The Provision of Consultancy: Debt Data Collection and Presentation Clarification Document Ref Number: RM3188 (696) Date: 23 rd January 2014 Page 1 of 9
Subject to Contract Introductory clarification points: - This requirement supports the delivery of the DMI Project, which is of strategic importance to HM Government and attracts a high profile at official and ministerial level, as well as across the private sector. The CO looks forward to engaging a highly qualified and experienced consultancy to support this key project. This opportunity is expected to provide the successful bidder s team with visibility and extensive contacts within a number of key departments and agencies, as well as within the private sector. - The Cabinet Office DMI team ( DMI team ) appreciates the fact that the delivery of the scope of this requirement is highly dependent on the level and quality of information available at each of the HDCs. - Part of this requirement is for the selected consultancy to discuss, analyse and report on many of the details requested in the questions below. As the due diligence exercise is just now starting, some of this information has not yet been analysed and cannot be reliably summarised at this stage. Arriving at some of these answers is amongst the goals for this procurement. - The objective of this exercise is to both reduce the need for those suppliers bidding for the DMI to carry out due diligence and enable them to understand the depth and quality of the data. In this respect, understanding weaknesses found in data is just as important in enabling DMI bidders to manage bid risk. - As the due diligence progresses, there would be more clarity on the data sets available at each HDC. On the basis of that information, we would be open to discussions with the consultancy and the HDCs to agree what is reasonably achievable within the project s timeframe. - Departments are currently working on accumulating the information deemed relevant to this requirement, with the expectation that much of this information would be available upon, or shortly after, the commencement of the consultancy contract. Hence, the consultancy is not expected to directly generate all of the required information the need for collection of data would be focused around clarifications and follow-ups with HDCs, as well as more detailed involvement in situations where an HDC is having difficulty generating some of the required data. Summary of Teleconference Q1. The scope of the requirement is very prescriptive, is there to be a broader financial advisor tender to be issued as well? A1. We do not currently plan to issue a separate tender for a broader financial advisory role in the DMI project. Q2. The scope is clear on HDCs, is this all departments or are there also subsets of these departments? A2. The departments listed in the tender documentation vary in size and organisational structure. The information to be presented would be analysed at overall departmental level Page 2 of 9
and by type of debt. Different types of debt may be administered by different subsets of these departments. Q3. What is the value of total debts? A3. Total debt currently planned to be placed with DMI by the HDCs is c. 3bn to 4bn per annum over the 2015/16 to 2017/18 period. The scope of the consultancy s analysis would extend beyond these debt balances. It would also cover debt eligible to be outsourced to DMI, which for some departments would potentially include total departmental debt. Determination of the size of the relevant debt balances is part of the scope of the requirement. Q4. Please can you confirm what exists already in terms of data/information? A4. Some relevant sets of data have been collected over time as part of various HMG projects, including ones led by the Fraud, Error and Debt Taskforce. This data covers some of the requirements to a certain extent; however, further work would be needed to ensure consistency across the review period, including reconciliations, etc. HDCs are currently in the process of accumulating data required for the DMI project (in line with the scope of the requirement), with the intention that most, if not all, of this data would be collected and available by the start of the consultancy. Q5. Please can you advise what systems are in place? Do they differ between departments? A5. Systems differ between departments and in some cases, by debt type. Some of the larger departments, which account for the vast majority of the debt, have consolidating systems in place, which are capable of generating a range of consolidating reports. Q6. Are legal advisors engaged? A6. Legal advisors are not yet engaged, however, we expect to engage them in early February. The relevant ITT for legal services was issued on 22 January 2014, with a procurement timetable similar to the one for the debt data collection and presentation. Cabinet Office and departmental lawyers are also closely involved and already engaged in the project. Q7. Can you confirm that the price capping is obligatory? A7. Yes, the price capping in the tender is obligatory. Q8. Please can you advise what is the nature of the assurance that you are seeking? A8. We are seeking assurance that the data presented is complete and accurate (based on the available departmental records, not on the actual underlying debts) and any estimates are based on reasonable assumptions. It is expected that the consultancy s assurances may contain certain reasonable caveats, which would be discussed between HMG s and the consultancy s legal teams. Q9. Why did you choose Lot 4.3 rather than Lot 4.1 on the Consultancy One Framework? Page 3 of 9
A9. Lot 4.3, Finance Operations Support, reflects the key requirement for this procurement, which is to work with each HDC on presenting the relevant debt data held by the HDC in the appropriate way. Q10. With regards to the expected timescales, can you advise when the IM should be ready by? A10. The current plan is to issue the IM towards the end of February 2014 and for it to be ready for review towards mid-february 2014. We realize that some of the information may not be ready to be presented to the market within this timeframe, which is why we will take a constructive approach to what is achievable by this deadline and what would be provided at a later stage of the process via a data room. Q11. You mentioned in the specification the impact of legislative changes, would the departments be able to hand hold? A11. Different legislative changes are in varying stages of evolvement and approval. The DMI project team, including participating departments, is closely following them and will provide guidance to the consultancy in relation to the required analysis. Responses to written questions