Principles of Benchmarking

Principles of Benchmarking

Principles of Benchmarking

These principles will help ensure the smooth and speedy management of the benchmark using a fair and equitable process. The Parties require the Benchmarker to follow these principles which balance their desire for transparency and openness with the need to maintain strict confidentiality of data. Each stage of the benchmark process will be reviewed and agreed by both Parties.

Prior to the start of the Benchmark, the Benchmarker will:

1. Sign a written confidentiality and non-disclosure agreement with each Party;

2. Sign a tripartite agreement with both Parties which incorporates the benchmarking terms and these Principles of Benchmarking. In addition, the tripartite agreement will state that:

  • all communications between both Parties and the Benchmarker which relate to the benchmark shall be shared concurrently with the other Party, unless the Parties have agreed that some information can be shared with the Benchmarker in confidence;
  • the Benchmarker will maintain an audit trail which is sufficiently detailed for either Party to instruct an independent company to audit all the work done by the Benchmarker, including details of calculations, cost base information, source data analysis, Normalisation Factors and other adjustments; and
  • the Benchmarker will make available to both Parties all supporting information and calculations upon which the Initial and Final Benchmark Report has been based, excluding the identity of the members of the Final Peer Group, as well as any further information reasonably requested by either Party.

3. Within ten (10) Business Days of being appointed, present to both Parties a Draft SoW including, amongst other things, the proposed methodology, expected timescales and agreed scope of the Benchmark;

4. Take account of both Parties reasonable comments on the Draft SoW and, with five (5) Business Days, issue a Final SOW for approval of both Parties.

Once the Benchmark has started, the Benchmarker will:

5. Maintain a list of any issues which cannot be resolved quickly, to avoid unnecessary delay to the Benchmark process, work in parallel to resolve these and incorporate a list of any issues outstanding in the Draft and Final Benchmark Report

6. Use a spreadsheet to create a detailed Service Profile for the Benchmarked Services, and:

  • include full details of all services, service elements and service levels
  • ensure that any unusual or non-standard services are adequately mapped into the Service Profile;
  • calculate the Benchmark Charges from the on-going charges for the Benchmarked Services, eliminating any fixed or one off charges, including but not limited to one-off capital costs, lump sum or any other form of up-front payment, transition charges and TUPE redeployment charges (including any associated pension costs) and add these to the Service Profile; and
  • review and agree the Service Profile and Benchmark Charges with both Parties.

7. Compile a Draft Peer Group of contracts for services which are, as far as practicable, the same or substantially the same as the Benchmarked Services, in particular having the same scale, scope and geographic reach, in order to minimise Normalisation Adjustments, and:

  • provide a profile for each proposed Peer Group contract, to a level of detail agreed by the Customer and BT to enable both Parties to assess their suitability as reasonable comparators. This profile will typically vary by service type but would typically include:

     - date of pricing, industry sector and term of contract;
     - geographic location and technology type of each service for each location, noting any in-scope countries without coverage;
     - location of central management of services;
     - volumes analysed by speed, sites, capacity, status (active/passive) and users;
     - contracted service levels, service credit regimes and their measurement periods; and
     - written confirmation that the service providers to the Draft Peer Group are of equivalent standing, scale and financial stability to BT.
  • provide a minimum of seven (7) contracts from a minimum of three (3) other service providers in the Draft Peer Group to allow either Party to request the exclusion of contracts reasonably considered anomalous while ensuring a reasonably-sized group remains for comparison purposes; and
  • review and agree the Final Peer Group with both Parties.

8. Add the Service Profile in adjacent columns of the spreadsheet for each contract in the Final Peer Group, and review and agree with both Parties:

  • which elements of the Service Profile add cost and so are considered material for the Benchmark;
  • a comprehensive list of Normalisation Factors, including:

     - factors which apply to all elements of the Service Profile equally (typically differences at a contract level);
     - factors which apply to individual services or services elements;
     - factors which result from specific customer requirements which impose a constraint on BT service delivery; and
  • the appropriate Normalisation Adjustments to be used.

9. Calculate the Normalised Charges for each service element of the Service Profile taking account of all the Normalisation Factors listed above, for each member of the Final Peer Group so that these charges are as directly comparable as is reasonably possible with the Benchmarked Charges, and;

  • publish the Initial Benchmark Report comparing the Benchmarked Charges with the Benchmark Target, taking account of the Buffer as described in Schedule and any other discounts, rebates, or other financial incentives available to the Customer, documenting how the Benchmark has been conducted and the log of any remaining unresolved issues;
  • take into account any reasonable comments and requests made by either Party and issue an updated Benchmark Report
  • review and agree with both Parties the Final Benchmark Report,

10. Publish the Final Benchmark Report.