Category Archives: Capita

Capita under fire again over GP support contract – but NHS England praises “improvements”

By Tony Collins

Hundreds of trainee GPs have not received their salaries from Capita, which is under contract to pay them, reports The Guardian.

Some of the trainees have applied for emergency funds from The Cameron Fund, a charity for the prevention of hardship among GPs and their dependents.

Capita administers training grants for GPs under its wide-ranging £1bn contract with NHS England to provide primary care services.

In November 2016 the then Health minister Nicola Blackwood described failings on Capita’s GP support contract as “entirely unacceptable”. 

She said Capita had inadequately prepared for delivering a “complex transition”.

In response,  Capita said it adding the full-time equivalent of 500 extra staff on the contract.

But in February 2017, after continuing complaints,  the Health Secretary Jeremy Hunt said he would be prepared to end Capita’s contract if necessary.

Since then, though, NHS England has praised “improvements” in the contract, according to Pulse.

Yesterday The Guardian reported extracts from a letter the British Medical Association sent to NHS England on 30 October 2017.

It said some GP practices were “having to pay trainees out of already overstretched practice budgets, or trainees are going months without being paid if the practice cannot cover the shortfall”.

Capita confirmed it had outstanding payments to some trainee GPs but was unable to say how many it is responsible for paying, or how many it has not paid.

It said that it had not received all the information it needed to pay salaries from the relevant employers. A Capita spokesperson told The Guardian that the problems were an inevitable part of “a major transformation project to modernise a localised and unstandardised service”.

It added: “We have made significant investment to deliver improvements and these have been recognised by NHS England and demonstrated through improved service performance and improved customer satisfaction.”

The Cameron Fund’s treasurer Dr David Wrigley described the outsourcing of GP support services as a “botched privatisation”.

“NHS England has commissioned out what was a very efficient service run within the NHS, and now Capita runs this contract in what I’d call another botched privatisation.”

One trainee GP went unpaid two consecutive months.  At the end of October she posted on a private message board for GPs: “Anyone know of how I access hardship funds (quickly) to feed children/pay nursery/mortgage (quickly)?”

Her surgery gave her a loan last month to tide her over but did not have enough surplus funds to do the same thing again.

She said that in the last 24 hours partners have stepped forward and have all taken a pay cut to provide a loan “to get me through the month as they were worried about my family”.

An NHS England spokesperson said it was “holding Capita’s feet to the fire on needed improvements”.

It added: “In the meantime, the lead employer for Health Education England or the GP practice are responsible for paying their GP trainee salaries and are subsequently reimbursed for this. Backlogs are being prioritised by Capita.”

The BMA’s letter to the NHS chief executive Simon Stevens criticises Capita.

“We are disappointed at the lack of progress that has been made … These issues have been ongoing since NHS England commissioned Capita … and it is unacceptable that more progress has not been made to getting these resolved …

Wrigley wants the House of Commons’ public accounts committee to investigate the contract.

“NHS England have known about this for a while and the BMA has been putting constant pressure on, and it’s all promises that it’ll get better but it doesn’t.”

New systems for cervical screening and GP payments and pensions that are also contracted out to Capita are due to go live next July. The BMA has told NHS England that it has “no confidence” in Capita’s ability to deliver the services.

Comment

It’s possible to have some sympathy for Capita which has the daunting task of trying to standardize a wide range of systems for supporting disparate GP support services.

But, as Campiagn4Change has reported many times on Barnet Council’s Capita outsourcing contract, it can be difficult if not impossible to make huge savings in the cost of running services (£40m in the case of the GP support contract), deliver an IT-based transformation based on new investment and provide a healthy profit for the supplier’s shareholders while at the same time making internal efficiency savings.

Capita’s share price is relatively low and under continuing pressure but is holding up reasonably well given the company’s varied problems.

Still, we wonder whether the company can afford to put large sums into sorting out problems on the GP support contract, at Barnet Council and on other well-publicised contracts?

The MoD has ended a Capita contract early, the company faces litigation from the Co-op and its staff are staging nine days of strikes over pensions.

Who’s to blame?

If anyone is to blame in this NHS saga it is NHS England for not fully understanding the scale and complexity of the challenges when it outsourced to Capita.

The first rule of outsourcing is: Don’t outsource a problem.

Doctors warned NHS England against signing the contract. Under financial pressure to do so – it needed the promised savings  – NHS England’s public servants signed the deal.

Those public servants will not be held accountable for their decision. In which case, what’s to stop public and civil servants making the wrong decisions time and again?

Two further questions:

Is NHS England too close to Capita to see the faults?

Do public servants have a vested interest in not criticising their outsourcing suppliers, in case opprobrium falls on both parties? 

Thank you to Zara Pradyer for drawing my attention to the Guardian article.

Hundreds of trainee GPs facing hardship as outsourcing firm Capita fails to pay – The Guardian.

 

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Is Barnet Council up to the job of managing its suppliers – including Capita?

By Tony Collins

Tonight (27 July 2017) Barnet Council’s audit committee meets to discuss the interim year-end findings of BDO, its external auditor.

BDO identifies a “significant risk” in relation to the council’s contract management and monitoring. There are “numerous issues”, says BDO.

Barnet is well known in the local government community for having adopted a “commissioning council” concept. This means it has outsourced the vast majority of its services, leaving officers and the ruling Conservative group to set policy and monitor suppliers.

Capita is a main supplier. Its responsibilities include cemeteries, ICT and collecting council tax.

BDO’s report for tonight’s council meeting says that, with the council’s services now being delivered through various outsourcing arrangements, “it is important to establish strong contract management and monitoring controls”.

It adds that such controls “allow the Council to ascertain whether or not it is receiving value for money from the use of its contractors, and to take remedial action where issues are identified”.

On this point – contract management and monitoring –  BDO says,

“During the course of 2016/17 we have noted a number of internal audit reports which have raised significant findings in this area.

“In addition, further concerns have been identified through our own audit work. As such, we have recognised a significant risk to our use of resources [value for money] opinion.”

BDO’s findings are interim. It cannot finalise its final statutory report until many questions are answered and errors, financial misstatements and lapses in disclosure are corrected in Barnet’s draft financial accounts.

