could get your fingers seriously burnt and it won't deliver a rehabilitation revolution. I wonder what those Trusts busily plotting to become mutuals make of it?
So, my top bidding tip is quite simple - don't!
Sign the petition here instead.