Improving Active Labour Market Policies in Spain

3. Engaging service providers

Abstract

This chapter examines how selected ALMPs in Spain engaged service providers to deliver high-quality services. It begins by outlining the rationale for assessing service provider engagement and presents the benchmark used for the qualitative assessment. The chapter highlights variations in service provider selection methods, payment models, and the mechanisms in place to monitor service quality across programmes. It identifies good practices that illustrate competitive procurement and outcome‑based payments, and concludes with recommendations grounded in the evidence reviewed to strengthen service provider engagement in future ALMPs.

3.1. Understanding the criterion and its benchmark for qualitative assessment

Whether ALMPs are managed by SEPE or regional PES, the implementation falls to various service providers. The calls for tenders typically target a broad range of entities, including autonomous bodies, public business entities, trading companies (wholly or majority-owned or controlled by a local authority), foundations, and other non-profit institutions, as well as both public and private training providers.

Therefore, a key criterion for designing effective ALMPs is the establishment of clear rules for selecting service providers, establishing robust contractual agreements, and ensuring the quality of the services they provide. This approach guarantees that resources allocated to the programme are used as efficiently and cost-effectively as possible.

When selecting service providers, it is essential to establish criteria that are both rigorous and transparent. The selection process should not only be fair and competitive but should also increase the chances of engaging providers capable of delivering high-quality programmes to all prospective clients (target groups) and across the Spanish territory. Potential criteria for service provider selection may include various qualifications and standards. For instance, providers might be required to demonstrate expertise or specialisation in areas relevant to the respective ALMPs, such as a successful demonstrable experience in youth support if the programme targets young people. Adherence to all relevant legal and ethical standards, including labour laws, non-discrimination policies, and data protection regulations, is also crucial. Other indicative criteria could involve a history of past performance and references, such as success rates in previous projects and endorsements from reputable institutions. Providers showcasing innovative approaches might also be considered. Each programme may require a unique set of criteria tailored to its specific objectives and context.

Designing an appropriate payment model for service providers is a crucial aspect of ALMPs. The challenge is to create a model that both attracts service providers and incentivises the achievement of desired outcomes. Outcome‑based payment models are recommended, as they have proven effective in motivating providers to offer superior services compared to traditional fee‑for-service models (Langenbucher and Vodopivec, 2022[8]; Vodopivec, 2023[9]).1 These models work by setting clear, measurable goals and tying remuneration to their accomplishment. This approach not only encourages providers to perform efficiently but also aligns their efforts directly with the program’s objectives. Payment variation based on client employability could also be implemented; for example, more challenging cases like hard-to-place clients could warrant higher payments. Moreover, to ensure that these outcome‑based models do not lead to the neglect of the most vulnerable jobseekers, it is essential to include safeguards such as minimum service requirements.

Finally, ongoing monitoring of service providers is crucial to ensure that they consistently meet the established quality standards. This involves regular assessments, potentially through both quantitative metrics and qualitative feedback from programme participants. In cases where standards are not met, prompt and appropriate corrective measures should be implemented. This could involve additional training for the staff who provide the services, adjustments in service delivery methods, or, in extreme cases, reconsideration of the service provider’s contract.

Box 3.1. Benchmark for excellence: engaging service providers in ALMPs

A benchmark ALMP excels in engaging service providers through careful selection, strategic contract establishment, and ongoing quality assurance. This model ALMP incorporates a transparent and rigorous selection process, potentially including criteria such as prioritisation of providers with proven expertise in relevant fields, compliance with legal and ethical standards, and a history of innovative and effective practices.

The programmes payment model strategically focusses on attracting and motivating high-quality service providers, ensuring that their incentives align with the programme’s goals. Payments are linked to concrete results (i.e. jobseekers moving to good quality jobs), and adapted based on the diversity of beneficiaries, promoting both effectiveness and inclusiveness in contracts and public procurement processes.

