In 2019, the Peter McVerry Trust secured Ireland’s largest-ever State-funded contract for homeless services after bidding €10 million below the cost estimated by the authorities. In December, the State began a bail-out of the cash-strapped charity, which may cost taxpayers up to €15 million by the end of March.

There is no direct link between these two figures. They do, however, illustrate a shift in national policy after years underpaying the organisations to which the Government outsources support for the growing homeless population.

In the meantime, Ireland has seen workers in the voluntary sector threaten strike action and the country’s largest homeless charity teeter on the brink of insolvency. Now the State stands to pay significantly more to help those who fall out of its dysfunctional housing market.

Based on tender documents, insider interviews and correspondence obtained through freedom of information request, this is the story of Ireland’s slow realisation that the procurement of its assistance to the homeless was broken.

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The Housing First contract for the Dublin region is the starting point of this story. It is worth dwelling on it because it is the largest on record through which the State has so far outsourced supports to help people out of homelessness (as opposed to just providing them with temporary shelter). It also constituted a tipping point where competition on price triggered a bitter row among those working to deliver these services.

Housing First, a policy developed by Dr Sam Tsemberis in the US, is often regarded as the gold standard in tackling homelessness. It aims to break the chicken-and-egg situation where people suffer from both lack of housing and separate but related difficulties, by addressing all issues at the same time with specialist social and health workers.

Rob Lowth is the national director of Housing First at the Housing Agency, a new office established in March 2022. He has long previous experience procuring homeless services for Limerick City and County Council. In an interview with The Currency, he recalled: “We could provide emergency accommodation, but what was the exit?” he recalled.

“Unfortunately, people with addictions, with mental health issues, with behavioural issues were deemed unplaceable in normal societal systems,” whether that was social housing or other forms of long-term accommodation. On the other hand, they could not recover from those issues because they were living in “chaotic emergency accommodation,” Lowth added. “That’s where Housing First fits, that fills the gap in terms of the solutions nationally.”

Focus Ireland and the Peter McVerry Trust ran an initial five-year Housing First programme in Dublin from 2014 at a contracted cost of €2.3 million (all costs in this article are quoted excluding Vat). Housing First funding, which comes from the Department of Housing and the HSE via local authorities, doesn’t cover the direct cost of accommodation, which is financed separately.

Housing First then became national policy to address complex cases and local authorities rolled it out by contracting implementing organisations in eight regions from 2018. This was before Lowth’s national office was established and the Housing Agency had no role in it at that point.

After public tendering, lead local authorities awarded the Housing First regional contracts to voluntary bodies in 2019. The Currency has obtained key data on some of those contracts, as well as other examples of homeless services contracted out since 2017. There have been other State-funded contracts awarded during this period but no data is available about them and not all local authorities contacted have responded to requests for information.

The Dublin Region Homeless Executive (DRHE) is a unit of Dublin City Council co-ordinating homeless services on behalf of all local authorities in Co Dublin. It invited tenders in November 2018 to deliver and manage at least 405 Housing First tenancies across Cio Dublin over the following three years, estimating the cost of this service at €16.4 million.

The Dublin contract was awarded "on the basis of the most economically advantageous tender" and ultimate cost was the most important of six selection criteria, weighing 30 per cent of each tender's final score.

Few organisations in Ireland are capable of achieving the contract's requirements. Other Housing First regions for which The Currency obtained tender details received just two offers, while the Dublin contract attracted four bidders.

In February 2019, the DRHE decided to award it to the Peter McVerry Trust after the charity offered to deliver the service for €6.3 million. At less than 39 per cent of the official estimated value, this was the lowest bid of all homeless services contracts analysed by The Currency in the last five years.

Asked how the local authorities expected the Peter McVerry Trust to make up the shortfall, a spokesperson for Dublin City Council told The Currency: “The successful tenderer for the 2018 Housing First tender made provision for funding from their own resources and fundraising, to go towards the running of the service.”

The spokesperson also provided the figures below on payments made under the contract so far. They remain below the initial cost estimate, even after a two-year extension. 

Tender documents specified that a “minimum of 405 new and additional Housing First tenancies MUST be provided and managed in the Dublin region” in the period from June 2019 to June 2022, with detailed targets rising from 125 new tenancies in year one to 145 in year three.

Official data from the Department of Housing shows that the Peter McVerry Trust has yet to deliver the minimum contractual annual threshold in Dublin in any year since securing the contract. Instead, the number of new Housing First tenancies in the capital region fell sharply after the organisation ended its partnership with Focus Ireland mid-2019 to start its standalone contract. 

While there are no public figures matching the exact contract dates, the most favourable three-year bracket in the period saw 271 new tenancies in Dublin out of the 405 required. Despite the end of the last Covid-19 restrictions in early 2022, the Dublin region still benefited from fewer than 125 new Housing First tenancies in the latest reported 12-month period from October 2022 to September 2023.

