Category Archives: legal disputes

Judge in Post Office Horizon case calls for a “change of attitude”

By Tony Collins

The Law Society Gazette reports that the High Court judge in the Post Office Horizon case has called for a “change of attitude”.

At a case management conference, the judge Sir Peter Fraser listed some of the problems already reported during the group litigation:

  • Failure to lodge required documents with the court
  • Refusing to disclose obviously relevant documents
  • Threatening ‘pointless’ interlocutory skirmishes.
  • Failure to respond to directions for two months
  • Failure to even consider e-disclosure questionnaires

The case involves a class action – called a Group Litigation Order – against the Post Office brought by more than 500 mostly sub-postmasters.

Justice for Subpostmasters Alliance seeks damages related to the introduction of the Horizon computer system about  17 years ago, which is alleged to have caused financial distress and in some cases bankruptcy.

According to the Law Society Gazette, the judge said the behaviour of legal advisers in the case “simply does not begin to qualify as either cost-effective, efficient, or being in accordance with the over-riding objective”. He added,

“A fundamental change of attitude by the legal advisers involved in this group litigation is required. A failure to heed this warning will result in draconian costs orders.”

The court has heard of problems trying to establish a timetable for the litigation. The claimants sought a substantive hearing for October 2018, while the Post Office argued the case could be managed for another entire year without any substantive hearing being fixed. Under this proposal, the hearing would not happen until at least 2019.

Fraser noted that to describe this approach as ‘leisurely, dilatory and unacceptable in the modern judicial system would be a considerable understatement’.

The day after a trial was ordered for November 2018, the Post Office asked for a change because its leading counsel already had a commitment at the Companies Court.

The judge suggested it was a ‘clear case of the tail wagging the dog’ if clerks were allowed to dictate hearing date. He said there was reasonable notice to arrange for a replacement counsel.

Fraser added: ‘Fixing hearings in this group litigation around the diaries of busy counsel, rather than their fixing their diaries around this case, is in my judgment fundamentally the wrong approach.’

Comment:

It appears that the judge did not single out the claimants or the Post Office as the main target for his irritation. He was impartial. But his no-nonsense approach might have surprised some at the Post Office.

The Post Office is familiar with control. When the Horizon system has shown a shortfall in the accounts of a local branch, the Post Office has required the sub-postmasters to pay whatever amount is shown, in order to return the balance to zero.

Even when paying the shown amount has led to bankruptcy and destruction of the family life of the sub-postmaster, the Post Office has pursued the case.

It has had control.

It supplied the contract that sub-postmasters signed; it supplied the Horizon branch accounting system; it required payment of what the system showed as a deficit; it investigated complaints by sub-postmasters that the shown deficits might have been incorrect;  it was able to decide what information to release or withhold – the “known errors” Horizon log being one piece of information not disclosed – and it was the prosecuting authority.

It has also been free to rebut public criticisms, as when BBC’s Panorama and forensic accountants Second Sight focused on the concerns of sub-postmasters.

Now it’s a High Court judge who is questioning, among other things, a failure to lodge required documents with the court and refusing a to disclose obviously relevant documents.

The judge’s comments are refreshing. Since 2009, when Computer Weekly first reported on the concerns of sub-postmasters, control has been one-sided.

Now at last it is on an even keel.

We hope the Post Office will reappraise whether it should be using public funds at all to fight the case.

If the case does drag on for years – postponing a judicial decision – who will benefit? Certainly not the sub-postmasters.

Law Society Gazette article

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Nine-year outsourcing deal caught on camera?

By Tony Collins

This photo is of a Southwest One board that was surplus to requirements.

Southwest One continues to provide outsourced services to Avon and Somerset Police. The 10-year contract expires next year.

But unless Southwest One continues to provide residual IT services to the police, the company – which is owned by IBM – will be left without its three original public partners.

Photo a metaphor?

IBM and Somerset County Council set up Southwest One in 2007  to propel council services “beyond excellence”.

Joining in the venture were Taunton Deane Borough Council and Avon and Somerset Police. The hope was that it would recruit other organisations,  bringing down costs for all.

It didn’t happen.

An outsourcing deal that was supposed to save Somerset residents about £180m over 10 years ended early, in 2016, with losses for the residents of about £70m. The council and Southwest One settled a High Court legal dispute in 2013.

Taunton Deane Borough Council also ended the deal early, in 2016.

Comment

Was it all the fault of Southwest One? Probably not. The success of the deal was always going to be judged, to some extent, on an assumption that other organisations would join Southwest One.

When that didn’t happen, two councils and a police force had to bear the main costs.

There was also the inherent problem that exists with most big council outsourcing deals: that it’s always difficult for a supplier to innovate, save money on the costs of running council services, invest significantly more in IT, spend less overall and still produce a healthy profit for the parent company.

It could be done if the council, police force or other public body was manifestly inefficient. But Somerset County Council outsourced what was, by its own admission, an excellent IT organisation.

Some at the time had no doubts about how the outsourcing deal would end up.

Southwest One – The complete story by Dave Orr

 

FT reports on a death after Post Office Horizon IT system shortfall

By Tony Collins

The FT reported yesterday on a class action against the Post Office over the “faulty” Horizon IT system.

In an article or more than 1,000 words, it said that 522 former sub-postmasters are involved in the legal action.

A procedural hearing with a managing judge will take place in October 2017, which should lead to a timetable for final resolution by the court.

