Market Testing (Hansard, 22 May 1996)

§ Mr. Willetts

The market testing of services provided by this Department's agencies is a matter for their chief executives and for their customers. I have asked the chief executives to write to the hon. Member.

Letter from N. E. Borrett to Mr. Martin Redmond, dated 22 May 1996: The Chancellor of the Duchy of Lancaster has asked me to reply to your Question about the market testing of our services. Property Advisers to the Civil Estate (PACE) was set up on 1 April this year following Ministers' decision to implement the findings of an Efficiency Scrutiny Report on the Management of the Government's Civil Estate. The roles of PACE set out in the Scrutiny recommendations which by their nature have to be performed in the public sector aim to ensure that the benefits of a centrally managed estate are retained following the transfer to departments of full responsibility for the properties they occupy. The Agency has a key role to promote co-operation between departments to enable them to obtain best value for money in the management of their properties. This may either be in relation to departments' or agencies' activity in the property market or promoting opportunities for inter-departmental rationalisation. PACE also provides a single central point for the provision of general property advice. The Central Advice Unit (CAU) was set up a year in advance of the Agency to assist departments taking on their new responsibilities. Where departments decide that it will not be economic to retain skills in-house, PACE provides intelligent client support on repayment terms. By charging for this particular service PACE are, in effect, being market tested by departments because the work would otherwise be carried out by their own staff. The Agency has been reconstituted out of Property Holdings (PH), which ceased to exist at the end of March. Since 1990, PH had managed the Government's Common User Estate (CUE), comprising mainly general purpose office property. PACE has therefore as a result inherited considerable experience in procuring and managing private sector services. Though maintenance responsibilities for some buildings on the CUE had been passed to departments, PH remained largely responsible for estates and most works services. In its last year (1995/96) PH had funding of £550 million for rents and £127 million for maintenance and new works. All estates and works services were undertaken by consultants and contractors in the private sector. During the early years of PH's existence services previously handled within Government by the Property Services Agency (PSA) had all been market tested. Consultants analysed Property Holdings savings from market testing. The level of fees paid under market tested commissions in 1992–93 were estimated to be some 40% less than the rates charged in the previous year under supply and service arrangements with the PSA.

Letter from Mike Devereau to Mr. Martin Redmond, dated 20 May 1996: The Chancellor of the Duchy of Lancaster has asked me to reply, in respect of the Central Office of Information, to your question about the market testing of services. COI has not market tested any of the services it provides for clients in the last year. Its activities are subject to constant market testing by customers who are under no obligation to use its services.

Letter from R. N. Edwards to Mr. Martin Redmond, dated 17 May 1996: The Chancellor of the Duchy of Lancaster has asked me to reply to your question about market testing in his department's Agencies. The Chessington Computer Centre has not carried out any market testing since April 1995. This is because Chessington has been working to prepare itself for privatisation in 1996. The sale of Chessington is on target for late July. 189W There has however, been a steady programme of market tests carried out since April 95 by customers on the services we provide for them. I hope this provides the information that you need. If it does not please do not hesitate to get in touch.

Letter from Robin Guenier to Mr. Martin Redmond, dated 20 May 1996: As Chief Executive of the Central Computer and Telecommunications Agency (CCTA), 1 am responding on behalf of the Chancellor of the Duchy of Lancaster to your recent question raised about market testing of services provided by CCTA. I am able to inform you that no services provided by CCTA have been market tested.

Letter from S. H. F. Hickey to Mr. Martin Redmond, dated 20 May 1996: The Parliamentary Secretary has asked me to reply to your Question on the Market Testing that has been carried out into the services that the Civil Service College provides. The College provides training and consultancy services to the Civil Service and also the wider public sector and internationally. We have no tied customers and thus are operating in a competitive market with other providers of these services. About three quarters of our income in 1995/96 came from open courses run mainly at Sunningdale Park and our London centre. The remainder of our work is single-client training and consultancy and is normally won following some form of competitive tendering which may well form part of our customers' market testing programmes. The College carries out its own training and consultancy and we have not market tested any of this provision. We do however use a considerable amount of input from outside sources. Over 50% of teaching input is from non-Civil Service College Staff. This is a strategic decision to ensure quality, relevance and flexibility and ranges from associate lecturers doing individual sessions on a course to partnership with Price Waterhouse to jointly deliver courses on the Private Finance Initiative. Ancillary services which include services which are provided by us to our customers, such as hotel and catering services, have been subject to market testing.

