04.02.09

Welfare-to-Work Scheme Could Be Derailed by Increase in Long-Term Unemployed

The Government’s proposed welfare-to-work scheme could be derailed by a substantial increase in the number of people unemployed for 12 months or more.

The warning follows an admission by the Department for Work and Pensions that the numbers expected to join the programme might be 300% higher than it had originally estimated – so closer to 300,000 than the 100,000 it had originally indicated.

The admission means that those organisations who have been bidding for contracts to provide the back- to-work support services under the Flexible New Deal scheme, may want to consider whether to scale down their bids – or withdraw them altogether.

The DWP has written to the bidders saying that not only does it expect start-up volumes to be higher but that it anticipates that “these higher volumes are expected to be sustained for at least the initial (5 year) period of the contracts.”

The Flexible New Deal (FND) contracts are heavily results based with 80% of the payment being dependent on finding people sustained work. So at a time when vacancies are dropping and unemployment is rising rapidly, the contracts may no longer make commercial sense.

The Department has acknowledged this and has told the bidders it recognises that the higher volumes and the current economic climate will put a greater pressure on their financial position, including their capital requirements and revenue models.

It has announced a “short pause” in the competition to run the FND contracts and has told the bidders they will be able to re-consider key elements of their bids – including their pricing and performance offers.

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