The FT reported on two families (previously unpublicised cases) whose lives have been devastated by shortfalls shown on the Post Office’s Horizon branch accounting system.  In one case, the Post Office dismissed Deirdre Connolly, a former sub-postmistress, after an apparent shortfall of £15,600. The alleged deficit was found during an unannounced branch audit.

The FT said that, out of fear, she made up the apparent loss with help from relatives. The Post Office did not prosecute. Her son later attempted suicide, which she attributed to his witnessing the stress she was under.

The FT also reported on a successful businessman, Phil Cowan, whose business ventures included a post office in Edinburgh run by his wife and her friend. He said that a £30,000 deficit shown on the branch electronic ledger account was a factor in his wife’s death from an accidental overdose of anti-depressants, alcohol and cold medicine. She was 47.

He attributed the shortfall to a technical glitch.

Cowan told the FT,

“This situation I know for a fact had a huge contribution to her passing away. It had a massive effect on her.”

In 2015 the Daily Mail reported on Martin Griffiths, a sub-postmaster from Chester, who stepped in front of a bus one morning in September 2013.

An inquest heard that Griffiths, 59, was being pursued by the Post Office over an alleged shortfall of tens of thousands of pounds.

The Post Office reached a settlement with his widow and required the terms of it to be kept confidential.

Court case

The legal action between the Post Office and the sub-postmasters could be said to be a simple one, at least from the PO’s perspective. Sub-postmasters signed a contract that held them responsible for losses shown on the branch accounting system (whether or not there was any evidence they gained from the shortfalls).

The Post Office’s lawyers will argue that there is no evidence that Horizon or any of its related elements such as network and communications equipment was to blame for the losses. Under its contract with sub-postmasters, the Post Office is entitled to pursue the former sub-postmasters for the losses.

It is this contract that is the main point of legal relevance, rather than claims by sub-postmasters that the losses were not real, that they didn’t steal any money and have had their lives, and their family’s lives, ruined by the Post Office’s actions against them.

For the sub-postmasters, lawyers will argue that errors were caused by software bugs and inadequate training and support. The FT article referred to a “pattern of bullying and intimidation by the Post Office dating back to shortly after Horizon was rolled out”.

After shortfalls were discovered, people were held and their homes searched,  Alan Bates of the Justice for Sub-postmasters Alliance told the FT. Freeths solicitors are handling the Alliance’s case.

Comment

The Post Office’s enforcement of its contract with sub-postmasters after discrepancies were found on Horizon raises the question of whether the law in this case has little – or perhaps nothing – to do with right and wrong.

The Post Office may have a contractual right to pursue former sub-postmasters for shortfalls shown on Horizon.

But does the Post Office’s conformance with the law – its contractual right to take action – make the action right?

In Vermont, it’s unlawful for women to be fitted with false teeth without the written permission of their husbands. It would be perfectly legal for Vermont’s lawyers to prosecute offenders. But being lawful to prosecute doesn’t make it right to do so.

It was perfectly lawful for the state to prosecute Alan Turing in 1952 (and Oscar Wilde in 1895) for homosexual acts. That the prosecutions were lawful (and were possible factors in their premature deaths) didn’t make the prosecutions right.

If NASA made its space missions conditional on a requirement that astronauts sign a contract that made them responsible for anything that went wrong, they would probably sign – because of their overwhelming desire to go into space. But if something went wrong would it be right for NASA to enforce the contact (assuming the astronauts survived?).

It can be lawful to enforce a contract but wrong to do so.

Post Office happy?

The Post Office (which is still publicly owned) sounds relaxed about going to court. The FT quoted the Post Office as saying,

“We welcome [the group litigation order] as offering the best opportunity for the matters in dispute to be heard and resolved.

“We will be continuing to address the allegations through the court’s processes and will not otherwise comment on litigation whilst it is ongoing.”

Even at this late stage, it’s not too late for the Post Office’s directors to ponder on the matter of right and wrong rather than go ahead with a court case merely because they can.

They have the power to exacerbate the devastation for hundreds of families. They also have the power to withdraw from the court case, settle and reduce the risk of any further personal tragedies.

This is where the distinction between enforcing a legal right and doing the right thing couldn’t be clearer.

Post Office faces class action over “faulty” IT system – FT

Shedding new light on the Post Office Horizon IT controversy?

Days from taking back outsourced IT, Somerset Council is unsure what it’ll find

By Tony Collins

Facing the TV cameras, officials at Somerset County Council spoke with confidence about the new joint venture company they had set up with the “world-class” IT supplier IBM.

“The contract has to succeed; we will make it succeed, ” a senior official said at the time. Greater choice for residents, more control, sustained improvement of services, improved efficiency, tens of millions in savings and enhanced job prospects for staff.

These were some of the promises in 2007.

Since then, Somerset County Council has been through a costly legal dispute with IBM; projected savings have become losses, and Somerset is days away from taking back the service early.

Now the council faces new IT-related risks to its reputation and finances, warns a team of auditors.

In several audit reports on the exit arrangements, auditors warn of a series of uncertainties about:

  •  what exactly IT assets the council will own as of 1 December 2016, when the joint venture hands back IT and staff.
  • how much software may not be licensed, therefore being used illicitly.
  • how much software is being paid for without being needed or used, wasting council tax money.
  • whether thousands of pieces of hardware have been disposed of securely over the years of the contract, or whether confidential data could later turn up in the public domain.
  • the accuracy of some supplied information. “… the same networking hardware items have the same value associated with them even though one is twelve years old and the other only four” said auditors.

