Tuesday 27 November 2018

Will the £4m cheque buy Capita another 5 years?

Updated below in Red
Urgency Committee meetings are designed to pick up urgent matters that can't wait to be dealt with at other scheduled meeting. This meeting popped up in the calender last week and will be held this Friday morning at 8.30 am with the single issue of whether the Leader should authorise the acceptance of a £4.12 million cheque.  In most cases people would be cheering at getting a welcome cash injection just before year end. In this case it is what the payment is for that is most troubling.
The report is titled 'Commercial Settlement of Historic Issues' a rather startling title and I think not as intended. I think the intention was to discuss previous (historical) issues but they may have been historic as well in so far as they will be remembered for many years as one of the most disastrous deals ever done in Barnet.

This report provides an overview of the £4.12m cash settlement payment to the Council negotiated between Capita and the Council to resolve historical commercial issues related to the CSG (NSCSO) and Re (DRS) contracts.
The key items that form this proposed commercial settlement are:
  • Mosaic (the Adults Social care system) – new IT system implementation that experienced issues with timeliness and quality of delivery;
  • Development pipeline – delays in delivering housing on council land;
  • Increased monitoring associated with financial controls – to cover cost of Grant Thornton and additional council resources (in addition to first payment made in September 2018);
  • Procurement gainshare – settling of respective claims; and
  • Miscellaneous items – estates compliance (related to 2013 to 2016); and KPI failures related to the Re contract.
In theory this may look attractive  but a further analysis of the problems suggest that Capita are getting off lightly. The Mosaic Case management systems has been an unmitigated failure and in July the council identified that it would cost £4.2 million and a new supplier to sort it out. The fraud and consequent Grant Thornton Report has not only cost a fortune but taken up huge amounts of senior officer time to try and sort of the mess and to implement control procedures that Capita should have put in place 5 years ago. The gainshare rip off is nothing short of a scandal and deserves much greater scrutiny and the KPI failures are numerous and serious.

So the payment is welcome if somewhat low compared to the actual costs Barnet has been subject to. However the sting in the tail is that paying this £4.12m allows Capita to sidestep their procurement savings guarantees of £30.17 million over the next 5 years. The argument is that we will now receive 100% of the savings. Given that most of the savings have already been squeezed out of the procurement budget, the risk now is that we receive 100% of not very much instead of a guaranteed £30 million.

My really big concern is that this has been pushed through as an urgency item to forestall any decision about Capita's future services to be discussed at the Policy & Resources Committee on 11 December. We have already seen that we are not going to get the agreed full business cases on which services to bring back in house. This cheque has the potential to render the meeting on 11 December entirely redundant other than as a talking shop.

