Foreign vendors meeting, January 22nd 2004, 5:00 PM, Jerusalem City Hall
Present at the meeting:
Ministry of Industry trade and labor: Mr. Raanan Dinur – CEO, Mrs. Ayelet Zeldin, legal Advisor, Mr. Amichai Katz, CEO Assistant.
Ministry of Finance: Mrs Yael Endorn, Deputy Head of Budget Div., Mr. Zvi Chalamish, Deputy General Accountant, Mr. Guy Krieger, Legal Advisor, Mrs. Iris Ginzburg, Budget Div.
Herzog-Fox-Ne'eman: Adam Eytan, Adv.
Shlomo Kramer Consulting: Jason Turner, Mark Hoover, Paul Seamen, Kathleen Hoover, Shlomo Kramer, Assaf Shalvi.
Foreign Vendors: David Heaney, Maximus; Dr. Eleanor Mower, Goodwill International; Peter Cove, America Works; Rob Dijkhuis & Bernard Brueren, Agens; Peter Kaiser, Kaiser Group; Marius Touwen, Calder Group; Leonard Krugel, ACS; Rogier Derks & Bob Bergkamp, Four-star; Richard Bonamarte, Wildcat; Roy Newey, A4e.
Mr. Dinur: We have called this special meeting in order to discuss the issues that you all would like raised today. Similar opportunities will be provided for the Israeli vendors.
Yael Endorn: Thank you for coming. We want to hear what you have to say on the presentations today. That is why we want to meet with you in a small group.
Jason Turner: This morning most comments seemed optimistic, this afternoon less so.
Comment: We recognize this is a big reform. We are big fans of WI model. We saw an example of it this morning from the financial point of view. We were disappointed, however, because we wanted maximum flexibility and control and output. We thought the joint venture wasn’t controlled. It is not good to divide control. For example, if the NII makes a mistake when a check is issued to a recipient, all would be affected. We think we can be more effective if we have complete responsibility for both engagement, work placement, and welfare check issuance.
Comment: It is responsible that we should have to reduce social welfare. But, at the end of the day you had a load of requirements. Those don’t facilitate the operation. How much control do you (the government) want to have versus holding the operator accountable for the outcomes not in controlling the operations?
Comment: The client flow is perfect. The government dictates who is hired. As the person who is taking the risk, I need to decide who works for us. Secondly, the Israeli workers (ES workers) are the ones who determine benefits. In Florida, the state eligibility employees are assigned to the operator of the job center and he has power to hire and fire. We are here because Israel’s system is not working. Yet you are telling us you decide who we must have as workers. The concern is being in being dependent on the NII worker. [Pete also raised the issue of up-front payments ($2,000) to participants.]
Yael: Only the person taking the application is an Israeli government employee. The vendor’s employee controls the engagement and whether the applicant/participant is meeting the Employment Test in order to receive the government payment.
Comment: Example: Government employees have strict rules on how to get rid of a state employee. In a private company those rules don’t exist.
Mark Hoover: The Employment Test that you heard about today has codes in the computer system. If the person didn’t comply with the test, then the Employment Service makes that decision and enters the appropriate code. The code hits the NII system and the payment is blocked. It isn’t like the US system where the government eligibility employee has the discretion to block payment or not. The vendor’s employee will control that action. That mitigates significantly the fear that you won’t be able to hold people accountable. We sat down with the Israeli head of NII and that’s how it works. My understanding is that it will work the same way as it works right now: you key in the code and it blocks the payment.
Comment: What qualifications?
Guy: Our most important achievement in the legislation: the case manager is the vendor’s worker not a government employee and is solely and independently responsible as to whether the person achieved the requirements. NII has no discretion -- it helps with flexibility. The Ministry decides qualifications. You can hire anyone with the qualifications. Each year there is follow up.
Yael: It is important that the workers are hired by the companies. But once a year the workers are reviewed to see that things are being done by the case manager.
Assaf: To reassure you about case manager, the suggested qualifications will be written by Jason and Mark. Mr. Dinur can reassure you that the qualifications will not be onerous.
Mark: Our suggestion will be that the employees should have routine skills and abilities that will allow them to be able to the job well. Many people will share in the decisions.
Adam Eytan (H.F.N. Adv.): The regulations will be ready before the RFP is published. We are aware of that issue.
Comment: In our discussions with potential Israeli partners, they have informed us that 30-40% of the 3500 employed are already working. If the participant has social welfare money and black mkt. money and we tell him to take a job – he doesn’t show up and he will appeal. Vendors have no appeal.
Yael: It must be justified.