Q1. Appendix C Requirement 6.4.1 indicates that all debt held at the included HDCs (not just that potentially eligible for DMI or DCAs) is in scope. a) What is the approximate value of that debt? b) Approximately how many ledgers is it spread across? c) Approximately how many different IT systems is it spread across? d) Approximately how many records does it comprise? A1 The goal of this requirement is to present to potential private sector partners in the DMI not only the debt initially committed to the DMI, but also the potential additional debt, which could be placed with DMI in the future. On that basis, the focus of the consultancy would indeed be on debt eligible to be outsourced to the DMI. Presenting each department s definition of debt eligible to be outsourced is part of the requirement - for some departments it may be total debt, while for others it may be a limited subset. Since the eligibility definition is not clear at this stage, an analysis of total debt at each department may be necessary for the purpose of determining what portion is eligible for outsourcing and what is not; however, such requirement may be limited in cases where the definition of debt eligible for outsourcing only covers a limited subset of debt. In that respect, the scope presented in the requirement may be limited in certain cases, as appropriate, based on the evolving findings of the data analysis exercise. Aa) The debt currently committed by departments to DMI is c. 3bn to 4bn per annum over the 2015/16 to 2017/18 period. The required analysis would cover debt balances beyond these values, for the purpose of presenting balances potentially eligible for outsourcing. Determining the value of such eligible debt is part of the requirement. As clarified above, an overview of total debt at the department may be appropriate for the purpose of determining what debt is eligible for outsourcing; however, we do not expect the monetary value of total debt at the HDCs to be a key indicator of the amount of work required by the consultancy. Page 4 of 9
Bb & c) Some of the departments have separate IT systems and ledgers for the key types of debt they own. In the case of the larger departments, for example, there are also consolidating systems, which are able to generate a number of consolidated reports from the respective sub-systems. Q2 Are there any known data quality issues and what is the process for these to be resolved (e.g. will data of poor quality be excluded or is there an expectation that we would work with Departments for data to be corrected)? A2 Quality of data varies between departments. The two larger departments, HMRC and DWP, have larger debt management operations and have experience in outsourcing debt. Some of the smaller departments have more limited resources dedicated to debt management, to reflect the lower debt volumes. The consultancy would not be expected to enrich data provided by departments (e.g. correcting or filling out missing addresses, phone numbers, etc.), but rather to work with departments, where necessary, appropriate and possible, for the appropriate reports to be generated and properly structured. Understanding weaknesses found in data is just as important to enabling DMI bidders to manage bid risk. We recognise the consultancy may need to caveat certain areas of its report due to any data quality issues it identifies. Q3 Do each of the included HDCs produce annual financial statements, trust accounts or similar? A3. Please refer to information available in the public domain, including www.gov.uk. Q4 Have any of these financial statements been qualified or otherwise criticised by NAO since 2010/11? A4. Please refer to information available in the public domain. Q5 Does each HDC and sub-department have consistent charts of accounts? A5. Departments make the necessary adjustments to reflect sub-department charts of accounts on a consolidated basis, however, sub-departments, which may be responsible for one or more key types of debt, may have different charts of accounts which better reflect the specifics of those debt types. Q6 Does each HDC and sub-department have co-terminous accounting periods? A6. Departments make the necessary adjustments to reflect sub-department accounting records in line with the department s accounting period, however, sub-departments, which may be responsible for one or more key types of debt, may have different accounting periods (e.g. some of HMRC s debt types). Q7 What level of IT resource will HMG provide for data extraction? Will this be consistent across the various HDCs? A7 The HDCs have dedicated teams, tasked with facilitating this DMI data exercise and responding to reasonable requests in line with the DMI project scope. The composition of these teams varies across HDCs, depending on the size and complexity of their Page 5 of 9
debt management operations, but they have a common focus on making the process as efficient as possible. Q8 What volume of data is required to be extracted (i.e. number of individual debtor balances, types of debtor balance)? How does the profile vary by HDC? A8 Currently there is no estimate of the volume of data required to be extracted this level of detail is expected to become clear as a result of the consultancy s work. Q9 What issues have HMG encountered during previous data extraction attempts? Please highlight which of these issues were successfully resolved and which are still outstanding by Department? A9 Some departments have encountered reconciliation issues in debt roll-forward schedules, for some it takes longer to generate highly customised reports, due to system limitations. As noted above, the DMI team would be open to constructive discussions with departments and the consultancy in finding the appropriate course of action should data issues arise and in agreeing what deliverables can reasonably be expected. Q10 What systems and how many are in place in each relevant HMG department for both (i) nominal/general ledgers and (ii) sales ledger/credit management? A10 Please refer to point A1 in this section. Q11 Will individual points of contact exist for each Department who will be responsible for supporting the extraction, cleansing and validation of the data? A11 Please refer to point A7 in this section. Individual points of contact are available for each department, which will help coordinate any requests and data exercises with the appropriate specialised teams within each department. Q12 Is the data provided in a consistent format across the various departments. Does the IT system allow to extract debt-related information (e.g. value, volume, collected, write-offs, adjustments, ageing schedules, balance outsourced to and collected by DCA, cost of collection, recovery yield) and relevant KPIs? A12 Data is generally not fully consistent across departments. Systems are generally capable of generating the types of report under question; however, this may vary depending on the level of detail required. As noted above, the DMI team would be open to constructive discussions with departments and the consultancy in finding the appropriate course of action should data issues arise and in agreeing what deliverables can reasonably be expected. Q13 Do the systems allow extraction of (i) budget and (ii) forecast estimates? A13 Budget and forecast estimates are generally not generated directly from the systems, but are prepared by the respective debt management teams using high level assumptions and relevant drivers they have identified for a particular debt type. Q14 Do the systems provide monthly information over the historical period? Page 6 of 9
