Atos contract

The process of outsourcing the work of the old Benefits Agency Medical Service was initiated by the Conservatives and implemented by Labour, with the first contract being awarded to the Sema Group in February 1998 (see this answer to a written parliamentary question for the original announcement). This contract was then re-let to Sema – who were by this point known as Atos Origin – in 2005 (see answer to written questions from 2005 and 2006). No new contract was let when ESA was introduced in 2008 – Atos simply switched from undertaking assessments for Incapacity Benefit to ESA.

The current contract
I think the Government should reexamine its contract with Atos, the cost of which is over £100 million a year, as shown by this written answer from 22 May 2012 . In particular Ministers should make use od the financial penalties at their disposal in the current contract. Unfortunately the previous Minister responsible for this policy, Chris Grayling, refused to reveal the extent to which DWP have done so, as referenced in these written answers from 2 July and 6 July 2012. This is something my colleague Tom Greatrex has been pushing particularly hard, as evidenced by this answer from 10 September 2012. My colleague Teresa Pearce also made this point at our DWP Select Committee evidence session with the Minister on 21 November 2012:

Q56 Teresa Pearce: DWP disputes some of the points made by the National Audit Office in its recent report, which found that the Department only applied financial redress for service failures by Atos on 10% of the occasions. So that, by default, means that in 90% of the time no penalty was incurred. Do you think that is acceptable?

Mr Hoban: There are two ways in which we can deal with service credits. One is to ask for a cash payment and one is to ask for Atos effectively to earn those back. So, effectively, if we are going to have a service credit for delays or a backlog, rather than just simply taking cash off that backlog we ask them to tackle that backlog. So where there is an issue about service there are a couple of options that are available to the Department and we have to make a judgment as to what we think the appropriate form of redress is. Personally, I think that rather than accepting there is a backlog, we should try to do something about it. I think that is the right and the proper thing to do, and it is in the interests of claimants to do it that way. Therefore, if we are asking Atos to work off a backlog, we may not get the cash directly, but there is a cost to Atos of doing so.

Future contracts
In written answers from the 24 May and 25 June 2012, Chris Grayling acknowledges that his officials are starting to consider what changes might be made if and when the contract is renewed in 2015. I’m going to push the Government to ensure that there is competition between contractors and some sort of penalty is imposed where it can be demonstrated that the advice given to DWP Decision Makers is clearly unfounded. I also believe there would be merit in reevaluating the practice of outsourcing medical assessments in general.

On 22 July 2013 Mark Hoban, the Minister responsible for ESA at the time, announced that the Government were bringing in new providers to increase capacity and ordering Atos to improve the quality of their reports. However this came with the bizarre assertion that:

A ‘C’ grade report does not mean the assessment was wrong, and the recommendation given in a ‘C’ grade report may well be correct, but, for example, their reasoning for reaching that recommendation may lack the level of detail demanded by the DWP.

It’s hard to believe that Ministers would be taking action if Atos were getting enough decisions right first time, so it’s rather disingenuous to claim that there isn’t a problem. I blogged about this on 25 July 2013.

It’s also been pointed out that Atos get paid for every face-to-face assessment completed, but also have responsibility for deciding which claimants are called in the first place. This could help to explain why people who are clearly unable to work are called for assessments.

Atos increasingly in the firing line
On 11 December 2013 the Work and Pensions Select Committee held an evidence session with Mike Penning, the new Minister responsible for ESA. He said:

On the WCA contract in particular, the first thing I would say—and I cannot go into too much detail—is there are global negotiations going on with Atos to do with their contracts within my Department. At the same time, we have already issued to the European Journal that we intend to go out to tender for other suppliers for the facilities on WCA. At the moment, Atos is the sole provider and they will not be going forward. They have a contract with us until 2015. Our tender is for contracts beyond that. I want to make sure that this market is opened up to more providers and make it worthwhile for those providers to come in.

He then went on to say:

The mess we picked up with WCA is astronomical.


Certainly, from the conversations I have had at board level with Atos—because we have taken it to a level where they had to really realise just how bad this was for their reputation in the UK, with other contracts in other Departments as well—they do get it that they have to step up to the plate and provide. We are not mucking about here; this is really serious stuff.

The Minister appeared to suggest that Atos wouldn’t be bidding to continue to deliver the WCA in 2015, but a subsequent statement from the DWP appeared to suggest that he was merely saying they wouldn’t be the only provider after this date. This story from the Disability News Service contains the key quotes.

The viability of Atos’ contract
During the aforementioned evidence session on 11 December 2013, there was an exchange on the decision by the previous Labour Government to award the contract for the face-to-face assessment element of the Work Capability Assessment to Atos Healthcare. Mike Penning said:

I have seen the evidence that was given to this Committee way back, that it was not possible to make a profit based on the tender that Atos had. That was a decision they made and a decision that the Government at the time knew, and still accepted. That will have to be for them and those Ministers at the time to address. We are picking up the mess behind that.

