Pilot Project on Utilising the Unemployed in Public Contracts Case Study Introduction One of the recommendations from the

Review of Public Procurement (2002) was to initiate a Pilot Project that involved a condition being included in certain contracts to utilise the unemployed in work on the contract and requiring contractors to implement an Unemployed Utilisation Plan (referred to as Employment Plan throughout this paper) on award of the contracts within the Pilot Project. It was envisaged that the Pilot would involve encouraging employers to recruit and train people who had been unemployed for at least 3 months (the target group), to work on significant contracts with Government Departments, their Agencies, NDPBs and Public Corporations. Departments were invited to nominate projects for the Pilot with values above 3.86m for construction and 0.5m for services. To ensure a comprehensive sample, The Tender documentation construction contracts between 1m and 3.86m and service contracts between 0.25m and 0.5m were also to be identified. required prospective Bidders to provide an Employment Plan that set out the firms Social Policy and details of specific proposals offered for utilising the unemployed in work on the contract. Tenderers were also required to provide details of their experience and their capacity to implement their proposals. The Plan would also include work carried out by sub-contractors on the contract. The Procurement Board approved the commencement of the Pilot and the Central Procurement Directorate (CPD) undertook the management of the Project. Detailed guidance for Contracting Authorities and tenderers was provided by CPD and can be accessed on the CPD website cpdni.gov.uk. One aspect worthy of note is that while the evaluation of the Employment Plan at selection or award stage would not count towards the identification of the most economically advantageous tender, in the event of two, or more, bids being assessed as equal the Contracting Authority may award the contract to the

bidder it judges to offer the Employment Plan most advantageous in meeting the objective. The Pilot Project commenced in June 2003 for a two-year period. 15 projects started during the period, fewer than the planned 20 projects due to some projects being withdrawn and delays in project commencement. The University of Ulster was commissioned to monitor and evaluate the Project. This involved an initiation meeting with each project sponsor, the collection and analysis of tender documentation, including Employment Plans, interviews with client contract managers and contractor project managers at the beginning, middle and end of the contract and the production of an Evaluation Report at the end of the two year period. This paper has drawn on the material contained in the Evaluation Report. (View full Evaluation Report) Throughout the two-year period of the Pilot unemployment in Northern Ireland had been at its lowest level since records began. At the inception of the Pilot in June 2003 the claimant count stood at 35,100 while in May 2005 it was 29,000. The number of people employed during this period grew from 674,290 to 692,960 the highest on record. It is clear that the Pilot Project took place at a period of high employment levels in Northern Ireland.

Employment Plan The Employment Plan that tenderers were required to submit was divided into three parts: Social Policy Statement Project Implementation Plan Previous Experience Statement

Social Policy Statement This set out the firms general policy in relation to the recruitment, training and retention of employees from the target group. This took the form of a strategic management document signed by the managing director, chief executive or senior partner. Project Implementation Plan This plan outlined proposals for recruitment and retention of employees from the target group for this contract and how the firm proposed to make contact with prospective employees. It also outlined a proposed monitoring and reporting system to inform the Employer/Contracting Authority during the execution of the contract. Previous Experience This provided details of any current or previous experience in this field either in partnership with other Government Departments, private firms or as an initiative operated directly by the bidder. In fourteen of the fifteen projects all the winning tenderers submitted an Employment Plan with their bid. One of the contracts failed to obtain any Employment Plans from tenderers due to the Contracting Authoritys failure to include the guidance notes on the Pilot in the tender documentation. A total of 75 Employment Plans were submitted across 14 contracts and in all but one case all plans submitted were deemed to be bona fide which shows that tenderers took time and effort to prepare their plans to a professional standard. During the two-year period 51 people commenced employment on the Pilot of which 46 were still in employment at the end of June 2005. The break down

