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Probation

Circular
UNCLASSIFIED

THE DEVELOPMENT OF REFERENCE NO:


SUB-CONTRACTING PLANS 33/2006

PURPOSE ISSUE DATE:


13 September 2006
To advise areas of the process to be followed in the submission of sub-
contracting plans to the ROM, as required under Improving Prison and IMPLEMENTATION DATE:
Probation Services: Public Value Partnerships. 27 September 2006

Additionally to provide guidance and the template to make the sub- EXPIRY DATE:
contracting return required under PC 07/2006 (Voluntary, Community and 31 March 2008
Private Sector Alliances).
TO:
ACTION Chairs of Probation Boards
Chief Officers of Probation
Areas to submit by 30 November 2006 their agreed sub-contracting plans to Secretaries of Probation Boards
the ROM covering the period up to 31 March 2008. These plans will have
been subject to discussion with the ROMs during October / November. CC:
Board Treasurers
Areas to submit attached template by 9 October 2006 in order to establish Regional Managers
the current level of sub-contracting to the voluntary, community and private
sectors on 1 October 2006. AUTHORISED BY:
David Griffiths,
SUMMARY Director of Probation Change
Programme
The requirement to sub-contract services is consistent with areas becoming
lead providers. This is developed further in the Briefing 35, Becoming a Lead ATTACHED:
Provider, supporting this Circular. Annex A – Reporting Template
Annex B – NPS Briefing 35
RELEVANT PREVIOUS PROBATION CIRCULARS

PC64/2005 – The Business Development Strategy (2005)


PC07/2006 – Voluntary, Community and Private Sector Alliances

CONTACT FOR ENQUIRIES

Anton.Obholzer@homeoffice.gsi.gov.uk or 020 7217 2016

UNCLASSIFIED

National Probation Directorate


Abell House, John Islip Street, London, SW1P 4LH
UNCLASSIFIED

Meeting the Public Value Partnerships’ Requirement to Produce Sub-Contracting Plans

“Probation Boards are working with regional commissioners to agree locally the areas for partnership expansion that are
planned for this year and next. Late in the year ROMs will collate probation area details of current sub-contracting plans
and proposals for future partnerships and NOMS will issue an update on plans in the sector.”
Section 3.8 of Public Value Partnerships

“A further update on our plans will be provided in NOMS commissioning plans to be published later in the year. These
provide a mechanism for collating the partnership development plans of probation boards. We are planning events to
which public, private and voluntary sector providers will be invited to discuss our plans and share ideas for service
innovation and improvement.”
Section 3.14 of Public Value Partnerships

The sub-contracting plans produced by Areas will need to cover the period to 31 March 2008, although contracts should
generally be for at least three years, with annual reviews. The purpose of sub-contracting is to deliver more effective
services and greater value for money in meeting the commissioning priorities of the ROM.

Areas will need to ensure they have a clear picture of these priorities from the ROM, before they begin to draw-up the
plans. Guidance should also be sought from the ROM at this early stage on what services the ROM wishes to exclude on
the basis that sub-contracting would be likely to conflict with future market development, or encourage on the basis that
there is a gap in provision.

Having established the view of the ROM, Areas should consult with staff, unions, and potential providers (in accordance
with procurement rules) about which services to sub-contract so as to improve service delivery. Potential providers may
well have innovative ideas about the approach to take to achieve the outcomes desired by the ROM. Boards may
propose with other Boards supra-Area contracts managed by a lead Board, particularly where best value can be achieved
through economies of scale.

Plans should include analysis of what skills the Area or Region has in procurement and contract management, and what
external support or recruitment will have to take place to ensure the plan is successfully delivered. In addition, plans
should demonstrate how the proposals will achieve value for money and ensure the NPS diversity policy will be followed
by sub-contractors.

When the Area has formulated its sub-contracting plans it should present these to the ROM. The ROM will have to check
their consistency with national and regional commissioning plans. Also, wherever possible, there will be an attempt to
standardise the terms of similar contracts so that providers do not have different commercial terms, reporting
requirements, etc for a number of similar contracts.

The ROM will then advise on any amendments and a timetable for procurement. The form in which the plans are
published will be a matter for the ROM.

Areas should present their sub-contracting plans to their ROM by 30th November 2006 at the latest. Plans should be
copied to the Alliances Project Manager, Anton Obholzer (see contact details below) to facilitate support.

