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Nearly half of the Work for the Dole co-ordinator contracts tendered by the federal government have been awarded to two giant corporations, including one in a joint venture with a major Australian charity.

Analysis of Work for the Dole contract documents by The Saturday Paper shows MAXNetWork Pty Ltd, trading as MAX Solutions, is by far the most successful bidder, picking up more than a quarter of the 51 Work for the Dole co-ordinator roles tendered last year. MAX Solutions is a wholly owned subsidiary of controversial government services provider Maximus, whose annual revenue in 2014 was more than $US1.7 billion.

The Work for the Dole program is part of the Abbott government’s newly announced jobactive program, which will replace the Job Services Australia (JSA) system from July 1. As part of this process, all existing JSA employment services contracts – the federal government’s program for assisting jobseekers – were tendered, and again MAX Solutions scored big.

The shake-up reduced the number of employment service areas across which providers may operate from 116 to 51 new regions. A capped number of employment service provider contracts, including a single Work for the Dole co-ordinator, were up for tender in each region.

MAX Solutions already enjoyed the largest share of Australia’s employment and disability employment services market (about 10 per cent), having earned $800 million from the federal government over the past five years under its existing employment department contracts.

The US company now dominates the “welfare business” in Australia, having picked up 27 employment services contracts across the country, including 14 of the 51 regional Work for the Dole co-ordinator contracts. The next most successful provider – Mission Providence – will operate in 11 regions, including six Work for the Dole co-ordinator contracts.

The Saturday Paper can reveal MAX Solutions’ highly successful tender bids were guided by the former Department of Employment senior employee who managed the purchasing process of the 2009 JSA tender, which awarded MAX Solutions its dominant market share.

The Work for the Dole co-ordinator contracts are worth $380,000 a year each.

Darren Hooper, a career public servant and former senior executive within the department, was employed by MAX Solutions in September 2014 – one month before the tenders for new Work for the Dole and employment services contracts were opened. Hooper left his most recent position as Queensland state manager within the Department of the Prime Minister and Cabinet to become general manager of strategy at MAX Solutions.

According to a Saturday Paper source, this is the second time MAX Solutions has made a key recruitment from the public service in the lead-up to an employment services tender. In February 2008, the company employed Karen Massier, the former chief of staff to a Coalition minister for workforce participation, Sharman Stone, and director of the then Department of Education, Employment and Workplace Relations. Massier was appointed MAX Solutions’ general manager of strategy performance seven months before the start of the JSA’s 2009 tender.

The Saturday Paper does not suggest any improper conduct on the part of Darren Hooper or Karen Massier. Massier is now general manager of strategy and government relations at APM, a new Australian entrant into the general employment services market that won contracts in nine of the new jobactive regions.

1 . Mission Australia's US partner

The other big winner from the Work for the Dole tender is Mission Providence, a joint venture between welfare organisation Mission Australia and Providence Service Corporation, another US sharemarket trading company. Mission Providence picked up co-ordinator contracts for six of the 51 regions.

Providence Service Corporation’s website describes it is “a national leader in the management and provision of the highest-quality human social services”. The company’s 2013 annual report cites that its “revenue rose modestly to over $US1.1 billion, net income more than doubled to $US19.4 million”.

A spokesperson for Mission Providence said Mission Australia and Providence “share the same core values and a commitment to best-practice services and support for people in need, through exceptional services, relationships, and innovation”.

The Work for the Dole co-ordinator contracts are worth $380,000 a year each and involve lining-up potential host workplaces for jobseekers, and selecting where the jobseeker will undertake their unpaid work. The remaining 31 Work for the Dole co-ordinator contracts not awarded to either MAX Solutions or Mission Providence were close to evenly divided between another 18 organisations.

The successful contract bids were decided by the Department of Employment and announced on March 31. The federal government said tenders were partly assessed according to how quickly the bidding providers had got jobseekers into work compared with their competitors during the past five years.

Maree O’Halloran, president of the National Welfare Rights Network, said: “It’s difficult to accept that employment assistance funding for people who need work should be diverted to provide profits to big US corporates ... It remains to be seen if there is a loss of local knowledge and experience. The main problem as we see it is that they are flogging a tired, old and expensive product in Work for the Dole.”

2 . BCA unimpressed by new scheme

The new jobactive scheme will apply Work for the Dole to all Newstart recipients under 50 years old who have been unemployed for more than 12 months. Jobseekers aged between 18 and 30 will be required to do unpaid work for up to 25 hours a week for six months of every year in which they are unemployed, depending on their jobseeker classification.

