The General Civil Contract (Not for Profit) 1st April 2003
Response to consultation by Legal Services Commission
Contents
§ Introduction
§ Summary of Responses
§ Next steps
§ Annex A – List of Respondents
Introduction
1. The Commission invited comments on the Consultation Paper ‘The New General Civil Contract (Not-for-Profit) from 1 April 2003.’ The document was published for comment in October 2002 and the consultation period closed on 31st December 2002.
2. The main aims of the consultation proposals were:
- To secure quality and value for money by introducing a process that enables the Legal Services Commission (“LSC”) to assess the reasonableness of time claimed for work carried out and adherence to the contract rules.
- To simplify funding and consider whether there may be any economies of scale in larger contracts.
- To make the contract more user-friendly by adopting a plain English style and removing unnecessary restrictions.
3. The Commission received over 140 responses. They came from a mixture of network representatives and contracted suppliers. A list of respondents is set out at Annex A.
4. Whilst the network representatives (ASA, Advice UK, The Law Centres Federation, Shelter and Citizens Advice) broadly welcomed the simplification of the contract and the opportunity to discuss the proposals with us, they expressed concern regarding many of the more significant changes. The responses from individual suppliers were mixed and largely focused on the proposals to introduce category specific time standards for individual cases.
5. A new General Civil Contract (NfP) has now been issued, with effect from 1st April 2003. This paper summarises the key issues raised by respondents, the LSC’s responses to these and our proposals for future development.
6. We thank all respondents for their detailed and valuable feedback. Unfortunately due to the number of responses we have been unable to address every individual comment in this paper.
7. The paper follows the order of questions asked in the overview of the consultation paper, for ease of reference.
8. Further copies of this report are available from the Legal Services Commission website (www.legalservices.gov.uk)
Summary of Responses
Contract Awards
(Consultation paper paragraphs 1-5)
1. Do you agree with the arrangements for contract awards?
Proposal
The consultation paper referred to the previous paper, “Regional Prioritisation and Bidding Rules June 2002” and stated that we did not intend to hold a national bidding round for NfP contracts in April 2003. We felt that this would be disruptive to our existing suppliers without providing significantly improved services. We proposed to offer the overwhelming majority of NfP suppliers new contracts from April 2003. However we stated that we expected to take ongoing local initiatives to refocus contracts and allow in new suppliers in line with Regional Legal Services Committees’ recommendations. Additionally, we anticipated making some adjustments to contract size to reflect historical under or over performance.
We proposed to specify the hours to be performed in each Specialist Quality Mark category of law in NfP suppliers’ schedules. As under the old contract, there would be a tolerance to allow up to 10% of work to be performed in other categories of law. Family, immigration, mental health and clinical negligence cases were, as before, to be excluded from tolerance. We also proposed to retain the provision allowing up to 10% of contract hours to be undertaken at Level One (i.e. short, one-off pieces of advice, where a means test is not completed) in any category of work.
Consultation responses
The majority of respondents were in favour of the proposal not to have a national bidding round. However, some expressed concern regarding the ability of regional offices to make reductions in contract sizes to reflect historic under-performance. Some respondents argued that a guarantee of 80% of previous contract hours should be added to the contract, similar to that contained in the solicitors’ contract.
Some respondents commented that the right of appeal to the Contract Review Body should be extended to cover any reduction in contract hours, in addition to decisions not to issue a schedule or to remove a category.
Many respondents expressed the view that ‘global’ contracts were better than those with hours specified in categories of work, in that they provided flexibility for suppliers to meet needs as they arose in any of their subject areas and gave greater scope for achieving overall target hours. They commented that if it was essential for subject areas to be specified then any allocation of hours should be done by negotiation based on past performance and sufficient hours should be specified to enable suppliers to meet the SQM supervisor requirements.
LSC response
The arrangements for the award of contracts in 2003 were implemented largely as set out in the consultation paper. However, subject to contractual provisions as to performance and sanctions, we will guarantee that existing NfP suppliers with a three-year contract will be issued a schedule in April 2004 for at least 80% of the level authorised by their 2003/4 schedule (or any amended version of that schedule).
The contract gives a right of internal review to the Supplier Development Group (“SDG”) for, amongst other matters, decisions by us on whether or not to issue a schedule, on the duration of a schedule and on payment and volumes (and categories of work) permitted under a schedule.
We agreed that, as with existing schedules, the total hours would not be automatically split out between categories, as this would not be necessary in every case. However, regional offices may specify how the hours are to be delivered across categories where they wish to more closely reflect identified regional priorities for funding. They will however consider the impact of this and discuss any proposed changes with suppliers before implementing them. They will not, in any event, specify more than 80% of the total Direct Casework Time (“DCT”) per contract. Annex C of the NfP Contract Specification sets out examples of how this might work. Where DCT has been specified in a supplier’s schedule it will be open to them to apply to their regional office to vary the split of work if they are not happy with it, for example because the pattern of demand for services has changed.
It is worth noting that the SQM enables supervisors to count non-LSC funded casework towards the hours’ requirements.
Funding under the new contract (paragraphs 8-23)
1. Do you agree with the proposal to adopt a single unified funding model based on the previous models one and two?
2. Do you object to the proposal to remove models three, four and five? If so, why?
3. Do you anticipate any difficulties in moving to the new funding model? If so what are these?
Proposals
We proposed to replace the five different funding models under the previous contract with one simplified formula applicable to all. This would be simpler to administer and would allow us to calculate a notional hourly rate for each supplier for purchasing contract work, making it easier to calculate and compare costs between suppliers. The formula would only be used to calculate the contract price, and not to prescribe how the supplier organises itself to deliver the contract hours. Recruitment requirements and payment arrangements would remain the same.