I will blog more about this after the meeting  on Friday but below are the questions I have submitted.
  1. Please can you provide the notional allocation of the £4.12 million attributed to each of the 5 items set out at 1.1 (a)-(e)
  2. Given that at the July Policy & Resources Committee the report noted that the costs of resolving the problems with the Mosaic system were £4.2 million and that there “are differences in views on who should pay for the £4.2m costs” can you clarify whose views have prevailed in this settlement and how much of the £4.2 million Capita are paying?
  3. The report notes that the payment of £4.12 million removes the liability for Capita to deliver net guaranteed procurement savings which amount to £30.17 million over the last 5 years of the contract. What impact does this have on the overall guaranteed savings of £126 million over the lifetime of the CSG contract and what are the risks of these savings not being delivered?
  4. In the financial  year 2019/20 will Capita receive £356,000 under the Agreed Procurement Price Recovery (APPR) mechanism as set out at 41.27 of Schedule 4 Price Payment Mechanism?
  5. Given that Capita will no longer receive any gainshare on this contract and APPR would have ceased after 2019/20 anyway, what incentives are there for Capita to fully resource the procurement function?
  6. Given that Capita have commenced formal redundancy consultations to cut 72% of their Corporate Programmes Team working on the Barnet contract, what reassurances have been provided by Capita that they will not cut the number of staff in their procurement team down to the bare minimum and /or move out the most talented staff to other contracts where they do receive a gainshare?
  7. Can you clarify if, by signing this agreement, it precludes the procurement team from being TUPE’d across to Barnet before the end of the contract?
  8. The report notes that no gainshare has been paid in 2018. However, advance claims were made and paid in 2016/17 for the entire three years of a contract which include 2018/19. Will those advance payments be recovered and if so what proportion of the £4.12 million do they represent?
  9. Can you clarify how much of the net guaranteed procurements savings were actually delivered in 2017/18 and, before this settlement is agreed, can you provide evidence that any shortfall in historical guaranteed procurement savings have been met?
  10. The report notes that procurement gainshare payments to Capita in 2017/18 were approximately £2 million. Can you clarify how that sum is broken down given that the Capita invoices suggest that the sum was  £1,665,543.26 and that of that sum, £534,000 was paid at the rate of 100% to Capita under the APPR mechanism (i.e. Capita received 100% of the savings and none was shared with LBB).
  11. Can you clarify if, by accepting this payment, this automatically guarantees that Capita will continue to provide the procurement function until the end of the contract irrespective of what the Business Case being presented to P&R in December finds?
  12. Does the payment of this sum guarantee that Capita will continue to provide any other services for the remaining 5 years of the contract irrespective of what the Business Case being presented to P&R in December finds and if so what are they?
  13. Does the offer of £4.12 million from Capita crystallizes an acknowledgement of financial loss exceeding £500,000 and  by accepting this payment does this preclude Barnet from invoking Step In Rights as set out at 21.1.1 in the contract?
UPDATE: 1 December 2018
I attended and spoke at the committee meeting yesterday. You can listen to what was discussed here and clicking on the sound bar. My appeal to the Councillors was not to refuse the payment but, at this stage, to defer the decision until the Policy & Resources Committee on the 11 December when more councillors would be able to scrutinise this decision and for more information to be provided to inform that decision.  Given that the payment from Capita will not go through until January anyway, deferring this decision by 11 days would have had no impact of the timing of the payment. It would have also allowed this to be discussed alongside the review of the Capita contract so the two items, which are inextricably linked, could be dealt with together. As is the way in Barnet, two councillors, Richard Cornelius and Dan Thomas, made the decision to press ahead, out-voting Barry Rawlings who was in favour of deferring the decision.

One thing that did come out during the course of the meeting is whether these savings are real or not. Because of the way the contract is written with a baseline for costs being set in 2012, it appears that any savings that are made at any time during the 10 years of the contract trigger a gainshare payment for the remaining duration of the contract, even if Capita had little or no involvement in the process. This is what I have always suspected but this seemed to be clarified in the responses and discussion to my supplementary questions. I have blogged about the one sided and anomalous gainshare process many time especially where contracts are let by council consortia. One such contract is the highways contract - LOHAC which is a London Highways Alliance and TfL joint initiative - you can read about it here. In the last two years Capita have claimed £1 million in gainshare on this contract. Part of the deal offered means that they can no longer claim gainshare on any procurement - which is a good thing. What it does do is make a complete nonsense of the often repeated statement that Capita is saving us £1 million a month. Over the period of the contract Capita claimed to save Barnet a net £47 million on procurement.  This meeting highlights that these savings are nothing more than smoke and mirrors and would have been saved anyway with or without Capita as part of the normal council procurement process. 

As such I can start to see why this might be a better deal for Barnet than sticking with the original contract - BUT it fundamentally undermines the rationale for outsourcing in the first place. In which case the best option would be to take the money and sack Capita. The problem is that by taking the money I suspect it makes it much harder to sack them. Cllr Thomas also made the bizarre comment that it was good that we had outsourced because when the contractor fails we can claim compensation unlike in house teams. The issue is if you outsource contracts you don't expect them to go wrong and getting Capita to constantly pay up for failure just means we have a failing service.  

Time will tell what happens but given the tactics employed yesterday I have no confidence that we will see a fair and balanced business case appraisal on 11 December. 

