Approval to award a contract for the provision of core Information and Communications Technology (ICT) services

Report: 11
Date: 17 November 2005
By: Commissioner

Summary

This report seeks Committee approval to award a contract to Capgemini UK Plc., (“Capgemini”) for the provision of ICT services. It outlines the procurement process and explains the economic and commercial rationale behind the recommendation.

The linked exempt report also seeks approval for the financing of the transition costs by the new service provider.

A. Recommendation

The Committee is asked to

1. Approve the recommendation of the award of a contract for the provision of core ICT services to Capgemini to commence on 7 December 2005 for an initial duration of seven (7) years, with the option to extend for up to a further three (3) years.

B. Supporting information

Introduction

1. As part of the Authority’s initial outsourcing of key ICT services in 1998-99, three contracts were awarded for the provision of certain ICT-related services. The contracts were with:

• Sema (later known as Atos) for the administration of information services;
• Ericsson (later known as Damovo) for the provision of telephony services; and
• EDS for the administration of the Crime Report Information System (CRIS).

2. In order to ensure continuity of service until the completion of the transition to the services under this new contract, extensions were agreed with the current suppliers. These extensions were approved by Metropolitan Police Authority (MPA) Finance Committee – 22 July 2004 ( paper entitled “The extension of the existing ICT Outsourcing Contracts”).

3. In 2002 the Finance Committee approved the set-up of the Outsource Services Programme (OSP) to manage the re-tendering of these contracts within Procurement Services. Since then, MPA Finance Committee has been involved at key points of the procurement process: noting the sourcing and packaging strategies for these services in January 2004, approving the commercial strategy and issue of the Invitation to Negotiate (ITN) documentation to a qualified short-list of bidders in July 2004 and the selection of two short-listed consortia for the negotiation of Best and Final Offers (BAFO) in January 2005.

4. The MPA approved in an Exempt paper to Finance Committee – 22 July 2004, the main drivers and commercial mechanisms, which the MPS should seek to apply within each of the OSP contracts as follows:

5. In addition, a series of additional ICT specific drivers and aims were

identified for this procurement, as highlighted to the MPA Finance Committee in July 2004 as follows:

• To improve customer satisfaction and provide better value;
• To separate service delivery from development;
• To improve supplier management and the supplier relationship;
• To increase ease and efficiency of service supply;
• To improve interface with end-customers;
• To prepare for future network integration; and
• To improve the flexibility of the contracts.

6. It is the belief of the authors that the proposed contract with Capgemini meets these drivers satisfactorily. The procurement process has now resulted in the selection of a preferred bidder. Following successful negotiations, the Metropolitan Police Service (MPS) now seeks MPA Finance Committee approval to award the contract for these services to Capgemini to commence on 7 December 2005 for an initial period of seven years, with the option to extend for up to a further three years. This report, along with the Exempt Appendix 1, outlines the benefits, affordability and value for money of the proposal for the consideration by the Board.

Procurement process

7. The procurement route adopted for re-tendering these services was the standard European Union “negotiated” route.

8. An Official Journal of the European Union (OJEU) notice was published on 13 February 2004 that specified the core ICT services to be provided.

9. To encourage a robust competition, a proactive market engagement exercise was conducted which alerted potential bidding organisations to the publication of the OJEU notice. Following this, 48 organisations attended a bidders’ conference held on 25 February 2004 and formal responses were received from 11 organisations or consortia.

10. These responses were then assessed and evaluated by teams drawn from Directorate of Information, Human Resources (HR), Procurement Services, Finance Services and Corporate Risk Management supported by external professional advisers. As a result of this evaluation seven bidders were issued Invitation to Negotiate (ITN) documentation:

11. Three bidders withdrew at the ITN Stage: A fourth joined another bidder as a material subcontractor. Three ITN responses were received in October 2004. These were subject to evaluation. References from customers were also taken up during this evaluation. This resulted in 2 bidders being invited to negotiate with the MPS: Capgemini and one other.

12. Negotiations concluded in July 2005 and the bidders submitted their Best and Final Offers on 30 August 2005. These were evaluated and, as a result, the Outsource Contracts Steering Group (OCSG) and Management Board selected Capgemini as preferred bidder for the ICT core services agreement. Work to close down the remaining outstanding issues with Capgemini and to finalise the transition plan and other aspects of the contract documentation is largely complete at the time of writing and is expected to be fully completed by the time the Finance Committee meets on 17 November 2005.

