Childcare Vouchers – why were Atos handed work without competition?

Last week the UK government announced a new system for childcare support, whereby parents will get a proportion of childcare costs paid by the government.  All good stuff – and I did notice Tom Martin, CIPS Surrey alumnus,  featured in this BBC article about childcare whilst I was researching this!

However, there is an interesting supply chain story behind this announcement, and a very upset bunch of private sector businesses. There is a well developed market already for providing childcare vouchers both for private sector firms who want to help their own staff, and under previous government schemes. Providers range from  giants like Sodexo to very small businesses. We understand they were consulted about this new scheme prior to the announcement, and the industry provided their thoughts and recommendations on how government could implement this wider new scheme.

They were then surprised last week to see that the work around the new scheme was not going to be competed (as they had assumed), but had been handed on a plate to National Savings and Investments. So what, we might say? Tough on the firms, but NS&I is a government organisation, so surely this is an example of a strategic decision to insource rather than outsource? Not quite. NS&I itself is 90 percent outsourced to Atos. They basically run the entire operation apart from the ‘intelligent client’ function and some marketing and strategy elements.

So basically, this major new piece of work, worth many millions, has been passed to Atos without any competitive process. Atos, who announced they were pulling out of the DWP medical examination contract recently, citing their staff being threatened (nothing  to do then with the fact they were pretty much on a final warning with DWP).

It took me a while to work out why this decision was made, but on reflection, it is almost certainly driven by political time pressures. The government can’t even have properly costed the outsourced option, because they haven’t gone to market. So this is almost certainly around the need to launch this scheme next October, so it is a live initiative at election time in May 2015. That means, I suspect, that there simply would not have been time to run a six-month (with a following wind) procurement process, then get the winning firm to do the necessary development work.  So time is apparently saved by just handing the work to Atos.

But it raises a few questions.

1. What are the moral issues around extracting intellectual property and ideas from the market and then not allowing them even a chance to compete for the resulting business? At best, it feels somewhat shabby treatment of those firms.

2. How does the government know that they have made the right decision if there has been no outsourcing comparator on which to base the business case for giving the work to NS&I / Atos?  Has this been Gateway Reviewed?

3.  How will the government exert any competitive pressure on Atos in terms of their charges for the work?

4. Did the original contract with Atos (and the whole EU process) allow them legally to carry out this work – this new work is quite different from the core NS&I work?

5.  What are the chances of Atos and NS&I actually delivering the new systems in time for launch in October 2015 when they have no experience in this market – and the new process to determine eligibility for the scheme requires links with the Universal Credit and other government systems? Place you bets now ...

Voices (2)

  1. IanR:

    6. What happened to government not awarding further contracts to firms, or barring them for competing, due to past poor performance?

    Does the right hand know the left hand, they should be formally introduced…

    1. Dan:

      They haven’t awarded a contract to ATOS, they’ve awarded it to NS&I (despite that fact that this is a paper organisation run by ATOS). These legal technicalities can matter a great deal.

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