Highly Political and Ideologically Driven - The Capita Contracts in Barnet

 It has been some time but Mr Reasonable is back! During lockdown and the incredibly tough time that we have all experienced, I thought I would ease back on my detailed scrutiny of Barnet Council and allow it to get on with what was a much more important job of looking after the residents of Barnet during this crisis. Throughout the entire lockdown period many vital frontline services have continued to operate and my thanks goes to all those incredibly brave and hardworking staff who have never had the option to work from home. However, council committee meetings have resumed in person so now is the time to resume detailed scrutiny.

Yesterday I reviewed the latest position on the Capita contracts in papers published for the Financial Performance and Contracts Committee which you can read here.  It sets out plans for which of the services currently operated by Capita will be brought back in-house, which will be reviewed after a year and which will continue to be operated by Capita after the contract expires in 2023.

In the past I would have taken my views and a long list of in-depth questions to the committee meeting in what would, in a normal democracy, be seen as public scrutiny. However, as we all know, in Barnet the current regime hate any form of scrutiny so they have gagged all those people who take a close interest in how the council is run.  I am allowed just one question on the contracts costing an average of £72 million a year. 

To set the Capita contract in context, set out below is the total Barnet have paid to Capita since the contract started in September 2013. As you can see, so far Barnet have paid Capita £540 million, £212 million more than was originally contracted.

When I meet people who are unfamiliar with Capita’s role in Barnet, they often ask if I am joking when I say that one council, Barnet, has paid over half a billion pounds to one company, Capita. The level of disbelief is huge but that is the reality of the contract councillors entered with Capita back in 2013.

The paper being discussed next week sets out where they have got to in reviewing the two contracts and the strategy going forward, something they are asking councillors on the committee to agree. Bear in mind that the CSG contract review should have been completed two years ago and the Re contract a year ago. It is accompanied by a “Market Insights” report prepared by Grant Thornton in which the Executive Summary opens with the statement:

“Historically procurement has been ideologically driven and highly political”

Definitely 100% true in Barnet’s case. It also goes on to say:

“The gap between cost and efficiency for delivery between the public and private sector has been significantly squeezed over the last decade as a result of market pressures. This means that outsourcing is not always the most cost effective option by default”

Unpicking that statement and reading between the lines, it is saying that the price difference between companies like Capita and in house teams is slim, if at all, something I told Barnet back in 2012 and 2013.

The killer line is at the bottom of the executive summary where it says:

Key to pragmatic delivery and understanding is an effective and objective options appraisal process with a clear vison at the outset of 

‘WHAT ARE WE TRYING TO ACHIEVE’ and 

'WHAT PROBLEMS ARE WE TRYING TO SOLVE’

The council failed to address those two critical questions in 2013 and reading the committee paper they still have not been addressed nearly eight years later. Indeed the current paper seems to have been written from a Capita centric view point with services from which Capita can continue to make money being retained and those that do not generate profit/make a loss, or don’t fit the model of what Capita want to provide, being returned to Barnet. 

For example, the reports says it makes sense for Capita to keep IT, customer service and revenue and benefits. All three of these services have contract clauses that allow Capita to charge extra for exceeding volume thresholds. The biggest money spinner of all is planning, a service which is intrinsically linked to local knowledge but which Barnet seem happy to let Capita keep creaming off a profit share. I am aware that there has been a high turnover of staff in the planning department and this has led to a real loss of local knowledge when planning applications are put forward. Knowing planning law may be seen as the most important criteria but I would say that having some local knowledge, is right up there when deciding planning applications. One possible reason for the high turnover of staff is that the biggest employer of planning officers are other local authorities who offer the benefits package, especially pensions, that Capita fail to offer.

Set out below is a summary of how the different services will be managed; retain means retained by Capita and returned means given back to Barnet to manage. I have dealt with the issues involved with each service individually below the table.