The auditors comment in their report on the “number and value of errors found” and the “level of misstatement in the current year accounts”.

These are some of BDO’s findings so far:

  • Large advance payments (about £44m in prepayments) as part of the Customer Service Group contracts with Capita. Not all of the payments were set out in the payments profile of the original contract. Significant payments were made at the start of the contract (and in subsequent years) to cover capital investment and transformational expenditure. The financial profile of the contract anticipates the advance payments being used by 2023. One advance payment of £19.1m in December 2016 covers service charge payments relating to the first three quarters of 2017/18. The council receives a £0.5m discount for paying in advance. The council also paid for some projects in advance. BDO finds that there was proper council scrutiny of the decision to make the payments.
  • Barnet overspent on services in 2016/2017 by £8.3m.
  • There’s a budget gap prior to identified savings of £53.9m over the three years to 2020.
  • There’s a substantial depletion in the council’s financial reserves.
  • Will claimed savings materialise? “Savings targets remain significant and achievement of these will be inherently challenging, as evidenced by the overspend in 2016/17.”
  • Net spending on the Customer and Support Group contracts with Capita increased to £34.4m in 2016/17 from £26.9m the previous year.
  • More than 100 officials at Barnet receive at least £60,000 a year and twelve at least £100,000.
  • Some councillors have failed to make formal declarations. A “poor response rate as compared to other authorities” says BDO’s report.

Comment:

You’d think a “commissioning council” – one that outsources the delivery of most of its services – would, above all, have a firm grip on what its main suppliers are doing and what they’re charging for.

In fact BDO’s report for tonight council meeting rates the council’s contract management and monitoring at “red”. BDO has identified “numerous” issues.

It’s easy for Barnet Council to issue press releases on the tens of millions it claims to have saved on its contracts with Capita.

But BDO possesses the facts and figures; and it questions the council’s “use of resources” – in other words “value for money”.

At the outset of its joint venture with IBM, officials at Somerset County Council spoke of planned savings of £180m over 10 years. In fact the deal ended up losing at least £69m.

Barnet blogger “Mr Reasonable” who has long kept a close eye on payments made by Barnet to Capita doubts that the council is up to the job of properly scrutinising Capita. We agree.

It was clear to many in 2013 when Barnet signed contracts with Capita that the council was unlikely to find the money to acquire adequate contract monitoring expertise and resources, given that its suppliers were required to deliver such a wide range of complex services.

Barnet Council’s most adept scrutineers, rather than local councillors, have proved to be its dogged local bloggers who include Derek Dishman (Mr Mustard), John Dix (Mr Reasonable), Theresa Musgrove (Mrs Angry) and Roger Tichborne (The Barnet Eye).

Had ruling councillors taken local blogger warnings more seriously, would they have specifically avoided becoming a “commissioning council”?

Will MPs’ report on Capita’s BBC contract make any difference?

By Tony Collins

At one level, Capita’s contract to handle most of the BBC’s TV licensing work is, in general, a success, at least according to statements made to the media.

Were it not for the National Audit Office and the Public Accounts Committee, a fuller story would not have emerged.

Today in The Guardian, a BBC spokesperson speaks of the Capita TV licensing contract in glowing terms. Through the contract, the BBC has reduced collection costs by 25% and increased revenue for programmes and services.

A Capita spokesperson spoke in similar terms. Capita has helped the BBC to collect more TV licence fee revenue every year since 2010-2011.

The only blip in the contract had seemed to be the heavy-handed tactics of some Capita staff. The Daily Mail reported in February 2017 that vulnerable people were hounded as some Capita staff tried to catch 28 TV licence evaders a week for bonuses of £15,000 a year.

This blip aside, has anything else gone wrong? There’s no hint of any technological problems on Capita’s website – or the BBC’s.

The BBC reported in 2011 that Capita will transform the TV licensing service, “using advances in technology and analytics to increase revenue and reduce costs”.

Capita’s website has a case study on its work for the BBC that refers to cost savings of £220m over the life of the contract, organisation-wide efficiencies and “protected brand image” among other benefits.

In December 2016, Capita described the “partnership” with the BBC  as a “success”.

The bigger picture

Capita processes TV licence payments, collects arrears and enforces licence fee collection. Its current contract with the BBC began in July 2012 and, after a recent renegotiation, ends in 2022 with the option to extend by up to a further five years.The BBC paid Capita £59 million in 2015–16.

The BBC has had a long-standing ambition to improve its main TV licensing databases so that they are structured by individual customers rather than households.

This was one of the hopes for the contract with Capita but it hasn’t happened. Capita had partly subcontracted work on the BBC’s legacy databases to CSC Computer Sciences.

Manual workarounds

The BBC, in its contract with Capita, aimed to upgrade ICT as part of a wider transition programme. The BBC paid Capita £22.9m for parts of the programme that were delivered, including restructuring contact centres, updating the TV Licensing website and upgrading handheld units for field staff.

The Public Accounts Committee says in today’s report,

“However, improvements with a contract value of £27.9m, primarily related to replacing legacy ICT systems, were not delivered by Capita and its subcontractor (CSC), and were not paid for by the BBC.

“As a result of the transition programme being only partly completed and subsequently stopped, the BBC and Capita currently have to do resource-intensive manual workarounds between inefficient ICT systems.

“Capita informed us that it was bearing the additional costs associated with undelivered elements of the transition programme. However, the BBC has had to allocate £9m to Capita to support the ongoing use of legacy systems, costs which the BBC told us were compensated for elsewhere in the renegotiated contract.

“It is unclear to us why ICT database improvements have proved so difficult over the last 15 years, particularly when competitors and other organisations can make similar changes.

“The BBC acknowledges that its current database is not fit for purpose for the future but does not yet have a clear plan to replace it.”

Comment

All outsourcing contracts have their strengths and failures – including early promises that don’t come to anything.

But it’s unlikely councils and other public sector organisations that are seriously considering outsourcing will take into account the past failures and broken promises of their potential suppliers.

If officials and councillors want to outsource IT and other services they probably will, whatever the record of their favoured potential suppliers.

They will see reports of the National Audit Office and Public Accounts Committee as biased towards negative disclosures.

