Is Barnet Capable of Managing its Outsourced Contracts?

Next Tuesday is the Performance and Contract Management Committee meeting. Reading the 119 page Performance Monitoring Report it makes my heart sink at how poorly some of the contracts are being monitored and managed and how performance management seems to be a box ticking exercise. You can read the report here at agenda item 7.

I have submitted a series of questions on a number of agenda items set out below. It will be interesting to see the responses.

1. Can you explain why the Commissioning Group budget has risen from £20.2 m in 2016/17 to £35 million in 2017/18?
2. On page 42 risk AC028 identifies the lack of a fully functioning case management system. Who is responsible for managing and maintaining this system and how confident are you that the draft plan to implement remedial works is actually working?
3. On page 44 reference is made to Barnet’s Children’s Commissioner and her report of January 2018. At 4.23.3 of her report she made specific reference to the role of the PCM Committee, raising a question over whether that Committee has the capacity or capability to scrutinise and monitor complex children’s services effectively. Why was this not highlighted in the papers for this meeting and how are you going to actually address this serious concern?
4. The Children’s Commissioner also noted that there is a culture in Barnet of over optimistic and over reassuring reporting to members. How confident are you that the reports you are receiving in these papers are not over optimistic and over reassuring and what steps are you taking to ensure that culture is changed?
5. At page 94 there is a report regarding the performance of Cambridge Education. As part of this contract, school meals were subcontracted to ISS. School meals was a profit centre generating £240,000 of profit before it was outsourced and the business case identified it as a major source of additional income generated outside the borough to support the business case. Why is there no information on the financial performance of the ISS subcontract and will you provide an update of ISS’s current financial and operational performance?
6. At page 97 it notes that there will be an additional charge for Revs & Bens work from DWP. In 2016/17 Capita charged £330,000 for additional Revs & Bens work plus £98,000 for face to face support. How much is Capita likely to charge in 2017/18?
7. At page 99 the reports states that there is a rebate from Comensura and administration charges to other services, totalling £1.986m. Please can you clarify how this rebate from Comensura is calculated, and what proportion of the £1.986m it represents?
8. One of the CSG contract variations identified in Table 12 is for £1,004,038 for dilapidations to NLBP Building 4 “to increase the funds to cover cost until October 2018”. Given that Barnet should have existed NLBP 4 in October 2015 why are we still paying into a dilapidations fund and why are we paying it to Capita, not the building freeholder?
9. At Page 103 the report states we are paying £78,908.65 to Capita to assist with Family Services recruitment. Given that we paid Capita £248,000 for the same task last financial year are you sure this further payment represents value for money?
10. At page 106 the report provides details on Re’s financial performance yet there is no mention of how much additional revenue they generated, a key component of the overall financial performance. Please can you tell me how Re are performing against revenue generation targets?
11. To what extent has the contingency plan recognised that Capita provide services through a range of different service companies (for example pensions administration is operated through Capita Employee Benefits Limited) and that with such a complex operating structure some companies  might continue to trade while others are placed into some form of insolvency measure?
12. To what extent has the contingency plan recognised issues such as retention of title, where for example if a Barnet contractor has purchased but not fully paid for essential equipment (such as IT hardware) the original supplier may uplift that equipment?
13. To what extent has the contingency plan recognised that before a  company goes into some form of insolvency measure, it may experience a prolonged period where cashflow is highly restricted, preventing investment in key equipment and failing to replace staff that leave which would have a highly detrimental impact on service standards?
14. Have you taken specific professional advice from an insolvency practitioner, for example from the external auditor BDO, to ensure the contingency plans are robust?
15. At the Audit Committee of 31^st January 2018 the Chair, Cllr Rayner, said that he was referring the issue of gainshare on the CSG contract back to this committee for a review. There is no mention of this in the forward work programme. When is it scheduled to take place?

Barnet Council - Commissioning Council At Any Price

Barnet Council have made it clear that they wish to become a Commissioning Council whereby we have a few senior officers who let contracts and a swath of subcontractors who deliver all of the services. Most recently the Council has commenced the outsourcing process of education services
which includes:

• Strategic and financial management of the service
• School improvement
• Special educational needs
• Educational psychology team (part traded)
• Admissions and sufficiency of school places
• Vulnerable pupils
• Post 16 learning
• Traded services including:
• Catering service
• Governor clerking service
• Barnet Partnership for School Improvement (BPSI)
• Newly Qualified Teachers support
• Educational psychology (part)
• Education Welfare Service (part)
• North London Schools International Network (NLSIN)

Much of the justification for pursuing an outsourced joint venture is predicated on generating a large amount of new income from traded services with other local authorities. In total 71% of the financial improvement is from income growth rather than efficiency savings and of that 60% comes from school meals. Given that school meals is such an important component of the outsourcing package you need to be really sure that the company delivering the service is suitably qualified. 

I have questioned the business case because they have used completely unsupported assumptions that show both a commercial ineptitude and and lack of understanding of the way school meals operates. Previously I challenged these margins and received this reply from Barnet Council:

"As stated at the Committee meeting in January, the document presented to Committee was an outline business case, which was based on our assessment of the various options for the future delivery of these services and which of those options was most likely to meet the project’s overall objectives.  The report made it clear that a full business case, based on the outcome of a procurement exercise, would be brought back to Committee for final approval.  It was also made clear to Members that the only true test of the market would come by carrying out this procurement exercise and that proceeding to procurement was the only means of providing certainty over the delivery of the required savings".