IT – “whoever controls the data controls the world” applies at corporate level as well. Without control of the IT systems we are forever dependent on Capita. A couple of years ago when there was a major review of spending being carried out, some of the shortcomings of Capita’s Integra system were highlighted, especially budgeting for capital project over more than one year. The then acting Finance Officer (who I rated highly) said that computer systems such as SAP had the ability to schedule capital budget over many years and he has used that at other Local Authorities. The irony of the situation is that Barnet had spent more than £20 million developing and perfecting an SAP system only for it to be thrown out and replaced by Capita’s Integra system when we signed the contract back in 2013. In this paper they have recognised the need to improve of the Integra systems and are saying that by extending the contract, Capita will make investment in this area. 

WARNING!!! 

This is a complete and utter myth. Back in 2013 Barnet councillors said they did not have the money to invest in IT systems and that is why they needed a company like Capita who would invest their own money in new systems. However, as soon as the contract was signed they completely reversed that decision saying that it was much cheaper for the council to borrow money than Capita and put up £16.1 million which they said saved the council £800,000 in interest that Capita would have charged. The same will happen again this time.

Customer Services – The report says that this service has performed well. Not what Barnet residents were saying pre covid when getting through to the council on the phone system was a nightmare. I demonstrated that on some departments Capita had never met their full quarter KPI targets on answering the phone since the start of the contract. 

Barnet’s response was clear and decisive…. they stopped publishing the data so that I could not point out the failings any more. Capita also charge extra when call volumes exceed target levels, even though many of the calls are now fully automated (quarter of a million pounds in 2018). The Covid pandemic has seen a massive change in the way calls are handled with call centres closed and most calls dealt with by staff from their homes. Why haven’t Barnet looked at doing this themselves?  Covid has forced many people in the hospitality and retail sectors out of work In addition, there are always people looking for fairly paid part time work, especially working mothers who need to balance childcare with work. Why aren’t Barnet looking at utilising these local staff working from home as a way to create better paid local jobs using people with good local knowledge. Sadly this is a prime example of ideology trumping pragmatism.

Revenues & Benefits – This service is now the largest recipient of the wonderfully titled “Gainshare” clause. With this clause, if Capita save some money or gather more than was forecast 9 years ago when the contract was drafted, then they get to keep a proportion of it – up to 50%.  Last year Capita claimed £837,218.66 using this clause including £180,421.92 gainshare for exceeding the council tax collection target,  £125,057.81 for gainshare on recovered housing benefit over-payments and £230,702.89 for reducing the number of people claiming single person discounts. Times and technology have moved on. It would be good to see Barnet hanging on to all of that £837,000 rather than handing it over to Capita.

Procurement – after years of campaigning and highlighting to both Barnet Council senior officers and to the External Auditor how much we were paying out unfairly in gainshare to Capita on procurement, gainshare on procurement was dropped as part of a secret deal done between Jonathan Lewis, CEO of Capita, and Barnet back in November 2018. This clause had generated just under £8 million of gainshare for Capita so was extremely lucrative. Without it Capita simply can’t be bothered so that is why they are handing this service back to Barnet.

Accounts Payable/Integra – Barnet are proposing that this service is given a short extension with a further review even though Accounts Payable has been one of the worst performing services of those provided by Capita. Since the start of the contract Accounts Payable has received four limited assurance reports from Barnet’s Internal Auditors in January 2015, January 2016, April 2018 and October 2019. This department’s failures were also highlighted by Grant Thornton in their investigation into the £2m fraud discovered in 2018. What else is to review – they have provided consistently lousy service and should have been sacked back in 2018. The report also talks about economies of scale but this is already a massive operation. In 2020/21 I logged and tracked 162,468 payment transactions and those were only the ones made public. Accounts Payable needs attention and is large enough to warrant being brought back in house where hopefully we would get more scrutiny on what is being paid out.

HR/Core HR - a large part of this service has already been brought back because of serious failings. It therefore makes sense to bring the rest back when the contract expires yet Barnet want to extend and review this service. Why? Ideology over pragmatism.