Making the October Sub-Contracting Return

Under PC07/2006, Areas are required to make a return showing the sub-contracts they have in place on 1st October
2006. The template to be used is the same as that used for the April return and is attached as the Annex A.

PC33/2006 – The Development of Sub-Contracting Plans UNCLASSIFIED 2


UNCLASSIFIED

Returns should be made to the Alliances Project Manager, Anton Obholzer Anton.Obholzer@homeoffice.gsi.gov.uk by
Monday 9th October.

Measurement

Measurement is on the basis that:

• It is a percentage of the Area Main Grant.

• To be counted, services must be:


• Offender-facing services delivered by the third or private sector (i.e. not the public sector or back-office
services); and
• be within the control of the Area

• Therefore, included are: Victim Contact, Court Work, Offender Management; Accredited Programmes, Unpaid
Work, and other services to offenders.

• And excluded are services where the funding is controlled by other organisations: OLASS (Education and
Training in England), DATs (drug services in England), Local Authorities (Supporting People), and centrally
provided (Approved Premises)

It should be noted that:

• The ROM will have discretion in the next financial year to decide what does and doesn’t count;

• VAT on eligible services counts towards the sub-contracting target until the VAT rules are changed (see
supporting Briefing: Becoming a Lead Provider);

• Services which are funded by the Board but are not part of the Area Main Grant count, e.g. other funding which
has been won;

• Secondments to private or voluntary organisations delivering eligible services where the Board is not reimbursed
count

Action Plans

PC07/2006 required Areas below 5% on 1st October 2006 to produce an Action Plan showing how they were going to
reach the target. Areas are no longer required to submit these Action Plans as they have been superseded by the
requirement to present sub-contracting plans to the ROM.

PC33/2006 – The Development of Sub-Contracting Plans UNCLASSIFIED 3


Voluntary, Community and Private Sector Alliances – Area Reporting Template
Completion Notes
Please read these notes before completing the template

This template is designed to establish your area's level of engagement with the voluntary, community and private sectors. It supports the NPS Business Develo
Strategy's key goal of developing alliances to enhance NPS competitive advantage through improved service delivery.
For more information, please see PC33/2006

Please ensure that it is made clear in the target service group box whether the service is specifically for groups defined by BME, gender or disability.

It is very important that you complete the template as fully as possible, using accurate and up-to-date figures. The template should be completed
biannually, on 31 March and 30 September.

As the template will be used to create a database, there are restrictions on what you can enter in certain fields. Please follow carefully the instruction
which appear when you click on each cell in the spreadsheet.
Many fields have drop-down menus: please select one of the options where applicable, following the instructions which pop up.

The Pathways field refers to the following categories:


1: Accommodation
2: Education, Training and Employment
3: Health
4: Drugs and Alcohol
5: Finance, Benefit and Debt
6: Children and Families
7: Attitudes, Thinking and Behaviour
OM: Offender Management - excluding unpaid work. This may refer to enforcement, compliance, management of risk, mentoring etc.
UW: Unpaid Work
If a provider operates in more than one pathway, please place it in the most relevant pathway and state this in the Notes column

If you have any queries about this template, please contact Anton Obholzer (020 7217 2016)

Please now click the tab marked "Progress template" at the bottom of this window, to begin completing the template electronically. Once completed
return it to anton.obholzer@homeoffice.gsi.gov.uk
Voluntary, Community and Private Sector Alliances – Area Reporting Template

Date completed
Area
Partnership manager
Phone Please refer to completion notes on previous sheet
Fax
e-mail

Area main grant 2006-07

Providers Pathways
Private Target Expected volume Length of
or service of service users Contract contract Contract Value in
Name of organisation e-mail address Phone VCS? 1 2 3 4 5 6 7 OM UW users BME Outline of service and KPIs 2006-07 or grant? (months) end date 2006-07 (£) Notes
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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

www.probation.homeoffice.gov.uk
“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 LEADER 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

www.probation.homeoffice.gov.uk
• 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

www.probation.homeoffice.gov.uk
• 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

www.probation.homeoffice.gov.uk
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% SUB0CONTRACTING 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

www.probation.homeoffice.gov.uk
(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

www.probation.homeoffice.gov.uk