I was unaware of any such evidence and so I asked Mr Penning to highlight this in a letter to him on 5 March 2014. You can read this letter here. I didn’t receive a response and so I sent a reminder on 15 May.

I finally received a reply from Mr Penning on 30 May. You can read this letter here.

He explained that he is not entitled to access advice given to the previous Government on the assumptions Atos made as part of their tender. Unfortunately this was not what I asked about in my letter, and so I wrote a further letter to him on 4 June. You can read this letter here.

I asked Mr Penning again to point me towards the evidence on this subject that he suggested had been given to the Select Committee previously, and suggested that if no such evidence exists, he should write to both the Chair and Clerk of the Work and Pensions Select Committee to correct the record.

On Wednesday 11 June 2014 the Minister finally acknowledged his error. In evidence to the Work and Pensions Select Committee, he said:

I think at this stage, Madam Chair, I also need to apologise to the honourable lady: at a previous Committee, I alluded to the fact I had read evidence from the Committee—using my words again—that Atos had loss‑led to get the contract. I have to say that I clearly did not read it there. It must have been anecdotal, and I must have misled the Committee inappropriately. I apologise; I will write to the honourable lady and to the Chair to do that.[1] It has become public that they were loss‑leading, but that is a separate issue to indicating the Committee had seen that. I wanted to put the record straight on that.

He then acknowledged his error formally in a letter to the Chair of the Committee, which you can view here, and I highlighted this issue in a debate on the performance of the Department for Work and Pensions on 30 June 2014. However I remain concerned about his suggestion that there was anecdotal evidence about the profitability – or otherwise – of the Atos contract in the public domain. I intend to follow this up.

Atos to walk away
On 21 February 2014 it emerged that Atos is attempting to negotiate an early exit from their contract, before it expires in August 2015 – see this story in the Daily Mirror. Clearly the Mike Penning wasn’t best pleased about this, as in DWP Questions on 24 February 2014 he said:

The Minister of State, Department for Work and Pensions (Mike Penning): Although we have seen some improvements in Atos quality, we are still in ongoing commercial discussions. Unlike Atos, we respect the commercial confidentiality of those discussions. It is important to get the procurement right. The previous Administration did not share that view, which is why we are in this mess today.

He followed this up in a debate on 27 February 2014 by saying:

It is not quite as simple as saying, as some Members have, that we should go out tomorrow morning and sack Atos. It has a contract. As I said at oral questions earlier in the week, I am determined that once we have negotiated the position with Atos—and we are in negotiation with Atos, which is why I was so surprised to read the views of Atos in the press over the weekend—we must make absolutely sure taxpayers’ money is not paid to Atos as compensation for the end of the contract when that comes. That would be fundamentally wrong and I would not agree to it. The negotiations continue.

I would suggest that this is largely a result of Ministers’ over-optimistic assumptions about their contractor’s capacity. Clearly it wasn’t capable of simultaneously running assessments for new claims, periodic and Incapacity Benefit reassessments, half of new claims for Personal Independence Payment, and making savings on its ESA contract between 2011 and 2015. I raised this in a debate on the performance of the Department for Work and Pensions on 30 June 2014.

While the Minister has committed to ‘learning the lessons from past failures and ensuring they are reflected in the design and management of future contracts’, I fear the only substantive change in the long term will be a move to multiple assessment providers. Although the Minister talks of competition improving performance, this is clearly not occurring with respect to PIP.

I would argue that the Government must prioritise making fundamental changes to the assessment process before it tenders for any new contracts. In particular I would suggest reforming the contractor audit process, encouraging the submission of further medical evidence and requiring all assessments to be recorded. These changes are critical to improve the quality of the assessment, but will be far more expensive to make once a contract has been signed. I set out these thoughts in a Westminster Hall debate on 14 April 2014.

Work and Pensions Select Committee report
The Work and Pensions Select Committee’s July 2014 report made a series of recommendations on the changes that should be included in the next contract:

  • Decision Makers, rather than the contractor, should decide whether face-to-face assessments or additional evidence is required.
  • The regularity of reassessment should be reduced, and a minimum time period following a succesful appeal should be introduced.
  • The risk that norms-based monitoring may be interpreted as targets should be carefully considered when agreeing auditing arrangements.

Our report also noted that the new contract was likely to cost more and, partly as a result of this, I pushed for our recommendation that DWP should consider whether the assessment process should be taken back in house.

Appointment of Maximus
On 30 October 2014 the Government announced that American outsourcing specialist Maximus had been awarded the new contract to undertake Work Capability Assessments – see the written statement here. They are set to take over on 1 March 2015 and the contract will run for three years, with the option of two one year extensions. No information has yet been made available on what, if any, changes will be made to the face-to-face assessment process as a result of this change in contractor.