Indeed the BBC and Capita, in their responses to today’s TV licensing report of the Public Accounts Committee, have drawn attention to the positive aspects of the report and not mentioned the technological failures.

Where does this leave councils and other organisations that are considering IT-related outsourcing and are seeking reference sites as part of the bid process?

Will those reference sites give only the positive aspects and not mention, or successfully deprecate, any media, PAC or NAO reports on contract failures?

Negative findings by the National Audit Office and Public Accounts Committee are usually important. Were it not for their scrutiny would not know how public money is being spent and misspent.

But their reports will have little or no effect as warnings to organisations that want to outsource.

Public Accounts Committee – BBC Licence Fee – 26 April 2017

 

Capita said to owe thousands to pharmacies

By Tony Collins

Capita owes some pharmacy owners thousands of pounds, according to Chemist+Druggist.

One pharmacist Salim Jetha of Lewis Grove Pharmacy in Lewisham told Chemist+Druggist he had emailed Capita in February but it “bounced back because the inbox was full”. He said that if emails are unanswered and there is no phone number to ring “what are you supposed to do?”

Under its Primary Care Support Services contract with NHS England, Capita is due, among other obligations, to reimburse some of the costs of pharmacy trainees. The trainees are termed “pre-registration” pharmacists because they have not yet passed a General Pharmaceutical Council assessment.

Pharmacy owners can apply for an annual grant from NHS England for up to £18,440 for every pre-registration trainee taken on.

Capita took on responsibility for delivering NHS England’s primary care support services in September 2015, including overseeing the pharmacy training grants.

In response to the article, Capita spokesperson said it is aware of “some isolated issues” and that all claims that meet “the required checks” have been backdated, as will any further claims.

The spokesperson said that one of the “key improvements” under Capita has been the introduction of a centralised process for dealing with primary care.

The old system was localised, meaning grant claims “came in from various sources on an ad hoc and irregular basis”.

Chemist+Druggist article

Jeremy Hunt is prepared to end Capita’s NHS contract if necessary

 

Capita’s chief executive to step down

By Tony Collins

Capita’s chief executive Andy Parker is to step down later this year. The company has today announced that full-year results for 2016 were “disappointing”.

The company reported a sharp fall in annual profit.

Underlying pre-tax profit – which strips out restructuring costs – was £475.3m, well below the group’s expectations despite two profit warnings late last year.

Capita had said in December it expected annual pre-tax profits in the current financial year to be at least £515m.

Reported pre-tax profit was £74.8m, down 33 per cent year-on-year on slightly higher revenues of £4.9bn.

The company is moving some jobs to India, where it already provides outsourcing services for UK companies.

Capita is being dropped from the FTSE 100 from 20 March 2017. Its share price has fallen sharply over the past year but has risen gradually from its low about three months ago. The company’s share price fell sharply this morning, at one point down nearly 10% on yesterday’s close.

The company has had problems on multiple contracts.

In a statement this morning Parker said,

“2016 was a challenging year and Capita delivered a disappointing performance. We are determined to turn this performance around. We have taken quick and decisive action to reduce our cost base, increase management accountability, simplify the business, strengthen the balance sheet, and return the Group to profitable growth.

“We remain very confident that our target markets continue to offer long term structural growth. Capita is well placed in these markets with our unique set of complementary capabilities and the talent of our people. The bid pipeline of major contract opportunities remains active, and we are also seeing success in providing additional new, high value, replicable services to clients.

“The proposed sale of our Asset Services businesses and Specialist Recruitment businesses are on track. We have received good interest and, following regulatory approvals where required, we remain confident in concluding these transactions this year, which will leave us with a more focussed Group and significantly strengthen our balance sheet.

“We expect 2017 to be a transitional year for the business, as we complete our disposals, bed down the structural changes inside the business, and re-position Capita for a return to growth in 2018”.

Capita’s 2016 full-year results

Hunt is prepared to end Capita’s NHS contract if necessary.

Birmingham Council to “close down” contract with Capita when it ends in 2021

By Tony Collins

Birmingham City Council has said in a job advert that it plans to “close down” its joint venture contract with Capita when it expires in 2021.

The advert was discovered by Government Computing which has reported the job requirements in detail.

Capita and Birmingham City Council have one of the largest and longest IT-based outsourcing contracts in the public sector.

It began in 2006 when the council and Capita set up a joint venture “Service Birmingham”. The council has spent about £85m to £120m a year on the contract which puts the total cost of the deal so far at more than £1bn.

Government Computing reports that the council is seeking an assistant director ICT and digital services and CIO role. The job will include a task to “oversee the effective closedown of the current Service Birmingham ICT contract”.

This suggests the council is unlikely to renew the existing contract. It could decide to sign a new outsourcing deal but the signs so far are that the council will bring services in-house in 2021.

The council says in the job advert it wants to move to an “increasingly agile state of continuous business transformation”.

Nigel Kletz, director of commissioning and procurement for Birmingham City Council, told Government Computing,  “The current Service Birmingham contract has four years still to run (until 2021), so this role will lead the implementation of the ICT and digital strategy, which includes developing a transition programme to identify and then implement ICT delivery options going forward.

“Decisions on how ICT support is provided from 2021 onwards are yet to be taken.”

Capita did not add to the council’s statement.

Alan Mo, research director at public sector analysis group Kable, is quoted in Government Computing as saying,

“When it comes to ICT, Birmingham is the largest spending council in the UK. Given what’s at stake, we cannot over emphasise the importance of early planning…

“As we know, Service Birmingham has been under a huge amount of scrutiny over the past few years. Given the trends in local government, it would not surprise us if Birmingham prefers to go down the in-sourcing path; the council has already opted to take back contact centre services.”

Projected savings of “£1bn” 

Service Birmingham lists on its website some of the benefits from the joint venture.

  • Projected cost savings of £1bn back to the Council over the initial 10-year term, for reinvestment in services
  • £2m investment in a new server estate
  • Rationalising 550 applications to 150
  • Consolidated 7 service desks into 2
  • 500% improvement in e-mail speed
  • Help desk calls answered within 20 seconds increased from 40% to nearly 90%

Service Birmingham provides Birmingham City Council’s IT, along with a council tax and business rates administration service. The council has discussed taking back in-house the council tax  element of the contract. 

