Value for Money Benchmarking
Summary
Deecon were tasked with performing a Value for Money (VfM) review of a large first-generation, outsourced service worth ~£700 million. The review was conducted in a condensed three-month timeline and was delivered on time with praise from the Client on our approach, engagement and quality of deliverables.
The Requirement
Deecon were engaged to perform a Value for Money (VfM) review for the Client.
The Solution
Deecon proposed the benchmarking for the range of services confirmed during the project kick-off meeting. Following this and our initial scoping definition and data collection phases, Deecon utilised a three-tiered benchmarking approach, drawing upon previous VfM engagements. This three-tiered approach considered:
The terms, conditions, and performance indicators of contracts compared with similar programmes in the industry or market
The organisation's operational processes benchmarked against other organisations in the industry and market
Organisational commercial performance set against its competitors and industry standards
By undertaking this approach, we fulfilled the three key benchmarking objectives of establishing:
Whether the agreed services as a whole are VfM
Other key findings regarding quality and competitiveness
A set of recommendations to the charges or performance levels if any of the services are not VfM, or the services as a whole are not VfM
Deecon’s benchmarking methodology was employed across three workstreams to determine: economy, efficiency, effectiveness, strategic value, stakeholder value, achievability, equity, and social value; across each of the ‘Lines of Development’ and additional areas. These three key workstreams are:
Workstream 1: Contractual Benchmarking
The purpose of this workstream was to understand the relationship between the two contractual parties, the terms, conditions, and performance indicators of the contract, and the full proposed scope of work. This included a review of governance maturity. The activities outlined below were undertaken to identify areas where the contractual terms and conditions were suboptimal and determine strategies for improvement. This included a review of:
The core contract, schedules, and appendixes – e.g., whether the contractor is compliant with contract terms and any pre-agreed timetable for work
Variation control - how these are recorded, quantified, substantiated, and resolved
The contract management process – is service delivery suitably monitored? Are any performance metrics including KPIs and SLAs being utilised to track success?
The contract and relationship history – how has the supplier-contractor relationship been maintained? Have there been any disputes or disagreements?
The contractor's risk profile – how are financial, performance or liability risks being managed?
Additions to service or out of scope deliverables – are these amendments being reflected in an updated project timeline? How are the financial implications being calculated?
Workstream 2: Operational Benchmarking (Internal comparisons)
This workstream assessed the operational processes encompassed by the contract. It was essential to establish how the contractor had been performing and any concerns with their operations management structures, assessing VfM areas of efficiency, effectiveness, equity, and strategic value. This review considered:
Performance – is work being done efficiently and to a high standard? Are ESG targets being met / on track? Is the supply chain being managed effectively?
Resource allocation – do activity levels reflect those promised? Does the contractor have sufficient staffing to match spikes in demand?
Regional differences in activity – how does geography affect operations? How do operations in rural areas compare to urban areas?
Challenges encountered – are there any factors limiting success? To what extent? Are these short-term or long-term impacts? Are there mechanisms in place to resolve these issues?
Deecon also conducted a business case review of the winning tenderer to establish the basis on which the company was selected, what was proposed, and validate whether these planned benefits are being realised.
Workstream 3: Commercial and Financial Benchmarking
This workstream analysed internal factors and compared performance against competitors and industry standards, using the findings of previous workstreams and the data collected during Phase 2 of the project. Our benchmarking methodology included the following components:
Discovery and internal analysis: Deecon reviewed contractor spend data across the breadth of the contract to understand spending patterns, what has been paid for and when/on what terms, the extent to which geographical location has an impact, and how spend has fluctuated since contract start – crucially assessing VfM areas of equity, stakeholder value and economy.
External comparisons: Financial and performance data was sorted into ‘buckets’, grouping similar functions, services, or activities. Deecon undertook comparisons with corresponding data from open-source research into publicly accessible market rates, Authority-provided data collected during Phase 2 or rate card data from our own in-house contracts. This data informed target rates, i.e., the rate that would be considered VfM, and influence the assessment against each Line of Development.
Building on earlier assessments, all VfM areas were considered in this workstream: economy, efficiency, effectiveness, strategic value, stakeholder value, achievability, equity, and social value.
The Results
During the benchmarking analysis across the breadth of the delivered service, Deecon collated the findings to meet the requirement. In addition to the final report, all analysis was provided to the Client as well as additional touchpoints to ensure Client stakeholders were kept abreast of granular methods, assumptions, and information. The final report was structured to include an overview, key findings and insights, and recommendations for strategic and tactical improvements.