shows that 32 people have been employed in the service sector and 19 in the construction sector. The job titles of people employed include a site supervisor, HGV drivers, a head chef and general labour operatives. As of June 2005 only 4 of the 15 contracts had been completed with one more substantially finished. At the end of the evaluation period questionnaires were distributed to all the winning contractors and the client contract managers. The return rate of the survey was excellent with 63% of contractor questionnaires returned and an impressive 93% (14 out of 15) client questionnaires returned. Key results from the survey showed that on the contractor side 90% of respondents believed that the Pilot did not lead to an increase in direct costs while on the client side over 64% considered that the Pilot did not result in any significant increase in workload. The NI Pilot project was compared with three similar UK projects, namely the Fusion 21 Project in Merseyside, the Community Benefits Pathfinder Project in Wales and Community Benefits in Procurement Programme in Scotland. Whilst 34 people had been employed on the Welsh Pathfinder project up to July 2005, 51 from the target group have been employed on the NI Project. The overall cost per job created on the NI Pilot project was one person employed for every 900,000 contract spend, which compares favourably to the much larger Fusion 21 project (1.5m. spend per person employed). It should also be pointed out that the 51 people in NI were employed on only 10 of the contracts that started during the evaluation period. Four of the five contracts in which no one from the target group was employed had procedural problems which effectively ruled out the employment of anybody from the target group. The fifth relied mainly on specialist subcontractors. If these contracts were excluded from the assessment the cost per job is reduced to approximately one job per 610,000 spend.

Outcomes The outcomes that were anticipated from the Pilot included: reduced unemployment and social welfare payments: the number of people

employed at the conclusion of the Pilot from the target group has made little impact on overall numbers unemployed and claiming benefit. However, this is a relatively small scale Pilot project, which has nevertheless resulted in 51 people employed from the target group with the potential for more given that 10 contracts had not been completed within the two year period. The Pilot project has however demonstrated that with some adjustments, roll-out across the full range of public procurement projects could make a significant impact to reducing unemployment and social welfare payments. ensuring that the supply market is more responsive to the government's

goals: whilst contractors responses have been varied, dependent mainly on the nature of the contract, there is evidence from both the interviews and the survey that contractors are supportive of government goals in relation to using public procurement to achieve social goals. The Pilot Project has provided a useful learning experience for contractors individually and collectively, with some evidence of shared learning developing particularly in the Construction sector. This should ensure that teething problems in relation to documentation, for example, should not pose problems in the future. improving the future career prospects for employees: all those employed from

the target group, including those who have left employment, will have gained confidence and experience as a result of their period of employment. This should therefore enhance their prospects of sustainable employment in the future. there have been no EU challenges: the Pilot project was based upon a

cautious interpretation of the public procurement rules then in place, and was

designed to ensure minimal risk of challenge by contractors, or intervention by the EU Commission. Whilst there have been some procedural errors during the Pilot, these have not made a significant impact on contract award. Having proved that the Pilot Project is compliant with EU rules, and with clients and contractors more experienced in applying the procedures, the Pilot may be extended more widely without risk of challenge, so long as the procedures are applied correctly.

Overall Evaluation Overall the Pilot Project has demonstrated that public procurement policy in relation to social goals, specifically unemployment, can be achieved economically, efficiently and effectively. Economy There has been no indication of any substantial increase in costs for contractors as a result of the Pilot. This was also the case in relation to workload as any increase in workload on the client side was primarily in the inclusion of the Pilot provision into the tender documentation and in monitoring the project. On the contractor side increased workload resulted in administration and in some cases monthly reporting to update the client on how the Pilot was progressing. 28.6% (four respondents) of clients thought that the Pilot led to a significant increase in workload while 10.5% of contractor respondents suggested that the Pilot Project led to a significant increase in their direct costs Efficiency The direct cost to CPD of the Pilot was 30,000 for the University of Ulster to monitor and evaluate the project. In relation to costs per employee recruited to the end of the Pilot, 51 people had been employed through the Project which,

considering that the total value of the 15 contracts let was 45.9m, works out at approximately one person employed for every 900,000 spent. However, as people from the target group has only been employed from 10 contracts with a total value of 31.2m, the breakdown works out at one person employed for every 610,000 spent. This compares favourably to the Welsh Pathfinder project, which aimed to employ one person for every 1m, spent. Effectiveness At the end of the Pilot four contracts have been successfully completed on time and budget with another almost completed satisfactorily. Whilst the Pilot Project was unlikely to deliver a high level of additional employment, 46 of the 51 people recruited were still in employment at the conclusion and the numbers gaining employment through the Pilot were expected to rise as the other ten contracts had yet to be completed. The aims of the Northern Ireland procurement policy in terms of using government contracts for socio-economic purposes, in this case relieving unemployment, have been met without breach of EU rules in relation to the wide range of contracts within the Pilot. Cost Benefit Analysis The NI Pilot was chosen as one of six case studies for further analysis under a study commissioned by DEFRA and undertaken by SQW Ltd in association with Professor Ken Willis of the University of Newcastle. The aim of this study was to deliver peer reviewed robust evidence of a cost benefit analysis of a sample of sustainable public procurement initiatives to evaluate their efficacy as a policy tool. The study can be viewed at www.defra.gov.uk The cost benefit analysis (attached as Annex A) compares the unemployment situation of the previously unemployed workers with the situation that would have pertained in its absence.