Comment

That Somerset County Council laments setting up the Southwest One joint venture with IBM is not new. What continues to surprise is the extent of the difficulties of ending the joint venture cleanly – despite months, indeed more than a year – of preparatory work.

The realty is that uncertainties and risks abound.

When IT journalists ask leading councillors and officers at the start of outsourcing/joint venture deals whether all the most potentially serious risks have been given proper consideration, the spokespeople inevitably sound supremely confident.

If things go wrong, they are sure the council will be able to take back the service under secure arrangements that have been properly planned and written into the contract.

Yet today some of the most potentially serious risks to Somerset’s finances and reputation come from continuing threats such as the possibility confidential data being found on old hardware not securely disposed of.

Or the council may be paying for unneeded software licences.

In short Somerset County Council is taking back the IT service on 1 December 2016 without being certain what it will find.

In future, therefore, when councillors and officials across the country talk with supreme confidence at the start of an outsourcing deal or joint venture about large savings, sustained efficiencies, and a step-change improvement in services that comes with the benefits of collaborating with a world-class private-sector partner, local residents will have every right to be deeply sceptical.

For the reality is more likely to be that the council and its world-class supplier are about to embark on a journey into the unknown.

Thank you to campaigner Dave Orr for alerting me to the council audit reports that made this post possible.

TV broadcast in 2007 days after the council and IBM signed the Southwest One joint venture deal.

**

Excerpts from reports due to be considered by Somerset County Council’s Audit Committee next week (29 November 2016):

“… laptops, servers, storage devices, networking equipment, etc.) have been disposed of without the correct documentation historically, throughout the term with SWO [Southwest One]. There is a high likelihood that without the documentation to show that SWO were meant to have previously disposed of any specific data baring assets in a compliant manner then subsequent fines and loss of reputation will need to be dealt with by the Council.

“This is being addressed as part of the exit works but initial investigations show an expected lack of documentation.

**

“The quality of asset management and therefore exposure to risk (over and above this inherited risk) is expected to improve significantly once asset management returns to SCC [Somerset County Council).”

**

“Asset locations have been updated and improved though there are still issues regarding all asset details not being recorded accurately in the Asset Register. There is a risk that if wrong details are recorded against an asset then incorrect decisions could be made regarding these assets which may in turn cause the Council financial loss and/or loss of reputation.”

**

“… the same networking hardware items have the same value associated with them even though one is twelve years old and the other only four.”

**

“Software assets are now included in the monthly asset register report though the information collected and lack of correlation to meaningful license information means the original risk is not fully mitigated.

“This continued lack of software asset usage information against licensing proof of entitlement as well as the obvious risk of illegally using non licensed software there is also a risk that the Council is wasting public funds and Council officer’s time to manage unnecessary software. This means the Council will not be able to show “Best Value” in these purchases which could lead to fines being imposed by Central Government and loss of reputation by the inefficiencies being reported in the media.”

**

“I cannot though see evidence of the warranty & support arrangements being recorded or accurate recording of end of life assets. Due to a lack of or incorrect detail on the asset information there is the risk of incorrect decisions being made regarding an asset’s usage which could then lead to loss of money or reputation for the Council.”

MPs to debate Capita NHS contract today

By Tony Collins

In the House of Commons today MPs will debate the Capita Primary Care Support Services contract.

It has been secured by Coventry North West MP Geoffrey Robinson, who wants GPs to be compensated for the failures arising from the outsourcing contract.

The debate comes a day after the BBC reported that “more than 9,000 patients’ records in Norfolk, Suffolk and Essex have gone missing” since Capita took on the task of transferring files.

As part of its contract Capita took on the job of transferring patients’ records, when people move from one GP to another.

A BBC survey of 78 GP practices showed that 9,009 records had been missing for more than two months.

Capita told the BBC it did not “recognise these claims”.

An NHS England spokesman said, “We know there have been serious issues with services delivered by Capita which have had an unacceptable impact on practices. We are ensuring Capita takes urgent steps to improve services.”

Patients “at risk”

Paul Conroy, a practice manager in Essex, has started a House of Commons petition on the delays, which has been signed by more than 3,000 people. It calls for an inquiry into the Capita contract and the impact it has had on GP practices.

“GPs rely on that full medical history in order to make key clinical decisions on patient care,” he said.

“If they can’t get hold of that physical record there could be vital information there could be vital information that puts a patient at risk.”

James Dillon, director of Practice Index – an organisation bringing together practice managers – told the BBC,

“GP practices are getting more and more frustrated by the missing patient records.

“Not only is this debacle putting the health of their patients at risk, it is putting added pressure on already stretched practices.”

In a statement, Capita said it had taken on the “challenging initiative” to streamline GP support services and there had been “teething problems”.

“[But] medical records are now being delivered securely up to three times faster than under the previous system,” it said.

“We do not recognise these claims regarding thousands of files being missing whatsoever.

“We request and move on average 100,000 files a week from multiple sites including GP surgeries and also third party run storage facilities which are contracted and managed by NHS England.”

GP magazine Pulse quoted MP Geoffrey Robinson as saying that the secretary of state should intervene directly “as this is extremely dangerous”. Robinson said that some medical records are not being delivered at all, or delivered late or delivered to the wrong practices.

