Post by Lorna Beaton on Aug 31, 2021 17:16:33 GMT
• What are the major (obvious and not so obvious) risks of this contract?
- Implementation of the contract would have tight timescales. For example: Employee, Recruitment, Induction and Training for the contract. Finding and launching premises would be challenging in a few months.
- Financial risk via the payment by results model especially given the previous provider was not successful in reaching milestones.
- Heavy reliance on other Justice stakeholders and an existing network for partipcant engagement.
- Delay of payments until first milestones are met. For example, program costs such as recruitment, training, property are going out the door and minimal money coming in until people start being and engaged say end month 1 contract to at best 7 month later for first sustainment outcome payments.
- 30% shortfall in funded revenue with the contract. Need to assure than this shortfall can be made up from other donors and funders. Do we have a pipeline of funders? How do we mitigate this risk or is 30% shortfall too much risk to consider?
- Small number of employers not wanting to employ those from Justice service background.
- Justice service participants returning to prison making milestones and therefore performance related contract difficult to manage.
- if we fail what would the impact on our reputation be?
- Would our reputation and other programs reputations be impacted negatively for working with justice service partipcants?
• What should be done early to ensure that the contract does not fail?
-Talk to those that are ‘in the know’ of delivering such a contract to get insights and advice.
-Invest key talent, invest resource into finding the right people with the right experience and network to do the job. For example, links with justice service and employers who are supportive of employing those with justice service background. Consider what the market value salaries are and be competitive.
-Secure Premises that are suitable for participants, that do not require much financial or time investment and that do not have long lease holds.
-Engage with local employers and stakeholders to market the positives of employing justice service participants. Share participant good news stories.
-Define results and goals. Ensure everyone is clear or their performance objectives and that performance measures are in place.
- Stress Tests, test various scenarios and implement integrated risk management.
-Engage with justice service stakeholders to build participant referral pipeline.
-Have adequate insurance.
• What are some of the tripwires that the program director needs to be able to monitor should the company move forward? How will that measurement occur?
- Slow participant referrals would be a big risk and set the whole performance and financials of the contract at risk. Know your metrics. You would need to set out a referral forecast to ensure performance and financials are clearly being monitored and measured and everyone understand the milestones is working towards them. Such as engage say 600 participants in total over first 6 months, so 100 participants a month for 6 months, assuming 50% (300) of those initially engaged will stay engaged and complete the training. Then aim for 35 participants out of each month 50 cohort start moving into work each. This will ensure 60% of participants will sustain in work for 6 months.
- Costs. Ensure there are stringent procedures for spend appropriate to contract delivery and that these are monitored and checked.
- Income received. Is billing going well are there any sticking points, compliance, or processing issues? Ensure checks and balances doing regularly and any issues on the risk register. Monthly meeting with finance and accounts to ensure financial solvency.
- Ensure implementation is project managed with key milestones to be met such as recruitment, engaged participants, engaged employers.
- Assure governance, utilise risk register and escalation procedures and processes. For example if towards end of month 1 only 10 participants engaged vs an expected 50 then a red flag would be raised from team leader right up to programme director. Team leader would own any actions and improvement, but director would need to understand the bigger picture of what this means to the contract financially and how it will impact projections.
- Slow recruitment would be a big risk
• How can you negotiate this contract to mitigate as much risk as possible?
-Ensure significant up front service fee in place so you mitigate risk of delays in implementation performance and payments from funder. This could be as much as 25% of the overall contract value up front.
-You may bring in key subcontractors for example the prison, probation, social services to assure pipelines.
-Improve margins. Negotiate the contract duration for as long as possible to allow for sufficient contract engagement. Engagement has been challenging previously so significant time and resource will go into initial engagement and retaining engagement to allow for sustainment conversion. Allow for 6months sustainment outcome tracking period after the end of operational contract to allow for fair and reasonable time to financially claim for participants moving into work at the end of the contract. For example, if this is a 2 year contract you get another 6 months to track participants that moved into work towards the end of the 2 years.
Further questions I would have:
- Is the 30% of revenue shortfall a service fee not outlined on the scenario or does shortfall need to come from other funding streams? What risk associated with other funding streams are there and can the business take mitigate risk on the shortfall if there is a shortfall?
- What is the employer appetite in the area like for employing justice service participants?
- Would there be fines is contract was delivered late? For example you run into difficulty hitting initial milestones as employee recruitment has been more challenging than forecasted.
- Get feedback from potential Justice service participants, employers of justice service, employees who may have delivered similar services to get opinions on the projects innovation to help shape positive participant engagement and into sustainable job conversions.
- What performance figures did the past provider deliver? What was their employer and participant engagement model? Are the targets set out realistic?
- What is our current stakeholder network like for these participants?
- Can we see a pipeline of participants and employers?
- How long does the contract last?
- How much is each milestone worth?
- How much money do we need to break even?
- What will be innovative? How do you delver something innovative in that timescale?
- If Easterseals were also unsuccessful with delivery what impact would that have on reputation?
Scenario #2: Fraud, Control and Compliance
• Was a fraud committed? Are there any compliance issues?
-Yes, fraud has been committed. Services have been provided that has not been paid for.
-Compliance issues with invoices
-Expensive dinner inappropriate for an initial meeting. Concern that agency knows our employees home address. Red flag over contractor relationship.
• What were the risks involved with this contract?
-Not getting paid for services rendered.
-Another contractor being able to come in and deliver services and therefore leading to our contract not being renewed.
-Unorganised agency such as mistakes on billing codes and payments being made.
- Disengaged agency not returning calls and the ‘contractor’ leaving the agency.
-Lack of professionalism on both parts using home address for sending gift and going for expensive dinners for initial business meeting.
• How could you have mitigated them?
- Built a service fee into the contract to assure the first few months of the contract. Clear contractual terms such as payment to be made within 28 days of services rendered. Could have fines for late payments built into contract terms.
- Due diligence should have been carried out on the agency to ensure relationship and contract was valid and appropriate.
- Service Level Agreements should have been in place prior to moving forward with any service delivery. This may have taken at least but more like several meetings to agree. These meetings would also have involved superiors and perhaps a legal or accounting representative.
- Built relationships with more than one contact at the agency.
- Had clear billing/payment terms set out
• What specific controls should we have implemented?
- Red flags and escalation procedures for non-payment of services, wrong codes being used. You would need to talk to the agency direct or financial controller to raise the issue. Internally the issue should have been made clear to our director and financial controller too.
- Ensured contract terms were very clear and that they were ran past director and financial controller. Have in writing what you need right from the start of any discussions.
- Escalated concerns of the initial meeting to superior to sense check the situation and make it clear that you are not colluding with the agency in anyway.
- Raise issue of agency behavior to whoever assigned you to the contract.
- Introduce late payment fees to contract.
• Are there any lessons learned?
- First meeting of this style should be a red flag. I would expect initial meeting in a business setting. I would also be concerned about gifts being sent to my home address.
- Ensure that the company process is followed for setting up new stakeholders has been followed.
- Ensure that any risks if mismanagement are addressed promptly and that contract is clear i.e. payment terms versus service liability.
Excellent recognition that there is always retention drop-off that needs to be accounted for on the front end so that the final milestone metrics are met to ensure program health. Your question regarding the source of the remaining 30% of program funds is a good one - my assumption, based on previous workforce development contracts, is that the 30% would be line-item/cost-reimbursable, but that point should definitely be made clear during the bid process. Building in ramp-up costs is an excellent strategy to mitigate the inevitable lag in performance milestone attainment; something more and more funders seem to be acknowledging.