My speech to the committee is below:

"The question is “does this deal represent good value for money. The council’s legal advisors say it represents “good value” but there’s not a single piece of evidence to support that statement. This 5 page report contains no detail, no risk assessment, no analysis of how the sum has been calculated, yet you are being asked to make a decision which could have major financial consequences over the next 5 years. This sum doesn’t cover the cost of fixing the Mosaic system. We still don’t know what the final bill will be for all the additional management time and control systems to address the fraud let alone the total cost of the Grant Thornton report. We’ve paid just shy of £8 million in gainshare on alleged savings which may not have been cashable.
By accepting this offer you remove Capita’s liability to pay £30.17 million of net procurement savings. The contract was back end loaded with two thirds of the savings falling due in the last five years which they will now avoid. You may argue that by taking away the gainshare guarantee we get to keep 100% of the savings. The problem is that the level of savings look entirely unrealistic. The two largest alleged savings were on the Comensura and LOHAC contracts. Comensura has been replaced and LOHAC savings are currently subject to challenge with the external auditor. Some gainshares were only derived because officers had set an indicative budget too high. The risk is  Barnet receives 100% of not very much maybe  £1 -2 million a year at the most. This would leave us with a £20-25m shortfall against the guarantees. There’s no risk analysis, no forward procurement projections, no advice from external procurement experts. Approving this deal without those documents or advice would be nothing short of criminally reckless.

I urge you to defer this decision and deal with it at the Policy & Resources Committee on 11 December alongside the Capita business case review by which time officers can provide the level of detail a decision such as this deserves and allow greater scrutiny by more councillors. The payment is not scheduled till January so deferring the decision for two weeks will have no impact on when you receive the money. Making the decision now could cost the council at least £20 million. Think carefully, you will be held accountable".

Sunday 25 November 2018

Anger, Chaos & Conflict - Just Another Barnet Audit Committee

On Thursday evening we witnessed fracture lines opening between the old and new guard of Barnet Tories, a meeting that satisfied no one and yet again highlighted the terminal failings delivered to us by Capita.

With seven speakers and 68 public questions this was always going to be a lively meeting but I am not sure anyone had quite anticipated the frustration and annoyance that was expressed by members of the public. Each of the seven speakers gave their three minutes with little or no questioning. Even with so little feedback there was still only time for 3 of the 68 supplementary questions.

There were two main items on the agenda; the first was the review of the Grant Thornton (GT) report and second was a run through of the internal audit reports. Most of the audience were familiar with many of the issues in the GT report because it was discussed in October at the Financial Performance & Contracts Committee. However, the biggest revelation that emerged was that a number of the committee members had not been provided with an unredacted copy of the report. The public are used to being treated with contempt by the council, but for councillors and the two independent co-opted committee members who are being asked to review a serious financial investigation not to be given a full copy of the report is inexcusable. Cllr Alison Moore asked for unredacted copies of the report to be given to members immediately. Lots of rumblings and patronising comments but it went to a vote.  Imagine the shock when new Tory Cllr Alex Prager voted with Labour and Cllr Laithe Jajeh abstained and the motion was carried. These two young councillors will need to be taken more seriously. Cllr Prager is an accountant and Cllr Jajeh is, I believe, a lawyer. They have the potential to bring a different perspective to the committee. Time will tell if the whip is brought to bear on them or if we will see a bit more independent thought from the Tories.

There were reports from the S151 officer, the assurance director and the GT staff. The one group unrepresented on the night were Capita, the company who were in charge of both the regeneration team where the fraud occurred and finance team whose lack of suitable controls allowed 62 separate fraudulent transactions to go unnoticed. The Internal audit function failed to identify this problem and agreed that they would have to put more resources into this area. Yet just a couple of years ago I challenged both Internal Audit and the Corporate Anti Fraud Team about the number of days allocated to reviewing the CSG and Re contracts but as always my concerns were ignored.

The reports were noted and the S151 Officer and his team went through all the systems they have now implemented to ensure this doesn't happen again. At one point Cllr Kathy Levine made the comment that if we (the council) are doing all this work for them (Capita), why don't we just do the job ourselves. She makes a perfectly valid point. We are paying Capita ,who do a lousy job and then sort out the mess that ensues. Cut out Capita and just bring the service back in house.

A vote on the report was deferred till the end of the meeting when Cllrs went into private session to read and discuss the freshly printed, unredacted, GT report. We don't know what was said or what they agreed so no transparency there then.