Dr Richard Vautrey, deputy chairman of the British Medical Association’s GP Committee said that the problems arising from the outsourcing contract “are directly impacting on the ability of many GPs to provide safe, effective care to their patients in the area”.

He said, “They are in some cases being left without the essential information they need to know about a new patient and the tools to treat them.”

In August 2016, NHS England published the results of a User Satisfaction Survey of primary care support services over the previous six months. Only 21% of GPs were satisfied with the outsourced service, giving it an average overall score of 2.91 out of 10.

Lunacy?

An anonymous GP told Pulse how the problems are affecting him. He refers to the “performers list” that assures the public that GPs are suitably qualified, have up to date training, have appropriate English language skills and have passed other relevant checks such as with the Disclosure and Barring Service and the NHS Litigation Authority.

Said the GP,

“I moved 12 months ago and still haven’t been able to transfer performers list. I am 6 months late for my appraisal and unemployable except for my current salaried job as a result.

” It would have been easier to emigrate. The department responsible for the performers list at Capita is uncontactable except via a national email that isn’t responded to and a phone line that isn’t able to put you through to anyone.

“… As it is it’s virtually impossible to move region if you a UK GP. I am basically a slave bonded to a geographical region, forbidden to move house and work anywhere else other than short periods. Totally at the mercy of a faceless uninterested bureaucracy incapable of helping. Lunacy and utterly depressing. Why the hell did I become a GP? I curse the day.”

“I urgently need my medical records”

A patient who wrote to Campaign4Change said,

“My medical records were requested at the beginning of June 2016 when I changed to another health centre about 2 miles away.

“[I] phoned Capita today and was told there was no record of this request and to get my solicitor to contact them. Then they put the phone down. I don’t have and cannot afford a solicitor.

“I urgently need my medical records with my new doctor and am feeling helpless and extremely stressed by this.”

Pulse magazine reported yesterday (7 November 2016) the results of a snapshot survey of 281 GP practices carried out by the BMA’s GP Committee. It found:

  • 31% of practices had received incorrect patient records;
  • 28% failed to receive or have records collected from them on the date agreed with Capita;
  • 58% reported that new patient registrations were not processed within the required three days.
  • 81% of urgent requests for records were not actioned within three weeks.

GP practices also noted a reduction in the number of incorrect payments and fewer delays in registrations of the “performers list”.

Comment

It would be a pity if MPs today, in criticising Capita, lost sight of the bigger picture: how such outsourcing deals are considered and awarded.

The root of the problem is that before the contract is awarded officials concentrate their attention on the minutiae of the benefits: exactly how much will be saved, and how this will be achieved.

Pervading the pre-contract literature and discussions are the projected savings. This is understandable but wrong.

It’s understandable because it’s the projected savings that justify the sometimes-exciting time and effort that go into the pre-contract negotiations and discussions.

Large amounts of money are at stake. For officials, the pre-contract work can be a euphoric time – certainly more interesting than the day-to-day routine.

But what happens to negotiation and discussion of risk?

Risk is a table or two at the back of the reports. It’s a dry, uninspiring vaguely technical and points-scoring analysis of the likelihood of adverse events and the seriousness of the consequences materialising.

Sometimes the most serious risks are highlighted in red. But there’s always a juxtaposed “mitigation” strategy that appears to reassure. Indeed it appears to cancel out any reason for concern.

Risk is mentioned at the back of the internal pre-contract because it’s a cultural anathema. It’s the equivalent of visits by Building Regulations inspectors at a theme park under construction.

Who wants to talk about risk when a contract worth hundreds of millions of pounds is about to be awarded?

A bold official may dare to point out the horror stories arising from previous outsourcing contracts. That hapless individual will then be perceived by the outsourcing advisory group to have a cloud over his or her head. Not one of us.

And the horror stories will be dismissed by the officer group as the media getting it wrong as usual. The horror stories, it will be explained, were in fact successes.

Even when big public sector outsourcing deals end in a legal action between the main parties, officials and the supplier will later talk – without explanation or detail or audited accounts –  of the contract’s savings and overall success.

We’re seeing this on the Southwest One outsourcing/joint venture contract.

No doubt some will claim the GP contract support contract is a success. They’ll describe problems as teething. Marginalise them. And later, when it comes to the awarding of future contracts, supporters of the GP outsourcing contract will be believed over the critics.

And so the cycle of pre-contract outsourcing euphoria and post-contract rows over failure will be repeated indefinitely.

It would be of more use if MPs today debated the role of NHS England in the award of the GP support contract.

Blaming Capita will do little good. The supplier will face some minor financial penalties and will continue to receive what it is contractually due.

Countless National Audit Office reports show how contracts between the public and private sectors, when it comes to the crunch, strongly protect the supplier’s interests. The public sector doesn’t usually have a leg to stand on.

A focus today on Capita would be a missed opportunity to do some lasting good.

NHS England letter on Capita contract – September 2016

Capita NHS contract under scrutiny after “teething” problems – June 2016

GPs decry Capita’s privatised services as shambles – The Guardian

Did NHS England consider us in the Capita take-over?

NHS England vows to hold Capita to account

Capita mistakenly flags up to 15% of GP practice patients for removal  

Capita primary care support service performance “unacceptable”

 

 

 

Well done to Unite for challenging council’s joint venture “savings” claim

By Tony Collins

When councils make unexplained (and self-congratulatory) claims that they have made savings at the end of a joint venture, it will usually raise a series of questions.