Ongoing monitoring of service providers is a key aspect. Regular assessments, using both quantitative data and qualitative insights, such as feedback from programme participants, ensure consistent high-quality standards. In cases of non-compliance or underperformance, the programme promptly implements corrective actions, which may include staff retraining, modifications in service delivery methods, or, in extreme circumstances, revisions to the service provider’s contract.

3.2. Summary of the qualitative assessment results

3.2.1. Selection of service providers

Approaches to selecting service providers varied significantly across programmes, with differences in the degree of competition, transparency, and criteria used in provider selection.

Some programmes relied on direct agreements, engaging providers with specialised experience in serving the programme’s target groups. This approach allowed for rapid mobilisation and ensured that service providers had relevant expertise, particularly in areas requiring highly specialised support. However, because this method did not involve an open selection process, it limited transparency and competition, potentially excluding alternative high-quality providers.

Other programmes used a non-competitive concurrence approach, where providers were selected on a first-come, first-served basis, provided they met minimum eligibility requirements. This method facilitated quick allocation of funds and reduced administrative burdens, but it also posed risks. High-quality providers who applied later in the process could be excluded once the allocated budget was exhausted. To mitigate this, some programmes introduced rules that capped the number of participants each provider could serve, ensuring a more diverse range of service providers.

In contrast, some programmes opted for a competitive tendering process, where service providers were assessed based on predefined criteria such as project quality, pricing, technical expertise, prior experience, and recognised quality management certifications (e.g. ISO 9 001 or EFQM). While this approach was more resource‑intensive, it ensured a transparent and merit-based selection process, often leading to higher-quality service provision. Competitive tendering was particularly effective in aligning service provision with programme goals, as it encouraged providers to demonstrate their capacity to deliver tailored, results-oriented support. A key good practice observed was the inclusion of selection criteria that directly aligned with the specific objectives of each programme. For example, some programmes prioritised service providers with strong employer partnerships to enhance job placement opportunities, while others valued a proven track record of supporting the target groups to ensure service providers had the necessary expertise to deliver tailored and effective interventions.

3.2.2. Payment models

Different payment models influenced the incentives of service providers and helped to shape programme outcomes. Some programmes relied on service‑based payments, where providers were compensated for delivering specific services, such as counselling or training, at predefined rates per hour or per participant. Payments were often linked to meeting minimum service requirements, such as a set number of hours or modules, ensuring that all jobseekers, regardless of their employability challenges, received adequate support. This model provided financial stability for service providers and facilitated upfront resource allocation. In certain cases, advance payments were also granted to help service providers cover initial operational costs, particularly in programmes targeting disadvantaged groups that required more comprehensive support. However, because payments were tied to service completion only, this model did not necessarily encourage providers to prioritise employment outcomes.

Other programmes adopted outcome‑based payment models, where provider compensation was liked to participants achieving measurable labour market outcomes. Some programmes linked payments to job placement alone, while others incorporated retention-based payments, rewarding providers when participants remained employed for a specified duration (e.g. 180 days). Additionally, certain programmes set a minimum integration threshold, requiring the service provider to secure employment for a specific proportion of participants to receive full payment. For instance, if fewer than a given share of participants (e.g. 50%) found jobs, payment reductions or penalties were applied. This approach aligned provider incentives with employment outcomes but also introduced risks. Strict employment targets could lead providers to prioritise jobseekers who are easier to place, potentially discouraging them from working with individuals facing significant barriers to employment. To mitigate this risk, some programmes adjusted payment structures by offering tiered incentives, where providers received partial payments for shorter job retention periods or for placements in part-time rather than full-time roles.

