Last Minute Tender

Scenario

A medium sized employer provides services that have traditionally been provided by local councils.  The business had set up a succesful operation through organic growth, but felt that it was time to pitch for council operations under PPP and PFI initiatives.

With several small tenders on the horizon, the employer approached BBS for help.

Solution

BBS prepared a report explaining the options that would be available to the employer should it be succesful in a tender.  The report helped the employer understand the issues so that when it came to a live situation, it could move quickly.

A few months later, the employer contacted BBS to confirm that it would be participating in a tender, and needed help with the pension options so that it could issue its tender two days later!

Without the groundwork that had already been done, it would have been difficult for the employer to consider all of the issues sufficiently before issuing its pitch.  However, with the groundwork laid, the employer decided to pursue the option to participate in the Local Government Pension Scheme as a "Transferee Admission Body".  All it needed to know was whether the pension risks would jeopardise the profitability of the contract.

The vast array of funding information provided to the employer meant it was impossible for them to understand the risks without advice.  BBS, however, could quickly take all of the disparate facts and distil them down into a draft report explaining:

• the likely on-going cost of participation;
• the requirements for the employer to put up a bond to cover the costs of early termination;
• the likelihood of a final payment being required to discharge any pension liabilities;
• the volatility of the contribution should experience be unfavourable.

The last point here was vital, as BBS could explain to the employer that if things went wrong, the additional contribution requirement could run to several tens of thousands of pounds each year.

Outcome

The employer knew that its likely profit margin was expected to run to many hundreds of thousands of pounds, so armed with the funding information, the employer knew that the downside pension risk was well within its risk tolerance.

The final touches could be put to its tender safe in the knowledge that there were no skeletons lurking in the pensions cupboard!