In summary the cost benefit analysis of the Pilot shows a Gross Present Value of benefits of employing the previously unemployed amounted to 264,785 while the Gross Present Value of costs amounted to 167,615, at a 3.5% discount rate. The Pilot therefore generated a small social gain with a Net Present Value of 97,170 and a Benefit /Cost ratio of 1.58. The benefits are relative small because of the assumption that the unemployed will obtain a job in any case and are reduced, compared with what they might have otherwise have been, by skilled workers being displaced by the unemployed, and themselves become temporarily unemployed. However, these workers are assumed to be re-engaged in the labour market more quickly than the longer term unemployed. The Net Present Value (NPV) is also sensitive to the costs of the Pilot both to contractors who employ the labour and to government departments awarding the contract. Since these costs are low the benefits of the Pilot to the unemployed outweigh the costs.

Conclusions While a limited number of people were employed from the target group, a number of factors need to be taken into account. First, there was a state of high employment in Northern Ireland generally, and specifically in the Construction sector, during the evaluation period. Secondly, it was argued that it was more difficult to employ people on contracts covered by TUPE regulations, for example the NICS cleaning, catering and security guarding service contracts, as staff of the previous provider transfer over to the winning contractor. Thirdly, in some contracts the rates of pay or conditions of service are a deterrent from encouraging people from the

target group to return to employment. Finally, there was a particular concern over health and safety in some of the construction projects, especially those that were relatively short term, as untrained employees would not be able to make a full contribution on site until training was provided. The Pilot led to the recruitment of 51 new employees from the target group of whom the contractors have retained 46. Those who have left employment will have benefited form their work experience. The creation of these jobs was achieved with very little additional direct cost. The overall project cost per job created during the evaluation period was 900,000, against a construction industry benchmark of 1m. However, given that only 4 projects had been fully completed (and one substantially), and others had several years yet to run, it is anticipated that the number of people employed will be greater. It may also be the case that employing people from the target group is more difficult and therefore more expensive than the industry standard. Finally, given variations in commitment to the Pilot across the projects, and the greater difficulty in some projects than others to employ people from the target group (for example, there was virtually full employment in the Construction sector during the period of the evaluation), a better indicator of project cost per job created is to only include those projects in which jobs were created. This results in a project cost per job created of 0.61m. The Employment Plan process has quickly become an embedded part of the culture of contracting with government amongst construction contractors. The survey issued to all contractors at the end of the pilot showed that almost two-thirds believed that the inclusion of the Employment Plan as part of the contract did not dissuade them from tendering for the contract.

The procedures generally operated successfully although there were a small number of instances of non-compliance. These included one case of the Employment Plans of two contractors whose bids were tied not being evaluated to determine the winner. The plans were however evaluated retrospectively, which confirmed the result of the primary evaluation. There were also several cases of bids which did not an include Employment Plan not being rejected. It is clear from the Evaluation Report that these were isolated cases, which came about through lack of clarity about the procedures. This was despite the clear and comprehensive guidance that was made available to all project clients by CPD.

The lack of a coherent link-up to training agencies has been a noticeable weakness in the Pilot. This was a strong feature of the Fusion 21 project in Merseyside. Nevertheless several firms, both successful and unsuccessful, demonstrated evidence in their employment plans of involvement in training initiatives such as Learn Direct, New Start and Skillbuild through local FE Colleges.

There was a variance in the commitment to the Pilot by the contracting authorities; some paid lip service to the Pilot while others were fully committed. The Water Service provides an example of best practice in this regard, with four projects within the Pilot, resulting in 13 people from the target group being employed at a project cost per job created of 0.72m. There was clearly commitment to the Pilot from the top of the organisation, project managers were fully informed and committed, arrangements for regular monitoring reports were agreed with contractors, and arrangements were made by contractors to link up with an FE college to provide potential employees.