Many programmes implemented hybrid payment models, combining both service‑based and outcome‑based payments to balance service provision with employment objectives. The distribution of payments between these components varied widely. Some programmes allocated a larger share to service delivery to ensure stable provider engagement, while others placed greater emphasis on rewarding employment outcomes. These choices often reflected the programmes’ specific objectives. A particularly effective practice observed in some programmes was the use of staged disbursements, where payments were made incrementally based on service completion, job placement, and job retention over time. This structure ensured that providers remained engaged beyond initial job placements and continued supporting participants through their transition into stable employment.

In some cases, providers were credited for the overall programme’s success and received full contracted payment if participants secured employment, even if they had not completed the entire programme itinerary. While this prevented rigid programme requirements from delaying job integration, it also risked shifting provider focus towards rapid job placement rather than delivering more comprehensive support. To address this, some programmes allowed participants who had secured employment to continue benefiting from remaining support services within their personalised itineraries, ensuring sustained career development beyond initial job placement.

Ultimately, payment models that combined financial stability for providers with incentives to achieve sustainable employment outcomes were best positioned to encourage high-quality service delivery and effective labour market integration

3.2.3. Quality assurance

Across all programmes, regular contact between the public institution managing the programme and service providers was a standard practice, ensuring ongoing oversight and co‑ordination. This included frequent calls, email exchanges, and in-person meetings, allowing for continuous dialogue and problem-solving throughout programme implementation. In some cases, review committees were established, bringing together representatives from the public administration and service providers to discuss progress, address challenges, and share best practices. In addition, service providers were required to comply with the monitoring framework established under the RRP, which mandated systematic data collection on service provision and participant progress (see Chapter 9).

Beyond the RRP framework, several additional quality assurance measures were implemented to assess the effectiveness of service delivery. On-site visits were a widely used tool, allowing public authorities to directly evaluate the quality of services provided. In some cases, these visits were conducted unannounced to capture a more realistic picture of service delivery. Some programmes also included a review of participant case files during these visits to verify compliance with programme requirements.

Participant feedback mechanisms were another key element of quality assurance, with many programmes collecting direct input from jobseekers through surveys or interviews. This feedback helped identify potential gaps in service provision and areas for improvement. Some programmes went further by implementing multiple rounds of surveys at different stages of participation, ensuring that evolving experiences and challenges were captured.

Where performance issues or non-compliance were identified, corrective actions were taken. These ranged from requiring service providers to adjust service delivery methods to, in more serious cases, imposing financial penalties. In programmes with stronger quality assurance mechanisms, providers were given structured options to address identified weaknesses through additional training or operational adjustments before more severe measures were applied.

3.3. Good practices identified

The following two examples, presented in Box on good practices 3 and Box on good practices 4, illustrate effective approaches to selecting and incentivising service providers. The first highlights how Castilla-La Mancha used competitive tendering processes with well-defined and targeted criteria to ensure the selection of high-quality providers. The second showcases a strategic payment model in Extremadura that links disbursements to both service delivery milestones and employment outcomes. Together, these cases demonstrate how thoughtful provider engagement can contribute to stronger ALMP implementation and results.

Box on good practices 3. Selection of service providers in Castilla-La Mancha: A model of competitive tendering

Castilla-La Mancha exemplifies good practice in selecting service providers through a competitive tendering system (“concurrencia competitiva”) for both vulnerable groups and women victims of gender violence programmes. This system awards subsidies based on publicity and equal competition. Applications submitted by service providers are assessed according to criteria established in the regulatory bases, with points attributed to different criteria, ensuring a transparent and merit-based selection process.

For each programme, different eligibility criteria and minimum requirements were established depending on the programme’s goals. The call for the vulnerable groups programme was open to placement agencies, which are organisations specialised in labour market guidance and intermediation. This choice aims to maximise the programme’s success in improving employability and insertion of its participants. Meanwhile, the call for the programme for women victims of gender violence was open to both public and private, for-profit and non-profit organisations, given the complexity of the programme and the group involved. For this latter programme, financial solvency was an eligibility requirement for service providers to apply, as well as having experience in similar programmes.