Capita has run into trouble on some of its major contracts, including one with the NHS to supply services to GPs.

Comment

It appears that Capita has served its purpose and put the council into a position where it can take back ICT services now that are in a better state than they were  at the start of the contract 2006.

Austerity is the enemy of such large public sector IT-based outsourcing contracts.  When councils can afford to spend huge sums – via monthly, quarterly and annual service charges – on so-called “transformation”, all may be well for such deals.

Their high costs can be publicly justified on the basis of routine annual efficiency “savings” which do not by law have to be verified.

The downfall for such deals comes when councils have to make large savings that may go well beyond the numbers that go into press releases. It’s known that Birmingham City Council has been in almost continuous negotiation to reduce the annual sums paid to Capita.

Capita is not a charity. How can it continue to transform ICT and other services, pay the increasing salaries of 200 more people than were seconded from the council in 2006, accept large reductions in its service changes and still make a reasonable profit?

It makes economic sense, if Birmingham needs to pay much less for IT, to take back the service.

It’s a pity that austerity has such force in local government but not in central government where IT profligacy is commonplace.

Job spec for senior Birmingham IT post looks towards end of Service Birmingham ICT deal – Government Computing

 

Capita share price falls to new 10-year low as it lowers profit forecast

By Tony Collins

Capita’s share price has fallen to a new 10-year low today (8 December 2016) after chief executive Andy Parker warned that “near-term headwinds” would hit trading performance in the first half of 2017.

The company’s share price of 513p at lunchtime today was 9% down on yesterday’s close.  A year ago it was around 1200p.

It’s the lowest price since July 2006.

The “headwinds” warning may cause some customers, particularly officials and ruling councillors in some local councils, to wonder whether their arrangements with Capita for outsourcing “transformations” and future IT-related investments will be affected.

Capita announced today that it intends to dispose of the majority of the Capita Asset Services division and a small number of other businesses which no longer fit Capita s core business strategy.

It says these actions will consolidate Capita’ s position as the UK’ s leading provider of customer and business process management services, while underpinning the company’ s balance sheet.

Chief executive Andy Parker said: ” We are committed to delivering good returns to shareholders, supported by a strong capital structure and a clear growth strategy. In recent months, we have reviewed our management structure, operating model, business portfolio and our leverage to ensure we are in the strongest position to support future profitable growth.

” In November, we announced changes to our management and business structure and today we are announcing our intention to sell the majority of our Capita Asset Services division and a small number of other businesses.

“We have also commenced a programme of cost reduction and investments to position the Company strongly for renewed future growth. Together, these actions will create a leaner Capita, focused on its core strengths and with a much stronger balance sheet.

” I am confident that the markets Capita addresses offer long-term structural growth. We are however currently facing some near-term headwinds, which continue to make 2016 a challenging year and will affect trading performance in the first half of 2017.

“Our long-term contracts provide us with good revenue visibility across the year and the structural and cost reduction actions we are taking now will support progress in the second half of 2017 and into 2018. We therefore currently expect a similar trading performance to 2016 in the full-year 2017.”

Capita expects revenue to be around £4.8bn and underlying profit before tax to be “at least” £515m, excluding the cost of restructuring, for the full-year to December 2016.

The company had previously forecast underlying full-year pre-tax profits to be between £535m and £555m.

” Our new divisions are now fully aligned to the markets in which they operate and the divisional sales teams are working seamlessly with the central major sales team to better address these markets and fuel greater organic growth in 2018 and beyond.

” The decisive steps we have recently taken and those we are announcing today make us a more resilient business, committed to generating organic growth, maintaining and then growing our dividend and delivering sustained value for shareholders. ”

He added, “The headwinds we have faced in the second half of 2016 will affect trading performance in the first half of 2017.

” Our long-term contracts provide us with good revenue visibility across the year and the structural and cost reduction actions we are taking now will support progress in the second half of 2017 and into 2018.

” We therefore currently expect a similar trading performance to 2016 in the full-year 2017. Our average cost of debt in 2017 will continue to rise as a result of the rolling off of our interest rate swaps.”

Its pipeline of work remains well below what it was earlier in the year, at £3.8bn today compared with £5.1bn in July.

Capita has a number of problem contracts which have yet to be fully resolved.

The Telegraph quotes Parker as saying today that he had put a £50m programme of cost reductions in place in order to stem some of the losses.

The firm’s IT Enterprise Services division has been particularly weak in the last three months, leading the company to make “extensive” management and structural changes. It has reduced its 78,000 staff by almost 3% and moved some services to India.

Parker told Reuters, “There’s been a fallaway in what we would call discretionary spend, like training and (providing) employee benefits. People are delaying making decisions on implementing technology, so there is a whole host of things going on.”

Today’s lowered profit forecast follows a profits warning in September that full-year underlying pre-tax profits would be £535m to £555m for 2016, instead of a previously forecast £614m.

The Guardian quoted analysts at Barclays as saying,

“So another outsourcer bites the bullet in order to deliver.

“Is it just unfortunate coincidence that nearly all the big UK outsourcers have suffered the indignity of having their accounting policies scrutinised, a string of contract disputes or issues resulting in multiple profit warnings, or is there a systemic issue across the sector?

“The latter is a function of contract complexity and risk – both of which have increased over the years, at a time when competitive tension has increased forcing the major players to offer more for less. What is also very clear is that big is not beautiful in this market.

” Both Capita and Serco increased their scale and scope through aggressive M&A in order to access broader market opportunities in adjacent market areas away from their historical core. That strategy is now in reverse.

“Sadly for Capita, they are selling the wrong bit, in our view.”

Record one-day fall in Capita’s share price – will customers care?

Barnet Council claims £31m savings with Capita – and not an auditor in sight.

By Tony Collins

capita

It’s commendable that Barnet Council has published much material on its three-year review of a £322m 10-year outsourcing contract with Capita.

More than a dozen council reports and appendices cover every aspect of the contract.

The quantity of material seems, on the face of it, to answer critics of the outsourcing deal, among them local bloggers, who have pointed to the lack of reliable evidence of the savings achieved. The suspicion is that costs have increased and council services including ICT have deteriorated since Capita took over in 2013.

