Capita Week - Today's Spotlight on Birmingham

Today's spotlight is on Capita's role at Birmingham City Council. Service Birmingham is a joint venture partnership between Capita and Birmingham City Council.  It provides information and communications technology (ICT) services and manage the council's revenue service and contact centre, as well as a number of other large and small scale IT enabled solutions to Birmingham City Council as part of the joint partnership agreement.

Between July and October 2012 a specialist consultancy organisation, Best Practice Group PLC, undertook a review of the Service Birmingham and  they published their findings in a report which you can download here.

The key findings were as follows:

• SB Board governance needs strengthening; there was no independent chair or members on the board which is definitely not best practice. Worryingly, I suspect there will be similar governance issues for Barnet. There is only one councillor on the proposed Board overseeing the NSCSO contract and as far as I am aware no residents. Governance is an issue on which Barnet does not have a glowing track record, it is secretive and it does its best to shut out the views of residents.
• Value for money/performance could be enhance; due to the secrecy in the One Barnet contract and the lack of a public sector comparator we will never know whether the NSCSO contract with Capita will represent true value for money.
  
• Partnership working has improved but challenges remain; partnership working is always difficult where the two partners have such differing objectives. Barnet want services to be of a good standard and Capita want to deliver a high return on investment for their shareholders. Such conflicting objectives will always make for a tense relationship and that inevitably leads to a sub optimal solution.
  
• Intelligent client function (ICF) team has more to offer; in Barnet we will have a thin client function and the risk is that it simply will not be sufficient to drive the contractor to innovate and enhance the service beyond what is specified in the contract. That could lead to ten years of inertia in terms of service improvements.
  
• Innovation in the partnership needs reinvigorating; the problem with a ten year contract is that once the initial honeymoon period is over there is no incentive to keep innovating. If Barnet had chosen a five year contract there would be a greater incentive on Capita to keep innovating but with a long contract and a 5 year extension option, there is no real incentive for Capita.
• Management of value in projects is not being maximised; in Birmingham, Capita had a duty to validate the value of both existing and on-going projects. If Capita do not have a financial incentive to do so why should they invest resources? In Barnet we are not clear in Capita have a similar role because we are not allowed to see the contract but I suspect that if there is no financial incentive for Capita to do anything outside the specification they won't.
  
• Flexibility required for pass-through charging; basically SB get a fee when managing a contract even if BCC had all the expertise and set up the deal. This is always an issue in contracts where there is adherence to the letter of the contract rather than the spirit of the contract. I suspect that the naivety of Barnet will lead to similar situations arising.
  
• Concerns over SAP project work being off-shored; although SAP has been implemented in Barnet there may be a risk at some time in the future that some of the data entry work may be off-shored. We have had some reassurances that call centres will not be off-shored but I do not recall the same assurance about data entry, software development, IT management etc. All I do know is that when contract costs come under pressure, Capita have a habit of off-shoring the work. Only time will tell.

The report also highlights some other serious issues. For example, it found that there was a significant reduction in the number of IT Support Staff. The reports states:

"There were 82 staff members leaving SB in the period, with only 32 joining. SOCITM (the professional society of Public Sector ICT Management) refer to this as ‘Staff Turmoil’. SOCITM define “turmoil” in this case as covering all the activity that is associated with the management of staff when they leave or join the organisation. Familiar activity can include exit interviews; advertisement; recruitment interviews internally and externally; consequential promotions; redistribution of workload and further interviews.
SOCITM caution “At low levels this turmoil can be helpful in bringing in fresh ideas, new experience and different skills to the organisation, but at higher levels (>10%) it becomes a drain on management resources and reduces overall productivity owing to the loss of information and experience, recruitment overhead and familiarisation of the new members of staff”. Without appropriate context from SB, such information can create uncertainty within the staff ranks."

In terms of procurement of IT the report states:

With the exception of desktop computers and based on the evidence provided to us at the time of writing this report, our analysis of the SOCITM benchmarking report indicates that SB could do much better with regards to the procurement of standard infrastructure (including laptops).
Based on the examples provided and the evidence from the SOCITM benchmarking survey, it is our view that generally, SB’s procurement capability is adequate when it comes to bulk purchase of standardised items. There is a lack of evidence to demonstrate that specialist project related purchases that fall into the £25,000 to £100,000 band (small to mid-range systems) are generating appropriate value.

Given that Capita will be responsible for Barnet Council's procurement function, I found this statement deeply worrying.

In terms of Key Performance Indicators (KPIs) upon which the contractor's performance is judged, the report states:

Having briefly reviewed the KPIs against several months of performance data it is evidenced that, despite the odd ‘glitch’, on the whole these KPIs are being met and exceeded by SB. Given the concerns from BCC about maximising value, this would indicate that these KPIs are in need of urgent review in order to replace those not now appropriate. The opportunity should also be taken to increase the standards of those which are still relevant and are being reliably reached and exceeded.

My experience is that KPIs can be a blunt tool and that meeting them does not always mean that the contractor is delivering the best service. We are not privy to the detail of the KPIs set by Barnet but I suspect that we will run into exactly these problems in the NSCSO contract.

If you have a spare 30 minutes the report is well worth a read. My big concern is, did any of our councillors read this report? Did they go and talk to anyone from Birmingham in depth about the contract performance and if so what lessons did they learn. Sadly, the impression I get is that Councillors have been spoon fed with information from the external consultants and senior officers who all have a massive incentive to get this contract implemented.