Contracts
08/01/2007 14:39
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Central government has dealt a blow to Royal Mail by awarding a £12 million contract to handle post for the Department of Work and Pensions to rival Business Post's subsidiary UK Mail.
While heaping further problems on the troubled state-owned company, the move is a boon to private sector competitors as it represents a change in government procurement strategy in an area worth £650 million of annual spend.
The contract represents part of an effort to find £21.5 billion in efficiency savings by March 2008 and procurement has been identified as the area with the most potential savings, the Financial Times reports.
An estimate made by the National Audit Office predicted that annual savings of £31 million could be made from more efficient use of postal services and low frequency of volume discounts offered by Royal Mail makes private companies compare favourably in terms of cost per item.
The Department of Work and Pensions is expected to save £1.7 million a year by using UK Mail to sort its post from its two largest mailing centres.
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