Executive summary

1  The Department for National Savings (National Savings) is an executive agency of the Chancellor of the Exchequer which helps to fund central government borrowing by offering savings products directly to the public. In March 1997, National Savings invited expressions of interest from potential bidders to run the operations required to process product transactions and provide a customer service (the operational service). Following a competition, National Savings transferred all of its operational staff and assets to Siemens Business Services (SBS) from 1 April 1999. Within a partnership framework, SBS will service all of National Savings' products for up to 15 years. The partnership forms a vital part of a programme of modernisation and transformation which aims to provide better value for the taxpayer and National Savings' customers. An intensive investment programme should enable National Savings to be competitive and relevant in the highly competitive and fast moving retail savings market.

2  National Savings has about 12 per cent of the retail savings market and at 31 March 2000 around 30 million customers had invested a total of £62,500 million in a range of products which include Premium Bonds, Savings Certificates and Investment Deposits. These products are serviced by SBS at three operational sites - Blackpool, Durham and Glasgow. National Savings is located mainly at its London headquarters (Figure 1). Business is conducted through agents and directly with customers by post and by telephone. During 1999-2000, the operational service processed over 50 million transactions resulting in sales of £10,200 million and repayments of £11,100 million. Although National Savings has a number of computer systems, many of the processes used for product transactions are paper based. Prior to April 1999, National Savings employed some 4,200 staff and incurred running costs of some £180 million a year.

3  We examined the value for money likely to be obtained by National Savings from the partnership with SBS, whether the contract underpinning the partnership will be an effective framework for managing the relationship and how the procurement process was handled. Our methodology is summarised at Appendix 1.