Contract for Insolvency Services Inverness Aberdeen

1. Contract for Insolvency Services Inverness Aberdeen Glasgow Edinburgh w/c 29 September 2008

2. Objectives • To provide an overview of the Accountant in Bankruptcy • To present a high level overview of how contracted out insolvency services will operate in the future contract • To outline the PQQ approach and timeline • To provide a brief overview of the eSourcing system • To provide access to specialist help and advice • To deliver the same consistent message at each regional event..

3. Agenda • Overview of the Accountant in Bankruptcy • Importance of the project • High level Vision and overview of the contract operation • PQQ and Tender Approach • eSourcing Scotland Overview • Questions • Close AIB Session • Lunch • Steve Ashcroft session

4. Welcome

5. Accountant in Bankruptcy: Overview • Executive Agency of the Scottish Government (since April 2002) • Operates independently, but responsible to Scottish Ministers for standards • CE is THE Accountant in Bankruptcy – independent statutory officer • Supervise the process of bankruptcy and act as trustee when appointed to do so

6. Accountant in Bankruptcy: Overview Also responsible for: • Personal Insolvency, Corporate Insolvency & Diligence Policy in Scotland • The award of bankruptcy in debtor applications • Debt Arrangement Scheme (DAS) • Maintain the public Register of Insolvencies • Supervision of protected Trust Deeds • Registering Corporate Insolvencies

7. Accountant in Bankruptcy: Overview • Administer cases both through internal administration teams and Agency contract • Relocated from Edinburgh to Ayrshire • Operational & Corporate functions based single site at Kilwinning in North Ayrshire • Approx 140 staff across all functions • Operating cost of circa £12m per annum

8. Contracted Insolvency Services • Projecting £5m expenditure for 2007/08 • Approximately 2/3 of our core workload • Significant operational risk to our business continuity • Significant reputational risk to the service quality

9. Contracted Insolvency Services • A key objective in out 2006-11 Business Strategy – published October 2006 • Preparation work began 2007/08 • Commitment in our 2008/09 Business Plan • Vision released June 2008

10. Government Context • Care about bankruptcy and Creditor/Debtor’s experience • Committed to Procurement to achieving best value – McClelland agenda • Ministers care about a successful Insolvency Services Contract

11. Vision and High Level Overview of the Contract Operation

12. We’re serious about making a contract fit for our collective modern purpose • We’re committed to contracting in a way that is interesting and rewarding for you • We want you to bid for our work • We’re confident our contract can work for you – whatever size of organisation you are • We want you to consider how this contract opportunity can fit with your organisation plans

13. Define Needs Background of our Approach Continuous improvement Step Change Customer focus Tender and Contract Develop Strategy Manage Performance Consult Customers Develop & Innovate

14. Define Needs Review available Management Information Consider best practice Review current internal processes associated with managing Agent contract Consider key strategic options Agree AiB vision and business strategy • Consult Customers • Public Sector • McClelland Reform Agenda • Best Value requirements • Creditor and Debtor organisations • Perceptions on performance • Ideal outcomes April April Continuous improvement Step Change Customer focus

15. Summary analysis of Current State • Political • Contract is dated • Does AiB have sufficient Regulatory powers to ensure consistency in case administration? • Awareness that the SME agenda is growing politically • Procurement Reform requirement for efficiencies • Full affect of Bankruptcy Reform not yet known • Economic • Creditor organisations have a choice. Their strategies are not yet fully understood but the impact could have significant and long term affect on AiB • Large number of existing Agents with variable performance and satisfaction, though limited availability of usable MI on key metrics • Opportunities exist for internal efficiencies with improvements in contract terms, performance of agents and reconsideration of some practices • Internal costs and potential for efficiencies in Case Operations are not yet fully known • A large pool of potential suppliers exists • No benefit of suppliers’ expertise is currently realised • Technological • MIDAS investment has not yet been utilised fully in respect of external caseload • Costs associated with double handling and continued use of spreadsheets internally AiB Case Strategy • Social • Increase in insolvencies projected • What socio-economic mix will this be and therefore what complexity for future cases? • What affect will LILA have, in particular on Debtor petitions? • What affect on complaints to Regulator of cases externally managed?

