Lincolnshire County Council’s plans to retender its long-standing BPO contract with Mouchel could prove yet another blow to the now bank-owned company (see Mouchel shareholders lose their penny). Mouchel lost other large BPO deals with Milton Keynes and Rochdale during its financial meltdown that led to it being bailed out by its lenders in August 2012.
Mouchel (via its acquisition of HBS) has run Lincolnshire’s back office and support services for 13 years. HBS initially signed a ten-year £306m deal with the council back in April 2000, and this was extended for five years beyond the original contract length, prior to Mouchel’s meltdown.
Lincolnshire is expecting to spend between £85m and £110m over five years, with an option to extend for a further two years. This equates to Lincolnshire spending between £17m and £22m each year, versus c£30m currently. Although it's difficult to compare exactly, it's clear a significant saving is planned.
Lincolnshire's planned approach makes it an interesting example of how local government outsourcing procurement is changing, moving away from much larger bundled deals, to selective procurements with a number of partners (see Second generation BPS deals: challenges and opportunities). In theory at least, this has the potential to make providers compete for business with the council, and drive down costs.
Lincolnshire’s intention is to have competitive dialogue with prospective suppliers around IT, finance, HR, payroll and learning and development services (IT and BPS), and then separate procurements to cover pensions (also BPS), and a range of support services. There will be separate frameworks to cover professional support and estates and valuations services. Currently Lincolnshire's contact centre is out of scope, although this may change.
As with most new local government BPS deals, Lincolnshire is hoping to sell services to other authorities and public sector bodies, and has apparently had discussions with some 13+ organisations including Lincolnshire Police Authority, the NHS Trust, City of Lincoln, and the university and schools. It reckons that this could generate a further £100m of spend.
Lincolnshire’s model will appeal to players that are comfortable with partnering, and prepared to take on smaller size IT/BP/support services deals. We expect it to attract local government IT/BP specialists like Agilisys, Civica and Northgate, and even some of the bigger IT players like Capgemini or CGI keen to expand in local government. Of course we also expect Mouchel to bid. It will be interesting to see whether big BPS and support services providers like Serco, Capita and Balfour Beatty respond. They are beginning to show more openess to partnering (see Capita and Balfour Beatty role reversal at North Tyneside). But taking on far smaller chunks of the overall opportunity may be a stretch too far.