Jason: Vendors will have success because they have control over the employees and control by case managers over the clients. To get the benefit they must pass two tests: the NII eligibility test and the employment test. Case Managers need to punch in on 2 separate systems. If the clients don’t pass then payments are denied. Now the vendors will do the Employment Service test. Case Managers have control over the schedule and won’t have to go to the NII and get a separate ok. On the appeals process – the clients don’t automatically get paid during the appeal process during 21 days. After 21 days and if no decision has been made, then pay will commence until decision is made, 21 days from filing of appeal. In US in some places they can appeal again and again and still get payment.
Comment: The vendor will lose money if a decision is not made within 21 days.
Guy: Our intention is that there will be enough committees to make decisions within 21 days.
Comment: 21 days could last as long as 60. Second point is how the appeal works. We have 100 operations around the US and there is not consistency. The appeal process will probably mean something different here than in New York or Wisconsin. My childhood is such that it doesn’t allow me to deal with authority, etc, but hard rules about it substantiates that appeals are necessary. Too much subjective decisions are involved otherwise. Must have negotiation over which Ministry will be your hearing officers. Social affairs people may not be on board with the program. Hearing officers are crucial to the program. I need clarification.
Yael: The Ministry of Finance and Ministry of Labor must approve the committee. The committee is made up of 2 civil workers, 2 experts in the employment market, 1 in national economics. It is a system of checks and balances. As Mark said after 3 appeals, the person must pay a 45 NIS fee. It will highlight that the person is regularly appealing and question validity of the person’s appeal.
Comment: There is risk being assigned to the vendor. There are a lot of questions. 35% may be a big deal here in Israel. We don’t know what the rules are. You need a lot of teeth and consequences. What’s our role in fraud reporting? How is fraud handled here? My guess is that during the first phase you wash out a lot of people due to their not really being eligible/working. There is potential for exposing a lot of fraud. You can clean this up by putting teeth in the regs.
Comment: Thank you for inviting us.
1. 1. I had the opportunity of seeing concept turned into a structured RFP. You’ve come a long way.
2. 2. I’ve bid on a lot of contracts around the world. We are trying to determine and assign risk and look at ourselves and decide. This is done in a lot of ways. If some risk can’t be determined upfront, you set up a model for the first year. Performance- Based model. The problem is in the risk, the devil in details, such as the ability to control variables. I have more comfort level when the ability to conciliate is available to me. I’ve seen the issues worked at HRA and seeing the process work, data control and getting the data to the people who make the decisions. Correct information wasn’t getting there on person’s appeal so they could make a decision. At HRA at the beginning they needed appropriate documentation to get to the decision makers but they didn’t get the info. We needed infrastructure to move the information quickly and concisely across. 80% of what I’ve heard today, I’ve liked. Understanding my risk increases my comfort level.
Comment: The model is doable. I look at the details and experience of the one stop, disability, workforce development and I look at risk factors. I need to know the eligibility determination and the law. I need to know the structure here and the timeframe - 24 months - and precise performance points each month that control payments to the vendor. Is that doable? Could we have the consideration of flexibility for the vendor to get to critical pts.?
Comment: I’m more comfortable now to bid.
1. 1. NII pays clients. There is the cultural issue of sharing coffee tray and same team. Government people are part of our team. That seemed to work. We had more difficulties in officers where this was not the case.
2. 2. The potential of government's IT I didn’t need to hear today. Our experience is that it is best to not be dependent on government IT solutions as they never are on time or work. Vendors will have their own system and should be able to use. Manage on outcomes.
3. 3. Clarification: work support services -- would payments to participant be part of eligibility costs?
4. 4. 2 year period are specific group of 3500 people or larger group?
Comment: There is issue with the defined areas and 3500 and exemption of a dislocated plant closing i.e. Pepsi moved from 1 area to another. The area where Pepsi moved TO did well and where FROM crashed.
Comment: Cost reduction in first month and I don’t have an answer. I’m skeptical that it will occur that fast. Details: continuity in projects, 3500 then new people coming in must put in a separate project. Then we hate administrators; we like the responsibility and it is not necessary that someone else needs to oversee. Too much burden.
Comment: I like the overall model. We fought for 23 yrs. for Pay for Performance. I’d like to see easing the vendors into that. There are a lot of imponderables here on both sides.
Local partners: you are building an erroneous premise by not insisting on, identifying, and evaluating the Israeli partner upfront. When someone has operated a center, they know that you need a strong local partner. The Israeli government needs to feel comfortable with that local Israeli partner and its qualifications and strengths. Should be required to be identified in the bid and be part of what is evaluated in awarding the contracts.
Last point: gaming the system. I know there could be two people in a family gaining benefits. We are used to single head of household and can sanction that one person. Here there could still be someone else in the family getting benefits.
