Supply Side
Contracting with Mutuals, and the MyCSP National Audit Office Report (part 2)

In part 1 (here) we looked at a recent report from the UK’s National Audit Office into the problems at MyCSP, the organisation that manages pensions for many public sector bodies. Today, we will look in more detail at what went wrong and how can other public sector bodies avoid similar problems in the future.

As the NAO says, the first problem was that “MyCSP was unable to properly test its new pension administration system” prior to the go-live date. Previously, Capita (the huge outsourced service provider) had run an IT system to administer pensions.  But MyCSP’s new pension administration IT system, Compendia, was not fully ready at the time of the migration and was not able to make payments until shortly before the migration. There also seem to have been some issues around the relationships between Capita and MyCSP – “MyCSP was also not able to dry-run its administration of the casework transferred from Capita, although it did embed staff at Capita’s site. Capita and MyCSP also disagree on the complexity of the cases transferred”.

The volume of work was also under-estimated and again that relationship issue rears its head.   “MyCSP expected 10,000 to 12,000 items of work in progress casework to be transferred from Capita …  MyCSP told the Cabinet Office that there were 54,000 items of work in progress at the point of transfer. These included around 40,000 member records with data issues flagged by its new Compendia system at the point of data migration. These records required a manual intervention to resolve. Capita disagreed that these 40,000 additional cases should be considered as part of the work in progress”.

There were also issues around the MyCSP work management systems, but in the main, this all demonstrates that changing supplier, particularly in the case of complex IT and outsourced services contracts, is not a trivial matter. It requires careful planning, a detailed understanding of the issues, and – as far as possible – a decent working relationship between the parties, including the inevitably disappointed supplier who is losing business.

When it then came to the contract management post-implementation, more of the usual issues that we have seen many times before raise their heads. “No-one has a view or control of the overall system”, the Cabinet Office who were in charge was under-resourced, and indeed had a conflict of interest. The Department was the sponsor of the MyCSP “mutual” (the “flagship” of the mutual programme, remember), a shareholder in the provider and the contract manager. Customer satisfaction was not monitored independently but relied on figures from the provider. Remember, that lay at the heart of the huge issues around the prisoner tagging contracts in the UK a few years back that hit the headlines – didn’t anyone in this case remember that?

But as well as the contract management failures, we come back to a fundamental point. There is no magic formula that means mutuals will automatically succeed. Equally, and to be fair to MyCSP and Francis Maude, the ex-Minister and cheerleader for mutuals, the problems in this case were not because the provider was set up as a (sort-of) mutual. Rather, they occurred because of some bad decisions and poor execution around what was a significant change of supplier.  However, it is possible that some of the bad decisions were influenced by Maude’s desire to go down the mutual route as quickly as possible.

So what we can learn is that changing suppliers (particularly of an important service) has risks and needs to be well planned an organised. The same goes for new systems; all the normal risks apply, whether or not we have a “mutual” involved. And then, just in case we didn’t know this from many past cases, providers need to be well contract managed. Again, that applies whether they are private companies, charities, mutuals or a team of hyper-intelligent parrots. You would think we should know all this, and of course we do when we stop and think. But time and time again, somehow these basics get forgotten.

There is also an interesting point about whether a public sector organisation can manage a provider when it is also a shareholder in that provider; in this case, maybe another organisation rather than Cabinet Office should take the lead? Indeed, that issue still applies and whilst the NAO report does make some general recommendations in that area, it is not perhaps as definite as we would have been. For instance, it comments that Cabinet Office should “performance manage MyCSP and involve employers in that management”; we would suggest that someone other than Cabinet Office should take responsibility for that performance management. That way, any potential conflicts of interest are avoided.