Two separate Capita contracts in the news this week

By Tony Collins

• Capita “wholeheartedly refutes” findings of independent report on aspects of its contracts with Barnet Council
• National Audit Office criticises Capita’s contract with the British Army. Lessons from many past IT-related project failures not learned

Barnet Council

It’s rare for strongly-worded criticisms by a major IT outsourcing supplier on any subject to come into the public domain. This week Barnet Council published the full version of a report by Grant Thornton on financial controls in Capita’s contracts with Barnet Council.

Full disclosure of the report, which includes Capita’s criticism of the report,  follows freedom of information requests. The council had already published the report in limited form.

In its written response to the Grant Thornton report, Capita says it “wholeheartedly refutes the conclusions of this highly caveated and limited report”.

It says the report’s conclusions regarding financial controls across the council and Capita’s CSG and DRS contracts with Barnet have

“not been independently verified, are not underpinned by clear evidence, and in many instances seem to be based on opinion and hearsay”.

Grant Thornton had criticised:

• a lack of effective review controls that resulted in a Capita employee being able to request 62 inappropriate payments to personal bank accounts. 
• a lack of effective review of journal amendments that enabled fraudulent costs to be concealed on the ledger.
• the “overall financial control environment” which was “not sufficiently robust to ensure that financial control weaknesses were actively identified and mitigated as part of business as usual.”

Grant Thornton also criticised the council’s lack of effective oversight of Capita’s outsourcing contracts.

Barnet’s local bloggers drew the Capita statement to public attention, particularly Barnet Eye.  Another authoritative local blogger Mr Reasonable tweeted on Capita’s statement.

The full Grant Thornton report and Capita statement is here.

Comment:

In its statement, Capita said it accepted that “this case” highlighted failings which “we have worked in partnership with the council to overcome”. It adds that “all the actions raised as a result have already been delivered by Capita and are in the process of being audited”.

But can we be sure Capita will learn from all the failings that Grant Thornton identifies given that it is scathing about Grant Thornton’s report?

We don’t often see a major IT company criticising an independent report commissioned by one of its clients.  Perhaps Capita has grounds for criticising Grant Thornton’s report. Or is Capita being extraordinarily defensive and acting like a company that cannot take criticism?

It is in Capita’s financial interests to have a reputation in the marketplace for accepting – and acting on – constructive criticisms. Throwing words at someone who criticises you is best left to the playground.

British Army

In a report published today (14 December 2018) the National Audit Office has criticised the British Army and its contractor Capita.

The British Army Recruiting Partnering Project was intended to cut the costs of recruiting soldiers and officers. The Army committed £1.36bn to the project over 10 years and agreed to pay Capita £495m for the company’s expertise in recruitment and marketing.

The National Audit Office said,

“Capita has missed the Army’s targets for recruiting new soldiers and officers every year since 2013. The total shortfall each year has ranged from 21% to 45% of the Army’s requirement.”

A core part of the Project was online recruitment but the MoD “failed in its contractual obligation to provide Capita with the necessary IT infrastructure to enable this”.

In January 2014, the MoD passed responsibility for developing the online system to Capita but the complexity of the Army’s requirements delayed system development. The online system was launched four years (52 months) later than originally planned, at a cost of £113m – triple its original budget.

Technical problems continued after the launch. Applicants had difficulties using the system and staff found it hard to process applications. The Army estimates it had 13,000 fewer applications because of the problems.

Capita, and not the Army, owns the online recruitment system. The Army has the right to modify and use it but it has not yet established whether it will be suitable in the future. After 2022, if the contract with Capita is not renewed, the Army will have to create a new system or negotiate a new support contract with Capita.

In April 2017, the Army agreed to lower Capita’s performance targets by 20%  but Capita continues to miss these lower targets for new recruits, said the National Audit Office.