Now the council has ostensibly proved that the opposite is the case. Barnet’s press release says,

Barnet Council and Capita contract delivers £31m savings

“A review of a contract between Barnet Council and Capita has demonstrated it is delivering significant benefits to the borough with overall savings of £31 million achieved alongside increased resident satisfaction…

“In terms of satisfaction with services provided, the review, showed 76 per cent of residents were satisfied with the outward-facing customer services, up from 52 per cent before the contract was established.

“This increase was even more significant in respect of face to face services, as 96 per cent of residents who engaged with the council in this way said they were satisfied compared with a previous 35 per cent.

“The review also showed that the cost of delivering the bundle of services provided in the contract is now £6m a year less than before the contract was signed and that 90 per cent of the contract’s key performance indicators being met or exceeded.”

The press release quotes two leaders of the council saying how pleased they were with the contract. Capita calls it a “positive review”.

The review has various mentions of items of additional spending including £9m on ICT and it’s not clear whether the extra sums are taken into account in the savings figures.

Among the review’s suggestions is that the council pay Capita’s annual management fee of £25m up front – a year in advance – instead of every quarter in return for extra savings.

The review also raises the possibility of extending the contract beyond the 10 years in return for additional savings. Capita is “keen” to explore this suggestion (though it could tie the hands of a future council administration).

The review reports were compiled by council officers who reported to a working group of Tory and Labour councillors, under a much-respected Tory chairman. By a small margin, Conservatives run the council.

Lack of independent challenge?

It’s unclear why the council did not commission its audit committee, or auditors, to review the contract. In the past the audit committee has been critical of some aspects of the contract.

For this reason the reports are unlikely to silence critics of Barnet’s outsourcing deal. Council officers compiled the review’s findings, not auditors.

As a result, despite the volume of published written material, there is no evidence that the figures for savings have been independently verified as accurate.

Neither is there independent verification of the methods used by officers for obtaining the figures.

Further, some observers may question the positive tone of the review findings. The “good news” tone may be said to be at odds with the factual neutrality of, say, reports of the National Audit Office.

There are also questions about whether the council is providing enough effective challenge to Capita’s decisions and figures.

At a council committee meeting in November 2016 to discuss the review reports, the most informed challenges to the findings appear to have come not from Barnet councillors but two local bloggers, Mrs Angry and Mr Reasonable, who questioned whether the claimed savings could be more than wiped out by additional spending – including an extra £9m on ICT. They appear to have received no clear answers.

Concerns of some officials

The body of the review reports outline some of the concerns of staff and directors. Mrs Angry quotes some of the concerns from the review reports:

“Transparency of costs, additional charges and project spend were raised as key concerns. It was felt that CSG [Barnet’s Customer and Support Group, for which Capita is responsible] are often reluctant to go above and beyond the requirements of the contract without additional charges.

“Directors reported that the council needs to be more confident that solutions suggested by CSG, particularly for projects and capital spend are best value.

“Concerns were raised that CSG has a disproportionate focus on the delivery of process and KPIs over outcomes, creating a more contractual rather than partnership relationship between CSG and the council. Directors noted that many KPIs are not relevant and their reporting does not reflect actual service performance.”

The Capita contract began in September 2013, under which it provides finance, ICT, HR, Customer Services, Revenues and Benefits, Procurement, Estates and Corporate Programmes.

Comment

On the face of it, Barnet Council’s review of the Capita contract looks comprehensive and impressively detailed.

Looked at closely it’s disappointing – a wasted opportunity.

Had the council wanted the review’s findings to be widely believed, it would have made it uncompromisingly independent, in line with reports by the National Audit Office.

As it is, the review was carried out by council officers who reported to a working group of councillors. The working group comprised Labour as well as Tory councillors but the facts and figures were compiled by officers.

Nearly every page of every Barnet review report has a “good news” feel. There’s an impression that negative findings are played down.

Example:

“It should be noted that the failure to meet the target for KPI 30 related to one quarter only [my italics] and discussions are continuing regarding the application of the above service credit.”

Some negative findings are immediately countered by positive statements:

“CIPFA benchmarking data shows that the cost of the ICT service is slightly above the median, but below upper quartile in terms of the cost of the service as a percentage of organisational running costs.”

Another example of a negative finding immediately countered by a positive one, which may be said to be one hallmark of a non-independent report:

“One key area of concern in terms of overall performance is internal customer satisfaction… Survey results in respect of the financial year 2015/16 were universally poor, with all services failing to meet the target of upper quartile customer satisfaction. As a result, service credits to a total value of £116k have been applied in respect of these KPIs.

“To some extent, a degree of dissatisfaction amongst internal service users is to be expected, given the fact that cost reductions have been achieved to a large extent through increased self-service for both managers and staff, along with more restrictive processes and controls over things like the payment of invoices and the appointment of staff.

“Despite the survey outcomes indicating a low level of satisfaction, the interviews conducted with staff and managers as part of this Review suggest that services are generally considered to be improving.”

Integra ERP financial system a “success” – ?

The review report describes Capita’s introduction of the Integra financial system as “successful”. Elsewhere, however, it says,

“Many users raised issues with the Integra finance system, describing it as clunky and not user-friendly or intuitive.”

Double counting?

There’s no evidence that savings figures have been checked for possible inadvertent double counting on overlapping services. Double counting of savings is regularly found in National Audit Office reports.

“There are no standardised way for departments to evidence the reductions in ongoing expenditure,” said the National Audit Office in a report on Cabinet Office savings in July 2014. “Departments provided poor evidence, and double counting was highly likely as projects reduced staff or estates requirements.”

In a separate report on claimed savings in central government, the National Audit Office quoted the findings of an internal audit …

“A number of errors (instances where the evidence did not support the assertion) were found during our review and total adjusted accordingly … In addition, a number of savings were double counted with other savings categories and these have now been removed…

“We assessed some £200m of other savings as Red because they were double counted due to the same savings having been claimed by different units or, for example, because savings on staff were also claimed through reductions in average case costs.”

Omitted costs?

