The Association of Learning Providers has called on the government to rethink the way it structures its Work Programme-related contracts, warning that the current system could put small firms out of business.
The move comes only a week after a Select Committee inquiry heard evidence that the targets set for providers to help the unemployed get back into work were over-ambitious.
Paul Warner, director of the Association of Learning Providers, told the Chartered Institute of Personnel and Development's in-house publication Peoplemanagement.co.uk that many of its members, which provide government-funded training and welfare-to-work programmes in England, were now reluctant to bid for government contracts because of the way they were drawn up.
The Work Programme contracts were based on a "high-risk financial model and unrealistic targets", he warned. The problem was that, while the first part of the contracts offered providers a "workable cashflow", such support was drastically reduced in the second half. This meant that those providers that failed to meet the stringent targets could find themselves in severe financial difficulties.
"Providers have told us they are not keen to bid for Work Programme contracts because of the risks, but feel that they have to because it's their business. Some of those that are bidding will breathe a sigh of relief if they don't get the contracts," Warner said.
Although the Department for Work and Pensions, which administers the scheme, has made it clear that only large providers with turnover of more than £20m should submit bids, Warner pointed out that they often sub-contract work out to smaller firms that are subject to the same financial risk.
As a result, he said: "We're not too far along the process to make changes, although it is a bit 'eleventh-hour'. It's possible to start the tendering process in February and keep to the timeline. If DWP engages with industry bodies constructively enough, we can find a way to make this work."
The DWP responded that it would work with providers to ensure that the Work Programme was viable as there was no point having a scheme in place that could not be delivered.
"There is some manoeuvre room on the contracts in as much as we will set out terms that we think are fair and just, and will give providers an opportunity to deliver the contracts for us and if they deliver them well, make a profit," it said.
But ultimately, it was necessary to ensure that contracts were stringent enough to provide good value for money for the taxpayer and that they delivered "what we want in terms of getting people off benefits and back into work, particularly those harder-to-help cases", the DWP added.
