1. 1 Eloise Anderson, Secretary Kris Randal, Division Administrator W-2 Program: Procurement for 2013

2. 2 Management Assumptions: The current W-2 program is working and does not need radical changes to eligibility, participation requirements or services offered to families. However, there is a need for improvement in program effectiveness, efficiency and equality of access to the program as well as a refocus on employment outcomes. DCF needs broad input from stakeholders in identifying problems and solutions, but it also must assure a competitive selection process that does not favor either existing or potential agencies. The service delivery and payment structures for W-2 and problems related to those structures are DCF’s responsibility.

3. 3 Management Assumptions: System performance problems are not the fault of the families participating in W-2. Changes need to be based on providing the best possible program for all participants. Statewide access and statewide program uniformity should be a primary goal of the RFP. Changes to the W-2 delivery structure should solve root causes of existing problems, not just address symptoms. DCF needs to incentivize the W-2 agencies, so they are motivated to make the program more effective and efficient and improve equality of access.

4. 4 Process of Discovery: We engaged in a year-long process that involved Delphi surveys of stakeholders to hear their ideas about the W-2 program, what’s wrong with it, and how to improve it; one-sided questions to stakeholders (particularly W-2 agencies); intense flow charting of the entire program and identification of problems that occur at each step in the process; intensive data analysis to understand differences in poverty, economic development, and labor markets in each of the PUMAs in Wisconsin; intensive analysis of cost structures, staffing patterns, caseload dynamics, and service delivery in each individual current W-2 agency. We asked thousands of questions and researched answers until we were satisfied we thoroughly understand the W-2 program and how it is delivered.

5. 5 Process of Discovery: 1.We’re paying agencies for excess capacity and standby capacity and its associated overhead. The excess capacity and standby capacity is being used by agencies (both public and private) to support programs other than W-2. This has become institutionalized and in some agencies is extreme. (expenditures per participant per month range from $149 → $1850) This is particularly concerning because of potential state liability for TANF funds not used solely for TANF purposes. (Summary spreadsheet of expenditure data is in C&I meeting handouts for October 2011) 2.There is no incentive to operate efficiently and save money because agencies are reimbursed for whatever they spend.

6. 6 Process of Discovery: 3.There is no incentive to achieve results for the participants agencies serve because agencies are reimbursed for all their costs regardless of results. 4.There is an incentive to deny services and discourage enrollment to keep caseload as small as possible so that excess W-2 capacity can continue to be diverted to support other programs.

7. 7 Process of Discovery: 5.There is an incentive to deny services and to keep caseload as small as possible to avoid potential liability for benefits – the smaller the caseload, the smaller the potential liability. This is one of the behaviors that characterize the current system that is totally the fault of the department. By allocating benefit funds to the agencies and not clearly stating they are not responsible for shortfalls – we have created this perception of risk. 6.There is an incentive to reduce delivery of services that would help people off of W-2 in order to save up funds to mitigate the perceived risk of being held liable for a benefit shortfall. Agencies have actually reported not filling FEP positions and curtailing services in case there is a benefit shortfall.

8. 8 Process of Discovery: 7.Many small BOS agencies can devote so few resources to W-2 (both because we allocate based on caseload size and because of diversion of capacity) that they only support eligibility determinations and the absolute minimum contact with the client they can manage. 8.Data regarding the percentage of potentially eligible population actually served in the program in each agency indicate that the issues of denial of access to the program described in the 2008 W-2 Takeup Study (online) still exist in 2010-2011. (Reports & Studies)

9. 9 Process of Discovery: 9.The smallest agencies cannot and do not provide the full range of services that individuals need – and they do not provide the same range and quality of services provided to participants in larger agencies. The W-2 program in BOS, particularly small BOS agencies, is not the same program as in Milwaukee. Milwaukee participants get a more extensive range of services, and in general have better outcomes. 10.Small programs do not have a QA/QC capacity specific to the W-2 program. Small programs lack capacity to do effective job development or provide specialized services (vocational needs assessments).

10. 10 Process of Discovery: 11.Despite the requirement in the last RFP for single entities, our W-2 consortia often have no centralized management, no centralized QA/QC, and no centralized decision-making. They are sometimes a collection of small agencies, each with small agency limitations, that achieve no additional advantage by having organized into consortia. Larger agencies with centralized management control achieve better outcomes than similar sized consortia, and the best BOS agencies are characterized by strong internal management and sufficient size to proved a broad range of services.

11. 11 Process of Discovery: 12.Not every problem is in BOS. The Milwaukee delivery structure has significant flaws. It undermines continuity of services because of the many hand-offs of participants from agency to agency, and participants are subjected to the same interviews and assessments multiple times and are frequently confused about which FEP they are working with and responsible to. 13.The quality of program delivery in Milwaukee is uneven, with some agencies having problems that critically impact services and that have been difficult to resolve through monitoring and technical assistance, and other agencies achieving very strong results.

