Outsourcing in the public sector can be a protracted business, sometimes taking up to two years, but the rewards may be substantial for both buyers and suppliers.

Special rules apply, explains Paul Bentham, a partner at the law firm Addleshaw Goddard. EU procurement laws seek to ensure that suppliers are treated equally, that they comply with a robust competitive tendering procedure and that the process is transparent, he says.

Potential IT outsourcing contracts must be advertised in the Official Journal of the European Union (OJEU), except where special exemptions are allowed, and must follow EU guidelines within exact time frames. The official tendering process is structured and formal, but can be bypassed in some cases by following “framework agreements” that have been set up previously by government bodies with approved suppliers. However, public bodies cannot stray far from the terms of these agreements before they have to fall back on the full EU procurement process, says Martyn Hart, chairman of the National Outsourcing Association.

For suppliers, the payback for time spent taking part in these complex procedures is greater certainty. “You know that someone will usually be selected for public-sector contracts — unlike private enterprise, where they can change their minds at the last minute,” says Kevin Tomlinson, head of outsourcing at Capgemini UK, an IT service and business consultancy that has been awarded many contracts in the public sector. “The criteria for work are also more certain.”

Because of the timescale involved, public-sector deals are usually signed for five-year terms, with extension periods of a year. “Even though much public-sector work has already been outsourced, there is still plenty of opportunities for departments to improve their services and management because of improvements in technology,” says Tomlinson.

Public-sector IT outsourcing contracts may come under greater scrutiny than those in the private sector; arrangements can be examined by the National Audit Office and, under the Freedom of Information Act, private companies can study contracts won by competitors.

Bentham says poor project design before procurement can lead to difficulties, but pitfalls can be avoided through good initial planning and continuing contract management and communication.

One satisfied customer is Nathan Elvery, director of finance and resources at Croydon council, which has outsourced all its IT infrastructural and application needs to Capgemini.

“It’s our largest and most important contract,” Elvery says. “With a 10-year term, it’s also one of the longest, and involved a two-year EU tendering process.” The contract has helped transform council services, he says. “If you get the relationship working right, many efficiencies and benefits result.”

- Visit www.ogc.gov.uk for more information on framework agreements

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