The scoring system is carefully designed to ensure that high-quality providers are retained, enhancing the chances of the programmes’ success (see Table 3.1). Some similar criteria are applied to both programmes. Firstly, ensuring the quality of the technical offer and analysing the coherence, proposal, and methodology is inherent to both programmes. More concrete criteria are also found in both programmes, such as ensuring sufficient human resources and having some monitoring tools. Partnerships and networks are also a relevant criterion for both programmes, but given their different objectives, for vulnerable groups, it focusses on partnerships with employers, while in the programme for women victims, it relates more to having a network of entities specialised in this target group to collaborate and expand the services that can be provided to these women.

There are also some criteria specific to each programme that allow adaptation to the specific objectives and needs of the target population. For instance, the geographical scope is critical for the programme targeting vulnerable groups, while innovative soft skills workshops are essential for the programme addressed to women victims of gender violence.

All in all, through its clearly defined criteria for selecting service providers, Castilla-La Mancha maximises the chances of success of the programmes. The selection process ensures that important aspects of the programme are considered from the outset. The selection principles align well with the criteria assessed in this report, such as partnerships with employers or holistic support (through the selection criterion “partnerships and network”), monitoring and evaluation (through the selection criterion “monitoring of participants “), and the alignment with RRP objectives (for instance, through the geographical selection criterion that tackles territorial cohesion for vulnerable groups programme).

Table 3.1. Main criteria used in Castilla-La Mancha for selecting service providers for territorial projects for vulnerable groups and training with commitment to recruitment and integration of women victims of gender-based violence, trafficking or sexual exploitation

Vulnerable groups programme (200 points)	Women victims of gender violence programme (100 points)
Similar selection criteria across both programmes:
Methodology and technical quality of the proposal*
Up to 20 points assigned based on the methodology and processes used in the development of the programme. It includes the tools available for market analysis, existing agreements for the labour market integration of participants, online tools for user satisfaction, and complaint procedures.	Up to 50 points assigned based on the coherence, rationality, structure, and detailed description of services and methodologies (content of the proposal, partnerships and networks, monitoring tools, innovation, etc.).
Partnerships and networks
Up to 10 points assigned to service providers that present partnerships or agreements with employers who show interest in hiring people participating in the programme: 1 point for each agreement.	Up to 5 points assigned for having an established network and co-ordination with public and private entities supporting victims of gender-based violence and the complementary use of other resources (in addition to services provided by the entity).
Sufficient human resources allocation
Up to 15 points assigned based on the ratio participants/technical staff (e.g. 90 participants/staff corresponds to 3 points while 70 participants/staff corresponds to 9 points).	Up to 20 points for assigning more technical staff than the minimum required by the programme (e.g. 1 additional staff member corresponds to 5 points, while 4 correspond to 20 points).
Monitoring of participants
Up to 5 points assigned for having online tools and procedures for monitoring user satisfaction, complaints, and suggestions.	Up to 3 points assigned for ensuring the provision of detailed monitoring and evaluation processes, including quarterly and annual reports.
Unique selection criteria for each programme:
Increment in labour market integration commitment: Up to 30 points assigned for committing to exceed the minimum 10% of labour market integration required: 1 point for each p.p. increase.	Economic offer: Up to 30 points assigned, with the cheapest offer scoring highest. Calculation is proportional based on the reduction from the maximum allowed bid price.
Previous labour market integration rates: Up to 5 points assigned based on the percentage of participant labour market integration over the last year (e.g. 1 point if between 10% and 20% and 5 points if above 50%).	Innovation: Up to 4 points assigned for detailed, well-founded proposals specifically addressing soft skills workshops aimed at empowering women.
Geographical coverage: Up to 45 points based on the territorial coverage of the project, with points increasing for broader geographic coverage. Additional bonus points are given for covering depopulated areas (based on the area’s population density and risk of depopulation).
Quality certificates: 5 points assigned for having recognised quality certifications like ISO 9001 or EFQM.

