Just what we pay Capita - How they billed £555 million to one council

 As readers will know, I have followed the two Capita contracts in Barnet since the very outset when the outsourcing of so many council services was first mooted. To date, Capita have been paid £555 million and there are still just over two years of the contract to run. 

The difference between the contracted sum and the total paid currently stands at £218 million, a large amount around which there is very little transparency for these additional or 'extra' charges. It was a Conservative Councillor, Hugh Rayner who asked the obvious question before the Capita contracts were let. He said that he likes extras, changes or variations to a contract because that is where he made his money and challenged officers to tell him how we would avoid this situation with Capita. Sadly he was right and the over optimism of politicians, consultants and officers at the time has proved very expensive. (Credit to the late Barnet Bugle who filmed so many of those council meetings providing a permanent record of the mistakes and blunders made by councillors).

 

 Each year there is a period of 4 weeks when any resident can inspect the accounts and this is my annual opportunity to see precisely what 'extras' we are paying for and question whether it is valid or appropriate. This year I requested copies of  439 invoices reconciling the total £54.28 million paid to Capita and in particular what the £21.6 million of extra payments included. It takes a bit of time to not only go through all of those invoices but to understand the specific breakdown of what they include.

At this point I have to give some praise to Barnet Council. Yes you read that right, praise, specifically to the council staff in the finance department. Barnet brought the finance function back in house from Capita a couple of years ago after a range of problems. I think the staff know me reasonably well so this year when I asked for copies of all the invoices and breakdown of what they related to I was surprised that even though I had put in my request early, assuming it might take them up to three weeks to compile, I was sent a fully detailed set of invoices and back up within 24 hours. So well done to all the Council finance staff  - excellent service!

Reading the details of what was in the invoices is both worrying and puzzling in that I keep asking myself why on earth this contract wasn't brought back in-house years ago. Set out below is a summary of the main categories of spending on the 'extras'.

The first three are items which there is limited room for manoeuvre:

Pensions is what Barnet have to pay for additional pension costs for staff who transferred over with the contract including payouts and changes to the scheme. We don't have any choice over these payments.

Indexation is the uprating of the contract value in line with the inflation rate. I am sure many people who have seen their pay frozen or cut over the last 8 years would welcome a clause where their pay automatically rises by inflation each year. Most other council departments have no guarantee that their budgets will be increased by inflation but it is a contractual clause so we are stuck with it.

Procurement is where Barnet request additional item, I understand this is mainly IT equipment. As it is stuff that Barnet have specifically requested then, again, there is little we can do about that. 

We then come on to the other three headings which are more interesting and where I have real concerns.

Gainshare is a term whereby Capita share in any savings that they make on behalf of the council. In the past this figure was much larger as it included savings made on procurement. I have fought these from the outset of the contract and exposed what a sham they were. Eventually after much hassle from me and from the my challenge to the accounts being overdue for two years, a settlement was reached with Capita whereby gainshare was removed from procurement items. I was told by someone who should know (I will not mention their name to save them the embarrassment) that my persistence had "saved the council million of pounds" by getting the clause removed. They also urged me to keep looking and keep questioning. This year the majority of gainshare was generated on  three areas, council tax collection rates, removal of single person discounts, savings on court costs. This year Capita received £480,197.59 for achieving council tax collection rates above the target set out in the contract. It related to this year and if they managed to recover unpaid council tax in previous years. 

The next is the removal of single person discount. Capita are paid a fixed fee of £127,200 to pay for staff to chase up  people claiming the single person discount and then on top of that they get a share of the additional council tax generated by removing the single person discount. Last year that share was a further £139,735.53 giving a total payment to Capita of £266,935.53. If you are living alone in a property and you have been hassled about whether you are entitled to a single person's discount then this is the reason why - because Capita make money if they remove that discount.

For both Council Tax Collection rates and single person discount removal, I have always felt that we should not just be handing over so much money when there are skilled people within Barnet's own team of staff who could pick up on this. We have a Corporate Anti Fraud Team (CAFT) run by an experienced senior officer who already investigates, tenancy and right to buy fraud, blue badge, freedom pass and parking permit misuse as well as larger corporate frauds, such as the £2 million fraud undertaken by a Capita staff member back in 2018. They also "use internal data matching in order to develop more data led pros-active investigations and allow CAFT to have a greater ability to investigate and adopt a preventative measures approach to a number of council services". If they were given just a small percentage of that £750k paid to Capita to add to their team, we could save the rest for important services the council is currently being forced to cut.