So well done to Nigel Behan of the Unite union for putting a series of FOI questions to Taunton Deane Borough Council about its joint venture with IBM, as part of Southwest One.

In an “Efficiency Plan” published on its website last month, Taunton Deane
Borough Council announced that it was “part of the ground-breaking Southwest
One shared services joint venture partnership, between Somerset County
Council, Avon and Somerset Police and IBM”.

“This ten year partnership, which is now drawing to a close, has delivered significant savings to the Council and has made an important contribution to our finances.”

Unite is not so sure. Its officials believe the joint venture has, for Taunton Deane,  broken even at best. Its FOI questions to the council:

  • Please will you provide the unitary charge payable by TDBC to
    Southwest One/IBM for each financial year from 2007-2008 to date?
  •  For each financial year since 2007-2008 what was the cost of
    letting and managing the contract – including legal costs, procurement costs etc. etc.?
  • Re IT – software, hardware and peripherals. What was the value in 2007 of all IT (Hardware, software, peripherals and infrastructure) and what is the value of these assets now, ie what has been the depreciation on this asset class since 2007? What will cost of replacing these?
  • What are the net savings achieved by Southwest One for Taunton Deane Borough Council for each financial year since 2007-2008? Will you define “significant savings” (provide a measurable test)?

 Comment:

Taunton Deane Borough Council’s claim of savings was imperious, self-serving and unexplained. The council’s Efficiency Plan looks like a glossy commercial brochure that local residents have had no option but to pay for.

Were a newspaper to make a controversial claim without any explanation or justification, its readers would be entitled to question the article’s veracity.

Taunton Deane’s joint venture peripherally involved a costly legal action between the two main parties to the joint venture: IBM and Somerset County Council.

To make a claim of savings in such circumstances is like officials claiming a mission to space was a success even though the spacecraft blew up.

No rational judgement can be made without a detailed weighing up of the costs and benefits.

Even then the costs and benefits may be subjective. What costs have been excluded from the “savings” figure? What were the baseline costs on which the savings have been measured? And were those baseline figures audited as accurate  – or were they intelligent guesses? Have any benefits been double-counted? Are the benefits audited?

Without people like Nigel Behan and Somerset campaigner Dave Orr, and organisations like Unite, councils would get used to saying publicly whatever they liked, possibly without challenge.

 

 

 

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

By Tony Collins

The share price of outsourcing specialist Capita fell 27% yesterday, a record one-day fall for the company. It was down a further 5% this morning (10.30 am, 30 September 2016).

The company said in a regulatory statement yesterday it is taking immediate steps to reduce the cost base in its underperforming businesses, which should benefit its 2017 results.

Some customers may be entitled to ask whether the transformation-based outsourcing services they are buying from Capita will be affected by any of the company’s financial pressures.

In local government Capita has what it calls “transformational partnerships” with Sheffield City Council, Southampton City Council, London Borough of Barnet, Blackburn with Darwen Council, North Tyneside, West Sussex County Council and Oxfordshire County Council.

Capita also has a joint venture agreement with Birmingham City Council, in a partnership that goes by the name of “Service Birmingham”.

Capita’s regulatory announcement yesterday said “our performance in the second half of the year to date has been below  expectations, as a result of a slow-down in specific trading businesses,  one-off costs incurred on the Transport for London (TfL) congestion charging contract and continued delays in client decision making”.

The company’s trading update said,

“Capita is taking immediate steps to reduce the cost base in the underperforming businesses, which should benefit 2017.”

Capita expects that capital expenditure will be lower than last year.

Outsourcing advocates may see the slow-down as temporary problem for Capita – and indeed the company has announced £949m of “major contract wins in the year to date,  including being recently selected by Three as the preferred bidder for a contract to provide customer management services in the UK, which is expected to start in 2017”.

It added, though, that “revenue from new major sales in the second half of this year is likely to be lower than expected, due to continued delays in decision making and lower conversion of our pipeline”.

Other observers of the outsourcing market may wonder whether major suppliers will always have enough margin to transform a customer’s business, including big new investments in ICT, while continuing to run the client’s operations successfully.

In yesterday’s trading update, Capita referred to problems on two contracts, one with Transport for London and another with the Co-op Bank. It said:

“We have experienced delays on the implementation of new IT systems on the  Transport for London (TfL) congestion charging contract.

“As a result, we expect  to incur between £20m and £25m of one-off costs, which will be included in our  underlying results. The systems have now gone live, the contract is performing  well operationally and these costs will not recur next year.

“Furthermore, we  are in a contractual dispute with the Co-op Bank regarding obligations relating  to the transformation of services.  The ongoing mortgage processing being  undertaken by Capita is performing well.  However, there is a risk of  litigation in respect of the transformation.”

Co-op dispute

Capita’s chief executive Andy Parker was reported in The Telegraph as saying there was a “high” risk of litigation with Co-op Bank over its contract to help administer mortgages.

“Everything’s ready to go and the client is refusing to sign off for one reason only – if they sign off, they have to pay us,” he is quoted s saying. “We’re still hitting targets and delivering for this bank.”

The Co-operative Bank, for its part, suggested it is owed money for delays, and denied it has failed to pay. “The bank strongly refutes Capita’s suggestion that they have delivered an element of the transformation programme which the bank has not paid for,” Co-op Bank was quoted as saying. “In addition, there are amounts which the bank regards as owing to it by Capita.”

