Lessons in outsourcing and bias

The last few days have seen a graphic example of the perils of outsourcing.  As the NHS is gradually auctioned off, one of the pieces up for grabs was the GP out-of-hours contracts.  Serco got the job in Cornwall, and were recently slammed for providing a substandard service.  Next came the 111 helpline.  The bidders had to work on assumptions about call volumes and length, since they were going to be paid per call.  NHS Direct, which won a lot of the contracts, has given one back shortly after starting it, and the rest before even starting.  The assumptions were wrong, and they can't make them viable.  For a minor player like NHS Direct, this is terminal.  They can't exist while making big losses.  But the major players can carry on regardless.
The journalist John Harris wrote a long article in the Guardian on Monday about Serco in particular and outsourcing in general.  He's got all the main points, and writes clearly and passionately.  But he misses one serious issue.  Contracts handed out by one government run for a lot longer than the government itself.  An incoming government in 2015 cannot cancel existing contracts except at immense cost.  So our fragile notion of democracy is further undermined.  We can get no further, because the politicians on all sides are not going to back away from outsourcing.  More local councils are looking at hiving off many of their services.  Government will flog off anything it can.  There are vast amounts of money to be made, and that's all that matters.

There was a hilarious article in the Telegraph yesterday.  Back in November 2011 the BBC's John Humphrys presented a radio programme called The Future of the Welfare State.  It was a personal view, from his Welsh home town.  But there were complaints that it was not based on evidence, and was politically biassed.  The BBC Trust has just ruled that it failed to back the views presented with figures, and breached the rules on impartiality and accuracy.  Cue outrage from Iain Duncan Smith, who obviously loved the original programme, and sees the Trust's verdict as typical left-wing bias.  Ironically, he felt the same about Humphrys interview of him about the benefits cap recently; and he professes himself "staggered" about the way the BBC reported the High Court's judgement on the bedroom tax yesterday.  Yes, IDS is ridiculous.  But he's also very dangerous.  The only acceptable stance, as far as he's concerned, is for the BBC to parrot the government's line uncritically.  Yet another chip out of the structure of democracy.

"I'm proud of our welfare reforms" says IDS

An astonishing piece appears on the Guardian site today in which Iain Duncan Smith is given the space to tell us how proud he is of his welfare "reforms".  There's no point in my analysing it for falsehood and self-delusion.  That's an exercise you can do for yourself.  It is, perhaps, significant that the paper disabled comments after 329 - quite a few of them not allowed by the moderator.  People were angry.  I will just pick out one claim: "Our Work Programme has launched and the industry tells us that so far 321,000 people have found a job through it."  This is at worst mendacious, and at best utterly misleading, as all of us who follow the WP know.  And it's typical of the whole article.
There's still no sign of the figures for sanctions, figures which were supposed to be published in May but were suppressed because of "doubts about the quality of the data".  I wonder why.

Burying bad news

The birth of the Windsor baby, and the fact that MPs and their journalist mates are all on holiday, meant that a significant news story was effectively buried.  The papers which did pick it up are a bit confused, and no wonder.  Try the Guardian.  "Atos reports found 'unacceptably poor'".  It's the quality of the written reports which the Atos people make which has not come up to scratch, not, the DWP insists, the validity of the verdicts.  Even so, they are bringing in "additional providers" from next year to work alongside Atos in order to speed things up.  It is really not clear what deficiencies the DWP is admitting to.  The Mirror says, "Atos rapped over wrongly passing fit for work up to 41% of claimants", and that the DWP was "told to act because of deep concerns about Atos at No 10".  That doesn't seem quite true, but who knows?  And what penalty has Atos actually paid?
Another little-reported failure is that of the Youth Contract, the wage incentive scheme which was supposed to help 160,000 young people into work over three years.  In its first year it helped just 4,700.  The Guardian and the Financial Times both analyse the figures.  But unless you read these papers you won't have heard any of this.  Is the timing accidental?

Stats, and a report

We learned last week that DWP press officers were to be sent on a statistics course this summer, following the outpouring of dodgy and downright untrue figures, designed to prove whatever Iain Duncan Smith wants to believe.  On Tuesday the man himself appeared before the Work & Pensions Select Committee, but the topic was the non-progress of Universal Credit.  It seemed to many of us that he was not to be answerable for misleading the public; but it's now been confirmed that he will appear before the committee on 4 September to answer questions on the DWP's annual report and on the Department's use of statistics.  It will be interesting; but if his performance on Monday in the Today programme interview is any guide, it will be entirely unproductive.

