PAC: DfE “surprisingly unconcerned” about whether free school meals contractor was “profiting at taxpayers’ expense” after “serious problems” in supermarket voucher scheme

At the start of the first UK Covid lockdown in March 2020 the Department for Education (DfE) set up a national food voucher scheme quickly through its contractor Edenred so that families with children eligible for free school meals could continue to receive that support while schools were closed to most pupils.

There were serious problems in the early weeks of the scheme: Edenred’s systems failed to cope with the demand for vouchers and the volume of telephone calls and emails. Schools and parents found it difficult to access Edenred’s website and to get answers from Edenred to their queries. There were unacceptable delays in Edenred processing orders from schools and getting vouchers to families.

Performance improved after April 2020 and the DfE and Edenred have now apologised to schools and families for the problems and inconvenience they encountered, but the Public Accounts Committee reports today that DfE “focused on firefighting the problems with the voucher scheme” at the expense of actively managing its contract with Edenred. Though the contract was extended twice, increasing its value fivefold from £78 million to £425 million, DfE failed to renegotiate the terms and secure better value for money for the taxpayer in the process.

Crucially, DfE was “surprisingly unconcerned about whether Edenred was profiting from the voucher scheme at taxpayers’ expense” and failed to use of the “open book” arrangement in the contract until the scheme had finished, failing to establish how much profit Edenred had made from the scheme until then and missing potential opportunities to reduce the cost or share in the profits. DfE declined to share details of Edenred’s profit with the PAC on the grounds of commercial confidentiality.

The extensions to the contract should have enabled the Department to consider how it could maintain the scheme as a standing resource and to tender with other suppliers. Instead, when schools were physically closed to most children again on 5 January with 24 hours’ notice the scheme was not activated again until later in January. Since its evidence session on the 17^th December, the Committee has not yet had the opportunity to examine why there was a delay in re-establishing the existing scheme when schools and parents were already familiar with it.

Meg Hillier MP, Chair of the Public Accounts Committee, said: “Whether it’s getting life-saving equipment to frontline workers or food to hungry kids in poorer families, government’s failure to learn from its repeated contracting mistakes, over and over, large and small, is costing this nation too dear.

“After the initial urgency we have seen the Government continuing to play catch up on how to support families whose children are entitled to free school meals, and despite the contract with Edenred growing more than five-fold there was no discussion about tendering the contract or even renegotiating it.”

1 The Department’s failure to understand how schools and parents would use the scheme contributed to delays in getting vouchers to families. The Department underestimated the extent to which people would want to call to talk to a human being when they were struggling to use the scheme, assuming that they would seek help by email rather telephone. Calls to Edenred’s telephone helpline increased rapidly, from 727 on 1 April 2020 to 3,940 on 14 April 2020. At the start of the scheme, Edenred had failed to put in place enough capacity to handle the number of calls from schools and families. It brought in an outsourced contact centre to help, but did not have this in place until 11 May 2020. The Department also recognises that it should have done more user-testing of the scheme and that its guidance was not clear enough. The Department and Edenred did not become aware until May 2020 that 40,000 eCodes for conversion into vouchers had not been delivered to families.

Recommendation: The Department should take on board lessons from the scheme and ensure, in designing services intended to be used by schools and parents, that:

• it properly user-tests new systems and engages with front line school leaders and representatives to better identify likely problems before they are launched; and
• there is sufficient call centre capacity to meet maximum expected demand at the start, which can be stood down or increased further as needed.

2 The Department was surprisingly unconcerned about whether Edenred was profiting from the voucher scheme at taxpayers’ expense, and missed potential opportunities to reduce the cost or share in the profits. The Department’s policy team worked with commercial colleagues and the Crown Commercial Service in managing the contract with Edenred. Despite extending the contract twice, and increasing its value from £78 million to £425 million, the Department did not seek to renegotiate any of the terms or introduce any profit-sharing element. The Department considered it achieved good value for money because it did not pay Edenred anything more than the face value of the vouchers issued to families. However, Edenred bought the vouchers from supermarkets at a discount, and the Department could have chosen to try and renegotiate how much it paid Edenred per voucher and so reduce the cost to the taxpayer. Although the contract included an open book arrangement, the Department did not use this to check on Edenred’s income and costs until after the end of the scheme. The Department now says that it is “very comfortable” with the level of profit Edenred made from the scheme, but has provided no figures or explanation of any kind to back up that judgement.

Recommendation: The Department should strengthen its commercial skills, taking advice from the Crown Commercial Service, and take opportunities to renegotiate terms when it changes or extends contracts, in order to secure better value for the taxpayer.

3 The Department did not have the information it needed to manage Edenred’s performance and understand whether the scheme was meeting the needs of families. At the start of the scheme, the Department received data from Edenred only on activity, such as the volume of orders for eCodes received from schools and processed. It did not receive data on performance – for example, how long Edenred was taking to process orders, or how long schools and families were waiting to access Edenred’s website to convert eCodes into vouchers. The Department did not monitor Edenred’s performance against a requirement in the contract that Edenred should answer 90% of calls within 30 seconds. Edenred itself did not start collecting data on the number of calls answered until 11 May 2020, by which point the volume of calls from schools and families was much lower than in the first weeks of the scheme.

Recommendation: The Department should collect complete management information specified in contracts from the outset, monitor performance as well as activity, and use this information to manage contracts effectively.

4 The Department did not do enough to assess how far families had to travel to supermarkets in the scheme and whether coverage was adequate to meet needs. The Department worked with the Department for Environment, Food & Rural Affairs to check there was at least one participating retailer in each local authority area. However, given the size of many local authorities, this offered limited assurance about coverage in practice for many families, particularly in rural areas. The Department did not analyse how far parents would need to travel to stores, or how long it would take. At the start of the scheme when six supermarket chains were taking part, almost 2,500 schools (11.2% of all schools) were more than five kilometres from their nearest participating store. This would have meant a long journey for families, and been especially difficult and costly for those reliant on public transport and given the movement restrictions during the early months of the pandemic.

Recommendation: In implementing future policies, the Department should ensure it robustly evaluates geographic coverage and likely travelling time for people to access services.

5 Limitations in the data shared between the Department and the Department for Work & Pensions meant that support for vulnerable families with children eligible for free school meals could not be routed through the benefits system. In March 2020, the Department’s preferred option for support was an uplift to benefits for families with children eligible for free school meals. However, not all families in receipt of Universal Credit are eligible for free school meals and the Department does not share data with the Department for Work & Pensions that would allow benefit payments to be targeted in this way. The Department therefore concluded that it would not be possible, in the time available, to implement a support scheme through the benefits system by distinguishing families eligible for free school meals from other benefit recipients.

Recommendation: The Department should work with the Department for Work & Pensions to explore how data sharing could be improved to allow government to support families with children eligible for free school meals more flexibly and responsively.