By Tony Collins
Are council outsourcing contracts becoming so unfathomably complex that officials and leading councillors have no real idea whether they’re saving money?
A Somerset County Council report on the lessons learnt from its troubled outsourcing/joint venture deal with IBM emphasized the importance of “not making contracts overly complicated”.
The report said:
” Both the provider [IBM] and the Council would agree that the contract is incredibly complicated. A contract with over 3,000 pages was drawn up back in 2007 which was considered necessary at the time given the range of services and the partnership and contractual arrangements created…
“The sheer size and complexity of this contract has proven difficult to manage.”
For years there have been arguments in Somerset over whether the council has saved or spent more as a result of the relationship with IBM. The absence of audited figures means nobody knows for certain.
It seems to be the same at Barnet. An absence of audited figures – the council does not have to produce them for an outsourcing contract – means that nobody knows for certain if Capita is costing or saving money.
It’s likely that councillors who supported the outsourcing to Capita, and critics of the deal, will never agree on whether local residents are better or worse off.
Now a Barnet resident and respected blogger Mr Reasonable, who studies the accounts of the local council as part of his efforts to be more open and accountable, has offered £250 to charity if the Tory leader Richard Cornelius provides evidence of how Capita is making savings as promised.
Mr Reasonable made the offer on 24 May 2015 and has heard nothing. His request to Barnet was followed up by Aditya Chakrabortty, senior economics commentator at the Guardian. The council didn’t reply within his deadline. Says Chakrabortty:
“If you want to see the world of outsourcing at its most illogical, spend a bit of time with detail-hunters like Mr Reasonable.
“He tells me about phoning his local library to see if a children’s book was in stock. The call was of course routed to a Capita call centre in Coventry, where staff spent ages unable to help before connecting him back to the librarians just down the road. By his calculations, for that wasted call Capita would charge Barnet £8.
“Outsourcing is full of these invented costs, which is how the privateers make their billions.
“Mr Reasonable can tell you about how Barnet now pays £800 for a day’s training in how to take minutes, or £14,628 for just two months of occupational health assessments. In both cases these are services that would previously have been provided in-house for minimal cost…
“These examples would be comic, if they didn’t cost blameless taxpayers so much money…”
Mr Reasonable says all the commercially sensitive elements of Barnet’s contracts with Capita are redacted and there are “numerous clauses relating to incentives and penalties which would have made publishing a single payments schedule almost impossible”.
It’s also impossible he says to know what Capita has billed for or not.
“I have asked repeatedly to see the evidence of precisely what we are paying for and a detailed explanation of why the payments are so high. Whilst a few promises of evidence were made when the previous COO was in place, none actually materialised.”
“If Barnet Council is serious about openness then why not host an open day where they go through the contract in detail so that we can understand exactly what we are paying for?
“I would have thought it would have made sense for Capita to get involved with this, to work through the contract with interested citizens and to demonstrate clearly how much money they are saving.
“So I hereby throw down a challenge to the Chief Executive Mr Travers, to Richard Cornelius and to Capita – host an open day, bring bloggers and critics in and show them what you are doing, how the contract is working in reality what money is being paid to whom and how much is really being saved – evidence is essential.
“Indeed a few Conservative councillors might want to come along as well seeing as they voted for this contract. I know some of them privately had serious concerns about the contract but were worried about making those views public.
“And to put my money where my mouth is, I will donate £250 to a charity of Richard Cornelius’ choice if he makes this contract open day happen.”
Outsourcing deals should be signed on the basis of pure pragmatism, never because of an ideology.
Barnet’s deal with Capita (and Somerset’s) was signed for largely ideological reasons. Somerset wanted to “go beyond excellence” and Barnet’s ruling councillors want to be immortalised by establishing a new frontier for local government – a “commissioning council” whereby all services are bought in.
It might have been cheaper for Barnet’s residents if the council had given its ruling councillors immortality by building statutes of them in the council’s grounds.
Will council officers have enough time or understanding of the nuances of the contract, with its maze of incentives and penalties, to know whether they are saving money or not?
In any case how accurate were the pre-outsourcing baseline figures and assumptions on which to make a comparison between what services were costing then, and what they are costing now?
There is no equivalent in local government of the National Audit Office, no organisation that will audit a local government outsourcing deal and publish the results.
This means councillors can say what they like in public about the success of a deal without fear of authoritative contradiction. Their critics can only speculate on what is really happening while they try to shine a light at the dense fog that is commercial confidentiality.
It appears that more and more councils are seriously considering large-scale outsourcing, perhaps on the basis that they can promise guaranteed savings without anyone being able to hold them to account on whether genuine savings materialise.
The first we’ll know anything is awry is when a council report, years into a contract, reveals some of the difficulties and says a resolution is being discussed with the supplier; and it’s another year or two before the contract is terminated at considerable extra cost to the council – and nobody is in post from the time of the original contract to be held accountable.
Is this really the shape of local government outsourcing to come?