Overview of offerings

13. This overview of the Capgemini offering is set out in the following sections:

• Overview of services
• Overview of governance regime
• Overview of transition arrangements.

The detail of the commercial and financial aspects of the offering, and the detail of the transition arrangements, are dealt with in the Exempt Section of this paper.

Overview of services

14. The contract requires Capgemini to provide the Authority’s core ICT services in a secure and resilient manner, with a key focus on delivering high quality services and ensuring that those services meet the needs of the Authority at all times.

15. Key sections of the contract provide for:

• Management and support of all user equipment such as desktop Information Technology (IT), telephony and mobile devices. The scope of this work includes 29,000 desktops, 4000 laptops, 38,000 telephone extensions, 1900 fax machines, 5400 pagers and 8,500 mobile phones.
• A high quality service desk to manage faults and orders through to resolution.
• Secure, resilient, high quality data centres hosting applications and services.
• A comprehensive performance regime designed to drive service delivery to the highest standards, with a focus on the end-user’s perspective and business criticality. The performance standards are significantly higher than those in force under the existing agreements with incumbent suppliers.
• Infrastructure monitoring and management tools which are unique to the Authority, in order to maintain the highest degree of security.
• Mechanisms to drive continuous improvement of services.

16. The majority of the contract services will be provided by Capgemini. Two material subcontractors will be used for specific activities:

• British Telecom (BT) will manage and support the Authority’s wide and local area networks, as well as telephony and mobile services.
• Unisys will manage and support certain applications and provide desktop support.

17. Please note: This paragraph has been removed.

Overview of governance

18. In support of ongoing high levels of service delivery and mechanisms for escalating issues to the appropriate level for resolution, the contract makes provision for several layers of governance and relationship meetings. It also details the principal reports and information to be provided by the supplier, and deals with the management of projects and new services in accordance with the Directorate of Information’s project lifecycle.

19. The general structure of the governance bodies was presented and discussed at the Information Board in July 2005. It follows the broad structure set out below:

• A senior Executive Group – this body reviews the overall performance of the Contract and oversees the strategic relationship between the parties, and is to meet at least twice per year;
• A Strategic Group – this body reviews the strategic direction of the contract services with particular regard to anticipated technology changes, as well as reviewing service delivery based on monthly reports, and is to meet at least quarterly;
• A Service Management Group – this body monitors and reviews the day-to-day delivery and performance of the services and supervises the operation of the financial and performance-related aspects of the contract, and is to meet at least monthly.

20. The above groups will meet more frequently during the transition phase, and a separate group (the Transition Management Group) has responsibility for monitoring the transition from incumbent suppliers over to the new supplier in accordance with the transition plan set out in the contract.

Overview of transition

21. The transition from the three current incumbents’ contracts to Capgemini will take place in two overlapping phases over a period of approximately 18 months. These phases are described in more detail in the Exempt Section of this report.

Risk management

22. An assessment of the key risks that relate to this procurement, along with appropriate mitigating actions, has been undertaken and is continuously monitored and updated. The OSP has taken every measure to ensure that key milestones in the procurement process have been delivered so far.

Benefits realisation

23. The new contract embodies significant service and financial benefits for the MPA. The:

• Service benefits reflect the higher standards of service agreed by the new supplier, additional flexibility and resiliency;
• Financial benefits reflect the generally lower levels of charges agreed with the supplier.

24. The realisation of these benefits is not an automatic process, however, and will rely to a greater or lesser extent on the actions and behaviours of those responsible for the management of the contract.

25. Central to the benefits delivery process is the effective and efficient management of the contract at all stages of its life, including transition, ongoing ‘business as usual’ and the continuous service improvement process embodied in the contract.

26. In realising the financial benefits of the contract, the Financial Model will play a central role in ensuring that the Authority will always have a tool with which it can demonstrate that projected financial savings are being delivered irrespective of changes in business volumes and types.

Next steps

27. Finance Committee approval of this paper and its recommendations will trigger the following actions:

• A mandatory standstill period of 10 clear calendar days during which the unsuccessful bidder will be informed of the intention of the Authority to award the contract to Capgemini and an appropriate debrief to the unsuccessful bidder will be undertaken on the strengths and weaknesses of its bid
• The set-up of the appropriate financial arrangements by the Authority to support the amortisation of transition costs
• Contract signature with Capgemini
• Implementation of the transition plan
• Implementation of the current supplier exit plan.

