Audit of the Data Communications Company (DCC)

Description

Under the Operational Performance Regime (OPR) contract management incentive, the auditor assesses the DCC’s management of its contracts. The auditor is tasked with using the scope listed in the most up to date version OPR Guidance document to assess DCC’s contract management performance against the National Auditing Office (NAO) Framework. Main tasks: *Assessment of DCC’s commercial activity over the course of the Regulatory Year. *The auditor will provide a score of DCC’s performance using the NAO Framework. Ofgem will use these scores to determine the final score to be awarded to DCC. The audit will run on an annual basis and have four main stages: *Evaluation stage – This will run for around six weeks where the auditor will carry out an assessment of DCC’s commercial activity in the Regulatory Year. The auditor will provide DCC with an interim report which will contain a score and rationale against each supporting question against the NAO Framework. *Reporting - The auditor will provide a draft report to the Authority which will include DCC’s level of attainment against the NAO Framework. The Authority may ask for iteration of the report before the final version is produced and shared with us. *Consultation stage – The Authority will publish a summary of report findings and consult on this – no further action is required from the Consultant at this stage. *Decision – The Authority will consider the responses from stakeholders on the consultation and determine DCC’s retained margin. We may ask the Consultants for further clarification around the scores during this stage. Lot 1: The DCC is the central communications body licensed to provide the communications, data transfer and management required to support smart metering. DCC was appointed using an outsourced service model, to manage contracted smart metering service providers. As such, external costs compose the largest proportion of DCC’s costs, and it is critical that these contracts are entered into, managed and closed out effectively and efficiently. Each year, the Authority scrutinises DCC’s incurred and forecast costs through the annual Price Control process to determine whether these costs are economic and efficient. Alongside the cost assessment, DCC also faces financial incentives under the Operational Performance Regime (OPR). Given the Authority’s and industry’s concerns around DCC’s contract management and procurement processes, the Authority consulted on whether it would be appropriate to financially incentivise DCC’s contract management and procurement as part of the revised OPR regime in May 2020. Stakeholders responded largely in favour of the Authority’s proposals, and in October 2020 the Authority published its decision to implement a Contract Management Incentive. This incentive aims to improve DCC’s performance in contract management and procurement to drive efficiencies on DCC’s external costs, and ultimately savings for DCC’s customers. It is intended to operate as an annual independent audit of DCC’s contract and commercial management and procurement activities, using the assessment criteria and scoring framework as set out in the National Audit Office (NAO) framework. The audit will run on an annual cycle alongside the Authority’s annual price control process and is expected to have four main stages: evaluation, reporting, consultation and decision. The evaluation stage is expected to take six weeks, with the successful tenderer producing an interim report for DCC to provide comment. In this stage, the successful tenderer will need to assess DCC’s commercial activity over the course of a Regulatory Year to provide a score and rationale against each supporting question against the NAO Framework, covering contract management, procurement and re-procurement. For more details on the scope and timelines refer to Annex A. In the reporting stage the successful tenderer will produce a draft report to the Authority. This report will include the successful tenderer’s assessment of the level of attainment DCC has reached for each supporting question under the NAO Framework with a clear rationale for each score. The Authority will review the report and may require further iteration after which the final report will be produced. In the consultation stage, the Authority will publish a summary of the report findings no action from the successful tenderer will be required at this stage. In the decision stage, the Authority will consider responses from stakeholders on the consultation and determine DCC’s retained margin under the Contract Management Incentive. The Authority may ask the successful tenderer for further clarification around the scores during this stage. Further information on the requirement can be found within the specification attachment in Annex A within the 2024-082 ITT document. Additional information: Please refer to the 2024-082 ITT document for further information