3.7 NS&I negotiated a contract, which only considered the investment needs of the business over the first 3-4 years. It had not fully considered how it could gain a low cost, sleeker and more efficient operation through the contract. It did recognise, however, that its objectives could change and incorporated change mechanisms in the contract.
3.8 The whole business approach requires each partner to challenge the requirements and actions of the other because of the impact they might have on the business as well as each other's objectives and how the contract is delivered. As this was initially a customer/supplier relationship neither party challenged the other sufficiently. In line with PFI principles, NS&I transferred appropriate risks to SBS but although NS&I, rightly, did not seek to approve SBS's actions, it failed to challenge sufficiently SBS's solutions for transforming the business. Neither did SBS challenge NS&I's requirements around product, channel and customers. And both partners failed to fully identify the longer term changes required to deliver the future vision. SBS did not do so because it was new to the BPO business and the retail financial market and considered it lacked sufficient ability to challenge NS&I's requirements.
3.9 As the contract required business transformation through the migration of all NS&I products to a new common IT platform to be completed by an early date, December 2000, SBS transferred complex products onto Thaler without adequately reviewing the processes and testing the application before implementation. NS&I now recognises that putting all products onto Thaler may not benefit the business as a whole.