The Department for Work and Pensions has not yet achieved value for money in managing contracted-out health and disability assessments.

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The Department for Work and Pensions has strengthened its oversight and management of contracted-out health and disability assessments, but it has not yet achieved value for money according to today’s report from the National Audit Office.

The Department uses health and disability assessments to help decide if people are eligible for benefits or to help those on long-term sick leave back into work. Between April 2015 and March 2018, the Department expects to carry out around 7 million assessments which it estimates will cost a total of £1.6 billion.

Today’s report found that the cost of providing assessments is rising and providers are still struggling to meet expected performance standards.

Under the latest contract with the Centre for Health and Disability Assessments (CHDA) for Employment and Support Allowance (ESA) assessments starting in March 2015, the Department expects to pay £595 million over three years for 3.4 million assessments. This is around £190 per assessment compared with £115 per assessment under the previous contract with Atos. Costs have increased in part due to a higher proportion of face to face assessments and rising salaries for healthcare professionals.

The Department has now reduced the number of outstanding assessments and these are being processed more quickly. Providers now take 4 weeks to process Personal Independence Payment (PIP) assessments, compared to a peak of 29 weeks in mid-2014, and ESA claims 23 weeks compared to 29 weeks. There is still, however, a backlog of at least 280,000 ESA assessments at August 2015. The ESA assessment provider, CHDA, is not on track to complete the expected number of assessments for 2015 and has missed assessment report quality targets since the start of the contract. Both Atos and Capita have failed to meet PIP assessment report quality targets since October 2013.

The NAO found that the Department has increased its capacity for performance management, expanding its team from 48 people in 2013 to 80 in 2015 and has managed the transition between ESA providers smoothly after Atos requested early exit from the contract.

The Department continues, however, to struggle with setting targets and requirements with clear evidence and failed to adequately test bidders’ assumptions, for example about staff training,  during the contract tender process. It does not yet have a clear strategy for contracting-out assessments and risks damaging market interest through tight procurement timetables, inflexibility towards critical assumptions and lack of transparency.

Among the NAO’s recommendations are that the Department should develop an overall commercial strategy for assessments, set challenging realistic targets for providers and engage with providers to learn from previous experience.

“The Department has addressed some of its immediate operational issues in managing contracted-out health and disability assessments but now needs to take action to break a perpetuating cycle of optimistic targets, contractual underperformance and costly recovery. The Department is paying more for assessments, but providers are still not meeting expected performance levels.  The Department needs providers to complete the planned number of assessments so that it can achieve the significant benefit savings it expects to make over the next few years.”

Amyas Morse, head of the National Audit Office


Publication details

Press release

View press release (8 Jan 2016)

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