We proposed to continue to use the mid-point of single local authority pay scales to determine salary costs. However in negotiation meetings with the networks, we advised that it would no longer be possible to guarantee annual up-rating of salaries if we were to control costs within the controlled budget. We also advised that we would not be able to increase the “on costs” figure (which is a contribution towards associated costs of employment such as National Insurance and pensions contributions) to reflect the 1% rise in NI contributions from April 2003.
Consultation responses
Many respondents welcomed proposals for a simpler system and agreed that Models 1, 2 and 4 could be replaced as proposed (the new formula has no impact on total funding for these models). However concern was expressed about the impact of the changes on those NfP suppliers formerly funded under Models 3 and 5. It was felt by some respondents that these models more accurately reflected work methods for some suppliers, particularly law centres, and should therefore be maintained. As an alternative, some respondents requested that we put arrangements in place to reduce the impact on funding due to the removal of allowances for supervision and administrative work under these models for a transitional period.
The network representative bodies were concerned that failure to up-rate salaries and increase on costs would exacerbate difficulties already experienced by suppliers in recruiting and retaining experienced caseworkers and supervisors.
LSC response
The LSC decided to move to a single funding formula with effect from 1st April 2003. The small minority of suppliers previously funded under Models 3 and 5 were also moved to the new formula but transitional arrangements were put in place for the first year of the contract (2003/4) so that their payments would remain at their previous rate notwithstanding the removal of the previous allowances for supervision and administrative work. The new formula will be used to calculate contract prices based on the reduced figures of hours for these suppliers from 1st April 2004 but if the suppliers are able to deliver more DCT from that date their regional offices may well agree to increasing hours and payments, subject to funds being available. Suppliers subject to the transitional arrangements will need to apply in advance to their regional office to increase DCT after 1st April 2004.
Due to budget constraints the LSC is not currently able to fund remuneration increases in either the profit (solicitor) or not-for-profit sector. We regret any difficulties this may cause, both in the recruitment and retention of staff, and in the operation of contracts generally. We will keep the situation under review should further funds become available.
It is worth noting that the rates and allowances for salary elements and running costs within the formula are used only to calculate the contract price and do not preclude individual suppliers allocating resources in a different way if this assists with recruitment or retention of caseworkers.
The LSC is also developing a number of initiatives designed to assist the sector. These include the development of a short training course for managers focusing on contract management skills, with the aim of improving performance. We have met with network representatives, who have welcomed the initiative and are actively involved in helping to design the course.
4. Do you agree with the proposal to set the amount of contract work required at 1100 hours pa per full time equivalent post?
Proposal
We proposed that contracts for a full caseworker or supervisor post would require delivery of 1100 hours per annum. The new funding formula however would allow us to calculate an hourly rate for contract work, specific to each supplier, which could be used to calculate the price of contracts of any size.
Consultation responses
Some respondents wanted this figure of 1100 DCT per annum per post to be reduced, arguing that it was too difficult to achieve, bearing in mind other elements of the job such as training, team meetings and holiday requirements. Many respondents advocated flexibility, particularly when setting up contracts in rural areas, where work levels could be lower or sporadic.
LSC response
We will maintain the 1100 hours per annum, per FTE funded post as a general requirement, as there was no persuasive evidence put forward that would justify reducing the value for money that we obtain from NfP contracts. However, there is flexibility to agree contracts for any size where appropriate, using the hourly rate to calculate costs.
5. At what size of contract should reductions for economies of scale begin to apply? (We have suggested 3300 hours pa.)
6. Which of the suggested methods for reflecting economies of scale do you consider to be the most appropriate? If none, do you have any other suggestions as to how we might achieve this?
Proposal
We proposed to seek savings on the basis of economies of scale in larger contracts where these were available. Whilst the fixed funding formula was considered suitable for smaller contracts (and the great majority of suppliers hold contracts for less than three caseworkers/supervisors), they would need further refinement to reflect reduced costs for suppliers running larger contracts. We suggested some ways that this might work and invited comments.
Consultation responses
Many respondents were concerned that these proposals would lead to redundancies within the sector due to the lack of flexibility in NfP funding in general. It was argued that solicitors with larger contracts were not required to accept lower rates of pay. Respondents suggested that any further consideration of these proposals be deferred until research had been undertaken into the funding arrangements for NfP suppliers with larger contracts. This would enable matters to be considered afresh, and it was requested that the LSC enter into further negotiations with the networks if they wished to take these proposals further.
LSC response
We agreed during the negotiation process to withdraw this proposal for April 2003 but to initiate a project to establish whether further value for money savings could be achieved in future years. In September 2003 we will be sending a questionnaire to all NfP suppliers to examine the cost to suppliers of providing advice under the contract. The questionnaire is being developed in consultation with the sector and the data collected will inform the future development of policy on funding NfP contracts.
7. Do you agree that we should pay actual start up (first year) costs, subject to a spending cap?
Proposal
We proposed to reimburse actual expenditure rather than paying a fixed sum for start up costs. All items would need to be agreed in advance with the regional office within the overall budget.
Consultation responses
The majority of respondents saw this as unnecessarily bureaucratic given the low sums of money involved. Some requested that the provisions apply to contract expansions, on the basis that it could be just as expensive to recruit and train a new caseworker as to set up a new contract.