The benchmarking and market testing processes involve comparing the competitiveness, quality of service (often evaluated against key performance indicators), and cost against contractual standards.
The outcome should indicate the extent of any difference in the current costs being charged to the public sector and the costs that would be charged by a similar organisation providing like-for-like services (the Market Costs). If the current costs differ significantly from the Market Costs, the contract can require that the costs of services are adjusted and failing any agreement, that the parties conduct a market testing exercise to potentially replace the service provider.
The market testing process involves opening the provision of services to other private sector companies through a tender process, inviting bids from alternative providers to take over the services. If a competing bid offers better value for money or improved service quality, the public sector may choose to instruct a new service provider.
Both benchmarking and market testing processes require a detailed and thorough analysis of Project Co’s performance. We often find that benchmarking exercises undertaken or managed by Project Co do not follow a thorough, accurate, or contractually compliant process. This can result in a suggested uplift in the services cost far exceeding an appropriate level.
Our experienced public sector team can review a benchmarking or market testing procedures at any stage to assess the fairness and contractual compliance of the exercise. In doing so, we are able to ensure our public sector clients receive a cost-effective and efficient service.
- Advising in relation to a priced benchmarking exercise undertaken by Project Co, including reviewing the benchmarking procedure and outcome report prepared by a third party instructed on behalf of Project Co, assessing the suitability and reliability of the exercise, and analysing the extent to which the exercise had complied with the relevant contractual provisions and good industry practice.
- The outcome report recommended a significant uplift in the cost charged to the authority for contractual services. However, our review concluded that the process was not contractually compliant in numerous instances ; we recommended that no price increase was acceptable based on this defective report;
- Supporting an NHS Foundation Trust in negotiating an alternative to the market testing process;
- Challenging uplifts and negotiating reductions to service costs.