When subjected to a cost benefit analysis the benefits of the Pilot are relatively small because the procurement policy reduces the average

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period of unemployment by a few weeks only. Benefits are reduced by skilled workers being displaced by the unemployed and themselves becoming temporarily unemployed. The NPV is also sensitive to the costs of the Pilot both to contractors who employ the labour and to government departments awarding the contract. Since these costs are low the benefits of the Pilot to the unemployed outweigh the costs and give a positive Benefit/Cost ratio of 1.58. Overall the Pilot Project has demonstrated that public procurement policy in relation to social goals, specifically unemployment, can be achieved economically, efficiently and effectively and without breach of EU rules in relation to the wide range of contracts within the Pilot. The Procurement Board considered the Evaluation Report on the Pilot prepared by the University of Ulster and agreed that following consultation with industry representatives the Department for Employment and Learning would consider how to take forward utilisation of the unemployed through public procurement drawing on the experience of other models cited in the Report.

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Annex A CBA of sustainable public procurement

Utilising the Unemployed in Northern Ireland

Introduction 6.1 The purpose of this initiative is to encourage employers to recruit and train people who have been unemployed for three or more months, to work on large contracts with government departments, their agencies, Non Departmental Public Bodies, and public corporations. 6.2 The tender documentation required prospective bidders to provide an Employment Plan that set out the firms social policy and indicated how they would support the development of the worker(s) who became employed under the contract. Tenderers were also required to provide details of their experience and their capacity to implement their proposals. 6.3 The main aim of the pilot was social, i.e. helping the unemployed back to work and aiding their career prospects. It was hoped that those who were employed through the pilot would become permanently employed by the contractor, not simply becoming unemployed again at the end of the contract. Of the 51 people unemployed, 46 were still employed at the end of the monitoring of the pilot scheme. 6.4 Additional benefits of the pilot were: 1 2 Economic reducing unemployment, and reducing social welfare payments (limited in the case of this small pilot). Making supplier markets more responsive to government objectives.

6.5 Fifteen contracts were awarded in a pilot of this scheme, totalling 45.9 million. These contracts were varied and included construction, security and cleaning contracts. 6.6 The fifteen contracts employed 51 people in total who had previously been unemployed for three months or longer (1 person per 0.9 million expenditure). However, people were only employed from the target unemployment group in 10 of the 15 contracts which had a total value of 31.2 million, which is an expenditure of 610,000 per person employed from the target group. 6.7 The length of contracts varied between seven months and seven years; but typical contract lengths were 24 to 36 months, with an average contract length of 26.6 months. These projects were never likely to deliver a high level of additional employment. However, an evaluation of the

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effectiveness of the clause requiring contractors to engage some workers from the unemployment pool by Erridge et al (2005) revealed that 46 of the 51 people recruited remained in employment two to three years after the contracts were awarded. CBA 6.8 The CBA of this policy compares the employment situation of these previously unemployed workers with the situation that would have pertained in its absence. Counterfactual 6.9 The counterfactual is the length of time it would have taken these unemployed people to find employment without the scheme; plus any difference in the productivity (as measured by earnings) as a result of being engaged under the procurement scheme compared to the counterfactual over the working life of the individual. Costs 6.10 This procurement scheme does not involve any capital costs. There are three main variable costs. 6.11 First, the extra variable costs to the contractor from undertaking the contract with the clause to recruit unemployed workers to work on the contract, compared to an identical contract without the clause. In the pilot scheme only 10% of contractors believed that it had increased their costs. This would include any efficiency loss from employing trainees compared to skilled personnel. 6.12 Thus it has been estimated that the cost increases for contractors amounted to an average of 250 for each employment plan produced. Since there were 75 employment plans produced in tenders for these contracts, this indicates an increased cost in year zero of 18,750. In addition contractors had to bear the costs of training these employees as agreed under the clause in the contract. It is estimated that these amount to 250 per employee per year.32 Since 51 previously unemployed people were employed, the training costs amount to some 12,750 per year.

32

Sourced from English Employer Skills Survey as average spend on training per employee in construction sector.

