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Merging Funding into Single Stream: Did it Cut the Red Tape?

The Department for Work and Pensions (DWP) has recently published a study evaluating the impact of the European Social Fund (ESF) Objective 3 co-financing system in England.

Introduced in September 2001, the Objective 3 co-financing merges ESF and match funding into a single funding stream. The aims of the single funding stream was to reduce the levels of bureaucracy faced by providers, promoting further alignment with Government programmes and maximising the added value to their delivery as well as improving the strategic direction and effectiveness of ESF expenditure.

Case Studies

The report’s findings are based on fifteen case studies with co-financing organizations (CFOs) including interviews with stakeholders and current and former Objective 3 providers. CFOs include the Job Centre Plus, the Learning and Skills Council (LSC), local authorities and Regional Development Agencies (RDAs). In evaluating the impact of the ESF Objective 3 co-financing system, the report investigates the steps taken by CFOs to maintain or raise the standard of provision under co-financing, the influence of co-financing on access to ESF funding for providers and beneficiaries and how co-financing has influenced the coherence with, and contribution to, local, regional and national policy.

The report reveals that there have been some key developments since previous studies in 2001 and 2003. One of these developments is the increased level of CFO activity due to successive CFO tendering rounds and from general experience which has led to familiarity with the principles and procedures involved. Overall there has been a marked improvement in the quality of bids and the standard of Objective 3 service delivery has been either maintained or raised. This improvement is attributed to better efforts of communication during the bidding stage by CFOs and the increased focus on beneficiary outcomes.

CFOs have also made considerable progress in terms of joint working and the establishment of collaborative approaches involving the development of strategic partnerships, good working relationships between individual CFOs and promoting an open exchange to share good practice and experiences. LSC CFOs, for example, have developed a partnership approach to encourage smaller providers to participate applying for funding. Overall providers saw a reduction in bureaucracy when applying for Objective 3 funding. The processes for bidding have become streamlined and generally easier.


Despite co-financing achievements there are many developments that are a concern. In spite of the fact that the co-financing mechanism has removed the need for providers (both large and small) to secure match funding and the reduced paperwork involved, the more systematic monitoring procedures of the ESF Objective 3 co-financing regime still require a high level of bureaucratic oversight. Although providers generally support the open and competitive tendering (OCT) process, they also feel the process fails to take into account a provider’s local knowledge or previous delivery history.

There are many perceived and actual barriers to small scale providers tendering for contracts, including the larger risks associated with the linkage of payments to beneficiary achievement for smaller providers and whether they would have the capacity and resources to cope with the contracts and the associated bureaucracy. It is therefore unlikely that smaller providers could participate as sole contractors. LSC CFOs tenders are for fewer and generally for larger contracts. With some CFOs, though, there have been increases in tendering for smaller contracts in order to focus on more challenging beneficiaries or hard to reach groups.

Regional Development Plans

This focus on hard to reach groups falls in line with Regional Development Plans (RDPs) but providers may be less willing to support these types of beneficiaries in the next programme round due to the imposition of outcome related payments. For example, one of the report’s case studies highlighted the case of a provider dealing with challenging beneficiaries and the inappropriateness of the outputs and outcomes they were expected to deliver for their target group. Other case studies also considered the expected outputs and outcomes were not always appropriate to their target beneficiaries.

Significantly, the impact of the co-financing regime on beneficiaries, providers and performance delivery is unclear in the absence of quantitative data, coupled with a limited number of completed contracts and reports. The research report has had to largely focus on case studies, which do reveal some of the achievements and shortcomings of the co-financing regime, but the lack of quantitative data is a significant weakness recognised by the report in making conclusive findings.

Manju Rani

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