16. High Level Vision and Design Principles A 3 year agreement with option to extend for a further year: • Debtor Cases in-house • Creditor Cases out • The establishment of an effective Customer Strategy • Establishment of effective Contract and supplier relationship management Implementation: • On going monitoring and review of the strategy • Transparent mechanism for comparing cost and performance internal vs external • Technology-enabled • A mechanism for continuous improvement

17. Develop Procurement Strategy Current provider intelligence Collect market information EU Legislation and Legal Advice Scottish Procurement Directorate Best practice principles Business case for Internal Efficiencies Options Appraisal for Procurement Business Case Strategic Board sign off Implementation Plan July June Continuous improvement Step Change Customer focus

18. The new contract strategy has had to balance the needs of many Stakeholders Debtors: Want our providers to be responsive; For costs to be controlled; and For an effective mechanism for handling complaints AiB & Public Purse: Want providers to carry out case administration requirements in a timely manner; For costs to be controlled; For processes to be streamlined to bring about significant internal efficiencies; For management information to enable objective measurement of performance; and For providers to contribute to the work related to policy and in ongoing programmes to improve processes Providers: Want to exercise professional judgement in carrying out their duties in case administration; For existing beaurocratic approval processes to be streamlined; For clear guidance on what is expected and how they will be measured Creditors: Want our providers to realise assets in a timely manner; and For costs to be controlled …and our approach meets all these needs

19. So - How will it work? • What you’ll get is: • Steady caseload for the next 3 – 4 years • Lots of which will be fairly standard • An opportunity to work closely with us to develop the service we provide • Trustee freedoms you can’t have • You’ll need to work acting on behalf of the Accountant which means: • Working within our boundaries • Reporting against key metrics

20. Some things about administering bankruptcies never change… • You need to assess the case – tracing and interviewing people • You need to realise assets and seek contributions • You need to submit accounts to us • You need to pay dividends • You need some other professional services to make all the above happen and • You need to return a Sederunt Book in order to be discharged at the end of the case …but we have made the process simpler to operate

21. In the new contract…. You will be able to work more according to your own professional judgement (within pre-defined boundaries). In the past, a request for “additional hours” was said to takes 2 hours to complete and submit

22. Payment for Court Appearance Attend Court, Note hours Y Is it on the list? Provider considers extra hours required Claim fee with Web Accounts process Provider Paid Prepare Request N PROVIDER Reason For reject Accept Y/N Y N AiB Y/N Auto update to Case Update SAGE to pay Log on Case AIB SYSTEMS Draft

23. In the new contract: Where you can self-certify (within pre-defined boundaries) you will be able to directly call off contracts for Outlays – another significant administrative and cash flow benefit

24. Regular Outlays Request (Phase 1) Prepare Monthly Invoice Instruct AIB supplier with Case Ref as reference SUPPLIERS Supplier Paid Y Regular Commodity? Can you self certify? Case manager determines a requirement Prepare Request Y N AGENT / COB Y N Advise Case Manager N Follow Ad hoc process Approve Check (exceptions) CONT. MGR / B1 (COB) Y Log on Case Receive Invoice Electronically Bulk load to case 78% expenditure 89% invoices 85% suppliers Update SAGE to pay AIB SYSTEMS Draft

25. In the new contract: • You will log on to a secure Web Application to submit • Accounts and Schemes of Division • Integration with MIDAS and • Semi-automatic calculation of fees and recovery • A significant reduction in time and cost for both parties

26. Audit of Accounts (incl. SOD) Preparation Of accounts Through process PROVIDERS Submit data & attachments To web app System Confirmation Std Letter Of Determination Agent Paid Std Letter of rejection AIB MANUAL N Monthly report showing accts due in period Overnight Integrate to MIDAS & workflow Accept? Audit Accounts & contributions SAGE for payment Y AIB SYSTEMS Midas generates Accounting periods 1st Phase: Accounts and 6 month MI 2nd Phase: Trustee Accounts Draft

27. How you will get work You can be awarded a contract for one, some or all lots This contract is designed to work whatever size you are

