These recommendations apply to the Department, but may have relevance to other similar deals.
Understanding Mapeley's profitability
a The Department has limited access to information under the contract, reflecting current practice when the contract was signed in 2001. It has not assessed the benefits realised by Mapeley from the STEPS deal nor the profitability of the Mapeley Group. The Department should seek full access to Mapeley's financial information, and that provided to Mapeley's bankers in line with the Treasury's 2007 guidance on standardised private finance initiative contracts. It should establish ongoing processes to assess Mapeley's financial position and profitability, including an independent expert assessment of Mapeley's return on its original investment. Full disclosure from Mapeley should be a prerequisite for any negotiations on varying the terms of the contract.
Undertaking negotiations
b The Department has performed poorly in bringing negotiations on a number of issues to a conclusion. It has a programme under way to make greater use of the vacation allowances which may require further negotiations. The Department should consider carefully any proposals for changes to the contract or changes that will affect its use of the vacation allowances. It must not offer any concessions without corresponding benefits, and it should reassess whether it has the right commercial and legal skills to undertake these negotiations.
Setting a strategy
c The Department has no long-term strategy enabling it to balance business needs and savings potential, and lacks a shared strategy with Mapeley. The Department and Mapeley should develop a joint annual estates strategy and set up a joint strategic committee, separate to the estates management function, to establish objectives for the next five and 10 years, and for the end of the contract. These should include cost and space targets at key points, aiming to maintain space utilisation of between 10 and 12 square metres per person in line with standards recommended by the Office of Government Commerce.
Maximising value
d The opportunity to vacate 60 per cent of the estate is a significant benefit but there are also opportunities for the Department to benefit by committing to retaining some buildings. In developing its strategy, the Department should also identify buildings it wishes to retain longer term. It should examine opportunities to share in the benefits Mapeley can obtain on deals that increase property values.
Understanding value for money
e The Department does not monitor the overall cost of the contract against initial models to understand whether it is achieving value for money, and it has not undertaken analysis on the potential savings available. Until recently it had a limited understanding of its liabilities in the event of contractor default. The Department should prepare an annual value for money assessment on the contract for its Board, including an update on costs versus forecasts, potential liabilities and risks, and available benefits.
Contract ownership
f There needs to be active management of the contract at Board level to ensure the contract represents good value for money. Current engagement is at operational level. The Department's senior management should work directly with the Mapeley Board to resolve outstanding issues, agree strategies, and manage risk.
Managing Data
g The Department uses a number of property databases which do not reconcile. It has no shared database with Mapeley. The Department and Mapeley should establish a common database, to include a complete estate inventory and specifications, and information on properties that it plans to vacate.
Managing risks
h The Department recognised that it would need strong risk management processes. It has generally reacted to risks as they materialise and has no shared risk register with Mapeley. It only began to develop a detailed business continuity plan to manage the risk of Mapeley default in January 2009. The Department should set up a comprehensive risk register that it shares with Mapeley. It should formally document its response to recommendations from commissioned reviews, and update its business continuity plan to manage the risk of contractor default.