When I worked on the DWP account we once had a meeting with the chap that lead the account, where he proceeded to tell us that the profit margin wasn’t great and it needed to improve to match our competitors, what was the profit margin? 13%.

Except that it wasn’t actually 13%, it was 34% but because corporate took 21%, we arrived at our measly 13%, far lower than the 16% averaged by our competitors. I’m not sure of the actual size of the contract but we’re probably talking ~ £1 Billion per year, so a 3% difference is ~ £30m.

A simplistic way to look a this, is that in order for the contract to benefit the tax payer, the DWP would have to be ~ 1/3 less efficient that EDS/HP (contract holder at the time), except that this would mean losing a lot of in-house knowledge and thus the efficiency difference would probably need to be higher (40%? 50%?) to account for the loss of in-house knowledge.

Another way of looking at this is that it would require 3-4 DWP FTE to do the work of 2 EDS/HP FTE (under the dubious assumption of similar cost per FTE) depending on how we value the in-house knowledge.

I have worked for the Civil Service recently, not the DWP mind, and I’m now back in the private sector and I find it hard to believe that it ever made sense.

I know what you are thinking:

  • A lot (most?) of civil servants get away with doing nothing.
  • It’s Senior civil servants that are the problem, in other words, management.
  • It’s the politicians.

Having worked in companies ranging from 12 to 300000+ employees, the first point is mostly a big company problem. is it worse in the civil service? I think so but mostly because of length of service.

As for the the last two points, well, the current model seems to prefer to embed contractors into the teams so the problems remain. The model where the outsourcer runs the contract was found to be wanting, which is why this newish model has been adopted.

In fact, my estimates about the efficiency gains needed by a contractor to benefit the taxpayer are way off, given the currently preferred model, namely contractors tend be embedded while costing 2 or 3 times more than a civil servant, but hey it’s not like the civil service can afford to pay techies decent salaries, much cheaper to pay the Methods, Madetech or Kainos of this world 2 to 3 times as much per person as a civil servant.