They then moved onto internal audit findings. Now I suspect that many of the committee members had not read the full report as it was buried away; a hyperlink in the summary report leads to other hyperlinks which eventually take you to the report. I have mapped out the click trail below:

The report gave no assurance, the lowest possible rating to the Temporary & Interim workforce service, a contract which is managed by Capita and for which they have claimed several million pounds in gainshare. It is a shocking report which you can read here.  Examples include:

On DBS Checks:
"Four individuals (2 x Passenger Transport Escort - Level 2 and 2 x Passenger Transport Driver) indicated that they would normally be required to have DBS clearance due to the nature of their roles and contact with vulnerable residents. We looked at the compliance tab within the agency staff system for each of these individuals but none had details of DBS clearance in place,"  and
"The supplier is supposed to audit suppliers regularly (six monthly for all agencies, three monthly for social care agencies) to assess compliance with statutory requirements in areas including immigration status, DBS checks and IR35. The six-monthly audits are supposed to be reported on to Barnet, but the three-monthly ones are only reported if requested. Only one audit report has been produced since the inception of the current contract, which was sent by the supplier to the Council in February 2017."
The risk identified was as follows: "If agency staff are not subject to the relevant vetting for their post, there is a risk that inappropriate appointments will be made, leading to financial loss, increased safeguarding risks and/or reputational damage for the council."

On Monitoring:
"18 (individuals) had their assignments extended beyond the initial assignment length. We looked at the records of approvals within the workflow inbox and requested supporting evidence from the supplier for the most recent assignment extensions for these individuals (all dating from after September 2017) and were not able to verify that the required permissions had been obtained for these extensions in line with the agreed workflow for extension approvals for 17 of the 18 extensions (94%)."
The risk identified was as follows: "If the Council does not have an overview of the length of service of agency staff, there is a risk of financial loss to the Council where a permanent post would be more appropriate, or where agency staff gain additional employment rights through length of service".

On Value for Money:
"The historic savings percentage quoted in the contract is used to estimate savings to arrive at the quarterly amount to be paid to CSG. It is not clear why the historic savings percentage is being used as the basis for the CSG gain share calculation, when the contract says that actual savings should be calculated and costs rebaselined annually. The text within the contract where the savings percentage has been drawn from is explicitly flagged as an illustration of past savings performance, rather than as a rate setting exercise. As such, it is likely that the CSG gain share calculations to date for this contract have not been accurate if the historic savings percentage has been used as the assumed savings amount"
The risk identified was as follows: "If cost savings and agency staff numbers are not accurately reported, the Council may not be able to understand whether or not the contract with the supplier offers value for money."

Personally, I find all these matters shocking especially as some of them were flagged up in 2014 and again in 2015. The response from the council is "we are changing the agency contract". What they failed to acknowledge is poor contract management, that is carried out by Capita and I see no prospect of their service improving. Worse, I see the Audit committee who have a responsibility for risk management failing to take any actions which would see the situation improve.

On 11 December we are scheduled to have a Policy & Resources Committee which will discuss the business case of which Capita services will be brought back in house. We know that this includes the Finance function excluding transaction services which will remain in Darlington and Strategic HR. I think that will be the totality of services. I also have a very worrying suspicion that the deal done by Capita to pay Barnet £4.12 million to resolve "historic (sic) commercial issues" is aimed at heading off any other services being brought back in house.

Monday 19 November 2018

Will a Confluence of Events Lead to a Crisis in Barnet

In the last couple of weeks a number of separate and different policy decisions have emerged. Each one on its own is bad but not overwhelming. However, as all these different problems come together in the next four weeks, this confluence of events risks leading to a political crisis in Barnet,the likes of which we have not seen in some years.  Set out below are just six of those issues.

The Grant Thornton Report
The Grant Thornton report into the £2 million fraud was published back in September but with a large part of one annex heavily redacted. This annex dealt with contractual breaches by Capita.
Next week is the Audit Committee at which this report is due to be discussed. I and other bloggers in Barnet have already highlighted the massive failure of systems that allowed this to happen. I blogged about it here, Broken Barnet blogged about it here and the Barnet Eye blogged about it here. Grant Thornton have pulled no punches about the causes of the problems and all roads lead back to Capita. There was an expectation that the report elements that were previously redacted would be made public so we could have a full and frank review, especially around the contract breaches. The report lists a summary of the contract breaches and these are set out below.
Crucially, the evidence and observations is the part that is redacted. A well informed source suggested to me that the redactions weren't just to spare the blushes of Capita but to conceal criticism of the Conservative group and the way the contract has been managed. At this stage that is just speculation and will only be proven one way or the other when the report is published in full. The big issue here is that by concealing the evidence and observations, democracy is being stifled at a time when key decisions about these contracts are being decided. There are many calls for this to be made available and ultimately this may end up with the Information Commissioner's Office, one of a list of complaints they are dealing with in regard to Barnet, but this is no way to run a 21st century council.