Conclusion

This report is of necessity only a high-level summary of a complex contract that has been developed over a period of many months. Important additional information is contained within the exempt Appendix, which has been redacted from this report on grounds of security and commercial confidentiality.

List of abbreviations

MPA

Metropolitan Police Authority

MPS

Metropolitan Police Service

ICT

Information and Communications Technology

OSP

Outsource Service Programme

ITN

Invitation to Negotiate

BAFO

Best and Final Offers

OJEU

Official Journal of the European Union

OCSG

Outsource Contracts Steering Group

IT

Information Technology

HR

Human Resources

BT

British Telecom

TUPE

Transfer of Undertaking Protection of Employment

C. Legal implications

1. It is confirmed that the matter for decision complies with procurement regulations and all relevant EU and UK Government Directives.

2. It is confirmed that the proposal is within the powers of the MPA.

3. The terms and conditions of contract (“the Contract”), based on model form contract terms developed for the Outsource Services Programme, were prepared and approved specifically for the outsourcing of the core ICT services. During the course of the negotiations with the preferred bidder these terms and conditions were amended to address commercially agreed issues. However, it is believed that the terms and conditions as amended still adequately protect the MPA in that they do not expose the MPA to any significant risks and are not unduly onerous in terms of the MPA’s responsibilities.

4. MPS Procurement Services has carried out a due diligence exercise to assess the preferred bidder’s financial risk and their ability to perform the contract. While such steps have been taken to protect the MPA’s position, there can be no guarantee that issues will not arise in relation to the Contract post Contract award.

D. Race and equality impact

1. The procurement process required bidders to declare their existing policies and initiatives and future actions with regard to promoting a working environment that actively encourages equal opportunities and non-discrimination on the grounds of race, gender, disability, sexual orientation, religion or belief and age. They were also required to respond to the six questions prescribed by the Secretary of State and endorsed by the Commission for Racial Equality.

2. Capgemini, BT and Unisys’ equality and diversity records are of a calibre commensurate with the MPS/MPA requirements, aspirations and reputation. The draft contract ensures compliance with all equality and diversity related matters and includes setting up a mechanism to monitor performance in respect of equal opportunities and diversity throughout the lifetime of the contract.

3. During the procurement process, the OSP Director and HR representative have held bi-monthly meetings with Trade Union representatives to update them on general progress. In addition, a trade union representative sat on the ICT Action Group which made the initial recommendation to OCSG to select Capgemini as preferred bidder.

4. Under Transfer of Undertaking Protection of Employment (TUPE) regulations, consultation with affected employees is the legal responsibility of the existing employer and the incoming contractor.

5. The key activities in respect of on-going consultation and communication will relate to transition arrangements. The MPS will facilitate a meeting between relevant HR contacts in each organisation to enable them to undertake the key transition activities, ensure that they fulfil their obligations under TUPE, and undertake a smooth transition of employees.

E. Financial implications

1. The Capgemini bid represents value for money for the Authority when compared to the existing charges for the service and other cost comparators. The bid is also within the current budgetary limit.

2. Further details are contained in the exempt Appendix 1.

F. Background papers

• Exempt Paper to Finance Committee – 18 April 2002 entitled “Outsource Contracts in the MPS - Proposed Strategies For Renewal”
• Exempt Paper to Finance Committee - 22 April 2004 entitled “Programme for Re-tendering the Services through the Current Outsource Contracts”
• Exempt paper to Finance Committee – 22 July 2004 entitled “ The future provision of the current outsourced contracts - strategic approach, underlying principles and aims under which sourcing and re-provision of the outsourced programme is being undertaken”.
• Exempt Paper to the Co-ordination and Policing (COP) meeting – 24 January 2004 entitled “The Future Procurement of ICT Outsourced Services”
• Open and Exempt papers to MPA Finance Committee –22 July 2004 entitled “Approval to Issue “Invitation to Negotiate (ITN)” documentation for the re-tendering of Information and Communications Technology (ICT) Core services”
• Various Update reports to MPA Finance Committee – 2003-2005

G. Contact details

Report author: Ailsa Beaton (Director of Information) and Anthony Doyle (Acting Director of Procurement Services).

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

This appendix is exempt.

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