Letter from John King to Mr. Martin Redmond, dated 21 May 1996: The Chancellor of the Duchy of Lancaster has asked me to write to you directly, with information about SAFE's market testing. This is in response to your recent PQ addressed to him. SAFE is an Executive Agency with a remit to provide a range of security services to Government. It has no tied customers and as a result it is for our customers to choose to use the Agency and most do this through market testing or other forms of competitive bidding. The Agency undertakes a great variety work to a value of £40M to £45M per annum and I regret that it is impractical to list all the individual items. Recently, the Agency did, however, initiate a major market test of one of its four operational units—the Inter Despatch Services (IDS). The IDS has a turnover of about £2½M per annum and the in-house team won against stiff competition from the private sector. The outcome has been significant price reductions for IDS customers.

Letter from Chris Penn to Mr. Martin Redmond, dated 21 May 1996: In the temporary absence of our Chief Executive, I have been asked to reply, so far as HMSO is concerned, to your Parliamentary question about the market-testing of the services provided by the Chancellor of the Duchy of Lancaster's agencies. The cost-effectiveness of the services that HMSO offers is frequently tested in the market-place by our customers. There have been some losses but a significant and growing proportion of our business has been won in open competition. 190W In terms of our own programme of market-testing, HMSO has tested a number of key service areas over the years, and our Annual Reports have regularly recorded the results. In the last year or so, we have announced the outcome of two market tests covering important elements of our Publications distribution business. A test of the order and enquiry services was awarded jointly to the in-house team and a commercial telesales company, EWA Ltd of Chelmsford. The new service began at the start of the year and is already demonstrating improvements in service standards. These include much reduced telephone call waiting times, increases in the numbers of order lines processed and a more proactive response to customers' needs. More recently, the test of receipt, storage and distribution arrangements was awarded to the in-house team with the prospect of both service and cost improvements. I hope this is helpful.

Letter from Dr. E. C. McCloy to Mr. Martin Redmond, dated 20 May 1996: Mr. Willetts, Parliamentary Secretary, Office of Public Service, has asked me to reply to your question to the Chancellor of the Duchy of Lancaster asking him to list, for each of his department's agencies, the results of market testing of the services they provide. In the period since 1 April 1995 no market testing was carried out of the services provided by the Occupational Health and Safety Agency (OHSA). As part of the privatisation process of the Agency some government departments have indicated that they may wish to market test the provision of occupational health services but no formal announcements have been made. In the past (1994–95) the OHSA market tested the provision of laboratory services which resulted in an aggregate net value of efficiency gains of £7,000 in each of the three future financial years.

Letter from Craig Muir to Mr. Martin Redmond, dated 21 May 1996: I have been asked to reply to your Parliamentary Question concerning market testing into the services provided by Recruitment and Assessment Services (RAS). As you are no doubt already aware, RAS was established as an Executive Agency on 1 April 1991. We provide recruitment, consultancy and related services to government departments, executive agencies and other public service bodies. As a result of government departments and executive agencies being given responsibility to carry out their own recruitment above Executive Officer level in 1991 (with the exception of the most senior appointments and fast stream entrants), RAS was faced with the challenge of competing against private sector recruitment companies for public sector business. The great majority of RAS potential customers now subject recruitment agencies to market testing by competitive tendering on the range and quality of services they are able to provide before appointing the successful bidder. RAS is not immune from this process and our reaction from this increased competition was to continue to develop and expand the range of services and recruitment products we are able to offer, both to those who had decided to carry out their own recruitment (sometimes with our assistance) and to those who had selected RAS to run the recruitment campaign for them. Despite a general decline in the number of appointments on offer, the wider range of services and products we are able to provide led to 1994–95 being our most successful year since our inception. We had a marked increase in market penetration. Our share of Civil Service recruitment rose to 11% in 1994–95 (compared to 7% in 1993–94), and from a deficit of £333,000 in 1993–94 to a surplus of over £415,000 in 1994–95. There was also a significant increase in consultancy and other recruitment related services. In total, 1,173 consultancy days were provided in 1994–95, an increase of 146% over the previous year. I hope that you will see from the above that the services of RAS are in the continuous process of marketing testing; it is only by remaining competitive and high on quality that we will maintain our position as the leading provider of recruitment and related services to a wider market as we head for privatisation later this year.

191W

Letter from S. P. Sage to Mr. Martin Redmond, dated 20 May 1996: The Chancellor of the Duchy of Lancaster has asked me to reply on behalf of the Buying Agency to your recent parliamentary question concerning the market testing of the services provided by the agencies for which his department is responsible. You may find the following background useful. TBA is a government trading fund with a sales turnover this year projected at around £250m, an expenditure budget of £5m and 125 staff. The agency offers a full range of procurement services to its public sector customers. TBA has no tied customers or business. It operates on a fully commercial basis and must continue to minimise costs in order for its services to remain competitively priced and attractive to customers. All TBA's services are market-tested regularly by customers, either as a result of winning business through competitive tenders or through customers' own price comparison exercises.