Capita Contract 'Realignment'
Back in July officers set out a series of services where they felt there was scope to improve service performance, value for money and strategic control as set out below.
A business case report was commissioned unanimously by the Policy and Resources Committee in July and it was scheduled to come to the next Committee meeting on 11 December. Last week we also found out via a letter from the Council Chief Executive that the Capita Contract 'realignment' has now been shelved. Officers have had nearly 5 months to prepare this business case but it simply hasn't happened. As a result, all but two of the various services that even the Conservative group had agreed should be considered for insourcing will be left with Capita for the foreseeable future. I suspect that this committee will call into question the authority of the Chief Executive to ignore a unanimous committee decision. If it is claimed there have been insufficient resources to complete the study, then I will point out that they allocated a budget of £300,000 for this work so what has that been spent on?  I made the suggestion at the July committee that council officers were already busy and that in these circumstances they should bring in external consultants to help prepare the business case. Residents and, I'm sure, many councillors who were expecting this report will feel betrayed and let down by the council and I suspect this will end up in legal action.

Internal Audit Report
At the Audit Committee next week councillors will also be considering an internal audit report which is shockingly bad with a NO ASSURANCE rating. This documents the failure and mismanagement of the interim and agency staff contract, a contract managed by Capita and on which they have received millions of pounds in gainshare payments. This detailed report is buried away and not listed in the agenda papers. As is increasingly the case, the report can only be accessed via a hyperlink in the officer's summary report which then requires three further click throughs before you can actually read the report. If you want to read it, here is the direct link to the report.  Some of the problems identified in 2014 and again in 2015 are still happening in 2018 yet nothing changes. There is always the promise of an action plan to solve the problem but why after five years of failure is this never followed through. I will be blogging more about this in the coming days but it is a catalogue of indifference, complacency and refusal to take decisive action.

School Budget Cuts
I was contacted by several people last week about the consultation taking place in schools to cut their budget further.  Barnet's approach is that their own budget has been cut by Central Government so the Council will have to cut the schools' budget. You can read about the consultation here. It offers three options all of which are bad as follows:
  1. A proposal to fund some services, previously funded from the Education Services Grant, from the budget shares of maintained primary and secondary schools. The impact would amount to a cut of £32.37 per pupil
  2. A proposal to increase De-delegation from maintained school budgets in order to continue the school improvement (LNI) service in its current form. The impact would amount to a cut of £11.28 per Primary pupil, £5.83 per Secondary pupil
  3. A proposal to transfer 0.5% of the Schools Block to the High Needs Block. The impact varies by school but for example my local primary school Danegrove would see their budget cut by £25,490, the cost of a teaching assistant.
In response 30 Chairs/Vice Chairs of Governors at Barnet schools have written to Barnet Council showing their  concern at the situation they have been placed in, the lack of true consultation and the impact it will have on future budget cuts.You can read the response here.

Council Tax Support Cuts
We have also seen a consultation on the cuts to council tax support. This is the amount of discount people who are on benefits receive on their Council Tax bill. There may be an assumption that people on benefits get all their council tax paid but that has not been the case for a while. Barnet have used the introduction of Universal Credit to change the discount and rather than make the new scheme cost neutral, they have taken the opportunity to cut £3.2 million from the support budget. This means that if you earn just £10/month on top of your benefits you will have to pay 48% of your council tax. The full schedule is below. You can give your views on the consultation here. This is just going to push even more of the poorest 20,000 people in Barnet further into poverty.

Bin Collection Chaos
The final issue that has arisen is the change to the bin collection service. This seems to have been rushed through with very little consultation with the frontline staff who do the job. There have been changes to collections of refuse from flats above shops and as we know the food waste collections have been indefinitely suspended. The net result has been chaos, with many bins left uncollected. I understand that senior managers were warned that some of the rounds were simply too long to cover in a day and that the number of bins that had to be collected on each route was not known. This is unforgivable. You only have to look on Twitter to see numerous pictures of unemptied bins around the borough.

