Tuesday 15 September 2015

Capita's Money Making Machine - It's Called Barnet Council

Over the next few weeks I will be publishing a series of blogs which relate to the two massive contracts which Capita have with Barnet Council, the CSG and Re contracts. It has taken some time to compile the data and is taken from many Capita invoices that I requested as part of the inspection of the accounts in June. The reason for inspecting all of Capita's invoices is because I remain unconvinced that the appointment of Capita is actually saving any money overall. They may be making savings on the core contracts but they charge for everything extra with dozens of special project which all attract additional payments. Overall in 2014/15 we paid Capita £51 million and £126 million since the contract started so I believe this deserves much greater scrutiny.

I preface my comments by noting that I was warned not once but twice, in writing, by Barnet Council that I risked committing a criminal offence for passing on, blogging or communicating in any form any of the information I discovered other than to the auditor, Grant Thornton, or the Police.  Surely in a 21st century open democracy this type of information should be available to everyone without any threats of prosecution. I read the legislation and in the absence of any clear evidence to support these assertions I asked where such offences existed in the legislation. Surprise, surprise Barnet said they had made a mistake! Time will tell on that front.

Today I will start with the Comensura contract. Comensura were appointed back in 2012 to act as a broker who coordinates the supply of agency and interim staff. They don't directly supply any staff themselves but provide one point of contact for Barnet with a range of staff agencies. In theory they are supposed to save the council money but over the last three years the cost of the Comensura contract has risen inexorably. In 2012 the average monthly cost of the contract was just over £1 million a month. In the first three months of 2015/16 it has hit £1.6 million a month and in July alone it was £2.3 million.  Now there may be very good reasons why we are having to use so many interim and agency staff, two thirds of which are in the Adults and Children's department but Barnet have been talking about reducing this cost for the last two years and have so far failed miserably. Based on my calculations and the current run rate, Barnet will pay Comensura around £20 million this year.

So, you may ask, what has this got to do with Capita. When Capita negotiated the CSG contract they included a Gainshare clause which means they get a share of any savings they make on contract negotiations. Although the percentage they receive is confidential by my reckoning it is 40% and so far I estimate they have been paid around £750,000 on this single contract. This contract was due to expire in October but because the procurement function ( run by Capita) have not started the tendering process and they don't want to be rushed,  the contract will be extended for another 12 months. If Capita continue to receive gainshare at the same level I estimate they will receive another £750,000 in gainshare payments over the next 12 months.

I would also point out that there are a number of people taking their cut on the agency staff contract in between what the staff get paid and what Barnet Council pays. The contract was originally let through a framework agreement from the Eastern Shires Purchasing Organisation (ESPO). They charge a small levy on every contracted hour purchased to cover their costs. The staff agency takes their cut on the staff supplied, Comensura take their cut of all the staff supplied and finally Capita get their gainshare payment. So four different organisations are taking their cut on this contract.

Some people may say that if Capita are getting 40% we are saving 60%. I would suggest that any contract that is so generous for one contract discussion should itself be renegotiated. It also make me wonder what on earth the Barnet commercial team were up to before Capita were appointed that allowed such poor contracts to be agreed - oh yes they were all too busy working on the Capita contract. I raised all my concerns  on the Comensura  contract at the recent Policy & Resources committee and although treated politely and courteously by Richard Cornelius the committee still voted to extend the Comensura contract for another year. Looks like another good year for Capita - unless they tell me otherwise?