Thursday 1 February 2018

Capita's problems or a one off opportunity for Barnet

Last night I attended Barnet's Audit committee. It was a catalogue of  Capita failures. Failures to meet the promises made 5 years ago when Barnet decided to appoint this company who promised to deliver services better and cheaper. Last night I said that the council needed to do something now and that doing nothing was not an option. I mused on this further and chatted with people who understand Barnet Council and why the Capita contract has delivered so poorly. The more I talked with them the more I saw Capita's failures in Barnet and their disastrous performance on the stock market as representing a one off window of opportunity for Barnet.

Yesterday I asked for Barnet councillors to start bringing key services such as finance and pensions back in house. Today I am asking for something more radical. We have a window of opportunity to think about how we design a local authority from scratch, a blank sheet of paper. Yes, the council clearly has to deliver a range of specific services but how they are delivered is up for grabs and what other services they provide is up for debate.

Prior to Capita taking over Barnet, there were established customs and practices, physical and organisational structures that restricted how change was implemented. Some aspects of the service were great; remember Barnet was rated a four star council. Other aspects were poor, often restricted by a lack of investment in good technology. We were told that Barnet could not afford to invest in technology and that is what Capita would deliver. Ironically, as soon as Capita were appointed Barnet found the money for investment and gave it to Capita. The services were outsourced but instead of coming up with a radical and bespoke organisational solution we simply transitioned to Capita's established customs and practices, Capita's physical and organisational structures. Is it any better? Well the evidence suggest it is no better at all and in many ways it is much worse. The recent Children's Commissioner's report criticised Barnet for its "Silo Structures" made worse by outsourcing. The report also said that Barnet was process heavy which slowed down decision making. In the review of the Capita joint venture, Re, the report noted, "Capita’s internal organisational structure (known as “the towers”) has been identified as a layer of complexity that potentially impacts on day to day service delivery".

My attention was drawn recently to how the cost of the commissioning function in the council has grown since the contracts with Capita were signed. Barnet are having to throw more and more resources in to managing the contract with highly paid "strategy staff". The commissioning budget has risen from £8 million to over £20 million in three years yet we still don't seem to have enough staff monitoring the contracts.

So can we start again from scratch; design an organisational structure that reflects Barnet's needs now but with the flexibility to adapt as the role of local authorities change and develop? We can develop a efficient structure that gives councillors and the public a clear joined up view of the council and how it is performing. That might mean some services are outsourced, typically those that are highly specialised and non-core to the running of the council. But they would be outsourced to market leading specialists rather than "we can do it all" suppliers like Capita.

I know some people will say we can't afford it but it is important to distinguish between capital and revenue. Borrowing to invest in services that will save money makes plenty of sense. Indeed Barnet are making many capital investments to save or generate revenue such as the new leisure centres.

It is clear to me that the Capita contract is not performing anyway near to the level we were promised. There are lots of extras we are being charged for. But most importantly Capita and the council do not share common goals. With the problems Capita are experiencing now, that goal divergence is likely to get worse, not better, as pressure increases to improve profitability of its remaining contracts.

The die hard defenders of outsourcing will trot out all the old phrases but my view is they are living with an outdated and broken model. We need fresh thinking and innovative ideas.

If I was leading a party into the forthcoming local elections I would be selling the opportunity to change the way the council is run, to get the best advice for a new and efficient model. A model that suits us, not a remote, corporate organisation going through its own massive restructuring exercise.

That means preparing a masterplan for the council with a phased withdrawal from the Capita contract. Indeed, as one of my fellow bloggers mentioned, Capita might be pleased to seek an exit from the JV contract, especially as it is struggling to deliver the promised returns. Bringing finance back as quickly as possible is essential because without control of finance any other plan will struggle. There will be lots of specific questions like, do we need to bring a call centre back to Barnet? There are plenty of organisations that could help set up a call centre quickly in Barnet staffed by people who are connected with the area, who know what services Barnet provide and have a connection with the area. There are lots of specific questions, but what is essential is to have a vision of what a great council looks like.

We have a window of opportunity. I just hope we have some councillors who have the courage to innovate and deliver something new, efficient, a new council that meets our needs not those of the suppliers.


  1. Am I wrong in thinking that there are no get-out clauses in the contracts with Capita? I remember reading that the contracts can be reviewed after 5 years but not cancelled for 10. doubt that councillors will do anything at all unless they feel that they will lose in the May election and even then the next Council may still be tied to Capita.

  2. Yes I am afraid you are wrong. Clause 43 of the contract allows for termination on six months notice at any time during the contract. I did ask about this before the contract was signed and the Commercial Director at the time kindly provided a response setting out the compensation to Capita on early termination:
    "It is possible to terminate the contract where no fault is attributed to the
    contractor. Such voluntary termination for the Council would result in
    payments to Capita for the following:
    1. Re-imbursement of “unamortised investment” (i.e. the value of
    investment made by the bidder which has not yet been paid for by the
    2. Repayment of any discount to the service fee that the Council has
    benefited from during the early years of the contract, but is yet to
    repay; and
    3. Payment for loss of profit to Capita. This is capped at £1.8m in the first
    3 years, £900k in the following 4 years, and £552k in the final 3 years."

    The termination clause is here at page 167
    the response to my question setting out the terms of a no fault early termination is here question 11 on page 4

    That is why I think it should be considered. Hope that helps.

  3. Can understand why both Capita n LBB do not want the the voting public to understand the simplicity of the contract get out clause by making it very complicated to gain the correct information. Well done for your persistance and thank you for sharing the information

  4. You are right. I get the impression that LBB do not want people to understand. They claim transparency but publishing thousands of pages without signposting is almost as good as keeping it secret. When I have got close to some of the really important numbers they claim commercial confidentiality. I will continue to battle for clarity because as Barnet residents we pay for this contract so surely we have a right to know.