Note: *The total amount of points attributed in the criterion “Methodology and technical quality of the proposal” may include some other criteria mentioned below in the table, such as having established partnerships and networks and having monitoring tools.

Source: Authors from information collected through questionnaires and consultations, and the administrative specifications outlined in the calls for tenders.

Box on good practices 4. Strategic payment model for enhancing service delivery and employment outcomes in Extremadura

The payment model implemented in Extremadura for the programme aimed at supporting vulnerable populations, specifically individuals with disabilities, exemplifies a good practice that effectively aligns the incentives of service providers with the ambitious goals of the ALMP.

Payment Model

Under this payment model, service providers receive up to EUR 6 000 for each participant who successfully completes a tailored itinerary designed to improve their employment prospects. The breakdown of the payment is as follows:

• Itinerary completion payment: Service providers are allocated EUR 4 900 per participant, which supports a range of services:

  • EUR 3 000 for core activities such as counselling, skill acquisition, and participation in job search teams.

  • EUR 1 200 for job training actions.

  • EUR 600 for scholarships and financial aids to assist with their participation.

  • EUR 100 for essential operational costs like facilities and supplies.

• Labour market integration bonus: An additional EUR 1 100 is provided for each participant who secures stable employment post-program, aimed at covering expenses associated with successful job placements. To qualify, employment (or self-employment) must last for at least three months at a minimum of 50% of full-time hours.

Payment disbursement and compliance enforcement

Payment is disbursed in stages linked to specific milestones:

• Initial Payment: 50% is released upon approval of the grant.

• Second Payment: 35% follows once at least 35% of participants have completed their itineraries.

• Final Payment: The remaining 15% is disbursed once all programme objectives have been met.

Compliance is actively enforced through payment reductions:

• Total non-compliance: requires full reimbursement of the payment by service providers if fewer than 80% of the itineraries are completed or if fewer than 50% of the job placement objectives are met. Note that the programme has a specific objective to achieve at least a 15% job placement rate for individuals with disabilities.

• Partial non-compliance: occurs when at least 80% of the itineraries are completed, but the overall objectives fall short of 100%, or when at least 50% of the job placement commitments are met without reaching the full objectives. In such cases, the principle of proportionality is applied, adjusting the repayment obligation of the received funds in proportion to the unmet commitments, both for itineraries and job placements.

Overall, the payment model in Extremadura effectively promotes timely and objective‑aligned service delivery. The structure of payments encourages providers to focus not only on completing tasks but on achieving stable employment outcomes for participants. This model connects disbursement to the achievement of specific milestones, which helps to ensure that programme delivery is both timely and meets set objectives. Additionally, the model incorporates penalties for non-compliance, reinforcing accountability and ensuring efficient use of public resources.

Source: Authors from information collected through questionnaires and consultations, and the administrative specifications outlined in the calls for tenders.

3.4. Policy directions: Avenues for strengthening service provider engagement in future ALMPs

3.4.1. Enhance the transparency and competitiveness of the provider selection processes

Service provider selection varies significantly across programmes, with some approaches prioritising speed over quality. While direct agreements and non-competitive procedures can be effective and necessary in certain contexts, increasing transparency and competition can improve service quality and encourage innovation. Future ALMPs should:

• Prioritise competitive selection where feasible, by ensuring provider qualifications, experience, and alignment with programme objectives are systematically assessed through an open and merit-based process. A structured assessment framework with a well-designed and transparent scoring system should be in place to reflect programme priorities, ensuring that evaluation criteria are both strategic and adaptable to specific contexts.

• Ensure sufficient administrative capacity and realistic timelines: Competitive selection processes require dedicated human resources to manage calls for tenders, assess applications, and oversee implementation. Allocating sufficient personnel and ensuring that the timeline for fund allocation is realistic will allow for a fair, transparent selection process while avoiding excessive programme delays. At the same time, leaner and more efficient procurement can be promoted through tools such as shared contract management systems across programmes, digital platforms to automate repetitive tasks, and standardised templates to reduce administrative burden.