Estates – another service earmarked a short extension and further review. Reading the report it is hard to understand why when it says “Overall, the Estates function has had a number of problems over many years, which go back to before the CSG contract was put in place. Repeated efforts to resolve this over the years have made some improvements, but the service is not yet consistently performing to the required standard”.   The only conclusion I can come to is that Capita want to hang on to it because while they provide a dismal service, they can still claim gainshare on property income where Capita keep 30% of the additional income from rent reviews, lease renewals and letting on the property portfolio above an agreed baseline. Last year that was just over £100,000. Are you starting to see a pattern here?

Planning Control & Development – Barnet is in the top ten of busiest planning departments in England (2,694 applications in 2020), something from which it generates a large revenue stream. The head of planning was a Barnet council staff member before the contract was outsourced so I am not sure what value Capita have brought to this contract but currently we have to share the planning income with Capita. Given that there has been so much criticism of planning and the accusation of conflicts of interest with other Capita companies such as GL Hearn, it would seem like an obvious choice to bring back in house. In this case the financial interests of Capita win again.

Building Control and Land Charges – again both revenue generating service where profit has to be shared with Capita so yet again the recommendation is to leave the service with Capita.

Regulatory Services - these include Environmental Health, Trading Standards and Licensing and they are recommended to return to Barnet’s control. Definitely, the right decision and one where right back in 2013 it seemed unwise to hand to a contractor. Possibly of more relevance is that none of these services make money so are therefore of no interest to Capita.

Regeneration – is also a strategic service which generates no income for Capita so surprise, surprise the recommendation is that it should return to Barnet. It is important that the service is run and controlled by Barnet staff but it is clear to see why Capita aren’t putting up a fight to keep it.

Highways – this is another service that has performed dismally under Capita. They have struggled to recruit and retain senior management for this service. It received a 'Limited Assurance' rating in April 2017 and a 'No Assurance' rating, the worst possible, in October 2019. Indeed at the most recent Audit Committee meeting in April this year, the deadline for resolving the problems identified in the 2019 report had been missed again – for the 5^th time. Capita do not physically carry out the highways work; that is let through a London Councils framework contract, they just manage it. The report is also contradictory on this service saying in the text that the service should be returned yet in the chart saying it should be extended with a further review. Which is it?

Cemetery & Crematorium – the report says that Capita aren’t doing a bad job. Others who had a loved one’s memorial bench chucked into a heap in the Hendon Cemetery memorial garden and who have seen the process of death “memorialised” to use Capita’s jargon, might disagree. However the service doesn’t fit with Capita’s strategy “and is the only cemetery and crematorium they (Capita) run. Whilst this does not present any immediate issues of concern, the potential for them to add further value to the development of the service over the medium-term may be limited”. So yet again they are handing back a service not because of any pragmatic or logical reasoning but because it doesn’t fit with what Capita want to provide.

Reading this report I am shocked that it is so one sided and biased towards what is best for Capita rather than what is best for Barnet and its residents.

The Grant Thornton Market Insights report raises a number of interesting points including information about councils that are insourcing (bringing back in house) services that were previously outsourced.

As I mentioned at the outset, local residents are not allowed to ask more than one question and if more than two residents want to ask their single question about an agenda item then they are simply ignored. We will be invited to a focus group session in early July and one later in the year in the same format as 2018. In that focus group they gave everyone tea and biscuits and £50, (I donated my fee to charity) listened to what everyone said and then completely ignored every single word. It ticks the box for consultation without listening to a word that is said.

This is a contract which has already cost £540 million yet this report seems superficial and entirely biased in favour of Capita. Grant Thornton are right when the say procurement has been ideologically driven and highly political. Unfortunately that seems to still be the case in Barnet. No big picture, no wholistic viewpoint, no recognition of the links between services that make a council function efficiently, just more of the same old fashioned ideology where Capita’s needs and strategy are at the forefront of any decision.