This is in contrast to nationwide figures, where the Department of Housing reported that the target set in September 2018 for 663 new Housing First tenancies over the following three years was exceeded with 722 recorded by October 2021.

Since 2019, the Peter McVerry Trust has held the contracts to roll out Housing First in half of Ireland’s eight regions. The Dublin contract alone accounted for just under half of national targets until 2021, and over half under the current 2022-2026 plan.

Instead of leading the increase in tenancies in the past two years, however, the capital’s share has continued to decline in the last two years, according to official statistics.

All this boils down to the DRHE’s acceptance in 2019 of a promise by the Peter McVerry Trust that it would privately raise nearly two-thirds of the funds required to roll out the State’s flagship policy to tackle homelessness in the capital. The public authority got what it paid for, with Dublin falling behind the rest of the country in delivering housing first.

The Peter McVerry Trust declined to answer questions from The Currency.

“A typo” and a legal letter

The contract attracted criticism, most acutely from the Peter McVerry Trust’s former Housing First partner, Focus Ireland. 

The Currency has obtained partially redacted correspondence between Focus Ireland and the DRHE through a freedom of information request. After the DRHE’s then director Eileen Gleeson wrote to the charity to explain why it had not been selected, Focus’s CEO Pat Dennigan pointed out that the Peter McVerry Trust had scored below the elimination threshold on “proposals to manage and lead effectively,” one of the mandatory quality criteria for selection.

The DRHE redacted details of the scores in documents released to The Currency. However, it replied to Focus at the time that the Peter McVerry Trust’s low governance score resulted from “a typo”. Once that was corrected, the two former partner organisations were left to compete on price and Dublin City Council’s law department confirmed Peter McVerry Trusts’ low-cost bid as the winner. 

This was despite Focus later highlighting the DRHE’s “assessment of the qualitative and delivery aspects… in which we demonstrated a clear leadership over the preferred bidder”.

Focus followed up with a legal letter from its solicitors Sherwin O’Riordan maintaining that the DRHE had failed in its obligation to explain the contract award. “Our client has concerns that the marks awarded to the successful tenderer in respect of the qualitative award criteria for which no reasons have been offered were simply not justified and is concerned that lower marks than those awarded ought to have been awarded to the successful tenderer,” the lawyers wrote on March 8, 2019.

“The service cannot possibly be provided at this price.”

Focus Ireland’s solicitors

But they also questioned the validity of the price bid by the Peter McVerry Trust. “In our client’s view and based on our client’s obvious and extensive experience of the service, the service cannot possibly be provided at this price in accordance with your requirements. It is wholly unsustainable and will inevitably give rise to difficulties in service delivery.”

Solicitors for Focus demanded a “full explanation” from the DRHE and alleged “violations of the procurement rules,” seeking a freeze on the start of the contract to “avoid having to bring this matter before the courts”.

Four days later, Dennigan backtracked to protect Focus’s position as “a leading candidate to provide those services” in the future.

“We are very clear about how we prioritise our time and our expenditure,” he wrote to Gleeson while instructing Sherwin O’Riordan not to launch court proceedings. “We believe that formal legal action will be a distraction from our core mission.

“However, that does not mean that we are satisfied with the outcome of the tender process. More importantly, this also does not mean that we have confidence in future similar processes with DCC [Dublin City Council] and the DRHE.”

Seeking a meeting on the future of procurement of services, Dennigan concluded: “We need to have confidence that we clearly understand the objectives and processes which are likely to be involved in future tender projects and that we can have confidence that procurement processes are conducted in a fair and transparent way with the goal of providing sustainable, high-quality services.”

New tenders early in 2024

The CEO of Focus had put his finger on the core issue. The 2019 Dublin contract was a low point for the procurement of homeless services, and the past four years have seen change that will only become fully apparent when all Housing First regions tender out new contracts early in 2024. The 2019 contracts were extended past the initial three years and are now coming to an end.

In an interview with The Currency, Focus Ireland’s advocacy director Mike Allen picked up where the 2019 documents ended. He said his organisation then took some time to reflect on what had happened.

“A proportion of our board are coming from senior positions in private enterprise,” Allen said. “They took some explaining to understand how you could win a contract to provide a major service, and then have to restate your accounts to take into the fact that winning this contract meant that you had to reduce the the surplus or increase the deficit you were going to have at the end of the year – being worse off for winning a contract.”

From then on, the board insisted on approving the price Focus would bid in any public tender. “The guidance they gave is that our pricing should be on the basis of full recovery of immediate costs at least,” Allen said, with only some shared overheads funded out of the charity’s own resources. 

