Press Release - PPP in practice: National Savings and
Investments' deal with Siemens Business Services, four years
on
8 May 2003
The PPP deal between National Savings and Investments (NS&I)
and Siemens Business Services has improved customer service and has
contributed to savings for the taxpayer, Sir John Bourn, head of
the National Audit Office, reported today. However, Siemens
Business Services and NS&I underestimated the challenge
involved. Siemens Business Services has encountered a number of
problems and so is unlikely to make its projected returns on the
project. Despite this Siemens Business Services remains committed
to the contract and continues to meet 98 per cent of the
performance targets set by the contract.
In April 1999, NS&I transferred its operations to Siemens
Business Services, in one of the largest outsourcing operations
ever undertaken by a UK Government Agency or Department. The
Committee of Public Accounts concluded in its report on the deal
that the partnership appeared to be good value for money, but it
remained a high risk project for Siemens Business Services and
NS&I, and that therefore NS&I must remain vigilant.
Siemens Business Services is modernising the operations to allow
NS&I to continue to offer what customers require and to improve
customer service further by streamlining processes. Siemens
Business Services’ work will also allow NS&I to better
understand its customers and thus improve its cost effectiveness
and service. In 2001/02 NS&I saved the taxpayer £176 million
thanks in part to Siemens Business Services.
Key risks accepted by Siemens Business Services under the
contract have crystallized. Siemens Business Services is unlikely
to make its projected returns on the project as it was unable to
deliver the full business transformation as soon as it had planned.
It has incurred more capital expenditure than planned and despite
increasing productivity, it was unable to reduce staff numbers in
line with its original plans and has not yet created as many third
party jobs as expected, although 650 new jobs have been created to
date. It is also spending more than planned on the upkeep of the
three sites at Blackpool, Durham and Glasgow.
Siemens Business Services underestimated the challenge of
transforming NS&I’s old business and found existing processes
were complex and difficult to change. It encountered a number of
problems when it began to transfer NS&I products from legacy
systems to a new IT platform.
NS&I requires Siemens Business Services’ operational
performance to meet high and increasingly challenging standards.
Although Siemens Business Services had not completed the business
transformation by the initial target date it continued to bear the
risk of delivering services to the more demanding standards. In the
first four years of the contract, Siemens Business Services
achieved 98 per cent of the targets NS&I set.
To ensure continuation of service and achievement of the
partnership’s objectives, NS&I, with Siemens Business Services,
has developed a programme to support Siemens Business Services’
actions to further the transformation project. As part of this
programme, NS&I has modified the contract to ensure it is
clearer, fairer and encourages NS&I and Siemens Business
Services to behave like partners. In particular, NS&I has
refined its performance measurement regime and it will share in the
costs of developing new products and channels while both parties
are incentivised to minimize development costs. The contract
modification does not materially change the allocation of risk as
the key risks of costs of operation, modernizing the business and
delivering the service remain with Siemens Business Services.
Neither has NS&I increased the unitary charge agreed in the
contract.
Sir John Bourn said today:
"This report shows that there are alternatives to
bailing out the private sector. NS&I and Siemens Business
Services have learnt valuable lessons in the operation of this
project, which are pertinent to other public-private sector
partnerships. A whole business approach, where decisions are based
on what is best for the business rather than what is best for
either the public and private sectors, needs to be adopted if the
public and private sectors are to achieve their objectives, and the
private sector needs to recognize the management challenge that PFI
represents."
Notes for Editors
- The Department for National Savings & Investments is an
executive agency of the Chancellor of the Exchequer which helps to
fund central government borrowing. It has up to 30 million
customers with investments totaling some £62 billion in a range of
products which include Premium Bonds, Savings Certificates and
Investment Accounts. Prior to April 1999, NS&I employed some
4,100 operational staff and incurred running costs of some £180
million a year.
- Press notices and reports are available from the date of
publication on the NAO website at www.nao.org.uk.
Hard copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 39/03
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