The Work for the Dole program purportedly aims to reduce Australia’s growing long-term and youth unemployment. Figures released last week show Australia’s unemployment rate at 6.1 per cent. The greater concern is the number of long-term unemployed (those on Newstart for more than 12 months), which has doubled since 2008. Youth unemployment levels are their highest since 1998.

Prime Minister Tony Abbott told reporters when announcing jobactive: “Work for the Dole is an important step in the right direction because you are having a go. That is the important thing. It is very much part of our Australian characteristic.”

Lisa Fowkes, a former chief executive of Job Futures, a non-profit provider of employment services under JSA, told The Saturday Paper she thought the idea of getting the unemployed to do voluntary work was good in principle, but questioned whether it would help long-term unemployed people over 35 get back into the labour market.

Fowkes, now a research scholar at the Australian National University, said that previous research on Australia’s Work for the Dole program published in the journals Applied Economics and Youth Studies Australia “found (in part) that because the program focus was on building generic skills through projects undertaken in not-for-profit organisations … there was often a mismatch between the type of skills development available through Work for the Dole and the demands of the labour market”.

The Business Council of Australia wrote in its submission last year to the employment department’s exposure draft for its jobactive scheme that the BCA “supports the principle of mutual obligation” but “work activities proposed will not address skill and qualification gaps present in a large cohort of the JSA caseload”. It further noted that “there is a strong risk it will displace some existing paid work in the not-for-profit and public sectors”.

The Saturday Paper also spoke with a number of people who are currently on the Work for the Dole pilot program that has been running across 18 locations since late last year. While some said they were enjoying the voluntary work, most said they felt the work they were doing was “menial” and “repetitive”, and not helpfully in accordance with their employment goals. One said he was pulling out nails from timber all day, another that she had just completed aged care studies but was put to work sorting clothes in a local charity store.

Another jobseeker wrote online that she had been given two choices by her employment services provider: “Either work in a kitchen peeling vegetables with court-ordered rehab people, or sort through contaminated charity bins for 15 hours each week.”

The request for tender document stated that jobseekers must be placed in a “quality” host worksite. However, there are no express obligations in the subsequent contract deed to put jobseekers into programs that align with their jobseekers’ employment aspirations, or national or area skill shortages.

3 . Training courses

In 2013, an external audit of Job Services Australia found that only 39 per cent of providers’ payment claims were legitimate. A 2009 report found MAX Employment – MAX Solutions’ employment services provider arm – had enrolled 141 people into a training course conducted in a room that could fit only 15 at a time. The report, aired by Four Corners, found that "there was no prospect of the client completing (or in the case of very late June, perhaps even commencing) the training" but did not make a finding against MAX or direct the company to repay any fees. Indeed, a departmental official advised the company it could claim for commencements.

The key changes to be implemented in jobactive include fewer jobseeker classifications, determined according to level of disadvantage and length of unemployment; a new requirement for jobseekers to look for 40 jobs a month, in addition to the current requirement they apply for 20 a month; and a reduction in the number of employment service providers from which the government accepts tenders, from 79 to 44, thus consolidating those it considers the best performers.

In a statement to The Saturday Paper, MAX Solutions’ managing director, Deborah Homewood, said her company’s success was a result of its high star rating. “Over the past six years, MAX Employment achieved employment outcomes for more than 280,000 jobseekers, many from our most marginalised communities,” she wrote.

Homewood added: “MAX Solutions’ tender was strictly in accordance with the stringent requirements laid down by government.”

Since 2006, MAX Solutions has increased its number of government service contracts, picking up 63 IT, management, workplace safety and human resources consultancy tenders from federal government departments, including 17 from the Department of Employment since 2010.

MAX Solutions’ parent company, Maximus, made its entry into Australian government services when in 2002 it purchased Leonie Green and Associates, a provider for Job Network, which preceded JSA. At the time of the purchase Green told Fairfax Media: “Long-term, [Maximus’s future] is very much driven by the government direction in outsourcing. Ultimately, if Centrelink is privatised, Maximus would be very well-suited to help.”

This story was modified on April 30, 2015, to make clear the nature of the report into MAX Employment's Sydney training course and to clarify that no findings were made against MAX in relation to that course.

A comment regarding the employees of Max Solutions was posted here in error. The comment was inaccurate, and The Saturday Paper apologises for its posting.

Print errata: A story published in last week's edition incorrectly stated that the company MAX Employment had been the subject of allegations of fraud in the Jobs Services Australia (JSA) system in a recent Four Corners program, had made illegitimate JSA claims and been forced to repay government fees after enrolling jobseekers in a training course that did not exist. The Saturday Paper accepts that these statements were not correct and apologises for the errors.