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It’s the client, stupid! Dutch options for welfare to work
market is still difficult for the small providers because of the red tape endured in tender procedures, the demands they face, the short timescales of the contracts, the payment structure (no cure, less pay), and the lack of guaranteed clientele.15 Between 2002 and 2008 the UWV organised seven tender rounds. Despite the great number of principals involved, in practice the majority of the market is in the hands of the benefit agency and four big cities (Amsterdam, Rotterdam, Den Haag, Utrecht). It is, therefore, a buyers’ market. UWV contracts are awarded to providers on the basis of five criteria: experience, price, placement percentage, methods used and drop-out rates. Initially, placement percentages were weighted highly. Depending on the target groups there are different weights for criteria. As the tenders up until now have been primarily based on price competition, it has been difficult for providers to stand out on quality.16 This led the UWV and municipalities to choose the lowest bidder for employment services, at the cost of service quality and the development of specialisms. Although the type of services was prescribed, in terms of content they were left at the discretion of the provider. When, in 2003, the ‘no cure, no pay’ and ‘no cure, less pay’ models of payment were introduced - in order to give further incentives to providers - price competition threatened to lead to a race to the bottom. The services to be delivered during the bidding were of less importance. A cry for help from the former chair of Boaborea persuaded the UWV not lower prices any further. Contract design The first contracts ran for one year, but since 2004 the UWV and most municipalities have used longer contracts as a means to achieving more commitment and lower transaction costs. Lately, there has been a trend towards using framework contracts and longer contracts (of up to two years).
They get rolled over if case managers (municipalities) and reintegration coaches (the UWV) are content with the service delivery and output. These public servants directly influence the number of clients providers actually get, thus giving them a bigger say in the market than before. The fee structure is geared to achieving outcomes. Retention in unsubsidised employment for at least six months is the key payable outcome for providers. In practice the duration can be shorter. The UWV uses the operational definition that a client has to have worked for two months and has an employment contract of at least four months. So a client still counts if after two months he drops out. Providers are either paid on a ‘no cure, no pay’ basis – for the relatively easy to help - or a ‘no cure, less pay’ basis for the difficult ones. Typically, the reward per client consists of a fixed payment when the action plan is approved (20% maximum), a fixed payment six months later (40-50%) and bonus payments in cases of job placement for at least two and six months (4050%). In practice some providers park the hardest to help and cash the payment of the service inputs. There is only a fixed payment for the easy to place. Much attention has been focused on how to create a well functioning reintegration market (particularly around the design of transparent tender procedures with low thresholds in order to contract providers with the best price/product combination). As a result the focus of providers was on the bidding not on results, and on the means – packages of services, called ‘trajectories’ – and too little on the goal (outflow to work). A trajectory consists of some or one of the elements of diagnosis, guidance/ soft skills, vocational training and placement. Reintegration contracts generally did not offer providers sufficient funds to invest in the relatively costly forms of employment assistance such as training. As a result, the nature of reintegration services shifted from
15 Mallee L and Mevissen J, “Re-Integratie in Nederland: Een Private Markt voor het Publieke Domein”, Tijdschrift voor Arbeidsvraagstukken, no 2, pp 106-119, 2007 16 Vinke, Evaluatie Aanbestedingscontranten, TNO, 2003
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