• Strengthen and adapt selection criteria to include not only general quality standards (e.g. general experience, compliance with regulations, financial solvency) but also programme‑specific elements that enhance service delivery. Criteria should be flexible enough to account for the diverse objectives of ALMPs, allowing programmes to prioritise aspects such as employer partnerships, experience with specific target groups, and a network of collaboration with complementary service providers.

3.4.2. Improve the balance between service continuity and outcome incentives in payment models

Payment models influence provider incentives and programme effectiveness. While service‑based payments ensure service continuity, outcome‑based payments drive sustainable employment. Future ALMPs should:

• Expand hybrid payment models, combining service‑based payments for service provision with well-calibrated incentives for employment outcomes, to balance service continuity and performance.

• Ensure that outcome‑based payments are well structured to incentivise not only job placement but also retention. For instance, rather than a single payment made at job placement, staged payments can be made at different employment retention milestones (e.g. three months post-placement, six months post-placement) to encourage long-term sustainability. For participants with more complex needs, outcome‑based payments could also be linked to verifiable milestones such as obtaining qualifications, improving digital literacy, increasing confidence (captured through validated self-assessment tools), or enhancing social skills (measured using structured assessment tools).

• Introduce safeguards to prevent the neglect of vulnerable jobseekers by requiring minimum service standards. These standards should, at a minimum, align with the rights established under the Employment Law 3/2023 and the Royal Decree 438/2024 on the Common Portfolio of Services (Cartera Común de Servicios del Sistema Nacional de Empleo), and, where appropriate, go beyond them to ensure tailored, high-quality support for those facing greater barriers to employment.

• Implement payment variation based on client employability (low employability to high employability), to counteract cherry-picking and ensure support for those facing greater barriers. Hard-to-place participants could warrant higher payments, encouraging providers to work with individuals who require more intensive assistance, an approach that was not observed in the programmes assessed but could strengthen inclusiveness.

3.4.3. Strengthen quality assurance mechanisms

Ensuring high-quality service provision requires mechanisms that promote accountability and continuous improvement.

• Programme managers/co‑ordinators should maintain regular and close contact with service providers, fostering ongoing dialogue to identify and address challenges timely and effectively. Monitoring frameworks should include both quantitative and qualitative data collection, such as that used under the RRP framework, to systematically track programme performance and participant progress.

• Expand the use of on-site visits to service providers, including both scheduled and unannounced evaluations, to obtain a realistic assessment of service quality and compliance.

• Systematically integrate participant feedback mechanisms, conducting multiple surveys at different programme stages to regularly track service provision and participant satisfaction, ensuring a more responsive approach to service delivery.

• Implement structured corrective measures to address underperformance in service provision. These measures should range from requiring service adjustments to, where necessary, applying financial penalties or reconsidering contracts in cases of persistent non-compliance.

3.4.4. Encourage innovation and knowledge sharing among service providers

To improve service quality and adaptability, ALMPs should foster an environment that encourages innovation, collaboration, and knowledge exchange among service providers. Future programmes should:

• Encourage innovation in service delivery by allowing providers to propose flexible methodologies, new training approaches, and digital solutions tailored to jobseeker needs, and by providing appropriate incentives to pilot and scale successful innovations.

• Promote structured mechanisms for knowledge sharing and best practice exchange through peer-learning networks, forums, and collaborative initiatives. Facilitating interactions between service providers will help disseminate successful approaches and improve service quality across different programmes.

• Support continuous improvement and learning among service providers through training opportunities, capacity-building initiatives, and facilitating engagement with research and policy institutions.

Note

← 1.  See also OECD/DG Reform projects: "Reforming the Swedish Public Employment Service" and "Labour market integration of the long-term unemployed in Slovenia".