Sir John Bourn, head of the National Audit Office, reported to Parliament today that the Radiocommunications Agency* has successfully entered into a partnership with CMG plc**, a global Information and Communications Technology group, which could result in significant financial savings.
In June 1998 the Agency and CMG plc established a joint venture company, Radio Spectrum International, owned 30 per cent by the Secretary of State for Trade and Industry, on behalf of the Agency because the Agency does not have the legal right to own shares. In addition to providing the Agency with IT services, Radio Spectrum International exploit commercially the Agency’s expertise in radio spectrum management by selling consultancy services and IT systems to overseas administrations.
In 1994 the Agency was unable to meet its requirement for IT services from in-house resources and was heavily reliant on expensive contractors. The Agency was keen to achieve financial savings by bringing this reliance to an end. After considering various options the Agency decided a partnership with a private sector company would give it access to a wider range of skills and resources than it had in-house, be available when needed and at a lower cost than their existing arrangements. The partner, through its understanding of the Agency’s systems and operations, would be in a strong position to sell the Agency’s systems and the Agency’s expertise. The new company has so far won consultancy contracts in Russia, Greece, Egypt and India although income has not so far been sufficient to cover the high initial start up costs for this new venture.
The partnership was at the time an innovative solution in the public sector to the problem of obtaining IT services and exploiting the intellectual skills base. The Government is encouraging departments and Agencies to exploit their skills and assets commercially through the Wider Markets Initiative which is aimed at improving the management of public sector assets. In his report Sir John draws attention to the main lessons learned by the Agency which may be of benefit to other public sector bodies contemplating entering into partnerships:
- the need for clear objectives at the outset of the process;
- trying to maintain a competitive bidding process or, in the absence of this, ensuring adequate benchmarks exist to measure value for money;
- considering the implications of linking projects (in this case the provision of IT services and the commercial exploitation of the Agency’s skills base) where one element is unproven;
- recognising the importance of aspects such as the alignment of business interests, trust-based relationships and effective collaboration but also building in contractual protections; and
- having a formal process for deciding on the percentage stake to take in a joint venture company.