Pressure is mounting for the Inland Revenue to resolve problems affecting its £1.5bn property outsourcing deal, Mapeley STEPS, after the National Audit Office published a critical report today.
The NAO said the Inland Revenue and Customs & Excise chose the right bidder for the contract – despite criticism of Mapeley for putting the property in a tax haven – and that it would save the taxpayer £300m over the next 20 years.
The deal, under which Mapeley is paid £170m pa for 20 years, is delivering greater flexibility and will help the departments respond to the Lyons review, the NAO said.
But it warned that ongoing problems could stop the full benefits being realised.
These include unresolved negotiations dating back to 2002 over the pricing of additions to the contract, such as new buildings, which had the Soros-Delancey consortium warning of collapse unless an extra £27m a year was paid.
Negotiations have “prevented some key senior management staff from focusing on core business and the departments have not yet been able to focus on core services”, said the NAO.
The departments and Mapeley have also clashed over the performance management system, which Mapeley argues does not provide enough incentive in certain areas.
A joint review is still trying to resolve the dispute.
Meanwhile an average of £121,000 a month is being deducted from the contract.
Such problems are preventing the development of “a sufficient level of partnership” to make the deal a long-term success, said the report. The departments are also slammed for failing to provide a contingency plan at the outset in case the deal collapsed.
The head of the public accounts committee of MPs is highly critical of the deal.
“The departments recognised the risks associated with the low bid put in by Mapeley. But they didn’t have a plan B if things went wrong,” said committee chairman Edward Leigh.
“The financial problems the company had after the agreement was signed meant the entire deal almost collapsed.
“But the departments hadn’t even looked at what the implications might be, let alone figured out an exit strategy.”
References: EGi News 07/05/04