There's a report out today on the whole subject of outsourcing.  It's by the Institute for Government, a think-tank which seems to be genuinely non-partisan.  It is summarised in the Independent, which headlines it as "the great outsourcing scandal".  The report uses the Work Programme as one of its four sectors for examination, and comes up with the (hardly startling) opinion that there is a lot of "creaming and parking" going on.  They say that they "found companies regularly playing the system to ensure they made money....... Providers were also cutting costs by using 'group sessions' and telephone calls rather than face-to-face contact."  Yes, well, I think we knew that.  The IfG's recommendation is disappointing: "The Government should set minimum performance levels, and punish poor performers by imposing penalties or terminating contracts entirely."  The authors are apparently unaware that there are minimum performance levels, and there are supposed to be penalties.  They miss the point that government has no wish to proclaim its own failure by punishing its contractors.
It's a timid report which, despite a few sensible points, misses some of the crucial dangers of outsourcing.

Iain Duncan Smith - true to form

I thought we might get an IDS-free day today, but still the media keep coming up with depressing pieces.  I've bookmarked so many that I can't possibly post links to them, and you wouldn't want to read them anyway.  When I listened to the interview yesterday on the Today programme, I was hoping that John Humphrys would challenge him over his misuse of figures - and he did.  But that brought the extraordinary conversation, recorded in the Huffington Post: 

  '"What they said was you can't absolutely prove that those two things are connected."  Challenged over the fact his statement was not supported by officials statistics published by his own department, Duncan Smith said: "Yes, but by the way, you can't disprove what I said either.  I believe that this to be right, I believe that we are already seeing people going back to work who were not going to go back to work," he said.  "I believe that this will show, as we move forward, that people who were not seeking work are now seeking work."'

Of course, lots of people picked that up and mocked it.  Another assertion, quickly picked up by the New Statesman, was that homelessness figures had "hardly moved".  Actually, homelessness in England is up by 27% since 2010.  The New Statesman published an excellent piece, "Five things Iain Duncan Smith doesn't want you to know about the benefit cap" - essential reading.
Something which went unchallenged was the assertion, or implication, that people can go out and get a job if they want one.
It was inevitable that the interview would result in a complaint from IDS about the BBC.  He said to Humphrys, "This is absurd. What you are doing, as always happens in the BBC, is seeking out lots of little cases from people who are politically motivated to say this is wrong.”
My final link is to a Steve Bell cartoon in the Guardian.

Labour had little to say.  And that's because they support the benefit cap, and know that a large majority of the electorate support it too.  No minds were changed yesterday, but what I found most worrying was that so many people on the ideological right were content to churn out statements which they know to be untrue or highly misleading.  
And the Tories feel that they're on a roll, and can put forward further "reforms".  We're hearing today about a reduction in the cap to £20k, if it's shown to "work"; stopping housing benefit to the under-25s; and denying housing to teenage single mothers.

  

Bingo!

There's an amusing story in the Daily Mail today.  The people running A4e's office in Kirby had a syndicate gambling on the EuroMillions, and they recently won the £28.8m jackpot. 
There was none of this, "It won't change my way of life" nonsense.  The next day, no one turned up for work.  And who can blame them?  Unfortunately, one of the 11 members of the syndicate was off ill on the day the payments were collected, and now the rest of the syndicate won't pay her her share.  She's taking them to court.
The Mail reports: "Yesterday an A4e employee tweeted: ‘In recruitment hell....all our staff in Liverpool office have left after winning lottery.’ The tweet was removed a few hours later."  

As I was saying ......

Last week I speculated about the future of outsourcing, and pointed out some of its perils.  Now comes vindication with the story of G4S and Serco having overcharged the government massively on their contracts to tag offenders.  Because G4S is apparently not co-operating fully with the government's investigation, Chris Grayling is calling in the cops.  With new contracts in the pipeline, Serco have said they won't bid for them - but Capita plans to do so.  Unless a foreign company throws its hat in the ring, that's it.  There are no other companies in a position to bid.
We learned today that, between them, Serco and G4S get £1.5 billion a year from the may contracts like this that they have.  And in total outsourcing is worth more than £80 billion a year.  That's our money.  Some are now putting the blame for messes like the tagging contracts on the poor skills of those civil servants who are supposed to manage and monitor them.  Well, maybe, but that's inevitable.  They are hugely outgunned by the companies.