The court costs gainshare is paid at 20% of court costs collected above the baseline.  My argument has always been that if we have a year where court costs are high (possible due to more actions being taken) then is it likely Capita will recover above the baseline which is a fixed sum. Last year this amounted to £101,719. 

There were a number of other gainshare sums including £76,000 on Estates gainshare which is where they exceed targets on rental from commercial properties owned by the council.

The next large area of costs is Brent Cross where Capita billed £4.94 million in fees for work on various elements of the Brent Cross redevelopment. Until August last year Capita were also responsible for project managing the new Thameslink station at Brent Cross. However, they were replaced by a company called Mace who also billed £1.38 million in professional fees. To be clear the Capita costs are just for their fees not for actually building anything. Last year  2020/21 Barnet spent £70.8 million on the Brent Cross project, up from the £45.5 million spent in 2019/20.

Credit: Brentcrosstown.com

The last area is Special Projects of which there have been many over the years. These are individual projects that have been commissioned by Barnet and on which Capita have an automatic right to operate without the need for a competitive tender. In the past I have been told that the day rates are competitive with other external companies but the issue here is not just the day rate but just how many days are billed. 

One of the largest special projects this year includes £2.28 million on the Hendon Hub where
Capita provide professional services for the development and submission of planning applications and the Final Business Case. That is an awful lot of time for a project that isn't even built yet and there are likely to be additional charges and the work continues in this current financial year. They also billed £37,639 for "Heritage Advice" on the scheme.

In addition we paid:

• £710,247 for "ICT Technical Resources"
• £631,134 for assistance in helping to increase the SEN classroom capacity
• £528,488 for "IS work packages"
• £270,621 for staff to help with the "Customer Transformation Programme" 
• £225,610 for schools modernisation work
• £207,159 for desktop computer refresh
• £162,871 for the decommissioning of North London Business Park offices, the offices that should have been vacated 5 years earlier.
• £100,256 for a study looking at increasing building capacity under Covid-19 regulations
• £90,608 for work on the lease surrender and decommissioning IT equipment out of Barnet House 
• £86,544 for temporary staff to help in anticipation of an increased demand for renewal of the garden waste (Green Bin) stickers as well as £22,534 for staff help for the start up in March 2020 but billed this financial year.
• £78,926 for fire risk assessments.

There were lots of other project although a few that caught my eye including:

• Capita were paid £12,078 to identify a new libraries system and guess whose system they chose.... Capita Libraries - who else! At the same time they were  billing £106,670 for the hardware upgrade or replacement of Bibliotheca equipment across the libraries estate, to support Windows 10 operating system. Windows 7 is no longer supported by Microsoft, so an update is required, which will include other solutions, such as  self-check kiosks, Open+ self-service and CCTV video. 
• Capita were paid a modest sum of £8,740 for a project known as the trickle transfers. This project involves the potential of transfer of around 300 council homes to Opendoor Homes (ODH), which will take over ownership/management in return for a capital receipt and income stream to the council. Instead of paying council rent at the lower level, new tenants will pay a higher social or affordable rent. The homes will only transfer when they are empty. The issue here is not that Capita were paid just under £9k but that they are working on a project to reduce the number of council homes available. I understand that the council policy long term is to transfer over as many council homes as possible as they become vacant to this higher rental level reducing affordability to the most vulnerable.

To all of this you may say "So What?" My concern is the lack of transparency about so much of the goings on in Barnet, something they have been making even more difficult as the years go by. We are gagged at meetings, and the amount of information they used to produce has been reduced. For example, Barnet used to produce a quarterly, one page summary of the benefits the Capita contract had generated (Benefits Realisation). When I started asking questions about the numbers, Barnet's response was to stop publishing it. I used to analyse the senior council staff salaries from data they published. One day they just stopped publishing it. I never published staff member names even though it was available only ever their title. Now we haven't a clue other than for the top handful of staff. Even worse they removed years of historical salary data that had already been published.  