Basic lessons not learned from countless major IT-based projects

The National Audit Office found that:

•  the Army failed to simplify processes before the project started. This contributed to the long time it takes to complete applications. In 2017-18, 11% of applicants went on to join the Army, but 47% voluntarily dropped out of the process. [Simplifying working process before implementing new IT is a basic lesson from countless past IT-related project disasters.]
• there was inadequate testing before the recruitment system and some changed processes were implemented
• the Army cut costs before the project started. [Lessons from past projects have shown that spending on staff and centres need to be increased at the start of major new systems. NHS England cut costs and centres before and during Capita’s introduction of new systems to support GPs. The implementation was a failure.] The Army cut the number of local recruitment centres, from 131 to 68, at the start of the army recruitment project, preferring a more centralised and online approach. However, the Army and Capita realised that this approach did not provide applicants with sufficient support, and that face-to-face contact was crucial in encouraging applicants to join.”

The NAO said the Army has penalised Capita for missing its recruitment targets, applying financial service credit deductions of £26m, 6 per cent of Capita’s total contract payments.

In September 2016, the Army and Capita renegotiated the recruitment targets as the Army considered that there was little prospect of performance improving without agreeing to concessions.

In the last two years applications from potential soldiers and officers have increased but not the number of recruits. This is because of the time it takes to complete the recruitment process, said the National Audit Office. In the first six months of this year,

“Capita recruited only 2,400 regulars, compared to the Army’s target of 5,300…”

The recruitment project will not achieve its planned savings of £267m. The NAO found that the Army has not yet adjusted its forecast savings to take into account the additional people that continue to be involved in the recruitment process.

Comment

Why do senior civil servants, taxpayers  and the general public continue to  suffer the consequences of high-profile failures of IT-related projects and programmes?

The main reason is a simple one. It’s a reason no official report has ever highlighted. Not even the National Audit Office has mentioned it.

That reason is a Whitehall convention that internal and external progress reports on major IT-related projects and programmes are kept secret; therefore nobody knows a project is failing until it fails.

If internal and external reports on a project’s progress and problems were published, the media and armchair auditors would be able to draw attention to the difficulties long before they became manifest in wasted millions and/or a poor service to the public.

Mandarins are terrified of journalists. They give a host of plausible reasons for wanting to keep progress reports secret – such as wanting advisers to have a “safe space” to air candid views – but in reality the mandarins are frightened of having journalists scrutinise their actions and sometimes poor decisions.

But mandarins operate within protective walls that shield them from effective accountability. They know that if they ignore, shrug off or don’t acquaint themselves with the lessons from past project disasters they will not be held responsible. In the civil service, responsibility is shared and non-identifiable. Mandarins like it that way.

In the Brexit debate, a Whitehall convention prevented the government from publishing its legal advice. But Parliament overruled that convention. MPs voted to force the government to publish its legal advice, not just a summary. As a result the full legal advice was published; and journalism reacted by saying, “What was all the fuss about? Why the secrecy?”

If every department and agency published regularly their IT-related project progress reports, journalists whom mandarins are so terrified of would quickly lose interest. After a short time, the published progress reports would go unnoticed and unreported.

But the change in Whitehall would be dramatic. If mandarins were aware their projects were being scrutinised at regular intervals by journalists and armchair auditors, the mandarins would want to be seen to be learning lessons from past projects.

They would not want to be seen ignoring or shrugging off lessons by cutting costs before the new IT is implemented or by failing to simplify working practices before designing the IT.

And Whitehall’s report writers and advisers, far from withholding candid views in fear of a tabloid reaction from journalists, would want to reflect the true problems rather than have their competence questioned by ignoring or not noticing problems that would later become only too obvious.

Indeed we have seen from the National Audit Office’s disclosure from time to time of internal and external progress reports that the current convention of secrecy over progress reports is  worse than useless. It encourages advisers to be soft and chummy with their fellow civil servants. Often projects are given green or amber lights when a red light would be more appropriate.

Will Whitehall ever drop its convention of keeping reports on IT-based projects and programmes secret in the name of preventing more disasters?

Not unless it were forced to do so by a Parliamentary vote.