In examining the Public Sector Comparator we benchmarked the processes used by National Savings against good practice published by the Treasury Task Force, and experience gained from our previous examinations of PFI deals. We consider that the Public Sector Comparator used by National Savings was a sound basis for making a value for money decision for the following reasons:
■ In the absence of a PFI deal, the comparator was a real business option
The PSC was akin to an in-house bid against competition from external service providers rather than a costing of an existing or lower level of service delivery. As such, the proposal was a real business option in the absence of a PFI deal. It was aligned to, and acted upon, the strategic objectives of the business. This alignment provides assurance that the comparator was a reasonable tool for a value for money case because it embodied real assumptions about likely alternative courses of action. National Savings based the comparator on a business plan prepared by the Operational Services Directorate, which reflected the conclusions of the strategic review. The business plan assumed successful delivery of the business process re-engineering project, the plans for which depended on the use of known and successful technologies, such as modern interactive databases and IT systems to support call centres. It was also based on the output specification and transaction volumes bidders were required to use.
■ It was prepared and reviewed by professional advisers and approved by National Savings' senior management
The comparator was prepared by PA Consulting and reviewed by KPMG, Dresdner Kleinwort Benson, National Savings' Operational Services Directorate and the Treasury. Throughout the procurement process, National Savings' senior management challenged the assumptions made. Such a degree of senior management involvement is unusual and indicates that the preparation of the comparator was subject to an appropriate level of internal as well as external review.
■ It was used as a value for money benchmark throughout the procurement process
National Savings used the comparator as a value for money benchmark throughout the procurement process. It was first prepared in outline form in May 1997, when National Savings started to consider how the private sector might help to run the operational service. The first full version coincided with the issue of an Information Memorandum to bidders in July 1997. The comparator was developed further during 1998 and a new version was complete when an Invitation to Negotiate was issued to bidders in April. Senior management within National Savings approved it in July 1998, prior to receipt of bids from SBS and EDS.
■ The comparator did not overestimate the costs of the in-house option
To avoid distorting a value for money decision in favour of a PFI option, departments should not overestimate costs within a Public Sector Comparator. We did not detect any evidence of this. With hindsight, costs may have been underestimated in the comparator for two reasons. First, SBS considers that National Savings' plans for business process re-engineering were ambitious. This implies that the comparator may have understated re-engineering costs and overstated the likelihood of successful completion within the time expected. Second, the comparator assumed the implementation of a project underway at Post Office Counters to automate systems for handling transactions on savings products. Successful completion of the project would have reduced National Savings' staffing requirements. In the event, Post Office Counters decided to abandon the project.