The omission of relevant costs could skew savings figures. It’s unclear from Barnet’s review reports whether extra spending of millions of pounds on, for example, ICT have been taken into account. Barnet blogger Mr Reasonable, who has a business background, raises the question of whether £65m of additional spending has been taken into account in the savings figures.

Reverse Sir Humphrey phenomenon?

The biggest single flaw in the review reports is that they appear worded to please the councillors who made the decision to outsource – the reverse of the “Sir Humphrey” caricature. The positive tone of Barnet’s reports implies that officers are – naturally – deferring to their political leaders.

In a BBC Radio 4 documentary on Whitehall, former minister Peter Lilley talked about how some officials spend part of their working lives trying to please their political leaders.

“Officials are trying to work out how to interpret and apply policy in line with what the minister’s views on the policy is …. They can only take their minister’s written or spoken word for it and that has a ripple effect on the department far greater than you imagine… Making speeches is the official policy of the department and that creates action.”

Another former minister Francis Maude told the BBC he found that too few officials were willing to say anything the minister did not want to hear.

“The way it should work is for civil servants give very candid well informed advice to ministers about what it is ministers want to do – the risks and difficulties,” said Maude. “My experience this time round in government, 20 years on from when I was previously government, is that the civil service was much less ready to do that.

“There were brilliant civil servants who were perfectly ready to tell you things that they thought you might not want to hear but there were too few of them.”

Barnet’s reviewing officers might have been dispassionately independent in reporting their findings and double checking the supplied figures – but who can tell without any expert independent assessment of the review?

The US Sabanes-Oxley Act, which the Bush administration introduced after a series of financial scandals, defines what is meant by an “independent” audit. The Act prohibits auditing by anyone who has been involved in a management function or provided expert services for the organisation being audited.

That would disqualify every Barnet officer from being involved in an independent audit of their own council’s contract with Capita.

The Act also says that the auditor must not have been an employee of the organisation being audited. Again that would disqualify every Barnet officer from an independent audit of their own council’s contract.

Review a waste of time and money?

It would be wrong to imply that the review is a pointless exercise. It identifies what works well and what doesn’t. It will help officers negotiate changes to the contract and to key performance indicators. For example it’s of little value having a KPI to answer phone calls within 60 seconds if the operator is unable to help the caller.

What the review does not provide is proof of the claimed savings. Barnet’s press release announcing savings of £31m is just that – a press release. It does not pretend to be politically neutral.

But without independent evidence of the claimed savings, it’s impossible for the disinterested observer to say that the Capita contract so far has been a success. Neither does evidence exist it has failed.

Capita share price at 10-year low

What is clear is that fixing some of the more serious problems identified in the report, such as obsolescent IT, will not be easy given the conflict between the continuing need for savings and Capita’s pressing need to improve the value of its business for shareholders, against a backdrop of difficulties on a number of its major contracts [Transport for London, Co-op Bank, NHS] and a share price that was yesterday [30 November 2016] at a ten-year low.

The review also raises a wider question: are most of a council’s busy councillors who come to council meetings in their free time equipped to read through and digest a succession of detailed reports on the three-year interim results of a complex outsourcing contract?

If they do glance through them, will they have enough of a close interest in the subject, and a good understanding of it,  to provide effective challenge to council officers and their political leaders?

If nothing else, the Barnet review shows that councillors in general cannot provide proper accountability on an outsourcing contract as complex as Capita’s deal with Barnet.

Either council tax payers have to put their faith in officers, irrespective of the obvious pressure for officialdom to tell its political leaders what they want to hear, or council taxpayers can put their faith in an independent audit.

Barnet Council has not given its residents any choice.

It’s a pity that when it comes to claimed savings of £31m there’s not an auditor in sight.

Barnet declares its contract a success – Barnet and Whetstone Press

Mr Reasonable – important questions on the Capita review

Mrs Angry – who writes compellingly on the council meeting where the review reports were discussed.

Capita to lose part of £1bn+ Service Birmingham contract?

By Tony Collins

Birmingham City Council is set to take back the “Revenues” – council tax – element of its Service Birmingham contract with Capita.

A report which went before a cabinet meeting on Tuesday said that decisions on the “proposed termination of the revenues element of the Service Birmingham contract” with Capita would be taken in the “private” – secret – part of the meeting.

One reason the discussions are in private is that even though the contract allows the council to take back services “at will”, this may still involve paying compensation to Capita,

In the open part of the meeting, the deputy leader said that bringing the revenues service back in-house will allow the council “greater flexibility” – which appears to mean lower costs.

It will require a change to the wider Service Birmingham contract under which Capita delivers Birmingham’s ICT services.

In particular, said the deputy leader, taking back the revenues service will avoid any need to invoke a formal “change control” within the contract. He didn’t say why the council was keen to avoid invoking the change control clause.

Taking back revenue services could mean up to 150 Capita staff returning to the direct employment of the council, according to theBusinessDesk.com.

Service Birmingham is a joint venture company run by Capita since 2006 in which the council owns a minority of shares. The contract, which mainly covers ICT services, ends in 2021.

In the first few years Capita received about £120m a year from the joint venture but the figure has come down to about £90m-£100m a year after much criticism of the cost of the contract.

Between 2006 and 2012, Service Birmingham paid Capita £994m. It’s unclear whether the payments have represented value for money for Birmingham’s residents.

The report for this week’s cabinet meeting said that since Capita took over revenue collection the government has introduced a number of local welfare reforms [related to Universal Credit] “which have resulted in the council wishing to deal with Revenues matters differently”.

Keen to retain the revenues work, Capita had suggested a revised service to the council but the report said, “These were considered and it was concluded that they did not meet the current requirements of the council.”

Taking back revenue collection could result in “savings” worth £10.5m between next year and 2020, according to theBusinessDesk.com.

The gradual introduction of Universal Credit means that the Department for Work and Pensions, rather than the council, will eventually handle housing benefit payments.

This would mean less work for the council and Service Birmingham.

Councillors were expected at yesterday’s meeting to confirm officer recommendations on terminating the revenues collection part of the Service Birmingham contract. The new arrangements are likely to come into effect from February 1, 2017

Capita says on the Service Birmingham website that it has transformed services and “realised savings of approximately £1bn”. Capita had introduced SMS texting to prompt council tax payments and reduce the need to issue paper reminders.