Co-op added that it continues to “work through” the issues with the programme.

“The bank continues to work through the issues surrounding this transformation programme with Capita. The existing outsourcing of mortgage processing to Capita both for new and existing bank customers continues to operate in a satisfactory manner and the bank is committed to ensuring that this remains the case going forward,” said the Co-op.

Transport for London

On Capita’s TfL congestion charge contract, Andy Parker said,

“The upgrade proved more complex than we anticipated and the penalties ramped up very quickly.”

At Forbes, which has ranked Capita as one of the world’s most innovative companies, a writer and analyst warned (speculatively) of the possibility of “further profit downgrades in the months to come, allied with the possibility of subdued revenues growth in the years ahead.

Analysts say Capita’s prospects may be dented by uncertainties over Brexit.

The concluding paragraph of Capita’s trading update yesterday said,

“We remain confident of the strength of our business model and aim to return the Group to profit growth next year, excluding the benefit from TfL one-off costs  dropping out.”

Capita is a FTSE 100 company. In 1991 when it was floated its turnover was about £25m. Now it’s close to £5bn. It employs 75,000, about 17,000 of them abroad.

Thank you to campaigner Dave Orr for alerting me to Capita’s announcement yesterday.

Capita trading update

 

Avon and Somerset Police to end outsourcing deal after years of proclaiming its success

avon and somerset police logoBy Tony Collins

Avon and Somerset Police has been consistent in its good news statements on the force’s “innovative” outsourcing deal with IBM-owned Southwest One.

These announcements and similar FOI responses have a clear message: that savings from the deal are more than expected.

But the statements have differed in tone and substance from those of Somerset County Council which ended up in a legal action with Southwest One.

Somerset’s losses on its Southwest One deal could leave the casual observer wondering why and how Avon and Somerset Police had made a success of its deal with Southwest One, whereas the county council has had a disastrous experience.

Now the BBC reports that Avon and Somerset will not be renewing its contract with Southwest One when the deal expires in 2018.

Southwest One is 75% owned by IBM and carries out administrative, IT and human resources tasks for the force.

Avon and Somerset Police’s “new” chief constable Andy Marsh – who took up the post in February 2016 – confirmed he has “given notice” that the Southwest On contract will not be renewed.

Andy Marsh, chief constable, Avon and Somerset.

Andy Marsh, chief constable, Avon and Somerset.

Instead he said he wants to work with neighbouring police and fire services. Marsh said,

“We will be finding a new way of providing those services. It is my intention to collaborate with other forces. I do believe I can save some money and I want to protect frontline numbers.”

Marsh came to Avon and Somerset with a reputation for making value for money a priority.

These are some of the statements made by Avon and Somerset Police on the progress of the Southwest One contract before Marsh joined the force:

  • “I am delighted with the level of procurement savings Southwest One is delivering for us, particularly as it is our local communities who will benefit most as front-line services are protected. “
  • “Using Southwest One’s innovative approach, we have been able to exceed our expected savings level.”
  • “I am looking forward to building on our close working relationship with Southwest One to deliver even greater savings in the future.”

FOI campaigner David Orr says of the police’s decision not to renew its contract with Southwest One,

“This controversial contract with IBM for Southwest One was signed in 2007 with the County Council, the Police and Taunton Deane Borough Council.

“We were promised £180m of cash savings, an iconic building in Taunton at Firepool, as well as new jobs and a boost to the economy. None of that ever materialised. “

Comment

If Avon and Somerset Police is happy with its outsourcing deal with Southwest One, why is it not renewing or extending the contract?

It’s clear the “new” chief constable Andy Marsh believes he can save money by finding a new way of delivering services, including IT. This sounds sensible given that the client organisation will at some point have to contribute to the supplier’s profits, usually in the later years of the contract.

Savings by ending outsourcing

Public authorities, particularly councils, when they announce the end of an outsourcing contract, will often say they plan to make substantial savings by doing something different in future – Somerset County Council and Liverpool Council among them.

Liverpool Council announced it would save £30m over three years  by ending its outsourcing deal.

Dexter Whitfield of the European Services Strategy Unit which monitors the success or otherwise of major outsourcing deals, is quoted in a House of Commons briefing paper last month entitled “Local government – alternative models of service delivery” as saying,

“Councils have spent £14.2bn on 65 strategic public-private partnership contracts, but there is scant evidence of full costs and savings”.

According to Whitfield, this is due to “the lack of transparent financial audits of contracts, secretive joint council-contractor governance arrangements, poor monitoring, undisclosed procurement costs, a lack of rigorous scrutiny and political fear of admitting failure”.

If it’s so obvious that outsourcing suppliers will eventually try to make up later for any losses in the early stages of a contract – suppliers are not registered charities – why are such deals signed in the first place?

Do officials and councillors not realise that  their successors will probably seek to save money by jettisoning the same outsourcing deal?

The problem, perhaps, is that those who preside over the early years of an outsourcing contract are unlikely to be around in the later years. For them, there is no effective accountability.

Hence the enthusiastic public announcements of savings and new investments in IT and other facilities in the early stages of an outsourcing  contract.

It’s likely things will go quiet in the later years of the contract when the supplier may be trying to recoup losses incurred in the early years.

Then, suddenly, the public authority will announce it is ending its outsourcing deal. Outsiders are left wondering why.

