UNCLASSIFIED

National Probation Service

Briefing
Issue 35 (Annex B to PC33/2006) September 2006

BECOMING A LEAD PROVIDER

INTRODUCTION

The purpose of this briefing is to support Areas in preparing for the new partnership environment described in
Improving Prison and Probation Services: Public Value Partnerships published on 17 August 2006.

It is published in support of PC33/2006 (The Development of Sub-Contracting Plans) and it builds on PC07/2006
(Voluntary, Community and Private Sector Alliances) and PC64/2005 (The Business Development Strategy, 2005).

It is suggested Areas adapt to the new environment by becoming the ROM’s lead provider of choice. Areas have
enough time to develop the skills and relationships necessary to achieve this, before legislation is introduced and
implemented that will permit other providers to deliver “probation services”. In particular, ROMs will want to see better
continuity of provision across the custodial and community sectors.

THE CONTEXT

“This year and next year we are requiring local probation areas, on a voluntary basis, to double and then double again
the proportion of services they contract out.”
Home Secretary’s foreword to Public Value Partnerships

“This [Public Value Partnerships] sets out our initial intentions for creating lasting public value partnerships – bringing
together the best of all…There is only one future now for correctional services provision and that is as a true mixed
economy of provision which draws on the skills, expertise and investment of all.”
Home Secretary’s foreword to Public Value Partnerships

“Regional Commissioners will not hold large numbers of small, local contracts. Rather, we believe local delivery will be
enhanced by Regional Commissioners contracting directly with main providers, who will sub-contract and enter into
partnership arrangements with local providers that meet the regional commissioners’ requirements.”
Section 2.12 of Public Value Partnerships

“All providers – new and old – must be prepared to collaborate with others, through consortia or other partnership
arrangements. It is essential that providers work together with other agencies, including the courts, the police, and
those involved in health, education, employment and housing...We want to create an environment which supports
partnership working as a matter of course, but also encourages new ideas and approaches.”
Section 2.3 of Public Value Partnerships

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“WHERE WE EXPECT TO BE IN 5 YEARS: Programmes to be coherent across custody and the community with
more programmes being delivered by provider consortia with private, public and voluntary sectors working together.”
Section 1.29 of Public Value Partnerships

THE LEAD PROVIDER ROLE

“Lead provider” means a provider that fulfils a contract with the commissioner, not only through delivering services
itself but also through sub-contracting and co-ordinating the services of others.

The NOMS’ vision is that the efforts of a wide range of public, private and voluntary organisations are co-ordinated
across custody and community to reduce re-offending and protect the public more effectively. As well as being
providers themselves, lead providers will – in formal agreement with the ROM – ensure that the benefits brought by
involving multiple organisations are realised and not lost in service co-ordination difficulties.

A successful lead provider will provide a great service to the ROM by:

• Valuing the ROM as a customer and offering solutions that meet the customer’s needs
• Sub-contracting services where better results can be achieved in partnership
• Delivering services with others regionally where this provides better value for money
• Being innovative and open-minded about new services and ways of delivering existing services
• Supporting all organizations to play to their strengths in unison
• Co-ordinating service delivery as agreed with the ROM
• Getting the full benefit and support of statutory partnerships
• Aligning its strategy and goals with the ROM, NOMS and Home Office

In order to effectively execute this role, lead providers will have to have specialist skills and infrastructure in
establishing contracts/partnerships and in managing them to achieve the best possible outcomes for the ROMs.

These skills and infrastructure are in many respects very different to line management ones, despite both resting on a
clear understanding of operational realities. Developing these skills and infrastructure will be the focus of training and
support (see Training and Support to Develop Lead Provider Skills and Infrastructure below).

The term “infrastructure” means here the combination of people, processes, tools and systems.

THE BENEFITS AND COSTS OF BEING THE LEAD PROVIDER

The Benefits of being the Lead Provider

It is clear that ROMs will want to contract with organisations that are capable not just of delivery themselves, but are
also capable of co-ordinating service delivery from others too. In return the lead provider will benefit from: (a) greater
opportunities to reduce re-offending and protect the public; (b) a network of relationships that reinforces its central
position in the marketplace; (c) a set of skills in contractor and partner management which are highly valued by the
ROM; and (d) a greater ability to deliver best value services through drawing on the skills and innovation of others.