Overspend

Birmingham council has a serious overspend for 2016/17, estimated to be around £49m.

The Birmingham Independent Improvement Panel says, “The Council faces a mammoth task to prepare a balanced budget for 2017/18.  With very limited general reserves available, this potentially places at risk its future success.”

Lessons

In 2012 a “high-level” review of Service Birmingham by the Best Practice Group suggested that the deal had its successes but that trust and relationships might have been breaking down in some areas.

It said,

“BCC [Birmingham City Council] and SB [Service Birmingham] seemed to overcome early challenges in their relationship by having a ‘great common cause’. The Council entered into this relationship in 2006 because it had the foresight to realise it had to fundamentally transform how it operated in order to improve social outcomes for its population…

“Now the transformation has largely been successful and the initiatives are almost complete, the level of innovation seems to have stalled and the relationship has deteriorated. Somewhere in the fire-fighting, both BCC and SB have lost sight of the next ‘great common cause’ – the fact that the Council needs to further reduce the cost of ICT service delivery by £20m per annum. This will require some significant ‘outside the box’ thinking about how to achieve from both BCC and SB.”

The report said that some individuals within the council needed to understand better that Service Birmingham was not a social enterprise, a public sector mutual, or a charity, and needed “to make a significant return on its capital for its shareholders” amid a “significantly deteriorating financial position due to Government cutbacks.”

Best Practice Group also said that Capita reduced its charges when challenged

“There have been statements made by a number of the officers in the Council that SB drops its prices when challenged, especially when the Council has investigated alternative industry offerings. SB have suggested that it is only when the challenge arises that initial data is clarified and therefore, more focused pricing can be provided.”

Trust

There was – at that time – a “general lack of commercial trust between the parties and the fact that BCC have shown that SB have reported some data incorrectly (after discussion around interpretation), means that the KPIs are not fully aligned to the business outcomes BCC now needs to achieve in the current financial climate”.

The report reached no firm conclusions on value for money but questioned whether Service Birmingham was “significantly more expensive” in some technology areas.

Comment

Birmingham City Council expects to make “savings” by bringing the revenues collection service back in-house.

If the new savings are added to the claimed £1bn savings originally predicted for the Service Birmingham joint venture, are the actual savings more or less what the council could have saved if it carried on supplying ICT in-house, without helping to keep Caita’s shareholders happy?

In fact the word “savings” has been largely discredited when used in connection with large council outsourcing deals and joint ventures.

In the absence of published and audited savings figures, council reports can interpret the word “savings” to mean almost anything.

The unfortunate truth, as observers of Barnet Council’s deal with Capita have discovered, is that local residents who fund joint ventures and outsourcing deals, have no idea whether their councillors end up paying far too much for IT and other services.

Hide

Birmingham Council this week discussed a major revision to the Service Birmingham contract in secret, which raises a wider point.

Commercial confidentiality means that councils and suppliers can hide behind the contract when things go wrong. Indeed all parties to the contract have an interest in not telling the public about anything that goes wrong.

Exactly what is going on with Service Birmingham nobody knows – outside the council’s inner circle of officers and ruling councillors.  Could the contract be costing too much but the cancellation fees are too high to make cancellation worthwhile?

How many of the councillors who were involved in the signing of the original deal will care if it ends up costing a fortune?

The ruling councillors in 2006 are highly unlikely to be the ruling councillors in 2016.

Councils have the power to make the wrong decisions in private and local residents have no options but to pay for those decisions; and when, many years later, councillors want to discuss a major revision to the contract, which could involve paying compensation on the basis of further promised savings, they have the power to go into private session again.

Those who have no right to know what’s going wrong are the captive council tax payers – those who fund the council’s decisions on the basis of never-ending promises of “savings” – savings that are rarely if ever independently verified as having been achieved.

The system could work well if big decisions were taken in public view.

ICT suppliers are not always obsessed with secrecy. They tend to want only very specific details kept secret. Ian Watmore, former head of Accenture, later government chief information officer and the first Civil Service Commissioner, has been a notable advocate of public sector openness.

But council officers and ruling councillors usually want to have all discussions about outsourcing deals in private – largely because life is simpler without accountability.

It’s not a political matter. Birmingham council is staunchly labour but it was a coalition of Conservatives and Lib-dems that set up Service Birmingham in 2006.

In the same way as the government imposed openness on local councils, so new laws or government guidelines could force councils to be open on big decision and major revisions to contracts.

There again, if council tax payers knew in advance the whole truth about the likely full-term costs and speculative benefits of a major IT-based outsourcing deal or joint venture, would such a public-private partnership deal ever be signed?

Update 11.05 17 November 2016

Barnet Council has this week published a report on “£31” savings from its contract with Capita, alongside “increased resident satisfaction”. Barnet outsourced IT,  HR, a call centre and other services in 2013 in a 10-year contract. The Barnet report will be the subject of a separate post on Campaign4Change.

Birmingham set to pull out of [part of] Capita joint venture in revenues collection overhaul.

 

Capita adds 500 staff to boost recovery on “unacceptable” NHS contract

By Tony Collins

nicola-blackwoodNicola Blackwood, minister for public health and innovation at the Department of Health, yesterday described failings on Capita’s GP support services contract as “entirely unacceptable”.

Blackwood told MPs at an adjournment debate on failures relating to Capita’s £1bn Primary Care Support England contract,

“It was always clear that Capita’s services needed to be at least as good as those that they replaced… Capita put forward the most credible of any of the bids accepted on the short list, and at the time both the Department and NHS England had every confidence that the programme would be a success.

“However, it is evident that Capita was inadequately prepared for delivering this complex transition.”

Under its contract with NHS England, Capita is responsible for providing GP medical supplies such as needles and syringes, transferring medical records when patients switch GPs, payments to GPs and “performers list” applications.

Capita won the “Primary Care Support England” contract in 2015, amid unheeded warnings from some GPs that the private sector would be unable to successfully deliver the complexity of support services to GPs that were being provided by the NHS.

Blackwood said yesterday that MPs were “right to be concerned that the service provided by Capita under the primary care support services contract … has so far fallen well short of the standards that we expect, and GPs have borne the brunt of these failings, as we have heard today”.