Good news?

Given Avon and Somerset’s determination to end its relationship with Southwest One, can we trust all the good news statements by the force’s officials in past years?

With facts in any outsourcing deal so hard to come by, even for FOI campaigners, selective statements by public servants or ruling councillors about how successful their deal is, and how many tens of millions of pounds they are saving, are best taken with a pinch of salt.

Especially if the announcements were at an early stage of the contract and things have now gone quiet.

Thank you to David Orr for alerting me to the BBC story and providing links to much of the material that went into this post.

From hubris to the High Court (almost) – the story of Southwest One.

Too easy for councils to make up savings figures for outsourcing deals?

Can all councils open up like this please – even Barnet?

By Tony Collins

Bitten by misfortune over its outsourcing/joint venture deal with IBM, Somerset County  Council has become more open – which seemed unlikely nearly a decade ago.

In 2007 the council and IBM formed Southwest One, a joint services company owned by IBM. The deal was characterised by official secrecy. Even non-confidential financial information on the deal was off-limits.

That’s no longer the case. Humbled a little by a failure of the outsourcing deal (including a legal action launched by IBM that cost the council’s taxpayers at least £5.9m)  local officials and their lawyers don’t automatically reach for the screens when things go wrong.

In 2014 Somerset County Council published a useful report on the lessons learnt from its Southwest One contract.

The latest disclosure is a report to the council’s audit committee meeting in June. The report focuses on the poor management and lack of oversight by some of Somerset’s officers of a range of contractor contracts. The council has 800 contracts, 87 of which are worth over £1m and some worth a lot more.

Given that the Council is committed to becoming an increasingly commissioning authority, it is likely that the total value of contracts will increase in the medium term, says the audit report by the excellent South West Audit Partnership (SWAP).

SWAP put the risk of contracts not being delivered within budget as “high”, but council officers had put this risk initially at only “medium”. SWAP found that the risk of services falling below expected standards or not delivering was “high” but, at the start of the audit assessment, council officers had put the risk at only “medium”.

somerset county council2One contract costing more than £10m a year had no performance indicators that were being actively monitored, said SWAP.

None of the contracts reviewed had an up-to-date risk register to inform performance monitoring.

No corporate contract performance framework was in place for managing contracts above defined thresholds.

“Some key risks are not well managed,” says the report.

“It is acknowledged that the Council has implemented new contract procedural rules from May 2015 which post-dates the contracts reviewed in this audit; however these procedural rules contain only ‘headline’ statements relating to contract management.

“Most notable in the audit work undertaken was the lack of consistency in terms of the approach to contract management across the contracts reviewed. Whilst good practice was found to be in place in several areas, the level of and approach to management of contracts varied greatly.

“No rationale based on proportionality, value, or risk for this variation was found to be in place. The largest contract reviewed had an annual value of over £10 million but no performance indicators were currently being actively monitored.”

Report withdrawn

Soon after the report was published the council withdrew it from its website. It says the Audit Committee meeting for 3 May has been postponed until June. It’s expected that the audit report will be published (again) shortly before that meeting.

Fortunately campaigner Dave Orr downloaded the audit report before it was taken down.

Comment

How many councils manage outsourcing and other contracts as unpredictably as Somerset but keep quiet about it?

Why, for example, have Barnet’s officers and ruling councillors not made public any full audit reports on the council’s performance in managing its contracts with Capita?

It could be that councils up and down the country are not properly managing their contracts – or are leaving it to the outsourcing companies to reveal when things go wrong.

Would that regular SWAP reports were published for every council.

All public authorities have internal auditors who may well do a good job but their findings, particularly if they are critical of the management of suppliers, are usually kept confidential.

Freedom of information legislation has made councils more open generally, as has guidance the Department for Communities and Local Government issued in 2014.

But none of this has made councils such as Barnet more open about any problems on its outsourcing deals.

Indeed clear and perceptive audit reports such as the one from SWAP are rare in the world of local government.

All of which raises the question of whether one reason some councils love outsourcing is that they can pass responsibility to suppliers for things that go wrong knowing the public may never find out the full truth because secrecy is still endemic in local government.

Thank you to Dave Orr for drawing my attention to the audit report – and its (temporary) withdrawal.

Somerset Council’s (withdrawn) Audit Committee report

Southwest One – the complete story by Dave Orr

Cornwall a model of openness as outsourcing deal with BT turns sour?

By Tony Collins

Will Barnet Council ever be as open as Cornwall Council has been over the performance of its IT outsourcing supplier?

Two years ago Cornwall signed a 10-year £260m strategic “partnership” with BT. The word “partnership” seems odd now that BT has taken out an injunction against Cornwall to stop the council ending the relationship 8 years early.

The two sides will go to court in December to determine if the council has a right to terminate the contract now.

If it loses  the case, Cornwall will have to retain as its main IT services supplier a company that has been its High Court adversary. The judge may also order the council to pay BT’s legal costs.

The odds may be against Cornwall’s winning because BT has much experience in outsourcing legalities. It’s possible that its managers have been collecting evidence of  any council shortcomings from day 1 of the contract,  in case the relationship turned sour.

But independent Cornwall councillor Andrew Wallis says on his blog that BT is dragging the council to court because of BT’s own failings. The council says BT has not achieved its key performance indicators or met to its guarantees on creating new jobs.

