£220 million in cost savings anticipated over eight years
Substantive financial gain to the BBC resulting from enhanced revenues and reduced cost
With the ten-year outsourcing contract for the administration of the TV Licensing operation up for renewal, the BBC embarked on what would be one of the UK’s largest ever outsourcing procurement exercises. See how Davies helped.
With the ten-year outsourcing contract for the administration of the TV Licensing operation up for renewal, the BBC embarked on what would be one of the UK’s largest ever outsourcing procurement exercises.
TV Licensing uses an outsourced business model to collect £3.7 billion of license fee revenue every year, representing the majority of the BBC’s funding. With the ten-year outsourcing contract for the administration of the TV Licensing operation up for renewal, TV Licensing embarked, a year ahead of time, on what would be one of the UK’s largest ever outsourcing procurement exercises. Like any client, it also wanted to achieve cost savings through the procurement.
It invited us to be part of the procurement team, bringing our specialist knowledge to the scoping of the contract, as well as to validate vendor’s costs and ability to deliver the service TV Licensing required.
Central to that would be a contract that recognised the channel shift that had taken place since the last renewal. In the four years before renewal, the majority of payments had moved to automated or self-service channels and calls to its contact centre have halved from twelve to six million calls a year. This new procurement offered an opportunity to realise the cost benefits of this shift and to build a wholly new delivery capability, more in tune with today’s rapidly evolving technology environment.
Furthermore, with costs rising and a licence fee freeze in operation, the BBC needed to maximise revenue by tackling evasion and ensuring prompt payments.
We agreed with the client that to achieve their objectives of maximising revenue and tacking evasion and efficient payments, they would need to undertake a thorough review of the supplier market and what it could deliver. It would mean negotiating openly with potential providers to build a solution in partnership.
The BBC was looking for a lot more than a keen price. It was looking for a partner that had multi-channel delivery capability, a demonstrable plan to evolve and innovate that capability, plus an appetite for contractual risk and reward sharing. The incumbent plus several other candidates were invited to tender.
Evaluating the proposals would require a deep understanding of the current customer management environment, as well as TV Licensing’s business and operational requirements. Having worked with the BBC in the past to help analyse, understand and improve the quality of the customer experience delivered to license payers, we knew the business well and could hit the ground running.
To facilitate comparison between proposals, we defined a common structure that bidders were asked to adhere to. We evaluated each when it came in, providing feedback to each bidder and clarity to the procurement team. Because the process was an iterative one, with bidders asked to refine their proposals as the process evolved, that meant several review stages and over 600 hours of dialogue with bidders.
TV Licensing relied on us to validate each bidder’s costs and provide assurance that they were not compromising their ability to deliver in order to achieve what they felt to be a competitive price. Thanks to our meticulous understanding of pricing models and procurement strategy, discussions about cost were concluded early in the process, leaving time to focus on the strategic elements of the contract.
The whole procurement exercise – despite its complexity and increased scope – was achieved within a year and with minimal disruption to the business. It resulted in a contract designed to deliver efficiency savings over £220 million over eight years, by leveraging the capabilities for lower-cost self-service delivery channels and bringing two contracts together.
The successful bidder partnered with the BBC’s collections provider, invested to extend their capability and was responsible for managing the whole process. This made the evaluation of their proposal more complex, but added considerable value to it.
The new partner also offered an effective approach to tackling license evasion, involving sophisticated and targeted collection strategies, underpinned by the use of advanced analytics. It has already led to a revenue increase, combined with the projected cost savings was to give the BBC a significant financial gain, substantially greater than it first anticipated.
The new contract also protected TV Licensing’s ongoing delivery with both a change programme – “taking what the BBC does today and making it better,” – and a development programme, to allow the service to flex and evolve. Analytics would also be used to refine and enhance the customer experience for every license payer. By identifying the characteristics of calls that generate the most positive consumer responses, analytics would help TV Licensing drive higher levels of consumer satisfaction and first-time resolution.
Bidders have since described this as one of the best procurement processes they’ve experienced.
Wherever you are on your outsourcing journey, Davies can help you take the next steps. Contact us for an initial conversation to discuss your current situation.
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