Interview: Kirsty McHugh says charities need joint ventures to win more contracts

In the first of two articles about consortium working, Andy Ricketts talks to the chief executive of the Employment Related Services Association

Kirsty McHugh
Kirsty McHugh

The chief executive of the Employment Related Services Association, occupies an unusual position in the welfare-to-work world. Her organisation, the trade body for welfare-to-work providers, is made up of more than 100 members, including the Salvation Army, Scope and Mencap, but also includes private sector providers such as A4e and Serco.

About half of Ersa's members are from the private sector, so McHugh chooses her words carefully on certain topics: when she is invited to make comparisons about the performance of providers from different sectors, for example, she says she is "a bit loath to generalise".

But she is forthright on many other topics, including how the Work Programme, the multi-billion pound scheme introduced by the coalition government to replace the Labour party's Flexible New Deal in 2011, was never going to be the saviour of the voluntary sector.

"The government oversold the opportunities that the Work Programme would offer the voluntary sector," she says. "I was really worried when I started this job because I was hearing these messages from government along the lines of 'don't worry, the Work Programme is coming, you can still get work out of that' - but there was never going to be enough work in the Work Programme for all the organisations that wanted it."

Payment-by-results

One area of difficulty for many smaller providers who wanted Work Programme contracts has been its payment-by-results requirement. McHugh, who was a Labour councillor in Lambeth for 14 years, says she cannot foresee this or any future government moving away from this method.

"The direction of travel for the government on public service reform is payment by results," she says. "Given that it appears to be here to stay, even if we had a Labour government - which doesn't look likely at the moment - we need to think about how we can get practical help for the sector to deal with this.

"There is an issue about payment by results, and it isn't really about sector - it's about size. If you're a small organisation, cash flow is vital, so payment by results is quite difficult to handle."

She says Ersa has produced a self-assessment checklist for any charity thinking about getting into a relationship with a large contractor and wanting to assess the risks. "It's basically trying to avoid them signing bloody stupid contracts," she says.

McHugh believes the sector needs to form more bidding consortia so that voluntary sector organisations are better placed to win large contracts in the future. "There is not enough focus in the sector on thinking about different ways we can work together," she says.

According to McHugh, the voluntary sector bidding consortium 3SC was formed too late to secure any prime contracts under the Work Programme, but things might be different in the future.

"If some of these consortia can get some smaller contracts, they would be able to put themselves in a position to get some of the bigger contracts when we get to Work Programme 2, which will probably be called something different.

New models

"We desperately need to see new models that will allow the voluntary sector to take on those bigger contracts through consortia, joint ventures and different ways of bidding," she says. "Access to social finance and to finance generally is important - we've talked a lot about social investment in this country, but we seem to have done precious little of it. That's an area that the government needs to stimulate.

"There are some interesting ideas bubbling under, but the organisations concerned have sworn me to secrecy."

McHugh is positive about the Merlin Standard, the agreement designed to ensure that subcontracting organisations receive fair treatment, and she sits on its advisory board.

"I think Merlin has forced the prime contractors to look closely at how they are doing supply chain management, and that in itself is a good thing," she says.

But there has been confusion about what it is there for, she admits. "What it is not going to do is help those people who wanted to get into the supply chains and haven't got there," she says.

She dismisses suggestions that some of the top-tier contractors, most of which are members of her organisation, might be engaging in "creaming and parking" - taking the easy-to-place job seekers and palming off the difficult ones on their voluntary sector subcontractors.

"What I see is people working in welfare-to-work because they want to get people into work - and that includes those in the private sector as well," she says.

McHugh CV:

2010: Chief executive, Employment Related Services Association
2002: National regeneration and partnerships director, Business in the Community
1999: Senior policy manager, British Chamber of Commerce
1998: Public affairs manager, Camargue
1997: Parliamentary assistant, Barry Gardiner MP
1993: Media and parliamentary officer, Chamber of Shipping

- Read our analysis on the progress of bidding consortia, including 3SC

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