EDS To Manage Canada's Savings Bond Program

Bank of Canada, Canada's central bank, is outsourcing the business operations needed to support its retail debt program, known as Canada Savings Bonds.

EDS Canada bagged the $271 million contract, which stretches 9.5 years. Earlier, EDS had landed a $156 million contract with CIBC to provide human resource operations and technology services.

The Bank of Canada contract is "a precedent setting move in terms of outsourcing in Canada," said Dave Kropla, vice president, business process management at EDS. "Not a lot of people outsource bond processing."

The firm beat out IBM Canada for the contract.

The deal will reduce Bank of Canada's expenses by $10 million-$20 million, depending on volume, said Dan MacDonald, outsourcing adviser and chief of the infrastructure service department at the Ottawa-based bank.

EDS will be responsible for the operations needed to support the sale, service and redemption of savings bonds issued by the Canadian government. Currently, about $26 billion worth of savings bonds are outstanding in Canada, down from $33 billion in 1996. Thanks to healthy tax revenues and cost cutting measures, the federal government now runs in the black, reducing the need to issue bonds.

Bank of Canada began revamping its retail debt program in 1995, when it modified the payroll deduction plan that allowed Canadians to buy bonds through work. However, all revenues collected by the central bank go to the Department of Finance, while the bank is saddled with the costs, which ballooned from $41 million to $76 million.

The bank found that time spent on the retail debt program consumed 40% of management's resources, prompting it to consider outsourcing alternatives. It took as its model the Bank of England, which outsources its retail debt program.

About 29 firms originally expressed an interest in taking over the program, and that was quickly whittled down to fewer than a dozen. Five firms were then issued a formal request for proposal. EDS got the nod after 16 weeks of negotiations.

"I am amazed at how well the whole process is taking place," said MacDonald, calling the deal fair for both sides. "It's a complex process-selling a business."

The contract, he added, is a bellwether for Ottawa, a government town where there's "not a lot of business process outsourcing."

The big challenge now, MacDonald said, is to "learn how to manage the contract. It's a whole new business process for us." That means beefing up talent and bringing management up to speed on the nuances of outsourcing contracts.

Bank of Canada, which employs about 1,700 people, will transfer 500 to EDS and then restructure its corporate services department.

As with most outsourcing deals, communicating the impact of changes with staff has emerged as one of the chief challenges, MacDonald said. Throughout the year the RFP process took place, the bank "worked extremely hard to make sure staff understood the impact." During the negotiations, the bank fought to ensure continued employment and job opportunities for staff and to make sure they didn't lose any advantages.

The Bank of Canada employees "bring a lot of expertise to EDS at a time when it's opening a computer facility with new mainframe equipment," EDS' Kropla said. "There are an awful lot of things happening at the same time. It's a complex program to manage."