Audit office endorses outsourcing scheme

31 May 2000
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01 June 2000 | David Arminas

National Savings has won approval from the National Audit Office for its radical purchasing scheme, with outsourcing specialists Siemens Business Services (SBS), a year after it started.

An NAO report, Public-Private Partnership with Siemens Business Services, said that "the procurement was properly planned, the requirements of the deal well specified and that the process was competitive throughout, which gives assurances that the price paid by National Savings was the best obtainable in the market".

The report added that National Savings' decision to outsource its non-core activities, at a cost of £635 million, provided better value than keeping the service in house, which would have cost £792 million.

The plan succeeded because the right people were chosen, according to Jeannie Bevan, National Savings' sourcing director. "The key was matching purchasing and supply management professionals with expert operations management people," she said.

"One of the most important aspects was that all of the company's senior directors and managers were involved, not just purchasing staff," she added.

Advisers were appointed in good time, according to the report, following competition where the standard of service was a main criterion. "We were not afraid of using external advisers, such as merchant bankers and IT professionals," explained Bevan, who is also chair of CIPS's board of management.

While the overall budget was exceeded by 14 per cent, this included an unplanned expenditure of £253,000 on the office accommodation project, which proved to be more complex that expected.

However, the NAO added that all extra spending was scrutinised by National Savings' board and finance department, and budgets were never exceeded without authority.

The £1 billion contract, signed last January, runs for 15 years. But, under the terms, either party can pull out after 10 years.

In April last year, 4,000 National Savings staff were transferred to SBS to carry out non-core purchasing operations, leaving only 130 staff at National Savings to oversee the business performance, design and marketing of products. In effect, National Savings acquired a private-sector business partner in SBS, as the deal, stressed Bevan, is not simply an IT outsourcing one.

National Savings, the UK's second-largest savings organisation, has over 10 per cent of the non-risk personal savings market and more than £63 billion invested in funds.

The company is completely underwritten by the Treasury and sales of its products finance 20 per cent of the national debt.

SMjun2000

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