A14 Generally monthly historic data is available in the systems; however, the level of detail varies by department and debt type. As noted above, the DMI team would be open to constructive discussions with departments and the consultancy in finding the appropriate course of action should data issues arise and in agreeing what deliverables can reasonably be expected. Q15 Please explain the different debt types by departments? What is available? A15. Detail of the relevant debt types within each HDC is currently being accumulated by departments and would be subject to review and confirmation by the consultancy upon contract commencement. Q16 For each debt type, can we extract the roll-forward/flow of the debt balance? A16 While individual components of the roll-forward/flow of the debt balance are generally available from department s systems, comprehensive reports combining all flow components are not consistently available as an automated report across the DHCs. This is why some reconciliation effort may be required. Q17 Do the systems allow the extraction of debt information by "individual and personal debt" vs. "business"? A17 The systems generally allow the segmentation of "individual and personal debt" vs. "business" (e.g. HMRC), however, this capability may not be directly available or even relevant at some of the smaller departments and for some of the debt types. Q18 What level of access to internal reporting/support will be granted (in order to provide descriptions of key drivers and trends impacting debt volume)? A18 Please refer to point A7 in this section. Q19 Do the departments have debt definition guidance (for example, standardised provisioning methodology) and are these guidances consistent across each Department? To what extent, would you seek to present the accounts receivable balance subject to a consistent methodology (i.e. a pro forma)? A19 Departments have debt definition guidances, which are used to classify certain receivable balances as debt or as write-offs. These guidances are driven by the characteristics of each debt type and are therefore not consistent across each department or even across the debt types in a given department. We would aim to communicate the relevant characteristics of each receivable and respective debt type in the way that is most meaningful for their analysis, as opposed to a fully standardised approach. Q20 By Department, please confirm whether the accounts receivable information has been subject to internal and external audit (e.g. by the NAO)? If yes, for which periods and what were the findings? A20 Please refer to information available in the public domain, including www.gov.uk. Page 7 of 9
Q21 By Department, please confirm whether the books and records of the Department have been subject to internal and external audit (e.g. by the NAO)? If yes, for which periods and what were the findings? A21 Please refer to information available in the public domain, including www.gov.uk. Q22 What is the level of information available (including detail of and basis for the assumptions) to support the forecast period by Department? At a summary level, what is the basis of preparation of this information (i.e. bottom up versus top-down) and to what extent will the approach be consistent by Department? A22 Please refer to point A13 in this section. The forecasting approach varies by department and debt type. Q23 Where will the consultancy work be carried out? If it is on our premises, what business impact level (IL classification) should we assume? (Note that IL1 = unrestricted, IL2 = protected, IL3 = restricted) A23 We expect the consultancy work to be carried out both at HDCs offices and at the consultancy s premises, as appropriate (the successful consultancy only needs to be on site when it needs to be in order to access data or people). Previous data exercises suggest that the majority of anonymised debt data is classified at no more than IL2. Where this is not the case or there are data handling issues, the Cabinet Office and the HDCs will work closely with the successful consultancy to facilitate resolving these issues as quickly as possible. HDCs are expected to extract and provide the relevant data in a way that makes accessibility as straightforward as possible. Q24 What are the data obfuscation (anonymisation) requirements both for data provision from the HDCs and within the data room and information memorandum provision? A24 Data provided by departments for the majority of the requirement components is expected to be anonymous. We expect data presented within the IM to be fully anonymous. Potentially there may be certain data provided within the Data Room on a non-anonymised basis, to provide shortlisted suppliers the opportunity to assess data quality. However, any such data samples would require the appropriate approvals in upcoming stages of the process. Q25 To what extent do we need to validate/augment the data provided (individuals and/or companies) to improve accuracy (e.g. CCJs, electoral role, PAF etc.), or is the assumption that this is handled within HDCs (or not required)? A25 Please refer to point A2 in this section. Q26 Can the data be provided to employees based outside the EEA on a confidential or anonymised basis? A26 While we would be open to discussing the potential for data to be processed outside of the UK, data handling needs to comply with the respective HDC s security requirements. Any offshore proposals must be agreed with the relevant HDC s Senior Information Risk Owner and the Cabinet Office. We would be happy to explore this further with the selected bidder. Page 8 of 9
Additional point of clarification Bidders should note that the Cabinet Office will require the successful bidder to have in place ethical walls agreement if it is either directly or indirectly involved in a bid for the DMI. Page 9 of 9