Inspection of the accounts - What we pay to Capita.

I don't know about you but I was keen to see the details of the £83.2 million Barnet Council have paid to Capita in the last year, especially as the contract value for 2019/20 was just £39.7 million.  

I have found issues in the past and feel it is my civic duty to at least provide a modicum of scrutiny to the huge amount we pay Capita.  I used to be able to attend committee meetings and ask detailed questions about the contract, but Barnet hated that, so  they introduced the gagging rules stopping that level of public scrutiny. Luckily, every Barnet resident has the right in law to inspect the accounts and that is what I have just completed, checking 421 Capita invoices. It presents some interesting data.

Contract Fee:

We paid £24.2 million on the Capita CSG contract and £20.3 million on the Capita Re contract for the basic fee.  What isn't made clear, when some councillors talk about savings with the Capita  contract, is that this figure excludes an inflation element which is billed separately under the heading of indexation. Last year this amounted to an additional £3.44 million. I would love to have a contract that gave me an automatic uplift for inflation each year and I can't think of a single council department where that inflation proof guarantee since 2013 is in place.

Gainshare:

We are still paying out on the gainshare clause whereby Capita get a share of any savings. They don't get gainshare on any procurement now, thanks to my persistent campaign showing that we were being ripped off by a poorly worded contract. However, last year Capita received £109,198 on printing gainshare and just over £100,000 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. They received £180,421.92 gainshare for exceeding the council tax collection target on the basis that if they collect more than 98.5% of council tax  revenues Capita receive 50% in gainshare.  They also received £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.  

In total, gainshare amounted to £837,218.66 last year, which I would suggest is money that Barnet desperately needs and should have been retained by the council. Capita supporters say it is essential to incentivise a company to gather this extra revenue, but I doubt the front line staff who do the actual chasing get a share of that gainshare. Barnet used to publish a schedule of how much gainshare had been paid to Capita (Benefits Realisation Schedule) but as with so much else in Barnet, they no longer publish it, possibly because it paints a very different picture of the contract performance.

Out of Hours Service:

Last year we paid Capita  £86,031 to answer the phone out of hours. We pay £1,200 per month as a fixed fee,  which guarantees 80% of call will be answered within 40 seconds, and then between £5.86 and £7.58 per call answered. We also pay and additonal charge if they have to escalate matters with an outbound call. According to Capita's website "'Response out of hours’ is a nationally shared out of hours customer service partnership, delivered by Ealing Borough Council and Capita. Public sector bodies such as local authorities, housing associations and health service providers can join the partnership, wherever they are in the UK, to access a large pool of highly skilled and experienced customer service agents, to deliver their out of hours customer service requirements". It does make me wonder if it might be a bit cheaper if we got together with some of our neighbouring London Boroughs and did this ourselves.

DBS Checks:

Last year we paid Capita £152,972.60 for DBS checks. Nobody is doubting the need for DBS checks, but this seems like a large number of checks and makes me wonder if this is driven by the large number  and churn of agency staff.

Other Items:

The are lots of other costs such as the £1 million paid to Capita for Office 365 licences, £463,628 for mailroom & photocopying, £1.96 million for pension deficit payments and £683,500  for TUPE payments. This again highlights that the savings talked about in headlines are quickly eroded by so many top up charges that are never discussed. We also had to pay back to Capita £801,775 which was money recovered through the proceeds of crime act. When the massive fraud happened within Capita Re with one member of staff stealing over £2 million, Capita had to refund all the money stolen. As money has been recovered and returned to Barnet, we have to refund it to Capita, so in this case not an actual cost to Barnet.  However, the other big cost area is Special Projects which I have detailed below:

Special Projects:

Capita have carried out a variety of special projects with a value of around £8.39 million including:

• £503,441 for the Corporate Transformation Programme (yes I wondered what that was as well);
• £286,458 for Customer Transformation Programme to deliver "improved and additional digital online transaction function to deliver a better service"
• £256,985 to "provide an impact assessment of all relevant and appropriate IT infrastructure for the introduction of the new office and subsequent closing of NLBP B4"
• £270,457 to provide support to the LBB;
• £357,787 to prepare a business case for development opportunities under the One Public Estate  (OPE) programme.

The Capita Re contract it is structured differently so they simply bill for work requested.  So in addition to the £8.39 million they have  also billed £659,523 on the new Council Offices in Colindale, £1.065 million on the Local Implementation Plan (LIP), £132,000 for Enhanced Advice and Adaption Services £436,930 for work on the Upper & Lower Fosters regeneration project, to name but a few. 