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6.13 Second, there is an extra administrative or transaction cost of the scheme to the commissioning government agency in drafting the contract and in monitoring the scheme. The cost increase for the client was approximately one day per month for each contract. The total cost for this element for all clients was estimated to be 1400 per year, on the basis of a salary of 25,000 for a government officer working 220 days in a year. 6.14 Third, there may be displacement effects. The fact that most contractors indicated that the scheme had not increased their costs suggests that previously unemployed workers displaced skilled workers who would otherwise have been employed on the project. Thus a CBA of the scheme needs to consider the efficiency loss to the economy from any skilled workers who would have been employed on the contract who are now displaced and either become unemployed themselves or who have to accept lower paid (i.e. less productive) employment. Benefits 6.15 The scheme has two main benefits. First there is an efficiency gain to the economy from employing people who were previously unemployed. This assumes a supply side improvement in the labour market, which is feasible for the small number of workers involved. This benefit is also assumed to be additional at the national level. Second there is an equity gain in terms of improving the income of low income individuals and households. Efficiency benefits 6.16 The efficiency benefits of employing previously unemployed people on these types of public procurement contracts can be estimated by assessing the impact on the probability of unemployment without the contract; followed by the value of employing previously unemployed workers to the economy under the contract.

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6.17 Duration of unemployment in NI can be short: 65% of claimants will find a job within three months, a further 50% of those remaining unemployed become employed within another three months (i.e. within six months), and only a small percent are unemployed one year later. The impact of the contractual scheme is the number of people employed multiplied by the probability that they would not have obtained work without the scheme.33 6.18 The shadow price of an unemployed person is the loss of his or her contribution to the shadow economy as a result of now being in full time employment. The benefit of employing previously unemployed people is therefore calculated as their current labour cost (13,350 per year) minus the shadow price of unemployed labour, and the latter was assumed to be 12%34. 6.19 In addition there may be some efficiency or productivity benefit in terms of increasing the skills of those previously unemployed, which should be reflected in an enhanced future wage rate. There may also be some efficiency loss if displaced workers with existing skills are unable to find jobs to match these skills. Since the employment history of workers in the scheme or displaced by the scheme were not tracked over time, these efficiency gains and losses could not be quantified, but they are probably quite small. Displacement effects 6.20 The policy has no displacement effects on the construction sector, if it is assumed that the contract would have been implemented whether or not the clause was included.

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Evidence on the impact of training schemes on the duration of unemployment in Northern Ireland is provided by McVicar and Podivinsky (2003) using a proportional hazard function. Hazard functions model the probability of exit to employment, after a particular duration of unemployment. On entering the third week of unemployment, an average male (aged 18-24) has a probability of around 0.06 (i.e. a 6% chance of getting a job during the following two weeks, both pre and post New Deal for 18-24 year olds in Northern Ireland (NI). McVicar and Podivinsky report a falling probability of employment with increasing duration of unemployment. The introduction of the New Deal in NI increased the rate of exit to employment by 40% on average. Without ND18-24, around one in eight 18-24 year old males entering employment would still be unemployed a year later; whereas with ND18-24 is actual figure is one in 14. For females the figures were one in 14 and one in 25 respectively.
34

following Willis and Saunders 1988

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1 Replacement effects 6.21 There may, however, be replacement effects in the labour market. ONS Claimant Count data for 2006 shows Jobseekers Allowance (JSA) claimants at 2.7% of the population. For the sake of this analysis we assume that the wage rates of employed and unemployed workers are equivalent. This is because many of those employed through the pilot were in low-paid (i.e. at or close to the minimum wage) jobs such as catering, labouring and cleaning, and so there is nothing to suggest that people employed through the pilot would be paid any differently. Thus the opportunity cost of skilled workers displaced was also assumed to be 13,350. 6.22 If 50% of the displaced skilled workers find alternative employment within a specified time frame (e.g. three months), then out of an initial 100 displaced workers, only six will remain unemployed one year later. The length of time a displaced worker remains unemployed depends upon age (displaced workers aged 18-25 and 50+ remain unemployed longer than other displaced workers), tenure (time in unemployment is longer for workers with long tenures), unemployment rate in the local labour market, size of the labour market (small labour markets reduce the probability of finding a job and hence increase the duration of unemployment), and the number of displaced workers as a proportion of all workers. The probability of displaced workers finding employment is assumed to be greater than that of unemployed workers generally. Transfer payments 6.23 An objective of this scheme was to reduce social welfare payments, through increasing employment. However, savings to the government from reductions in social welfare payments are not counted as a benefit in CBA since these social welfare payments are transfer payments. The social welfare payments now remain with HM Treasury instead of the previously unemployed in NI. The amount remains the same; only someone else has this social welfare amount. There is no change in the resource efficiency or output of the economy: it is merely a transfer payment. Of course from a public finance perspective the savings in social welfare payments would count as a benefit of the scheme, and would be a significant benefit. But the current study adopts a CBA framework, and not a public finance perspective. Hence transfer payments are excluded from the analysis.

