If we look at the Way Ahead document, what jumps out to you?
“Firstly, monthly payments in advance from April this year coupled with a 6-month schedule from April based on hours, as now”
So, that’s six months on the same system as now – same rules given continuing compliance with the same Specification as now, and similar if not the same targets albeit based on half of a full year?
“Yes that’s right, but only until the introduction of fixed fees for the social welfare law (SWL) categories in October 2007. On fixed fees, the details have yet to be announced for immigration & asylum, mental health and family, but otherwise we know the worst:
Debt - £196 [£121 tolerance]
Employment - £225 [£147 tolerance]
Housing - £171 [£135 tolerance]
Welfare benefits - £164 [£133 tolerance]
It’s also worth mentioning other things we know now from the Way Ahead about fixed fees:
National fees – nothing extra for London
Only one housing category
Tolerance cases will be paid at their own rate [worse than 85% previously proposed]
Exceptional cases – at 3 x fixed fee
It seems a real pity, amongst other things, that the payment figure for tolerance work now proposed is actually worse than the figure originally put out for consultation (originally a reduction of 15% for tolerance cases); what happened here and how can the LSC justified this?
“The LSC decided to take tolerance cases out of the calculation of fixed fees. They say that the costs of tolerance cases are lower in most categories, and that they believe that the fees should reflect this, as well as encourage work in category specific contracts. Where the costs of tolerance cases are lower, they point out that taking them out of the calculation means that the fixed fee for work done under category specific contracts is increased.”
It looks then like the real transition is going to be October, when we finally move to the fixed-fee regime. How do you see this working money wise? I imagine people are concerned how much their organisation will be paid overall and to what extent this will be equivalent (or not) to what they were paid under the current hours targets
“From 1st October, subject to performance, agencies will receive the same income as before [at least for the transitional period]. This is based on agencies receiving a number of New Matter Starts (NMS), which would enable them to break even over the period of the schedule.
So, if you had a debt contract for £53,900p.a. and are currently performing the full 1,100 hours required by the contract, you should get 275 matter starts [£53,900 divided by the fixed fee of £196], if the first schedule under the new system is for 12 months.
At the moment it is not clear how long a period will be covered by the schedule that takes effect from the 1st October. The principle however should be the same.
What do you mean “at least for the transitional period”; and does this mean that the LSC will show some understanding towards organisations, at least whilst they bed into the new fixed-fee arrangements from October?
“The Way Ahead says that the LSC is likely to allow reconciliation over a longer period than the first year of the contract in order to assist with transition.” [para 28, p.29] We are still discussing the transitional arrangements with the LSC, but they do understand the problems that NfP agencies will have in making the transition. I am hopeful that we will be able to agree something that will be fairly reasonable.”
It strikes me that this October changeover will cause a few headaches, not least how organisations will be paid for cases started under the first six months of the year but which are still open and being worked on after October
“Yes, whereas it’s clear they will be paid under the present system for work done up until 1 October, from this date work will fall into three possible brackets in terms of how organisations claim this work:
Cases started before 1st October – when finished you claim for the time spent since 1st Oct using your previous hourly rate
Ordinary cases started after 1st October - when finished you claim the fixed fee [FF]
Exceptional cases started after 1st October – when finished you claim for all work done on solicitor hourly rates [separately for attendance/preparation, travel & waiting, letters & phone calls] if you think the total comes to more than 3 x FF. The LSC can then assess each claim, and decide how much they think it is worth. If it is more than 3 x FF they will credit that amount. If it is less, they will say you are only entitled to the FF. If you don’t accept the assessment you can appeal.”
I know we are going to examine the issue of claiming work done at solicitor hourly rates, rather than on the more straightforward current system, within this year’s CLS Support training programme but I think many will think this is the LSC just twisting the knife. Is this just another way that organisations could lose out, i.e. is it a backdoor way of reducing the financial value of the work that they do even further or at least adding another unnecessary layer of complexity and making the goal posts even more difficult to find?
“It will certainly make things more complex if agencies have to cost all claims in the way that solicitors do. There are at present different rates for preparation as compared to travel and waiting, different rates for different categories of work, and different rates depending on whether you are in or outside London. Some of these rates are likely to be lower than the rates which some agencies presently receive.”
So, for organisations who’ve just read this, what would you say they need to do now?
“Well, agencies have to work out what all this means to them. How do their average case lengths compare to the FFs? How many of their cases would qualify as exceptional? This should give them an idea of their case profile and some idea of how things might work out if they were working to fixed fees now.”
What would you suggest if their average case time worked out greater than the fixed fee for their particular category of law – I’m sure there are quite a few organisations out there where this is the case?
“If their average case lengths work out as more than the FF, then agencies need to consider:
Claiming exceptional cases
Reducing their case lengths on ordinary cases (which may involve treating more matters as separate matters)
Changing their case profile
Again, these are all issues we will be exploring in depth in the CLS Support training from April, but this “claim exceptional cases” doesn’t seem to be the solution it might first appear to be, surely it can’t be that easy?
“Yes, exceptional cases are problematic as a solution; for example:
They are subject to cost assessment
The LSC is going to consult on reducing NMS from April 2008 for suppliers with high average case costs, subject to the 80% guarantee [Way Ahead p.27]
At present the draft contract includes a Key Performance Indicator (KPI) of 85% matter start usage
Satisfactory performance against KPIs is the first requirement/hurdle for becoming a preferred supplier
According to the Regulatory Impact Assessment, on 2005-2006 figures, the proportion of cases nationally which would be exceptional are 3.79% in debt, 11.67% in employment, 4.17% in housing and 6.47% in welfare benefits.”
Coming back to the transition period in October it looks like the actual accounting that will be necessary, and how this links in with performance, will place some serious strain on organisations. What problems do you foresee?
“There are basically two transitional problems:
1. Adjusting to FFs so that, as soon as possible, your monthly credits are equal to your monthly income
2. Accounting for the fact that you are changing from being paid in advance to be being paid on account but credited in arrears.
How the latter will be done is subject to ongoing negotiations with the LSC.”
I know of a couple of organisations who I have worked with recently who are actually looking forward to the introduction of fixed fees – they firmly believe that they will be better off financially than now, and from what I’ve seen it looks like they probably will be
“Yes, we mustn’t forget that it is likely that some organisations will actually gain, at least to some degree, from the fixed fee regime; the LSC even claim that 44% of NfPs will be better off [Regulatory Impact Assessment p.19] but we don’t know how they calculate this.”
Thank you to Adam Griffith for providing his comments for this forum. Adam is the Legal Services Policy Officer at ASA and a key member of ASA's negotiation team
Dates to look out for where these issues will be explored further:
1. The ASA conference Friday 23rd March will include workshops on:
2. The CLS Support 2007 training programme has now been advertised and contains new courses such as “Making Every Matter Count: forward to fixed fees” and “The Unified Contract: structure content and purpose” - see the link in the item within the News section of this forum
3. ASA is going on the road and will be holding a number of free half-day events nationally which will include short presentations and question and answer sessions – dates to be advertised in the near future