Editor’s blog Friday 23 April 2010: Exclusive - KPMG outsourcing review of business support to DH & arms’ length bodies

Hello. Today we are spoiling you, Ambassador.

Not with Ferrero Rocher, of course: that would be bad for your health.

No we are spoiling you with an extra, religious-reform-inspired dose of The Maynard Doctrine for you.

And then we are spoiling you some more, because HPI associate director Tom Smith has contributed this commentary on yesterday’s ‘Great Health Debate’ at the Kings Fund.

You can watch the debate here for yourself.

And then we are trebly spoiling you, because we have a bit of FOI-gleaned news: KPMG (management consultancy and employer to former DH commissioning supremo Mark Britnell) is undertaking a review of the Department of Health.

The information that has been released appears in full below.

In summary: KPMG has won a contract for a analysis of DH and its back office and arm’s length bodies “to produce high level estimates of potential savings, and to create practical options for delivering the benefits”. Mark Britnell was not involved in the bidding process.

It should take about three months, cost £160,000 (excluding VAT and disbursements), and it aims to scope business support to DH and the ALBs; test potential market outsourcing opportunities; and come back with a plan.

Now at one level, this tells us little we could not have guessed within the DH’s intention to reduce management costs by 30%.

Unplanned admission
What is quite interesting is that this scheme has been secret. It is not even mentioned in the DH’s 2009-11 Business Plan. The Business Plan is where you would expect to see it: the financial storm was well-known at its publication in June 2009.

What is more interesting is that KPMG is effectively acting as a middle-man between the companies that would actually supply the DH and ALBs’ back-office services.

It is not wholly clear that the DH’s management, who will be the customers of the outsourced-to back office providers KPMG suggests and selects, are using this £200,000 (as it will be after VAT and sundries) very wisely. What value is it adding?

Middle-men, in this kind of situation, look like a luxury. Perhaps the DH has become addicted to management consultancy?

It will, of course, also mean job transfers, and probably job losses.

Rationalising back office functions could be eminently sensible. At a minimum, the ALBs should probably share back office support: there is scant efficiency in continuously reinventing the wheel.

You can’t help wondering, though, whether it might have been desirable to ask the extant back office staff whether they had any interest in setting up a social enterprise to bid for contracts.

I mean, we’re all social entrepreneurs now. Aren’t we?

The questions and answers
Q1. Has a contract been awarded to KPMG UK for management consultancy services to undertake a review of the Department of Health?
A1. Yes.  The Department appointed KPMG to analyse the Department’s and its Arms Length Bodies’ back office functions in order to produce high level estimates of potential savings, and to create practical options for delivering the benefits.
Q2. Was there a competitive tender?
A2. Yes.  It was run under the Buying Solutions Catalist 'Multi-Disciplinary Consultancy' framework.
Q3. Who were the other bidders?
A3. All ten suppliers on the Buying Solutions Catalist 'Multi-Disciplinary Consultancy' framework were invited to bid.  Five suppliers submitted bids.  They were: Deloitte LLP, Ernst & Young LLP, KPMG LLP, PA Consulting Group and PricewaterhouseCoopers LLP.
Q4. What is the total cost of the contract?
A4. £160k, excluding VAT and disbursements.
Q5. What is the timescale of the project?
A5. The project is expected to take approximately three months to complete.
Q6. What are the metrics for success?
A6. Completion of the key stages of the work, the key stages being:
•      STAGE ONE - establishing the current service lines across the business support functions within the DH and ALBs
•      STAGE TWO - a marketing exercise to consult with the market and establish how they would deliver the potential services and preferred delivery models, where similar synergies and efficiencies have been achieved elsewhere in the market
•      STAGE THREE  - an appraisal of the various options for restructuring the “in-scope” services to deliver efficiencies
•      STAGE FOUR - final recommendations with a project plan, showing key milestones from the start to end of the project, showing how it is achievable within the DH timelines

Q7. Was Mark Britnell involved in the KPMG bid and negotiations?
A7. No.
Q8. Please provide me with copies of all documentation including slides associated with this tender process.
A8. We can confirm that the Department holds the information falling within this element of your request.  However, we estimate that the cost of complying with this question would exceed the appropriate limit of £600 specified in regulations laid down under the FOIA for central Government bodies.  This represents the estimated cost of one person spending 3½ working days locating, retrieving and extracting the information for this part of your request.
Therefore, under section 12 of the Freedom of Information Act the Department is not obliged to comply with this part of your request and we will not be processing it further.  Please note that if you were to make a new request for a more narrow category of information relating to the tender process, it may be that we could comply with that request within the appropriate limit, although I cannot guarantee that this will be the case, nor that any material so located might not prove to contain information which was exempt from the duty to disclose under one or other of the provisions of the FOIA, notably S43, which covers information whose release might be prejudicial to the commercial interests of this Department or any other entity.
I hope that this information is helpful.