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First delivery

The Nest admin contract offers value and flexibility

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This time last year, the Personal Accounts Delivery Authority had just begun its procurement process for the main administration services that will underpin the National Employment Savings Trust.

Since that time, a lot of hard work and effort has brought us to a point where, I am delighted to say, we are ready to award the contract for scheme administration services.

This has been a complex procurement so we are very pleased that this has been completed ahead of schedule and we have found a great
supplier that can deliver the services at a good price.

All the bidders involved with this exercise have been impressive – we enjoyed working with them over the past year and benefited from their input.

During the process, Tata Consultancy Services progressively dem onstrated its ability to meet Pada’s requirements and emerged as a very strong bidder.

This has been confirmed by a rigorous evaluation of its final bid.

Pada is confident that TCS will fully meet our delivery requirements while offering excellent value for money to Nest members.

As with any commercial contract, many of the first questions centre on the value of the deal. This is a significant contract with fixed and variable elements.

The value of the contract will vary with volumes, which are inevitably uncertain at this stage but we broadly expect it to be in the region of £600m over 10 years (including VAT and inflation).

The contract has been divided into two stages and runs for 10 years with possible extensions for up to a further five years.

The first stage runs up to October 2010 and will cost no more than £25m. This allows TCS to commit resources and manpower to that work during the seven-month period and will deliver substantial progress against the implementation plan.

Before the first stage expires, a decision will be made on whether to proceed with the contract for the remainder of the contract term. If, the
decision is taken not to proceed with the second stage of the contract, then no further costs will be incurred.

There are a number of reasons for this approach. First and foremost – value for money. Signing now secures the terms and conditions agreed during competitive dialogue, de-risks the project, and provides certainty for TCS, enabling them to mobilise resources to deliver the contract. Furthermore, the Gov ernment made a pledge not to enter into long-term commitments at this point in the electoral cycle. The contract we are proposing is consistent with that but also allows us to secure the terms and cond itions as well as enabling TCS to begin the work necessary
to set up the scheme.

This is a major milestone for Nest and I am pleased we have achieved value for future members. Nest is a critical component of the Government’s workplace pension reform programme and, as one of the pension schemes that employers will be able to use to fulfil their automatic
enrolment duties, will play a major role in supporting low to moderate-earners in saving for their retirement.

Tim Jones is chief executive of the Personal Accounts Delivery Authority

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Interested Observer 18th March 2010 at 2:41 pm

    £600m including VAT and inflation over ten years. Reports elsewhere estimate membership to be a minimum of 2m people.

    So, with a hop skip and a jump, that gets you to circa £21 per member. That’s cheaper than the past estimates (Turner Report) which were in 2005 money, didn’t include profit and didn’t include the initial development expenses.

    Tim, could you disclose what options the contract offers to Tata should they find they can’t deliver within the £600m, and what rights are PADA themselves retaining to vary the member charges?

  2. I seem to recall reading that, in the wake of all other contenders having walked away, TATA was the only outfit still tendering for the job. I also recall reading that NESTs will be subject to an additional AMC of 2% for an indefinite number of years to recover its rather large initial expenses.

    So claims that TATA having emerged as a very strong bidder from a field of one and that an extra AMC of 2% will offer members excellent value for money seems somewhat to be stretching credibility.

    And, as the only contender for the scheme’s administration, what if TATA don’t live up to expectation? There’ll be nowhere else it can be transferred. TATA may well do an excellent job but if they don’t and the scheme’s administration turns into an almighty mess, then with TATA it’ll have to stay unless the job’s taken on by a government department, which hardly inspires confidence.

    And finally ~ where are the contributions going to be invested?

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