Cornwall council logoCornwall threatened to terminate for breach of contract but did not do so while it was in talks with BT’s senior corporate executives. When an amicable termination could not be agreed BT instructed its lawyers to seek an injunction preventing the council from terminating, which they did at a hearing on 12 August.  The result was that the High Court agreed to an expedited trial that will start on 1 December 2015.

It’s all a far cry from the time two years ago, before the contract was signed, when BT and council officers were promising much, and saying little about what could go awry.

In its literature, amid beautifully-executed artwork and graphics, BT highlighted its success at South Tyneside Council, its sponsorship of events such as Comic Relief, Children in Need and Childline and its presence as one of the largest employers in the South West.

Similarly, Cornwall officers, in 2013,  wrote reassuringly about any forthcoming deal with BT. They said:

“It should also be borne in mind that strategic partnerships are nothing new. BT – and other councils – have been involved in them for more than 10 years.

“Similarly the outsourcing market is mature and well understood. The UK local government IT and Business Process Outsourcing market is the biggest outsourcing market in the world and there are over 100 deals in operation.

“Risks are sometimes managed well and sometimes managed badly. The risks have been mitigated by using expert advisors and the Council has senior officers who understand this territory well.”

A BT spokesman told Government Computing this week:

“BT has commenced legal action to ensure fair and proper handling of the issues which have arisen about BT Cornwall, and while this is taking place, it would be inappropriate for us to comment.”

Comment

How is Capita’s performance on its contract at Barnet? We don’t know. The success or otherwise of the deal is blanketed in secrecy. In May Barnet blogger Mr Reasonable offered to make a charity donation of £250 if the council showed it was making the promised savings. The money went unclaimed.

There is no evidence of any failure of Barnet’s outsourcing deal. But would the public or media ever know if the supplier’s performance was falling short of the council’s expectations?

Cornwall has many independent councillors (36 compared with the 37 ruling Liberal Democrats). Debates tend to be on the merits of the matter not on the basis of party politics.

Barnet’s policy is tied in with a political ideology: ruling councillors want to turn Barnet into a “commissioning council” which involves outsourcing as much as possible.

In  practice the bedrock of this ideology is the relationship with Capita. If it went wrong would Barnet have too much to lose to go into dispute? For the sake of its ideology would Barnet accept any quality of service Capita delivers?

Cornwall

In threatening BT with termination because of breaches of contract, Cornwall Council could be criticised for not letting a 10-year outsourcing bed down. It’s unusual for a strategic partnership to end up in court less than 3 years into a 10-year contract.

On the other hand BT promised to create jobs in year 1 and 2 of the contract that the council say have not materialised. Councillors and officers are unhappy about many other aspects of the deal.  BT took on about 280 full-time equivalent council employees, about 130 of whom worked in Information Services.

What’s striking about the history of outsourcing discussions at Cornwall, and the run-up to the signing of a contract, is its openness. It would be easy for BT’s defenders to say that Cornwall’s open, feisty and unforgiving attitude are factors in the strained relationships so far.

On the other hand the problems Cornwall has experienced in the first 2 years of the relationship may be normal in outsourcing deals at other councils. It’s  just that ruling councillors and officers don’t talk about them in public.

All the more credit to Cornwall for its openness.

Barnet’s outsourcing deal may be more successful than Cornwall’s – but how does anyone outside a small group at Barnet really know? Local government and democratic accountability are often uncomfortable bedfellows.

Thank you to Dave Orr who drew my attention to the latest developments at Cornwall Council. 

Cornwall Council rushes to sign BT deal before elections

Cornwall Council tries to pull the plug on BT Cornwall

BT Cornwall is not working for Cornwall as it should

Overview of BT Cornwall’s performance against commitments and guarantees – as perceived by Cornwall’s officers

KPI measures Achieved (185/289) – 64%

PI measures Achieved (266/402) – 66%

Service Transformation (percentage of plans completed) – 38%

Financial contractual baseline savings (10% & 11.6%) – 100%

Trading gain share received (est £17.4m over 10 years) – £0

Guaranteed new jobs in Cornwall (yrs 1 & 2 111 new jobs target / 35.1 created) – 32%

Committed new jobs in Cornwall (yrs 1 & 2) – 0


Some of BT’s pre-outsourcing deal literature for Cornwall’s councillors

  • BT is a FTSE 100 company
  • We are one of the largest employers in the UK and the SW
  • We currently employ > 5,900 people in the South West including 1,028 Cornwall residents
  • BT already makes a financial impact of over £749m a year in the region
  • BT spent >£145m with local suppliers in 2011/12 and will increase this substantially through the Partnership
  • We generate 142,000 fraud referrals each week for the DWP across 50 data sources from 260,000,000 records
  • We undertake c.1,000,000 criminal record checks per annum at Disclosure Scotland to safeguard vulnerable groups.
  • We provide the highly secure directory services for the 260,000 military and civilian defence staff
  • We collect circa £580,000,000 in tax revenues each year on behalf of our local authority partnerships
  • The NHS Spine platform exchanges £3.5m prescription messages per week
  • We are delivering in excess of £500,000,000 savings in partnership with six UK Councils through efficiency and transformation programmes
  • We run one of the worlds largest data warehouses to enable the timely anonymous collection of patient data and information for clinical and billing purposes other than direct patient care .
  • Yes, we do poles and wires…but did you also know in the public sector we process over 532,000 benefits assessments for new applications and change of circumstances each year in our Local Government Partnerships?