DWP censured for 'loose' contract management

19 October 2012

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19 October 2012 | Anna Reynolds

The chair of the Committee of Public Accounts has strongly criticised the Department for Work and Pensions (DWP) over its poor handling of a contract with Atos Healthcare.

“The department’s management of this contract has been unacceptably loose and permits loopholes that can all too easily be exploited by contractors,” said Labour MP Margaret Hodge, who chairs the committee. “I am stunned to discover that the department does not check and challenge the key performance data that supports invoices.”

The contract, under which Atos carried out medical assessments on individuals applying for benefits, is the subject of a National Audit Office report examining the handling of the contract. Concerns were raised in August about the deal by Labour MP Tom Greatrex.

“The financial model that informs contract charges was designed by Atos and the department lacks an understanding of how it even works. The department’s inaccurate forecasting of demand for services has undermined its ability to hold Atos to the terms of its contract,” added Hodge.

The report published yesterday found 38 per cent of appeals against the department’s decisions on employment and support allowance benefit entitlement have been upheld, which Hodge described as “a mark of this process’s shortcomings”.

The report also revealed the DWP has not sought financial payback for the underperformance of the contract. As part of the deal, service credits can be applied where the contractor has failed to meet the required service level.

Hodge added: “Atos Healthcare billed the department for over £110 million to conduct the medical assessment of some 740,000 people in 2011-12. Over the same period, around 20,000 people received substandard assessments. In March this year, one in four cases was taking Atos more than 56 days to deal with.”

Hodge said that the DWP needs to understand why so many appeals are successful and that it needs to take a more ‘robust’ approach when contractors underperform. She also said that Atos needed to improve its performance dramatically.

A DWP spokesperson said: “In 2010, the work capability assessment (WCA) was not working properly and since then we've substantially improved it. It's a complicated area but we're committed to making it a success - so it's fair and accurate for the user and value for money for the taxpayer."

Steps taken to address some issues identified include working closely with Atos to improve productivity and increase the volumes of cases cleared, while ensuring quality standards are not compromised to speed up the WCA process.

The Department said it is not allowing Atos to underperform and has already enhanced the process for applying financial penalties. A review of the contractual targets is also under way to continue to meet the needs of the business. Further, it insisted delays had not been allowed to go on without action being taken. When processing times have exceeded the target level, the Department has agreed improvement plans with Atos Healthcare.

Regarding appeals, the Department disputed the figure, saying overall, 9 per cent of all ESA decisions are overturned on appeal, and where one is, it does not necessarily mean the original decision was inaccurate, as new evidence is sometimes produced.

Atos has yet to respond to SM’s request for comment.

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