28. National Lot • Consider it as our insurance policy against unpredicted increases in demand • It will run alongside the regional lots through the life of the contract • Cases will only be allocated through the national lot in the event that regional demand increases above that currently predicted

29. Example Allocation Model Region x with annual capacity 1,000 Allocation every 10 cases • We can’t guarantee volumes • We can’t control flow • You can’t pick and choose

30. How you will be paid Flat Fee – A flat fee will be paid for all cases administered, regardless of complexity or origin of the application. This will be in 2 instalments Uplift – Based on assets realised through the course of the case. Hourly Rate – For trading cases For work we agree is additional In the future, the uplift will reward you for much of your additional time

31. Past Performance Approx 54% of Creditor petitions in the past have realised no assets • 2,545 externally-managed cases closed between 1/4/07 and 31/3/08: • 40% cases ingathered funds 207 of which were in excess of £3,000 • 22% cases realised heritable assets, 426 of which were in excess of £5,000 • 19% cases realised contributions, 80 of which were in excess of £3,000 Significant further detail will be provided at tender stage to allow all bidders to commercially assess the opportunity

32. How you will be measured Financial Performance To provide an unambiguous measure of provider performance in realising assets. Likely to include: Value of contributions; Assets realised; actual costs Process Performance To provide an unambiguous measure of performance in the administration process. Likely to include: Timeliness and accuracy of accounts, timeliness and accuracy of Sederunt Books Customer Service To provide an unambiguous measure of provider performance related to customer (largely external) satisfaction. Likely to include: Time to first contact with debtor; measures related to complaints Developing Partnerships Approach to innovation; active involvement in AiB initiatives to improve processes and policy. More difficult to establish objectively

34. Pre Qualification Process

35. Sept Tender and Contract Development of Pre-Qualification Criteria Development of Evaluation criteria Clear specification of requirements Reporting and performance expectations Term of contract Payment schedules and timing Rewarding the best performers Balanced Scorecard approach Implementation – Internal and External. A long process • Manage Performance; Develop and Innovation • Customer-specific metrics • Focus on value – the end result • Benchmarking and development of best practice • With our providers and across UK and Europe Insolvency Services • Regular two-way communications • Challenging status quo • Secondments Continuous improvement Step Change Customer focus

36. Pre Qualification • Allows us to define and assess the features and qualities we’re looking for in our future partners • Allows you to decide if you wish to bid • We’re using the eSourcing Scotland technology to facilitate this process

37. Contract Notice PQQ Launch PQQ Due Evalua- tion Tender Launch Contract Award Implementation 24 Sept 31 Oct w/c 3 Nov 14 Nov March / April 09 13 Sept April 09 Indicative Timing Two ways to receive PQQ: OJEU Public Contracts Scotland website

38. Pre Qualification – How to Access Log on Browse contracts

39. Financial Services Category

40. Contracted out Insolvency Services

41. Record your interest & follow instructions

42. What we’re looking for Financial Status and Insurance 10% Technical Ability and Quality 80% Business Probity 10% The Pre Qualification contains a mixture of mandatory questions, and others that will obtain marks

43. What we’re looking for Financial Status and Insurance 10% Banking Minimum requirement Accounts 100% Insurance Minimum requirement

44. What we’re looking for Business Probity 10% Question 1 Minimum requirement All others Equal proportion

45. What we’re looking for Technical Ability and Quality 80% Technology Minimum requirement Policies Minimum requirement Experience 22% Capacity 20% Competence 22% Principal Business 13% Customer Service 8% Account Management 5% Management Info 3% Secure Data Storage 5% Electronic information 2%

46. What to do with Questions • No such thing as a daft question • Ask anything through the system • eSourcing Scotland representatives will demonstrate

47. Summary • We’ve approached PQQ criteria very carefully • We have a well balanced and fair approach to evaluation • We hope you find the process clear and the system easy to use • Don’t let the technology be a barrier to bidding – we’ll help you get on…

48. eSourcing Scotland

49. Questions

50. Questions Scope • Not existing contract • PQQ • Vision for future operation • eSourcing tool • Remember – fees and their structures will be part of the tender