4.5 In August 1997 Capita, building on work by the Agency's previous financial advisers, CCTA and KPMG, produced a report entitled the "Baseline Business Case" establishing the case for the development of a partnership and the potential savings which would result. This report was subsequently submitted to the Department and the Treasury for approval to proceed.
4.6 The possible cost of the partnership was compared with two Public Sector Comparators. A Public Sector Comparator is intended as a valid benchmark against which private sector bids for work previously undertaken in the public sector can be compared. This enables the cost of different options to be compared, taking account of different risks that may arise.
4.7 Capita compared a partnership with:
■ the mix of in-house and contract staff predicted to be necessary, "the existing arrangements"; and
■ replacing all contract staff with civil servants.
Capita's estimates of the savings that the partnership offered are summarised in Figure 12.
12 |
| A partnership should generate financial savings | ||||||
|
| This figure shows that a partnership was expected to provide more economical IT services than in-house options | ||||||
|
|
|
| £ million
|
|
|
| £ million
|
|
| Estimated cost of continuing with existing arrangements |
| 66.3 |
| Estimated cost of an option in which in-house staff replaced conractors |
| 56.4 |
|
| Less cost of partnership |
| 54.2-56.0 |
| Less cost of partnership |
| 54.2-56.0 |
|
| Saving |
| 10.3-12.1 |
| Saving |
| 0.4-2.2 |
|
| Note: Figures represent cumulative net present value over 7 years. Source: The Agency | ||||||
4.8 The analysis showed that the partnership was expected to provide more economical IT services than the two in- house options. While the expected savings from the partnership over the option of replacing contractors with in-house staff were marginal, the Agency did not consider the option was feasible. The Agency would encounter the same problems of recruiting and retaining skilled IT staff at civil service pay rates that it had been experiencing. In addition the Agency did not believe that this option would allow them to achieve a sufficient skills base to meet all their needs, especially in the development of new services. This option would, therefore, mean an important benefit of a partnership would not be achieved, notably access to a pool of IT staff with varied skills which could be applied to the diverse projects which were planned. The Agency therefore rejected the option of replacing contractors with in-house staff as a benchmark.