2.11 The contract between National Savings and SBS includes a comprehensive list of events which can lead to default. These include such events as the insolvency of SBS's parent company, a change of control of SBS or its parent company and any fundamental breaches of obligations. Fundamental breaches include abandonment of the contract by SBS or a failure to take action which results in the standing or reputation of National Savings or the Government being adversely affected to a significant extent. In particular, poor performance on the part of SBS gives National Savings the option to terminate the contract when performance deductions of 40 per cent or more of the unitary charge are made in a month or any platinum graded key performance indicator is failed two or more times in any six month period. National Savings can also terminate the contract for any reason after two years from the start of the partnership but would have to give 12 months notice and pay compensation if SBS was not at fault. SBS has agreed to a limit of £250 million on aggregate liability for all defaults during the contract period. On the other hand, SBS may terminate the contract if National Savings fails to pay any sums properly due or is unable to perform its obligations.
Box 3 |
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Governance of the contract |
Area of Coverage | Broad Description | Number of KPIs | Date of Introduction | Measurement | Frequency of Reporting | ||
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| Platinum | Gold | Sliver |
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|
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Treasury Management | Banking of receipts and transfer from local banks to Bank of England. Transfer to and from National Loans Fund and National Debt Office | 2 | 3 | - | 4 at 1/4/99 1 to be decided | Timeliness and accuracy of money movement | Daily |
Product Delivery - Sales | Despatch of customer documentation sales queries and updating of records | - | - | 5 | 4 at 1/4/99 | Timeliness of despatch and response to queries and accuracy in compliance with customer's instructions | Daily or weekly monitoring with results reported monthly |
Product Delivery - After Sales | Replies to queries, despatch of statements of interest | - | - | 7 | 4 at 1/4/99 | Timeliness of despatch Accuracy of replies to customers | Daily monitoring with results reported monthly. Quarterly for ISAs Annual |
Product Delivery - Payments | Despatch of payments and customer documents, queries | - | 2 | 2 | 3 at 1/4/99 | Timeliness of despatch and accuracy in compliance with customer's instructions | Daily monitoring with results reported monthly |
Product Delivery - Premium Bond Prizes | Informing major winners, despatch of high value claim forms and of prize warrants, and automatic reinvestment of prizes | - | 1 | 4 | 5 at 1/4/99 | Timeliness of despatch and accuracy | Monthly |
Product Delivery - Customer Service | Customer enquiry calls | - | - | 7 | 3 at 1/4/99 | Speed of answering and duration of calls Accuracy of fulfilment | Daily monitoring with results reported monthly |
Customer Service - Research | Customer satisfaction with the service provided and customer complaints | - | 5 | - | 5 at 1/10/99 | Percentage of satisfaction | Continuous sampling with quarterly reporting of results. Daily monitoring with results reported monthly |
Management Information | Delivery of standard and ad hoc management information reports specified by National Savings | - | - | 4 | 4 at 1/10/99
| Timeliness and accuracy | Daily, weekly and monthly |
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| 2 | 11 | 29 | 23 at 1/4/99 |
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Note: National Savings did not introduce all of the key performance indicators at the commencement of the contract. Those not introduced immediately are in areas where National Savings had not previously measured performance or are for new processes introduced under the contract, for example the provision of management information by the private sector partner to National Savings. SBS wanted to gain experience of these measures before they became subject to performance deductions. | |||||||
2.12 In the event of a fundamental breach of contract, National Savings will receive compensation for any losses after deduction of the "value inherent" in the assets of the partnership at termination. Under force majeure, SBS would be entitled to compensation equal to its net investment from the start of the contract to the termination date. However, as the nature of service delivery was likely to alter out of all recognition over the life of the contract, National Savings and SBS could not agree a definition of "value inherent".
2.13 Where assets are to be returned or transferred to another private sector partner in such circumstances, it is essential for departments to have unfettered access to the private sector partner's accounts for the business. SBS is required to provide monthly auditable financial statements for the operational service and will show on an open book basis all cost components, cost levels and profit margins in relation to National Savings and third party work. Along with assisting the monitoring of profit sharing and benchmarking arrangements, National Savings consider that this arrangement will help any future negotiations on "value inherent" and, if agreement cannot be reached, both parties have access to agreed dispute resolution procedures.