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Marginal costs of public funds 6.24 The excess public procurement, or public expenditure, in terms of additional costs to contractors (employers) and to the commissioning agency (various government departments in NI) amounts to some 197,500 in each year of the contract to development and administer the programme. This money is derived from taxation. 6.25 Taxes on products induce a welfare loss (in terms of consumer surplus) on reduction in quantity purchased as a result of the tax. Taxes on earnings reduce the incentive to work and earn, resulting in a loss to society. The marginal welfare cost of public funds (MCPF) is therefore the change in welfare divided by the change in revenue. For lump sum taxes the MCPF is 1.0; for other taxes the MCPF is greater than 1.0 (assuming a negative substitution effect between work and leisure, i.e. leisure rises when its relative price falls due to a tax on earnings). A MCPF of 1.2 has been assumed for this study.35 6.26 Thus public expenditure is only efficient if the benefits exceed the direct tax cost plus the additional welfare cost to acquire the funds. This implies that government expenditure must be, if the MCPF is 1.2, 20% more productive than private expenditure to produce a welfare gain. The social cost of the project thus includes the MCPF.

Equity or distributional effects 6.27 HM Treasury (2004) recommends that appraisers assess how the costs and benefits of each option are spread across different income groups; and that further analysis can be undertaken using distributional weights. There are various methods of deriving distributional weights, including weights based on marginal income tax rates (taken to reflect societys distributional preferences), and the marginal utility of consumption (linking personal utility or satisfaction with income).

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A discussion of the factors determining MCPF, and a review of a number of studies on the MCPF, is provided by Ruggeri (1999). Estimates of the MCPF for the UK vary between 1.18 and 1.51 depending on the type of tax, the marginal tax rate, the elasticity of labour supply, and whether social security (out of work) payments are excluded or included.

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6.28 A number of studies have suggested a value around 1.0 for the elasticity of the marginal utility of consumption36. This implies that if consumption doubles the marginal utility of consumption falls to half of its previous value37. The Green Book also provides weights based on this marginal utility of income function to weight distributional changes. For net changes in income these are 1.9 2.0 for the bottom quintile; 1.3 1.4 for second quintile; 0.9 1.0 for the third quintile; 0.7 0.8 for the fourth quintile; and 0.4 0.5 for the top quintile. These adjustment factors can be used to weight changes in the distribution of benefits to different income groups, for example additional employment for people previously unemployed. 6.29 A weight of 1.9 was applied to the benefits of employing the previously unemployed; and a benefit of 1.4 to the loss to the economy of displaced skilled workers whilst they were unemployed and waiting to find another job. 6.30 Benefits and costs were discounted over 4 years, from year zero through to year three, which is the typical length of a contract.

36 37

Pearce and Ulph, 1995; Cowell and Gardiner, 1999 HM Treasury, 2004

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Conclusions 6.31 The GPV(B) of employing the previously unemployed amounted to 264,785; whilst the GPV(C) amounted to some 167,615, at a 3.5% discount rate. Thus this sustainable procurement project generated a small social gain, with a NPV of 97,17038. These figures are tabulated in Table 6.1.

Table 6.1 GPVs, NPV and B/C ratio over 4 years GPV(C)= GPV(B)= NPV= 167,615 264,785 97,170 IIR cannon be calculated B/C ratio = 1.58

6.32 The benefits in this procurement policy are relatively small because the unemployed will obtain a job in any case, without the procurement policy, a few weeks later. Benefits are reduced, compared to what they might otherwise have been, by skilled workers being displaced by the unemployed, and themselves become temporarily unemployed. However, these workers are assumed to be re-engaged in the labour market more quickly than the longer term unemployed. 6.33 The NPV is also sensitive to the costs of the scheme both to contractors who employ the labour and to government departments awarding the contract. Since these costs are low the benefits of the scheme to the unemployed outweigh the costs.

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The undiscounted benefits minus costs are positive for all years, thus an IRR cannot be calculated.

Reference:BO000143