The experience of third sector subcontractors in the European Social Fund Programme Richard Crisp Centre for Regional Economic and Social Research (CRESR) Sheffield Hallam University

The European Social Fund  Approx. €6.bn will be allocated in current programme (including €3.bn match)  Two priorities: ‘Extending employment opportunities’ ‘Developing a skilled and adaptable workforce’  Single, national Programme but funding – prime contracts - awarded at the regional level by Co-Financing Organisations (CFOs) either to: prime contractors who directly subcontract delivery consortia of organisations that submit a joint bid with nominated ‘lead’

Research aims How much funding goes to third sector subcontractors The experiences of third sector organisations as subcontractors:  Applying for funds  Delivery  Meeting targets  Relationship with lead contractors and partners

Research methods  postal survey of all third sector organisations awarded ESF subcontracts  in-depth telephone interviews with 19 subcontractors

How many subcontractors are there?  ESF website lists 1,266 subcontracts and 706 unique subcontractors…  …but a number of TSOs we contacted had no subcontract  We estimate there are 488 subcontractors  And surveyed 137 of these (28 per cent)

Third sector squeezed out?  Mean average of contracts held = £275,754 but the median average = £87,000.  Total value of subcontracts = £134.6 million  4 per cent of the estimated £3.4 billion awarded through ESF  Previous review found third sector receives 17.7 per cent of the total value of prime contracts

Third Sector squeezed out?

And smaller TSOs squeezed out the most?  Subcontractors are much larger than the 'average' third sector organisation.  Nearly half of responses (48 per cent) were from large or very large organisations (annual income of £1m plus)  But consortia do offer one route in for smaller TSOs: 67.7 per cent involved in a consortium 56 per cent entered a consortium because too small to deliver on their own 63 per cent found as part of a consortium a positive experience.

Overall experience positive  63 per cent satisfied and 20 per cent dissatisfied  Most felt subcontract enabled them to able to draw on organisational strengths, work with disadvantaged clients and deliver a high quality service  Largely positive about relationship with prime contractors: 75 per cent had clear lines of communication 64 per cent felt the prime contractor provided appropriate support and guidance 79 per cent reported that they had a good relationship with the contract manager

What makes a good prime?  support in managing administrative demands  regular communication  responsiveness to concerns or queries  a genuine sense of partnership

Satisfaction with experience Income Sector of prime Overall Per cent

Some notable criticisms  Delays in starting contracts  Excessive paperwork  Lack of flexibility within contracts  Payments delayed or end-loaded  Insufficient funds: a ‘Mickey Mouse’ service?  Lack of time to work with ‘hard-to-reach’ clients  Demanding targets encourage ‘cherry-picking’

Some examples  Payment delays: 12 weeks for enrolment claims to be rewarded  End-loading: 10 per cent for enrolment and 90 per cent for achievement of NVQs that took up to six months to achieve  Inadequate time to support clients: ‘you can’t take someone on with no English and get them an entry-level certificate in 30 hours. You could do it six months’.  Cherry-picking: 'Would we go for the most in need in the future? We would be wary of it and that’s not ideal as we work with the hard- to-reach’.

Final reflections  Some evidence that TSOs are squeezed out at the bidding phase… ...but largely positive about their experience once they are in.  Key concerns around contract specifications and systems rather than relationship with prime contractors.  TSOs feel able to deliver a valuable service that meets needs of the ‘hard-to-reach’.  92 per cent said they would apply to ESF again.

The Work Programme  Explicit support for Third Sector: ‘ We have been very clear to all of the organisations on the framework that they must demonstrate their ability to address the specific needs and barriers of each customer in every locality. In order to do so, they will need to engage with a range of smaller local and specialist organisations including those from the voluntary sector’. (Grayling, 2010)

Lessons for the Work Programme The challenge for prime contractors:  Ease the burden of paperwork  Minimise financial risk  Provide flexible subcontracts that support innovation The challenge for third sector subcontractors:  Be ‘reasonably commercial’  Keep focused on outcomes without losing sight of social aims  Can ‘do-gooders, pink or fluffy, social workers’ survive?