“We lost a number of contracts as a result of that over the succeeding years,” Allen said. “But more recently, we've seen a pattern in which local authorities are responding to that, and we've won contracts since.”

Yet this is still some way from fully recovering the cost of delivering services on behalf of the State, he cautioned. He mentioned frontline staff’s pensions, which for example are covered by the State for public servants but not for those in similar positions at voluntary organisations, or the employment of organisation-wide health and safety or data protection officers.

“That's something where there are discussions going on with the Department of Housing and representatives of local authorities, to try and shift that so it would be full cost recovery,” Allen said. As for private charitable donations, “the fundraising should go to do the additional things that the State hasn't yet thought of: innovative things, filling gaps that the State isn't filling, or additional services that would really make a difference to people that aren't currently within the State’s planning.”

According to Allen, annual public expenditure on alleviating homelessness (so-called Section 10 funding) now stands around €400 million, up from €50 million ten years ago, with the vast majority going towards providing shelter by renting accommodation from private landlords.

A minority of funding goes towards tenancy supports delivered by specialist workers at voluntary organisations. Focus Ireland provides these services only. Other charities also provide their own accommodation. Housing First aims to tackle all problems facing a homeless person through one holistic service.

“If you’re funding a Housing First service, you’re funding staff with skills and qualifications whose job it is and who are successful at moving people out of homelessness and ending their homelessness,” Allen said.

Staff “would be doing everything from making sure they're on the housing list, advocating with the local authority that they should have priority in relation to certain things, supporting the household to look for other housing options in the private rented sector and so on, but also helping them link in with mental health services or health services or employment services, or any other mainstream public services they wouldn't be aware of, and they would find difficulty linking in with while they're in emergency accommodation.”

“It’s like, ‘We get a cheaper car because we get one with only three wheels’. It doesn’t work.”

Mike Allen

According to Allen, this is the type of work where cutting costs is counterproductive: “You end up not providing the support for people to effectively move,” he said. “You spend a lot of money to move them out of homelessness, and they fall back into homelessness again.”

His experience of dealing with the authorities in the past is that they were constantly seeking to cut spending here and there, arguing it was in the public interest; but he said it is not. “It’s like, ‘We get a cheaper car because we get one with only three wheels’. It doesn’t work.”

The table above, however, shows a reversal since the bidding war for the 2019 Dublin Housing First contract. Public tenders for homeless services in the past two years have seen voluntary organisations including the Peter McVerry Trust submit winning bids close to or above the cost estimated by the authorities.

There has also been a “sympathetic ear” from the Department of Housing under Minister Darragh O’Brien and the DRHE’s current director, Mary Hayes, after an initial period following the 2019 row when criticism from Focus was seen as “sour grapes”. 

“Yes, we were upset that we had lost the contract for something we were very committed to delivering. But we were also pointing out that if they continued in that direction, they were hollowing out the whole homeless sector,” Allen said. “For a period, I think that fell on deaf ears and they just sort of said, ‘Great, this organisation will do it cheaper and we don't care that somebody is saying we need to pay more’.

“I think even before certain issues that have come to light in the Peter McVerry Trust, there was a growing recognition that the model wasn't working. That's partly just people listening. And it's partly,  right across the sector – not just the homeless sector, it obviously is other care sectors – the recruitment problems we were having.”

Allen’s view is that the State’s past policy was to subcontract services to charities under the same professional standards, but expecting to pay around 10 per cent less than through public service agencies. This has driven workers away from those employers because of poorer pay and conditions.

Amid gaps in services, increased trade union activity culminated in mid-October’s threatened strike in the voluntary sector. It was cancelled at the last minute after the Government backed a pay agreement at the Workplace Relations Commission.

A new procurement process

Back at the Housing Agency, Rob Lowth agreed with Allen’s assessment. “From a staffing perspective, we all want the best quality and sometimes you have to pay slightly more for your staffing as a result. I know there's been a lot of, I suppose, unrest in the sector – agreements and strikes and so on,” the national director of Housing First says. “To be at the frontline of homeless services, they deserve increases. They deserve to be getting remunerated for the quality of the work they're delivering, because it really is a difficult environment to work in.”

To secure both adequate capacity and price in the next round of Housing First contracts, Lowth says his office has been working on a new procurement design since its establishment last year: “We're feeding in all what we've learned over the last 18 months or so, in terms of the good, the bad and the indifferent.”

He says consultations with local authorities, the HSE and homeless NGOs have revealed aspects as unexpected as the inclusion of dental health, after lack of access to a dentist emerged as a significant challenge to some homeless people’s nutrition and ability to stabilise their life in a new home. As a result, when calls for Housing First tenders go out in the coming weeks, they will follow an entirely new two-step process.