The Costs of being the Lead Provider

The level of cost borne by the lead provider against each sub-contract/partnership will be driven by:

• The risk posed by offenders – a sub-contract/partnership dealing with high-risk offenders will require greater
per capita investment in management than one providing to low-risk offenders

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 • The number of parties – two way relationships (e.g. sub-contracts) are likely to require less resources to
manage than multiple complex ones (e.g. co-ordinating with another direct contractor with the ROM)

• The need to account for public funds – where there is no flow of funds, e.g. voluntary referral arrangements,
management and assurance will tend to be cheaper

• The extent to which the contract payment mechanism drives the right behaviour in the sub-contractor – it will
be more cost effective over the life of the agreement to create and manage sub-contracts that encourage and
drive the desired behaviour rather than ones that rely purely on monitoring and penalties to ensure compliance

• The size of the contract – a higher proportion of the value of small contracts is spent on procurement and
contract management, compared to large contracts where the cost of procurement and contract management
overheads are more easily absorbed

Lead providers will only succeed if they can quantify the appropriate cost of establishing and managing a sub-
contract/partnership so that: (a) they can reasonably estimate the total costs, as against in-house delivery; (b) the
ROM can decide whether they want to pay to have a partnership managed; and (c) the lead provider can allocate
enough resources to ensure that the establishment and management of the sub-contract/partnership is successful.

Clearly to make decisions on the allocation of limited resources the ROM will also have to be able to quantify the value
of the outputs from the sub-contract/partnership. The lead provider should support the ROM in doing this.

BECOMING THE LEAD PROVIDER

Areas are exceptionally well placed to move into the position of lead provider. The Service has a history of partnership
working and is respected by its statutory partners. In addition, the Area’s co-ordination of service delivery will sit
naturally with Offender Management.

However, moving from being a monopoly provider to a successful lead provider will mean overcoming the significant
challenges of any organizational change. The risks are well rehearsed and include (a) managers being distracted
from in-house service delivery leading to a fall in performance; and (b) the Area being unable to develop the necessary
skills, infrastructure and relationships to operate successfully as the lead provider.

The alternative to being the lead provider – of risking being marginalized as another organization takes the lead
provider role – is unlikely to be attractive to any Area.

As part of becoming lead providers, Areas will need to ensure that by the time contestability is fully in place they are
following a clear strategy for managing relationships with the following categories of partner, some of which will be
through the prison gate:

• Sub-contractors: Private, public or voluntary organisations that the Area pays (or seconds staff to) to deliver
a part of the service for which it retains overall responsibility, e.g. a provider of Unpaid Work

• Direct Contractors: Prisons and other organizations that hold contracts directly with the ROM to deliver
services that interface with probation service delivery

• Delivery Associates: Private, public or voluntary organisations that receive funding from other sources to
deliver a service to offenders, either specifically or within their wider client group, e.g. a welfare-to-work
provider funded by Jobcentre Plus, a Citizens Advice Bureau funded by the local authority

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 • Co-Commissioners: Other public bodies with which the Area jointly commissions services specifically for
offenders or as part of a wider client group, e.g. DATs, Supporting People

• Statutory Partners: Other public bodies with which the Area has a statutory duty to work to fulfil common
objectives, e.g. CDRPs, MAPPA

• Other Interested Parties: Public, private or voluntary organizations that have a direct interest, e.g.
Sentencers, public sector planning functions

Areas may find it aids communication to use these as standard terms when working with other Areas or the ROM.

TRAINING AND SUPPORT TO DEVELOP LEAD PROVIDER SKILLS AND

INFRASTRUCTURE

Areas will have to develop a new set of skills and infrastructure to operate successfully as the lead provider. To
appropriately establish and manage sub-contracts/partnerships Areas will need to have a foundation in technical
procurement & contract management skills, and an infrastructure to support partner & alliance management.
Infrastructure means here the combination of people, processes, tools and systems.

Sufficient investment in this specialist lead provider function – in accordance with the description of costs above – is a
pre-requisite for the successful deployment of these skills and infrastructure. Areas may find that this function sits
most naturally with current partnership work due to the central importance of soft relationship skills.

Foundation Platform – Technical Procurement and Contract Management

At the request of NPD, NOMS Commercial and Competitions Unit has produced for Boards to consider and use if they
wish:
• Procurement Guidance
• Contract Management Guidance
• A Set of Standard Procurement Documents

These documents include guidance on how to effectively incorporate NPS diversity policy into sub-contracting.

These will be sent to Areas and posted on the Probation Service Intranet, EPIC, shortly.