Guy: Full family sanction is provided so if head of household fails to participate, then the entire case does not receive the payment that month.
Comment: Not sure there are enough guarantees that we are paid for our risks. For example the IT system. Must have a link with the government. It is difficult if it doesn’t work. We do everything on paper. Same problem: on money side, 35% case reduction to reach in the first 4 months is impossible even with a strong Israeli partner.
what happens if the recession is deeper than we thought? Need provisions for an update from the government if certain assumptions do not play out as now assumed in the model. If we take a lot of losses we need to set 2 M euros aside and I like to keep it. Program “as-is” is very challenging to live risks unless clarified and mitigated.
Comment: IT interface is a nightmare. We are dependent on your system. All systems are different.
Operations manual? Ours are on line so shouldn’t need to provide four paper copies with the bid.
I was surprised today by the fact that Israeli partners are not a part of the bid and evaluation process.
Adam: explained
Jason: At lease 60% of the questions raised are concerns we have answers for -- the rest not yet.
Mark: Assaf did a great job –much information on the financial model. Start up period: first six months you are paid on the basis of what you put forth as a bid. There is really no risk unless you don’t open the center on time per your bid.
Assaf: Payments during the contract period:
1) 1) you submit a bid for your start up (6 months) 100% government invested. You are not expected to finance that. 10% upfront and then 6% every month. Yours forever. Last payment is less the first advance.
2) 2) We will request certain milestones, but they are very general.
Adam: Milestones: general, under your control, your own IT system, hire staff and open the center. The Government is paying you according to your bid.
Mark: No significant risk for startup.
Comment: If start up is quicker can we get all the money in the bid for start-up?
Yael: We’ll think about it.
Mark: The second part: now I’m operating (rent, payroll, IT support, etc) upfront payment 5% for operations (when you open the door) clients coming. The way payment is designed, you get that even payment every month per your bid. Preset.
Support costs you provide for the client: (transportation, daycare, work boots -- you tell us). Those get reimbursed – there is a cap per job center.
What about the benefit payments? 35%? Government has budgeted “x amount” for benefits. The 3500 remains constant in determining the budget frame amount. We’ll give you that much money (benefit shekels originally expected to be expended) and a government investment of a certain amount. Over 2 years, there are some additional expenses mostly support service costs. Those are paid for by the reduction of caseload money. People must comply so that it is reasonable to expect significant caseload reductions freeing up funds to pay for the extra costs of operating the One-Stop Job Centers.
Jason: 3500 people fixed or dynamic? And IT link.
Mark: 3500 is dynamic once the area is defined. The vendor is responsible for all new applicants in the defined geographic area of the job center. We assume the caseload will decreased by 35%.
Assaf: We want you to take it down.
Mark: You aren’t responsible for funds for the grants. You are responsible for your operating costs (payroll, rent, etc) and support services costs which must come from additional government investment and a reduction of caseload.
Assaf: Update for economic indicators is planned once the regions are defined and after six months of operation.
Adam: Generally, the risk of the economy and jobs during the two years is considered as a risk of the vendor. Explanation of the steep decline in first 3 months: reduction in government expenditures doesn’t have to be a result of placement. It is assumed that it is the result of people hearing about the new requirements and they don’t want to work or are already working so don’t come in.
Jason: Anecdotal evidence that there are more Israelis working off the books than there were in NYC.
Comment:: We have a bid bond. Regions aren’t equal. This needs to be addressed.
Adam: Geographical areas: you will bid and an adjustment will be made after 6 months if expenses are higher than you budgeted and there is adequate justification per guidelines that will be provided in the RFP/Contract.
Yael: This program for the first 2 years AND it is a pilot. We are learning as we go. We will take this into consideration. We are more flexible because of that. We have done reforms with these populations and it will be taken into account. We will be more open and will make changes as we go along.
Comment: This is the most open and creative process I’ve ever been involved in: the preparation and feedback -- you are listening to us. I’d love to see this in the US.
Adam: What do you think about foreign and Israeli partners? Did we do it right, ie., foreign operators bid first then identify the partners or should you identify and include in the proposal?
Comment: Identify with the bid. The partner is so valuable.
Guy: Anyone think otherwise?
[The majority voiced agreement that the partner is valuable.]
Mark: IT system: My understanding is that you bring your system and you run your operation with it. You don’t have to adapt it but you do have to share information. The only critical IT interface required is the one that reports to the NII whether applicants or participants are complying with the Employment Test and this should mirror the current Employment Service system. You are not dependent on interfaces that you must develop.
Yael thanked participants for their feedback. It will be given due consideration in finalizing the RFP/Contract. She encouraged additional questions or comments to be shared through internet site set up for that purpose or faxed.
Notes: Kathleen Hoover