Chris Grayling: we will protect subcontractor charities

The planned Work Programme will foster bids from voluntary sector, work and pensions minister tells John Plummer

Chris Grayling
Chris Grayling

Chris Grayling, minister of state at the Department for Work and Pensions, says the government is "taking all the steps it sensibly can" to involve the voluntary sector in the new Work Programme.

"There is no reason for individual voluntary sector organisations to be locked out," he says.

He cites as evidence of this the creation of a new code of conduct for contractors called the Merlin Standard and a match-making website that will pair subcontractors with prime contractors.

All organisations working on behalf of the DWP must adhere to the code, which contains clauses on issues such as payment terms and honouring commitments. Failure to comply can lead to contracts being revoked.

The minister says the code has teeth and will protect voluntary organisations that act as subcontractors from being exploited by prime contractors.

"The purpose is to make it absolutely clear that we expect prime contractors to behave responsibly and supportively towards their subcontractors," says Grayling.

"We don't expect prime contractors to turn up with a list of voluntary sector subcontractors only to dump them the day after they win the contract."

Commissioners will also expect bidders to demonstrate they have a "network of specialist support" to enable them to help jobseekers with greater problems, says Grayling.

"What I don't want to do is hand over contracts to big organisations that will just deal with a chunk of the audience and leave everybody else untouched."

The DWP will also launch a match-making website this month to put potential prime contractors and subcontractors in touch with each other.

Grayling says any charities that missed the 31 July deadline for expressions of interest in the programme could still use the site.

His comments come after criticisms were made last month by Yvette Cooper, the shadow work and pensions secretary. She said the size of contracts had, in effect, "locked out" voluntary organisations from the bidding process.

The DWP is due to award seven-year contracts worth up to £50m a year in January. The programme will begin in spring. Third sector organisations currently provide about a third of the DWP's welfare-to-work services, mainly as subcontractors.

Grayling, who met voluntary groups to discuss the programme last week, is reluctant to say whether he expects this percentage to increase.

"I don't want to put numbers on it," he says. "The issue is to make sure it's done right."

He says he expects to see charities bid individually or as consortia for prime contracts and also to operate as subcontractors.

Those in the latter category, he says, can be confident they will be treated fairly.

"We don't want to create a situation where you end up with a hard taskmaster prime contractor in effect exploiting voluntary sector organisations," says Grayling.

"What we want is a good businesslike approach across the whole supply chain."

Analysis: Where can the voluntary sector find cash to compete for major contracts?

By John Plummer

It's difficult to think of many third sector organisations that could realistically compete against private companies such as Serco and A4E for Work Programme contracts.

The start-up costs associated with such large contracts are likely to be too great, particularly as payment by results means any return on investment will not come until later.

Experienced welfare-to-work providers such as the Shaw Trust and the Wise Group could compete, as could the new bidding consortium 3SC - but few other third sector organisations spring to mind.

The closure of the government loan fund Futurebuilders has turned off one of the main funding taps for organisations seeking to finance bids.

Anyone looking to the planned Big Society Bank is also likely to be disappointed: compared with what is needed, the bank's anticipated start-up funds of £60m to £100m seem insufficient. Furthermore, the contracts will have been awarded by the time the bank opens next year.

Employment minister Chris Grayling maintains that charities can look to ethical investors and financiers for backing.

He says he is "cautiously optimistic" that City financiers will invest after he and welfare reform minister Lord Freud held meetings with them.

It seems that unless third sector organisations are used to bidding for huge contracts, they had better make friends in the City soon - or their role in government welfare projects could continue to be limited primarily to subcontracting.

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