Political Crisis
So all this is coming together in the next four weeks and I get a sense that more and more ordinary, Barnet residents, those who are not engaged with social media, those who have no more than a passive interest in politics are starting to question the actions of the Conservative councillors. Brexit may be providing an immediate distraction but on a day to day basis all of these problems are now affecting many more residents. Coupled with the budget shortfall of £66.8 million over the next three years things are only going to get much worse.

I also get a sense that not all members of the Conservative party are happy, let alone thousands of residents who are feeling the impact. I get the impression that a gulf is starting to open up between the old guard politicians  and some of the new young Tory councillors.  The net result for Barnet residents is a badly run council, a weak leadership and poor management. That is good for no one especially the poor, school children, and anyone who believes in democracy. This council is falling apart and I doubt that is going to change any time soon.

Friday 9 November 2018

Capita realignment -The silence is deafening. Should we read something into that?

Back in July Barnet Council published a very significant paper which set out the details of the process for the "realignment" of the Capita contract. You can read the full details here. The basis for this review was driven by a number of issues identified with the contracts as follows:

"In relation to the CSG contract, these have included issues with: financial controls and reporting; pensions administration; estates; and user satisfaction with back office services. In relation to the Re contract, issues have been raised on financial controls and the operation of the Highways service. A number of these performance concerns were also highlighted in the contract reviews that were carried out in 2016 and 2017 of the CSG and Re contracts respectively".

The review considered which option could deliver three aims as follows: high quality services, value for money and strategic control and they framed this in three options as follows:

  • Option 1  - keep the Capita contracts as they are now; 
  • Option 2 - bring some services back in house; and
  • Option 3 - terminate the contracts and either insource or contract with a different organisation.
The initial conclusion was to go for Option 2  and the summary of reasons is set out below:

Option 2 would consider bringing the following services back in house.

At the meeting  and after some debate, it was agreed that consideration would also be given to bringing even more services in house by looking at Option 3 as well as Option 2.  At the meeting I also asked several questions including:

"Which firm of consultants will be used to carry out the business case" to which the response was "The full business case will be developed by council officers, taking external advice as appropriate". The other question I asked was "As part of the business case process will there be any public consultations or public evidence sessions" to which the response was a very succinct "Yes". I expressed my concern that council officers were already very busy dealing with day to day matters and that there was a risk that they simply wouldn't have time to prepare a business case. By contrast I was pleased that the council were taking the sensible approach to hold public consultation on the business case especially as this might at some stage be subject to legal action.

That was back in July. We are now in November and the business case report is due to be tabled at the Policy & Resources Committee in just over 4 weeks. Given that the report has to go through all the council review processes before it is published and it has to be published a week before the meeting,that means it should just about be finished. Yet we have not had any public consultation on this process, or been able to provide any public evidence. Once again we have been told an untruth.

As you will know I am not prepared to leave matters like this to lie unresolved so on 30 October I wrote to the Chief Executive and copied in to Cllr Cornelius asking when the consultation would take place. No reply, not even an acknowledgement. So on Tuesday I emailed them both again. Today is Friday and still no response.

You can draw one of two conclusions from this. The first is that they are simply ignoring me and do not want to engage in any form of dialogue - definitely a possibility. The alternative conclusion is that they they have no intention of opening up consultation because they have no intention delivering either option 2 or option 3 and they will now seek a fudge on the current contract.

If I hear back from either the Chief Executive or Cllr Cornelius on the consultation then I will of course blog about it. If I hear nothing then don't be surprised if, in 3 weeks time, we hear that, yet again, Barnet have fudged the options and most, if not all, the service are staying with Capita. 

I have reached a point where I no longer believe anything the Council tells me.

