1 In April 1999, National Savings & Investments (NS&I) transferred its operations to Siemens Business Services (SBS)1, in one of the largest outsourcing operations ever undertaken by a UK Government Department. In May 2000 we published a report2, "National Savings Public-Private Partnership with Siemens Business Services", which concluded that NS&I had secured a very good deal with SBS and that the partnership was capable of delivering significant benefits. The Committee of Public Accounts'3 conclusions on the deal are shown in Figure 1.
1 |
| Conclusions of Committee of Public Accounts on the deal |
|
| "The partnership appears to be good value for money. NS&I estimated that the cost of the partnership would be £158 million4 less, over the life of a 15-year contract, than retaining the operational service in-house. The entire operational service had been transferred to SBS, which planned to invest in new technology leading to new ways of working and a substantial reduction in staff numbers. As part of SBS's wider strategy to expand its operations, 500 former NS&I staff have so far been re-deployed on third party work allowing continuity of employment at the three sites, though a similar number of staff had accepted voluntary redundancy. This outcome resulted from a well-managed procurement process that took account of the interests of customers, employees and the Treasury. At 8.7 per cent before tax, the return SBS expects to make over the life of this contract is significantly lower than the average return on other PFI deals. |
|
| Nevertheless, this remains a high-risk project for SBS and NS&I. In modernising the operational service, SBS is dependent on the gradual introduction of a relatively small but crucial amount of new technology. If SBS fails to deliver, the significant improvements in quality of service for customers envisaged by NS&I will be delayed. SBS considers that the risk of failure is reduced because it has more control over this project than over past public sector projects in which it has been involved. |
|
| NS&I must therefore remain vigilant. To ensure that the partnership works as intended, NS&I and SBS have put in place a joint governance structure. Within this structure there are two key elements which need to be managed with particular care. First, NS&I should continue to ensure that the operation of the performance management regime, and in particular the penalties for poor performance, is transparent and promotes continuous improvements in performance by SBS. Second, successful implementation of a process to benchmark SBS's performance and costs against the market will be essential if good value for money is to be maintained throughout the life of this long-term contract." |
|
| Source: Committee of Public Accounts Report. HC 566 1999/00 |
2 The contract is into its fourth year and this report examines its progress, with particular reference to the Committee of Public Accounts' previous recommendations. The methodology we used is set out in Appendix 1.
__________________________________________________________________________________________
1 A division of Siemens AG, the German parent company of the Siemens group.
4 Net Present Cost Value.