MPs have instructed the Department for Work and Pensions to insert “robust sanctions” into the Merlin Standard governing supply chain deals between contractors and subcontractors on the Work Programme, after civil society groups complained that the Standard lacked teeth.
In recent months, cross-party MPs on the Work and Pensions Committee have been scrutinising the contracting arrangements within the Work Programme and hearing evidence and representations from charities and private-sector providers. Earlier this week they published their conclusions and recommendations.
Regarding the Merlin Standard, they wrote: “We welcome the creation of the Merlin Standard as a significant step in helping to promote fairness in the supply chain. However, we share the concerns of some witnesses that it still lacks sufficient ‘teeth’.
“We recommend that DWP establishes robust sanctioning arrangements and takes steps to make the Merlin compliance measures more precise and objective. DWP must also demonstrate how the arbitration process will be truly independent and impartial.”
Acevo was one of those that had highlighted the weaknesses of Merlin. In its evidence, it said: "It will be critical for organisations of all sizes to work together and harness mutual strengths in achieving positive results for the Work Programme at all scales. What is critical in this process, however, is that risk and reward are passed on intelligently down the supply chain. It will be vital that the Merlin Standard is given significant teeth in order to ensure this happens with appropriate sanctions for those that do not conform to expected behaviour."
Acevo alerted the Committee to "cynicism" within the sector from historical experience of sub-contracting "so it will be vital that the Work Programme and the Standard can be seen as credible and both holding primes to account as well as stimulating a drive towards continuous improvement in performance".
The Committee welcomed the involvement of civil society organisations (CSOs) in the delivery of the Work Programme, and added: “It is important that the voluntary sector’s involvement in the Programme is meaningful and that organisations are not simply used to make prime contractors’ bids more attractive.” It said DWP must closely monitor whether prime contractors are indeed subcontracting to the voluntary bodies that were named in their bids, and should cancel contracts if they are found not to be.
Financial risk
The Committee also acknowledged sector concerns about the risk to the financial viability of smaller, specialist subcontractors if primes do not pass on sufficient upfront funding. “DWP should be proactive in reminding prime contractors that a key aspect of their role in the Work Programme is to bear financial risk, rather than passing it on to subcontractors unfairly or disproportionately.”
Prime must not place an “unnecessarily onerous administrative burden” on subcontractors when establishing their supply chains, the Committee added. DWP should promote the use of a single, simplified Expression of Interest form for subcontractors, it said.
And it advised DWP to keep the new payment-by-results model under constant review to ensure providers are not creaming off those clients who are easiest to help and leaving those with more complex needs to subcontractors to deal with.
Excessive profits
The Committee also had a word to say about the financial returns available to providers. It said that given the demanding minimum standards set by DWP, it is unlikely that providers will “profit excessively” from the Programme in the current labour market and economic conditions, and so no cap on payments should be set at the moment.
However, payments should be kept under review to ensure that prime contractors don’t make excessive profits if circumstances change, it advised.