I do this because someone has to try and hold the council to account!

The Ladder of Citizen Participation in Barnet - More Snakes Than Ladders.

 Tomorrow there is a Community Leadership & Libraries Committee meeting where one of the agenda items is all about resident participation. The main thrust of this is about getting Barnet residents to do more for themselves but they also talk about greater engagement and participation and include a section about informing and consulting with residents.

There is quite an academic tone to the paper referencing the ‘Ladder of Citizen Participation’ "first modelled by Sherry Arnstein in a US planning journal in 1969" as the report says.

From my perspective we are definitely stuck on the lower rungs of tokenism and that is where we will remain unless there is a change of administration or we encounter more snakes and slip further back down the ladder as the urge to suppress discussion gets worse.

Over the last ten years we have seen many backward steps in resident participation.

• No longer allowed to address (speak at) a committee. Originally you could ask to address the committee for up to 5 minutes and committee members had the opportunity to ask questions of the speaker to get more insight into the issue. This was then reduced to three minutes, then the right to speak was removed entirely.

• Not allowed to ask more than one question on an agenda item, no more than 100 words, and if more than two people want to ask a question about the same agenda item only the first two questions are taken and all others are rejected. 

The excuse given was that people were asking too many questions even though the time for questions and speeches was limited to no more than 30 minutes. Some agenda items especially those dealing with budget and finance may be accompanied by up to 12 additional reports running to several hundred pages. Irrespective of the length of report or topics covered, one agenda item, one question is the limit.

• Restrictions on asking questions at residents forums. Pre 2010 residents forums used to be held up to 10 times a year, you could submit questions on the evening and there was a dialogue about the items. Now forums are just 4 times per year, you have to submit your question a week in advance and you can only speak for three minutes which is rigorously enforced. One councillor, John Marshall, disrespectfully labelled people who wanted to speak for four, five, six or seven minutes as "village bores". 

The report identifies the need to "reinvigorate" residents forums but what I find so galling is that exactly the same message was given 10 years ago in a detailed paper which you can read here. Set out below is an extract from that research paper:

The research asked what would encourage residents to get involved, the most common themes were:

• Topics needed to be of specific interest and relating to their local area;
• The Council should demonstrate they are taking action and feeding back what was happening as a result;
• Engagement should be better publicised through a variety of methods.

As a result, their principal requirements for an attractive engagement model was that visible action resulted on the night from those with authority, which was then fed back. The system should also be more widely publicised, and there were a number of suggestions on how this be done including greater use of electronic communications. There were also suggestions that the council should make greater use of Barnet online and the web to understand the issues that were causing residents most concern within different areas.

In terms of format some participants said they did not like the top table format and would prefer the meetings to be more informal, with table discussions, mixing residents, councillors and officers on each table.

There were some requests for all local issues, including other public services, to be covered, and for meetings to allocate a small budget, but this was by no means universal.

The research paper also identified barriers to people attending residents forums which included:

• Lack of action as a result of what is raised or discussed was the main deterrent to getting involved in the future
• Lack of feedback and explanation of the process was also seen as a key deterrent
• Lack of time was also a barrier to getting involved
• Inconvenient time/day - some participants felt if the engagement foras were held at inconvenient times this was a particular barrier to some residents. Reference was made in particular to mothers with children who would find it difficult to attend in the evening due to childcare
• Inconvenient location – if the event was in held at an inconvenient location and not in participant’s local area
• Confidentiality - was also mentioned as a barrier to raising issues in face to face foras. Particular reference was made to raising anti social behaviour issues about neighbours.

At the time, I thought the officer responsible had done a good job in identifying the problems and therefore their recommendations would be accepted. But no. This is Barnet and of course they ignored the findings and made it even more difficult to ask questions by banning a range of issues that could be raised. No surprise when people stopped going. 

Now they say they have a problem with engagement and want to 'reinvigorate' the forums. Ten years, no lessons learned, no one looking back to research carried out previously, same councillors doing their utmost to supress, ignore and discourage resident engagement. No wonder people are disengaged.

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.