Questions, answers and entertainment

Iain Duncan Smith appeared before the Work and Pensions Select Committee this morning to answer questions about the status of his Universal Credit project.  There's an account of what happened on The Register website (marred somewhat by lazy language).  UC is, apparently, proceeding slowly.  In October it will be rolled out to six more jobcentres; but these will be in places, including Harrogate and Bath, where unemployment is relatively low; and it will still only take in single people with the simplest of claims.  Despite some scathing questioning by Glenda Jackson MP, IDS and his mate Lord Freud got off lightly.  This afternoon the committee were asking questions about the DWP's misuse of statistics.  Many had anticipated that IDS would be skewered for his blatantly misleading figures.  (See a blog piece here.)  But it was a couple of civil servants who had to face the music.  Apparently the ministers will be called in September.

Remember that spate of TV programmes, culminating in the appalling "Famous, Rich and Jobless", which made entertainment out of poverty?  (There have been a few more since then, I know, but I refuse to acknowledge them.) It couldn't get any worse, you might have thought.  But perhaps it's about to.  On BBC1 tomorrow night (11 July) we have, first, "Great British Budget Menu" "in which leading chefs tackle food poverty by living with three families who are struggling to make ends meet."  What fun.  I should have given them my recipe for carrot and lentil soup.  Having watched that you may be in the mood for "Nick and Margaret: We all Pay your Benefits".  This is a "two-part special in which ...... Nick Hewer and Margaret Mountford try to find out how much unemployment benefit is enough to survive on."  They went to Ipswich.  And they pitted workers against claimants.  As we've pointed out before, this is a false dichotomy.  I won't be watching.

Outsourcing Jobcentre Plus - the first steps?

When a report comes out of the Centre for Social Justice, one can assume that it's with the approval of Iain Duncan Smith, who set up the outfit and has close links with its people.  So its latest proposals could well be seen as the floating of something the government wants to do.  "Break state monopoly of failing £1.4 billion job centres" is the heading of their press release.
It's an extraordinarily muddled analysis to support their wish to move to the Australian model, which uses lots of private and voluntary sector bodies (the code is "market-based") rather than a public sector jobcentre system.  For Conservatives this is axiomatic, needing no justification.  But the CSJ obviously has to come up with reasons.  So what do they find is wrong with our current system?
Well, "Thousands of claimants lack an up-to-date CV".  This preoccupation with CVs puzzles many unemployed people.  Most of the jobs they apply for don't require a piece of paper headed "CV"; they want an application form completed, on paper or online.
Then there's the claim that "40 per cent of claimants who move off Jobseekers Allowance make another benefits claim within six months".  Er .... yes.  How many jobs today are temporary or even casual?  How is this the fault of the Jobcentres?  And how does this compare with the private sector Work Programme figures?
"JCP focusses far too much on arranging benefits for claimants instead of identifying the factors that are preventing them from getting work and staying in work."  This is a ridiculous statement.  When someone loses their job and signs on, the first role of the Jobcentre is to ensure that they get the benefits to which they are entitled.  That doesn't always work properly; but I would far rather entrust that role to a civil servant than to the employee of a private company like, for instance, A4e.  After that, they are supposed to help you back into work.  In recent years, jobcentres have been starved of resources and money has been diverted to the private companies to deliver programmes like the Work Programme.  So, does the CSJ want the money restored?  Well, they admit that JCP staff are underpaid, and advocate "increased pay for effective advisers" i.e. performance-related pay based on getting people into sustained work - the private sector model.
There's more of the same in the report.  But to pick holes in it is to miss the point.  We are on the way to handing the unemployed to the private sector from the moment they sign on.

Just an idea ....

This is pure fantasy, because it depends on the closing down of the Work Programme and all such private-profit schemes, and that's not going to happen.  But just suppose ....
Start by ending the WP and strengthening the Jobcentres, with more staff, retraining and more resources; put them into partnership with local councils.  They would do the basic stuff where necessary, like CVs and interview techniques.
Now, that £400 attachment fee which the WP providers have been getting.  Instead, put that into a notional account for every person who has been out of work for, say, 6 months.  The claimant and JCP adviser together decide what needs to be done to enhance the claimant's job prospects.  It could be a training course (a real one) up to the value of £400.  I know some training costs a lot more then that, but I think you'd find FE colleges and genuine training bodies willing to put together proper courses for that when the money was sitting there.  It could be used for driving lessons; after all, so many jobs depend on having a driving license.  Any other ideas?  It wouldn't have to be spent all in one go.
Of course, if the claimant signs up for something expensive and then doesn't complete it, there would have to be a good reason.  But I don't think there would be many defaulters if it was clear that this was genuinely useful.  And those outcome payments?  Well, they could go to restoring the money which used to help someone bridge the gap between starting a job and getting paid.
As I said, it's not going to happen.  Pity.