She added,

“We need to make sure that GPs and their patients receive the service to which they are entitled.

“We want to restore acceptable services, and the contract contains sufficient financial incentives to ensure that Capita shares that goal, which is an important part of the contract and process.

“Let us be clear that the problems encountered with medical record transfers [in which thousands of records have gone missing, says the BBC] and overdue payments are entirely unacceptable. The Department shares that view.

“Both Capita and NHS England are co-operating fully with the Information Commissioner’s Office in order to address the implications for information governance, and I accept the need for urgent action in order to address the impact that this is having on patients and practitioners.

“That is why I have been holding regular meetings with Capita’s chief executive for integrated services, Joe Hemming, its new managing director for primary care support, Simon England, and NHS England’s national director for transformation and corporate operations, Karen Wheeler, and I will continue to hold such meetings.

“Both NHS England and Capita openly acknowledge that the service has not so far been good enough.

“NHS England has demanded and received rectification plans from Capita for the six most affected service lines, and has embedded a team of seven experts within Capita to support it as it resolves these issues…

“… it is also about having the right resources in the right place at the right time. Capita has informed me that it is adding around 500 more full-time equivalent staff to the service, at its cost, and that it is improving the training provided to ensure that new staff understand the importance of the service to both patients and practitioners.”

The minster denied that patients had been harmed (by GPs not having patient records).

“I know that these problems have caused great inconvenience and distress, but with reference to risk NHS England has assured me that it is not aware of any direct cases of patient harm that can be attributed to service issues.

“However, NHS England is working closely with regional and local medical directors so that we can be assured of patient safety. In particular, Dr Raj Patel, medical director of NHS England Greater Manchester, has joined the embedded team to ensure that clinical risks and concerns are appropriately addressed.

Backlogs

“The priority now is to deal with any backlogs, particularly with medical record requests, and to ensure that services are stabilised with the capacity to deal properly with new requests.

” There has been progress on that, which is encouraging. The backlog of medical record requests has reduced from 17,262 to 3,465 in the past two weeks. Capita assures me that it has an effective triage system in operation for new requests and is confident that the situate”ion will not recur. However, I will be monitoring the situation closely.”

Shortage of supplies

Blackwood continued,

“I am aware that some GPs were left short of basic supplies as a result, including syringes, and that they have had to source those from other suppliers at their own expense.

“NHS England tells me that it has reimbursed practices for any costs incurred from having to buy local supplies of needles and syringes.

Contact centre shortcomings

“I know that many of the members’ GP constituents have experienced frustration with Capita’s contact centre. I share those frustrations.

“Capita assures me that the contact centre has improved the way it responds to urgent queries by investing in more staff, improved processes and enhanced training. Capita is confident that these measures will deliver a quality service to customers. We will monitor its progress closely, including through meetings.

Late payments – compensation?

“I recognise that GPs, and ophthalmologists in particular, have suffered financial detriment as a result of late processing of payments.

“NHS England is working with Capita to explore what can be done to support affected stakeholders, and I have made it clear to Capita that I expect it to consider compensation as an option.”

Absence of medical records

Another Coventry MP Colleen Fletcher said that people who have requested a copy of a late relative’s medical records from the primary care support service have had to wait for more than twice the maximum 40 days that it should take to process such a request.

“It is utterly unacceptable to put anyone through that kind of delay, but it is inexcusable for it to happen to anyone who is already in an extremely vulnerable position following the death of a relative.”

New charges to the public for medical records

Geoffrey Robinson said,

“I have nothing against the private sector making profits—I am all for it—but the irony is that the companies cannot make a profit from a proper service, so they turn to such measures as imposing a £40 charge for access to a deceased relative’s records …

“They do not have to impose that charge. I think it used to be left to the GP’s discretion — but they now insist on it, and people have to pay postage and delivery charges on top, which is a disgraceful pursuit of short-term gain at the expense of the people they are meant to serve.”

Reinstate the old NHS support service?

Blackwood said,

“Some have suggested that the old model for provision of primary care support should be reinstated, but we must remember that it relied on localised services that did not connect with one another, with much duplication across processes.

“The quality of these services varied greatly—in some areas, it was outstanding; in others, it was quite poor. That was simply unsustainable.

“Furthermore, the system was unable to generate useful management information and so, honestly, issues such as the ones that we now face would be very unlikely to have surfaced. They would have gone unreported.

“A new model, with efficient and modernised processes, is the right approach to deliver to our primary care providers the service that they deserve.

“The Department and I will continue to closely scrutinise Capita and NHS England as they work to resolve current problems and build a quality service that is sustainable.”

A long way to go

“I acknowledge fully that there is a long way to go before the service can be considered acceptable and that Capita has much to do to earn the trust of practitioners and patients.

“This is clearly a live issue. I want to be clear today: I am listening. The issue is at the top of my priority list and will remain there until I am satisfied that an efficient and effective service is being delivered that meets the needs of patients and providers.”

Lessons

Coventry Labour MP Geoffrey Robinson, who secured the adjournment debate, told the minister,

“These contracts are gaily handed out to companies that do not have the skills, preparation or sheer commitment necessary to provide the service.”

He questioned whether the contract would make the intended 40% savings.

“… the irony is that we have ended up with a terrible service that is costing more than the previous service ever would, because the company was not properly prepared, did not have a commitment to providing the service, and was unable to do so, and because of the competing and irreconcilable claims about short-term gains in the form of profits and illusory savings for the health service…

“We should not have badly planned impositions from the private sector, which does not know what it is going to do or how to do it.”

He said that minsters and civil servants pride themselves on awarding a contract that they have won a hard-nosed negotiation.

 “We got them down from Y to X and we saved all this. It is great. We really screwed the private sector, didn’t we? That is all a total illusion.”

Labour MP Kate Green said that NHS England trialled the new system in west Yorkshire and it provided unsatisfactory. “Yet the contract was rolled out regardless.”

Savings?

Robinson said,

“How can the Minister talk of savings? How can any savings have been made when 9,000 patients records have been missing for more than two months, without which they cannot attend doctors surgeries? It is illusory to speak of savings.”