The perverse outcomes of results based contracts

“That’s another fine mess you’ve got me into”, said Dave to IDS (I suspect) when today’s Daily Mail arrived through the letterbox of No.10.

The headlines suggested it had all gone horribly wrong (again) on the procurement front.  Fresh on the heels of the CX of the UK Student Loans Company promoting tax avoidance, here was a ‘Tsar’ getting an £8.6m dividend through what appears to be promoting contract avoidance.

In a nutshell the story is the lethal mix of:

• A Tsar
• The DWP Work Programme
• The Tsar is paid a dividend from her company
• The company’s only customer is the public sector
• The main customer is the Work Programme
• The company’s delivery performance has been abysmal, namely, 9-24.2% ‘back to work’ as opposed to the target of 30%
• Half the company’s subcontractors are the third sector.

It looks like the main beneficiary in getting 120,000 troubled households into work was the main shareholder of a poor performing contractor. I suggest she would be better as the Tsar of Contract Manipulation. To take Dave’s previous endorsement out of context “… I know we can count on her to help drive this campaign forward”.  It seems to me that
troubled families have enough problems without adding to their woes – maybe Dave and IDS feel the same.

There is one small mercy, the contractor, while acknowledging failure said their performance was better than the industry average!  Now that’s something I suspect Dave and Iain will want to have a chat about.

Suggested lessons for the future:

1. Be sure there’s a defensible and robust approach to appointing Tsars
2. Be sure there’s no potential conflict of interest between a Tsar and a contract delivery partner
3. Ensure the supplier selection criteria for providers is robust
4. Ensure you have robust performance management of suppliers in place which protects against rewarding poor performance
5. Ensure there is robust contract management in place for Tsars and providers
6. Be sure, if you plan to pay by results, it is clear what the results are before money changes hands
7. Ensure there isn’t the remotest possibility of a perception that contract management is compromised as a result of proximity to a Tsar .

Background reading 

Groves, J. (2012) ‘Fury as Families Tsar gets £8.6m on one year’, Daily Mail, 10 February, p.1 and p.4.