The future of outsourcing: can A4e survive?

Many people may have wondered how the dismal failure of the Work Programme to achieve its targets for the second year in a row has been hailed as a great success by the government which is paying for it (with our money).  But in fact the lies have shown the flaw at the heart of outsourcing.
Public sector bad, private sector good: that's one of the basic tenets of a free market system.  The private sector, with profit as its driver, will always be more efficient and innovative than the public sector.  Evidence for this assumption is hard to come by.  The real rationale is actually much closer to what Thatcher believed - that an industry or service should always be making money for someone.  The last Conservative government privatised everything for which the public paid directly; transport, for instance, and the utilities, most of which are now owned by foreign companies.  The Blair government followed by outsourcing those services which were paid for out of the public purse, whether locally or nationally.  In theory it makes sense, at least initially. You don't have to have an army of staff, with all the attendant costs and hassle.  You specify what you want and contract with the cheapest company to provide it.  If they don't deliver, you don't pay.
When this bonanza started, A4e were well placed to benefit.  But in a few short years the problems with the model started to appear.  In their chosen sector the company was soon scooping up contracts, to the bemusement of their competitors.  Was A4e simply undercutting its rivals?  Or did they have some sort of favoured status with government?  In other sectors, similar things were happening with companies like Capita, G4S and Serco.  It costs a lot of money to put a bid together; if a company can't see a possibility of ever getting a contract, it will cease to compete.  The success of the big players meant the demise of competitors.  The supposed free market was rapidly becoming an illusion.  When the government recently announced that it was to outsource most of the functions of the Probation Service, everyone assumed that the only bidders would be G4S and Serco.  All the outsourcing companies left standing have diversified into fields in which they have no previous experience, including welfare-to-work, where they have been joined by foreign companies.  A4e is no longer the top player.
The targets written into the contracts, and promised by the private companies, became notional at best.  The strange procurement process meant that previous performance couldn't be taken into account, so companies could fail and fail again, but still get new contracts.  There was no risk.  A good example of this was G4S's incompetence over the Olympics security contracts.  Their reputation took a temporary knock, and their profits stumbled, but it did no lasting damage.  Fortunately, on that occasion there were the police and the army to step in.  The G4S event was also an example of how dangerous the private sector practices can be. The company had to recruit a lot of temporary staff, and did so in good time; but they didn't want to pay them until they absolutely had to, and so by the time they called in their recruits many of them had made other plans and weren't available.
Occasionally a contract would prove to be such a bad deal for the company (usually because it had made a bad bet) that it had to cut its losses and give up the contract.  A4e did that with a number of prison education contracts, after badly miscalculating the costs and incurring big losses.  More recently we've seen NHS Direct pull out of two of its 11 medical helpline contracts because they are "financially unsustainable".  Other companies must step in and pick up the pieces.  But what happens when there are no other companies?  When you have closed down the public sector departments and got rid of the staff, you can't bring a service back in-house except at enormous expense.
The power should lie with those commissioning the services; with government departments or local authorities.  But as the number of players shrinks, the power shifts.  The design of contracts is negotiated with the providers, who have the upper hand, as we saw with the Work Programme.  We've even seen A4e being paid to tell government how to design contracts!
The answer, from this government, is Payment by Results.  But that has simply made matters worse.  It automatically limits the numbers of companies which can bid to the largest and most financially well-endowed; those able to sustain a period without any profits.  From the outset, it wasn't quite what it was supposed to be.  An upfront "attachment fee" was negotiated, which kept the companies ticking over without any results whatever.  However, PbR satisfies the free marketeers, who disregard the fact that if a service is not being delivered, it's the service users who suffer.
It is very much in the interests of government that outsourcing should succeed.  They don't want to have to admit that they got the whole process wrong and have spent our money to no good purpose.  That was what made Emma Harrison such an embarrassment when it was revealed just how much money she had pocketed in profits.  She had to go.  And it's why the Work Programme data has been so misrepresented.  So the private companies and the government have a mutual interest in pretending that black is white, if necessary.  It's also why the companies employ people who have a direct line to government (think Blunkett and Olliff-Cooper at A4e).
A4e's last published accounts showed their business shrinking, and perhaps struggling.  The accounts for the year to March 2013 won't be published until the end of the year.  Will it survive?  Outsourcing isn't going away, so much will depend on whether the company can adapt to the changing environment.