For technical procurement and contract management advice, Areas should call CCU on 020 7035 1956. For generic
procurement guidance Areas should visit the Office of Government Commerce website at www.ogc.gov.uk

In addition, NPD, jointly with CCU, will be developing a programme of training on procurement and contract
management. The objective of this training will be to make Areas aware of what if anything they need support with.
Areas may chose to acquire the necessary procurement expertise through using outside providers – such as their
local authority procurement departments – or recruiting individuals with this skill-set.

Essential Infrastructure – Partner and Alliance Relationship Management

Technical procurement support is an important foundation for basic procurement and legislative compliance.
However, as the ROM seeks to commission and sub-contract higher value financial and reputation risk orientated
services, a strong infrastructure will be required to investigate, create and manage partnership agreements. In
addition, as the lead provider the Area will not only need to develop the infrastructure to work closely with the ROM, it
will need to use this approach in working successfully with many of the other partner types listed above as well to
ensure partnership working throughout the sub-contractors and other delivery partners. Effective partner and alliance

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management includes a combination of people, processes, tools and systems. Whilst accessing procurement advice
externally can enable basic purchasing or contracts to be set in place, to develop sustainable partnerships Areas will
need to hold this infrastructure internally. As such, NPD will be holding training workshops to develop both the hard
infrastructure and the soft skills.

This will be reinforced by the option of individual support for Areas/Regions organised through the Business
Development Unit.

OVERCOMING BARRIERS TO ACHIEVE THE 10% SUBCONTRACTING TARGET

There are a number of barriers to achieving the 10% sub-contracting target. The following proposals are potential
solutions developed by Areas working together in the Alliances Project Reference Group.

Skill Gaps

Some Areas have significant skill gaps in letting contracts and managing alliances. This will be addressed through the
training and support described above.

In addition, Areas may wish to draw on external support from, for example, local authority procurement departments.

VAT

Currently VAT is generally not reclaimable on sub-contracts to deliver probation services to offenders, i.e. the supplier
must put VAT on their invoice but the Area cannot reclaim that VAT from the Treasury.

NOMS Finance is addressing this issue and expects to have the necessary regulatory changes in place by the end of
the financial year if not earlier. VAT should not be used as a reason for delay, in the light of the benefits of extensive
consultation with potential providers, the length of the EU procurement process and the advantages of an extended
service set-up period for the successful bidder.

Grants

Areas may wish to make grants to voluntary organizations. However, issues of value for money, contestability, etc
remain relevant. Areas should be aware of the generally weaker performance controls for grants. Grants are exempt
from VAT, but depending on the nature and provision of the services it may be treated as a contract subject to VAT.

Industrial Relations

NOMS is committed to developing a marketplace where competition is based on innovation and value for money, not
through reducing staff’s terms and conditions. If services currently delivered by Probation staff are sub-contracted,
then protecting those staff’s terms and conditions through TUPE, secondment or redeployment will be a necessity for
the Board. This will include consulting the Unions at the earliest possible opportunity.

Capability of Suppliers

Some Areas may have concerns that suppliers will not deliver a higher level of reliability or value for money than is
currently delivered in-house.

Boards have an over-riding duty to secure best value and should not sub-contract if it is in conflict with this duty. The
publication of Areas sub-contracting plans by the ROMs – and the associated consultation with prospective suppliers

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(which must be done in accordance with procurement rules) – will increase the chances of attracting suppliers who
can deliver best value. NPD will be supporting this process.

CONCLUSION

Ministers have made clear that changes to Areas’ relations with other providers will be driven by NOMS both pre- and
post-legislation. These changes can be seen by Areas as an opportunity to develop skills as the lead provider of
choice – the alternative is to risk allowing another organization to take that role and for the Area to become
increasingly marginalized.

Areas must include the ROM in their planning to become the lead provider of choice, to ensure (a) the Area is
delivering what the ROM wants; (b) the ROM is briefed on the value that the Area is adding through each of its
partnerships, and (c) the ROM fully appreciates the importance of the Area’s strengthening partnership skills and
infrastructure to creating a joined-up service where risk is well managed.

ADDITIONAL INFORMATION

For further information please contact Anton Obholzer, Alliances Project Manager:

Email: Anton.Obholzer@homeoffice.gsi.gov.uk
Tel: 020 7217 2016

FURTHER INFORMATION:
Further Briefings like this one will be produced as necessary and will be posted on the National Probation
Service website at: www.probation.homeoffice.gov.uk>News and Updates>Briefings
Issued by NPD Communications

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