Saturday 3 November 2018

Ten Tips to Negotiate a Contract Break - Perhaps Barnet Councillors Should Read This

I saw this and thought Barnet Council might find it useful. My comments are in Red
Solicitor Robert Griffiths gives ten tips on negotiating your way out of troublesome contracts.
1. Read the contract thoroughly
Before you take any firm action, or start worrying about how to deal with a troublesome contract, the first thing you should do is read the contract thoroughly. By doing this you will make sure that you are properly prepared and appraised of the situation, and can be sure that you know your contractual position, all well in advance of contacting the other party.
If you are in any doubt as to the meaning or effect of any of the clauses in the contract, you should seek specialist advice from a solicitor as soon as possible.  
I would recommend Barnet employ a red hot contract lawyer as soon as possible - not members of the "magic circle" but a lawyer that has a real appetite to dig deep into this contract.
2. Consider all of your options
Before you decide to take any firm action, take stock. Ask yourself whether you are certain that you want to bring the contract to an end, and whether this is the only course of action open to you. If you are reacting impulsively as a result of falling sales or rising overheads, or have found a more profitable or better-value deal elsewhere, you may be able to talk to your customer/supplier and work out a way forward that suits both parties.
In Barnet's case they have been in discussions with Capita for at least 10 months and over that period the problems only seem to be getting worse. It may be that some services don't come back in-house and are instead shared with another local authority but the experience of  sharing legal services with Harrow has been expensive and problematic. There are a long list of councils that have brought contracted services back in-house and I would hope that officers have visited and talked to them to see how that process was managed.
3. Look at the termination clause
The contract may allow you to end the deal at any time, provided you give due notice. Before you do this, however, check whether you will have to make a penalty payment. Ideally, you will have agreed an exit clause with a minimal penalty. If not, the “fine” may be such that you are effectively locked into the contract. In these cases, it usually pays to be open with the other party and attempt to negotiate a better deal. 
I FOI'd the termination clause and had to go all the way to the ICO to get Barnet to reveal it.  You can read it here. It seems to me that the costs are not significant in comparison to what we are paying and the poor service we are receiving, although ideally we would not pay any penalty payments to Capita.
4. Look out for anniversaries or other key dates in the contract
These might enable you to leave the contract without penalty at certain times. Many contracts operate on a rolling yearly term, which is automatically renewed on the anniversary of the term and can usually be terminated without penalty at the anniversary. 

We missed opportunities to take advantage of the three year review but in less than 12 months the six year review is due at which time, if the contract has not been terminated, Barnet have the opportunity to change elements of the contract.
5. Cost your exit. What will you save by an early exit?
Don’t rush into serving notice or terminating the agreement until you have costed the implications of both leaving the contract and finding an alternative.

I hope the alternative solutions are being costed right now. If they haven't been then Officers have not been doing their jobs properly. We also need to make sure that we don't keep referring back to the baseline costs of 2012/13. The world has moved on, technology has improved and services have changed. We need detailed and thorough costings which are realistic and evidenced.
6. Look for a breach
Go through the contract to check that both parties have complied with their obligations. If the other party has performed poorly or failed to meet its obligations, you might be able to terminate the contract for a breach on its part.

There are so many occurrences which look like contract breach, the failure to provide reliable financial data, the failure to back up data for the library system, the failure of the pensions administration system, repeated payroll system failures, the failures to meet contractual commitments.
7. Misrepresentation?
You may be able to do the same if you have been the victim of misrepresentation – that is, you signed the contract on the basis of a written or verbal statement that turned out to be misleading or untrue. 

So many issues seem to be being raised where the spirit of the contract seems to have been breached but the letter of the contract has been followed. Is that misrepresentation?
8. Once you know your position – contact the other party and begin negotiations
The best course is almost always to try to negotiate a mutually beneficial and cordial end to the relationship that leaves open the possibility of working together again the future.

Hopefully that is what Barnet have been doing over the last 9 months - if it isn't then someone hasn't been doing their job.
9. Consider setting-off money you’re owed against what you owe
The law in this area is complex, but it may be possible to set sums off against each other where “the claim and cross claim are so closely connected that it would be manifestly unjust to enforce one without taking account of the other”.

I'm not sure how this applies in Barnet's case but certainly worth investigating
10. Be flexible
The chances are the other party will be feeling the pinch, too, and won’t want to lose your custom. They may respond to your concerns by amending prices, increasing quality or changing service provisions, or agreeing to a temporary variation in the contract until sales pick up again.
Frankly I don't care if Capita are feeling the pinch because Barnet residents are feeling the pinch much more and supporting Capita shareholders should not be the first priority.