12. 12 Process of Discovery: 14.The Milwaukee structure takes many of the advantages of centralized control over services and throws them out the window by dividing up service delivery among too many players. The Milwaukee structure really hasn’t delivered on our hopes and expectations for improved service delivery. 15.Some parts of the structure have a very high cost that does not appear to be justified by the results we are getting.

13. 13 Analysis of Root Causes: Once we identified system problems, we spent a great deal of time analyzing the root causes of these problems, those root causes converged around 3 issues: The payment structure fails to reward desirable behavior and does not provide a disincentive to undesired behavior. The perceived risk agencies have of being held liable for benefits contributes to undesireable behaviors that undermine the W-2 program. There are inherent limitations to organizational capacity in the smallest agencies that make them less effective than larger agencies in carrying out the program.

14. 14 The Solutions: Every participant should have access to the program, and no eligible participant should be discouraged from applying or denied services s/he is eligible to receive. The W-2 program must be able to provide the full range of W-2 services needed by any participant in the program regardless of where in the state that participant lives. Agencies in the program must have the capacity to provide job development, customized training, professional assessments, SSI-Advocacy and similar specialized functions that are linked to successful outcomes for participants.

15. 15 The Solutions: All agencies must have the internal capacity to train and evaluate staff, provide management oversight and control over their operations, carry out a QA/QC function to assure decisions are made correctly, and respond to requests from the department to change their practices or implement new requirements. The program should provide services at a reasonable cost to make funding stretch as far as possible, and the payment system should encourage all agencies to operate efficiently in terms of costs and effectively in terms of outcomes for participating families. The W-2 program should provide quality services to W- 2 families wherever they live.

16. 16 Snapshot of Major Changes: Performance based contracts: use a combination of monthly capitated rate and performance based payments for identified outcomes. Duration of contract: four year contract with up to four two-year extensions Redefine geographical areas : Balance of State (BOS) geographical areas condense 20 individual county agencies and 11 multi-county agencies (consortia and private contractors) to six geographical areas Milwaukee County: define four Milwaukee County Regions (currently five)

17. 17 Performance Based Contracts: Outcomes Rewarded in RFP/Contract: Serving eligible W-2 participants – monthly capitation Job Attainment – payment for placing a W-2 participant in a job Long Term Participant Job Attainment –payment for placing a participant with more than 24 months on the W-2 “clock” in a job High Wage Job Attainment – payment for placing a participant in a job paying in the top 15% of placement wages in the region Job Retention – payment for job lasting 3 months or more SSI/SSDI Award Attainment – payment for participants awarded SSI/SSDI as a result of the contractor’s efforts Helping DCF meet Work Participation Rate – quarterly payment for each quarter the contractor meets 50% rate

18. 18 Performance Based Contracts: Monthly Capitation: Limited to 60% of the total budget for geographical area in 2013 declining to 40% in 2015 Provides financial security & cash flow to contract agencies transitioning to pay for performance Provides incentive not to discourage enrollment Some flexibility on timing of payments with contractor bearing full risk of enrollment above budget limit

19. 19 Performance Based Contracts: Performance pay points: DCF defines a target price and outcome amount for each performance outcome based on our definition of a successful W-2 program DCF target price and attainment level are set to improve current performance standard and efficiency Proposers can counter with less than DCF target price and more than minimum quantity for more points in competitive process so long as proposal does not exceed total budget across all pay points Proposers can also counter from their business perspective with more than the target price or less than target quantity, but lose points in the competitive process

20. 20 Performance Based Contracts: Performance payment: Total payments are limited by NTE budget Payments for performance may be at least 40% of maximum budget in 2013 rising to at least 60% in 2015 Contractors who achieve less than the quantity of outcomes in their cost proposals are paid only for the performance actually achieved Contractors who achieve more than the quantity of outcomes may at the Department’s discretion be paid more if funds are available, and overall performance across all performance outcomes warrants additional payments

21. 21 Performance Based Contracts: Work participation rate payment: Total payments are limited to $1 million prorated across all geographical areas based on W-2 caseload – quarterly prorated figures are shown in table 3 in the RFP Payments of one-quarter of the maximum for the region are made quarterly if the contractor meets the federal standard of 50% participating in eligible activities No payment is made for any quarter the federal standard is not met Wisconsin has been exempted from this standard in recent years, but it applies again starting in 2012

22. 22 Performance Based Contracts: Impact of performance based contract: Total budget for 2013 contract year is about $51 million compared to 2011 allocations of about $62 million We have $5 million holdback on available funds to account for the possible need to renegotiate budget limit during 2013 for rising caseloads and to pay for performance above contracted levels. Savings come from economies of scale and shifting from cost reimbursement payment methodology which has no incentive for cost savings