“Stage one is a pre-qualification document, which will require elements of financial assurances, general insurances, tax clearance cert – all of the different associations there for a company, but there will be elements of quality as part of that stage one as well,” Lowth says. “Everything what we're trying to focus on is about the quality. It's not necessarily about the estimated running costs of the project.”

Although procurement will continue on a regional basis, smaller organisations will have the option to tender for a single county.

Lowth says that stage two would consist in an evaluation of the organisations pre-qualified within the framework of stage one to rank them by order of capacity. “You’re giving choice to the local authority and the HSE to say, ‘Well, if we give 30 tenancies to number one, we see how those tenancies get on. And we think that organisation is at capacity, we can then move on to offer number two',” he explained. While dialogue would continue with the best-ranked bidder, “you have the backup, you have the opportunity to talk to the second organisation on the framework and it's a negotiated procedure from that perspective”.

Only at the point of entering a contract will local authorities and the HSE then negotiate a price with the selected implementing organisation based on the costings it had submitted in its original tender. “I think that's something we've all learned in the last 12 months, the volatility of economics across the board has been huge,” Lowth said. 

From being a deciding factor – albeit not the only one – price has been relegated to a post-selection negotiated point. This also means that changes in the costs of labour and inputs will feed into the final price agreed for each contract.

“Homeless services should be cost-neutral to the organisation delivering them.”

Rob Lowth

“Homeless services should be cost-neutral to the organisation delivering them and, in fairness to the HSE, the Department of Housing and the Department of Health, we all get that,” Lowth said. “We have to realise that it has to be a cost-neutral service to make it viable.” He added that voluntary organisations, by their nature, would always do more to help individuals with their own charitable money, but State-funded services had to deliver their own outcomes and Housing First was the most closely monitored such programme.

While new Housing First contracts will still be for three years with a possible extension, there will now be provisions for annual reviews and corrective actions if needed. This means that services provided to some tenants may transfer to a new, better-performing operator over time – without the person having to move home, Lowth clarified, as the accommodation tenancy itself is legally separate from the social and health supports delivered under Housing First.

National policy is now to add 1,319 tenancies under Housing First between 2022 and 2026, doubling the figure of around 1,000 delivered so far. Lowth says that an increase in spending is planned to match this. A central benchmark is a ratio of one intensive case manager for 12 tenants, to be maintained as the number of tenants grows.

To be clear, does Lowth expect the cost of Housing First for the taxpayer to rise under the revised procurement process? “Ultimately, yes,” he says. “We've accepted that. When we actually go to release the projections for each region as part of the tender, that's going to be very visible.” He won’t be drawn on the scale of cost increases until those projections are published.

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The coming weeks will redefine the procurement of homeless services for years to come. While the Housing Agency has emerged as a central point to co-ordinate the outsourcing of those supports to charities, local authorities remain responsible for running the tendering process and ensuring the transparent reporting of its results. The next round of Housing First contracts is unique in that they all take part in the process at the same time.

“Each local authority makes its own decisions on these things, so we're not exactly sure how this is going to roll out beyond Housing First into other contexts, but we hope that it will be a sort of domino effect of good practice across local authorities,” said Focus Ireland’s Allen.

“In terms of looking at cross-government projects, there will be indications as to how we're monitoring this and it's being watched closely by the Department of Housing,” Lowth added.

Shortly after our interviews, the DRHE issued a call for tenders to provide the capital's outreach service. The contractor sends teams onto the streets to meet rough sleepers and refer them to shelters and other services as needed. The Dublin Simon Community secured the current contract in 2019 for €1.4 million over three years, against an estimated cost of €3 million, and later received an extension. The new call for tenders estimates the cost for the next three years to be €7.5 million.

Comparing tendering documents five years apart shows there have been changes to address the issues raised by Allen and Lowth, albeit only partially. On the plus side, there is a new provision for the DRHE to seek clarification of "abnormally low tenders" and disqualify a bidder if it fails to explain "commercially unsustainable or otherwise problematic" pricing. The procedure has also evolved from an open contest to the constitution of a single-operator framework followed by a negotiated contract, allowing more headroom to agree a final price for the services effectively contracted.

The selection of this single operator, however, remains "on the basis of the most economically advantageous compliant tender" with ultimate cost still accounting for 30 per cent of the decision – though this is now on a part with adequate resourcing.

The Peter McVerry Trust, until now the largest provider of Housing First alongside other support services as well as sorely needed underlying one-bedroom apartments, is working through its own financial difficulties at the precise time when charities must pledge additional capacity for the next round of contracts. Will it be able to do so and meet the qualification criteria? 

“I very much hope so,” Lowth says. “They have done fantastic things for Housing First, across the country, not just in Dublin.”

“They have fantastic tenants who've really gone on a journey of recovery. And amazing staff, like across the sector – amazing staff doing a great job.”