1. Administrative Data - the Statistical Potential Alan Cave Business Director, Capita

2. Price and Risk A successful contract is based on a price that accurately reflects both parties risk judgements and appetites. The key dimensions of risk are: – Delivery – Cost – Legal – Reputational

3. How does a bidder reach a price? 1.Understand the “As-Is”: operating model, liabilities, cost allocation. 2.Understand customer requirements and the changes/novelty involved. 3.Build a Solution, a Target Operating Model and a financial model. 4.Price the solution: – Within the customer’s cost envelope – With an acceptable return – Building in contingency for risk

4. Issues in assessing and managing risk Scenario 1: Outsourcing a well-established service (3G) Example: Local Authority services Base line and improvement possibilities are clear and well- known Benchmark data widely available Data is trusted

5. Issues in assessing and managing risk Scenario 2: Innovating in an already outsourced service (2G) Example: DWP Work Programme Base line partially clear Commercial model contains element of hypothesis/pilot Benchmark data not widely available Data is largely trusted (but typically separate sets of Admin data)

6. Issues in assessing and managing risk Scenario 3: Initial outsourcing of a service (1G) Example: MoJ Transforming Rehabilitation programme Base line clear Commercial model rests on predictions based on modelling the customer’s Admin data Bidders required to make assumptions/take data on trust

7. Administrative data in a commercial context Clear strengths: Reflects “operational reality” Frequency and regularity Subject to quality controls/audit Drawbacks: One-sided Worries about quality Defensiveness

8. How to handle trust and uncertainty issues? 1.Price it in 2.Ignore it 3.Adjust over time: “True Up” Above all: a more mature approach