11 May 2009 | Martha McKenzie-Minifie
BT is set to make savings of £48 million over the next three years after overhauling its outsourced product testing contracts.
BT Operate, a business arm of the telecoms giant, used e-auctions to put in place six fix-priced deals, where services suppliers are measured and paid based on their output - rather than receiving a daily rate.
Vendors will be rewarded with extra money if they exceed a key performance indicator in a contract and be penalised for under-performing.
John Hatton, vendor management director at BT Operate, said before the changes contracts were managed on a "time and materials" basis. This provided flexibility but meant the longer a vendor took to complete a job, the more money they received.
He told SM: "We expect this change in approach to align the need to the delivery with far greater reliability. The bonus is that the new arrangements are being sourced at significantly lower price levels."