However, the biggest source of billing for Capita is for work on the different elements of Brent Cross project including the new waste transfer station, the new Thameslink station and the Brent Cross South regeneration. In total these Brent Cross projects clocked up £14.1 million of charges from Capita.

Brent Cross is a massive regeneration project and it has become a major source of income for Capita. I will be writing a follow up blog on Brent Cross in the next few days which I would urge you to read as the consequences of this project could be exceptionally serious.

In summary, when councillors tell you about all the money that the Capita contract is saving ask them about all the extra charges, and whether they have factored these into their claims. It is a bit like the £350 million pounds a week sign on the big red bus. It makes great headlines but dig a bit deeper and you know it simply isn't true.

Why Capita's Contract is a rip off for Barnet - Day Four Extra Charges

Over the past few days I have been looking at the gainshare payments. Today I am looking at the extra charges Capita have billed on the Barnet contract.

The first example is a bill for £128,000 for additional electronic data storage. Barnet agreed to pay this amount, set by Capita, "because the electronic storage levels are above the amount agreed in the contract". Now I may be wrong but that sound a great deal given that it is on top of an agreed level in the contract. I would welcome input from any IT experts out there but my own bit of digging suggests that is quite a lot. While I am no fan of Amazon whatsoever I know that their Amazon Web Services (AWS) is a huge and profitable part of their business. I took a look at some of the data rates for storage, both simple data storage and a more flexible file management system and the rates are below.

Now the reason I looked at AWS rates is because that is who Capita are using to store some of Barnet's data on the OpenBarnet data portal. It may be that we are using a huge amount of data storage but remember this is in addition to the storage levels agreed in the contract. That says to me that somebody either horribly underestimated how much data we would be using in the contract or we are being ripped off. Either way we are paying through the nose for it.

The second example is a bill for £247,000 for additional call volumes above the baseline figure. Now when the contract was signed everybody talked about 'channel shift', getting people to use on-line means of contacting the council such as webforms rather than by phone as this would save money.
It may be that the council set over-ambitious targets for the decline in phone calls but then wasn't Capita responsible for implementing 'channel shift'? To help channel shift along  and to cut costs, Capita have introduced something called the 'Virtual Agent' which is the automated telephone service that I am sure many residents have experienced. Because it is automated it shouldn't cost more to run (in terms of additional call centre staff). However, my experience of the automated system is that because it is very difficult to get put through to the right department first time, you end up ringing in multiple times.  However, what I did was look at the performance stats published by Barnet comparing the most recent data with the year 2014/15. Barnet haven't published telephony data for Q4 of 2017/18 yet, so I used Q4 2016/17 to give a complete year of four consecutive quarters.

What that data tells me is that call volumes haven't risen over the last three years but the use of the Virtual Agent has as can be seen in the table below:

So how come Capita want an extra £247,000 for providing a service where call volumes are pretty static but they have reduced the calls answered by an operator by more than a third, saving a fortune in call centre staff . I simply don't see how this charge can be justified.

The third example relates to a bill for £692,759 for dilapidations to North London Business Park Building 4 (NLBP4). Originally the plan was to employ Capita who would use their offices in Coventry, Belfast, Blackburn, Darlington and so on, to house services and we could then trigger the break clause to vacate NLBP4 in late 2015. A good idea in theory but one that didn't happen. LBB staff were moved out and consolidated into Barnet House and NLBP2 but the Capita staff remain located in NLBP4. My thought was, no problem but Capita must be footing the bill. Well actually no they aren't, we are and hence we have been stung with a bill for dilapidations on NLBP4 for nearly £700k.

These three examples alone amount to more than £1 million being paid to Capita which could have been used to provide vital services such as 40+ care staff or refuse/street cleaning staff. I know where I would prefer that money to go.

The Conservatives keep saying how much outsourcing is saving but the evidence is clear that while we are making savings on the core contract, all the extras, all the gainshare, all those special projects at consultancy rates mean that by my reckoning we aren't saving anything especially when you include the millions of pounds making so many council staff redundant, the huge investment we funded in IT and the £11 million of consultants and lawyers fees to get us to a signed contract.

Tomorrow, Councillors will be looking at which services to bring back in house. Unless they have all the information about all these extras, how can they make a properly considered decision? Sadly I suspect the decision has already been made and any opposition will simply be out voted.