2.25 SBS has paid performance deductions and annual rebates to NS&I as agreed under the contract. NS&I receives an annual rebate from SBS for lower transaction volumes, unused new products and shares in third party rent. Appendix 6 shows how this rebate is calculated.
2.26 The rebate due for the second year of the contract, 2000/2001, was £2.9 million, mainly because NS&I did not launch any new products during the year. SBS did not pay this rebate until the end of March 2002 because it did not make provision for it and sought to reduce the financial impact of the payment by balancing it against costs incurred on other areas of NS&I work for which payment was due.
2.27 Up to October 2002 a significant number of performance deductions were outstanding. Deductions for failing treasury management KPIs were outstanding from October 2000 and SBS was also formally disputing a number of deductions for failed KPIs on after-sales and payments that resulted from the Savings Certificates rollover incident (Figure 8). NS&I and SBS have now agreed all outstanding deductions to July 2002 and SBS has cleared these for payment.