When we had three bidders for this contract there was an argument that a dialogue might reveal that the business case was completely wrong. That very rapidly became two bidders, Capita and Mott MacDonald. Capita made it clear that they would subcontract out school meals to Compass so at least everyone knew what they were dealing with. 

This week we found out that this tender competition has become a one horse race with Capita folding, leaving a clear run for Mott MacDonald who trade under the name Cambridge Education. They don't provide school meals services so for the first time this week we found that they would subcontract that element of the business to ISS Catering.

So to summarise the situation:

• Barnet have tendered a contract for which there is only one bidder;
• Barnet don't know what margin they will achieve on the largest component of the business and will depend on the sole bidder telling them;
• The company Barnet are in dialogue with don't actually provide the largest component of the service being tendered;
• Until this week no one was aware  (other than  a few senior officers) that the now sole bidder would subcontract the largest component;
• Capita who run the two large outsourcing contracts and have the best opportunity for economies of scale have walked away which may indicate that the contract isn't viable.

If an in house team had been allowed to bid we would have had a very clear benchmark  against which any other bidders could be measured but in Barnet, in-house teams have been refused permission to bid.

We are faced with a situation now which is entirely unsatisfactory, exposes the council to significant financial risk and from a governance and scrutiny perspective is inadequate.

I also believe that there is a glaring flaw in the entire process. The Barnet business case is for a Joint Venture with Cambridge Education. The largest part of this contract is the school meals service and without that hitting very aggressive growth targets they will fail to deliver the forecast savings.  ISS, the school meals sub contractor, is a major player. They will not be part of the JV, merely a subcontractor to it. When opportunities to bid for more school meals contracts arise, say, in Harrow, Brent or Enfield, will ISS forgo a share of their profit to bid for these contracts as part of the Barnet JV or will they bid for them on their own  - given they are specialist school meals caterers - and keep all of the profit to themselves. The JV model can only work where the partners are the major service suppliers and that is not the case with Cambridge Education. I forecast therefore that if Barnet enters a JV with Cambridge Education they will never hit the massive revenue growth targets which are predominantly school meals driven and as such they will fail to meet the budget savings required. Consequence - disaster.

I call on all councillors to suspend the dialogue process immediately and seek an in house comparator bid to at least provide some form of competition/comparison.I also ask them to reconsider the right to subcontract such a large component of the contract to a third party. If the council continue to push this through with a single bidder with a subcontracted school meals service, then they will have failed in their responsibility to demonstrate best value and in the future that decision will come back to haunt them.

One Barnet and Why Capita's £75 million Doesn't Add Up

We have been told repeatedly that the Capita One Barnet Contract will save residents millions of pounds. The two main contracts and the forecast savings are as follows:

NSCSO (now called CSG)
Baseline (at December 2012) costs £38.8 million
Forecast costs savings £7.01 million
Procurement savings £4.69 million
Improved council tax collection £0.84 million
Total guaranteed saving £12.54 million
By my reckoning this means that Barnet should pay £26.26 million per annum
(Source: NSCSO Business Case Cabinet Meeting 6 December 2012)

DSG (now called Re)
Baseline (at June 2013) costs £14.2 million
Forecast cost savings £0.53 million
Increased income £3.38million
Total guaranteed savings £3.9 million
By my reckoning this means that Barnet should pay £10.3 million per annum
(Source: DSG Business case Cabinet Meeting 24 June 2013)

So if we look at the figures above this means that we should be paying Capita £36.56 million assuming they deliver all of the guaranteed savings. It may therefore surprise you that in the year 1 July 2013 to 30 June 2014 Barnet paid Capita £75,008,840.49. Yes £75 MILLION,  £38.44 million more than we should be paying.

Even setting aside the £16 million of up front investment Barnet have paid to Capita (which should be factored back into the annual cost savings)  that still means we paid £59 million when the cost of providing the service before outsourcing was only £53 million. Also bear in mind that Barnet have shelled out millions in redundancy payment, £8 million on Agilisys/iMpower, millions for agency staff as well as causing distress and heartbreak to hundreds of families that have suffered redundancy to push through these contracts.

At tomorrow night's Council meeting, Richard Cornelius will once again be selling the myth that Capita are saving Barnet residents a fortune in his response to a question from Alison Moore. I hope some of the Councillors present start asking whether these figures are real or just smoke and mirrors. The number don't add up Cllr Cornelius.

Contract Monitoring in Barnet A wake up call for Capita

 I turned up slightly late for last night's Contract Monitoring committee meeting. Walking into the room I was shocked by the phalanx of men in suits. Capita were clearly keen to make a show of force. All I would say is that by the end of the evening Capita will have been left in no doubt that Barnet is going to be a challenging contract.

I only caught the tail end of public questions about Your Choice Barnet, asked by Janet Leifer. Sadly she did not get many sensible answers.

Next up was the Kier contract. They are the construction company who have built/rebuilt a number of schools in the borough. Everyone talked about what lovely buildings they were but I was surprised no one talked about value for money especially as Keir was one of the firms fined £1.7 m (reduced from the original fine of £17.9m on appeal) by the Office of Fair Trading back in 2008. This followed an investigation into what is called cover pricing where firms agree to inflate bids artificially and school construction was a specific sector where this practice took place. You can read more about it here.

Next up was HBLaw (London Borough of Harrow legal department), Barnet's outsourced  legal services provider. Cllr Schneiderman asked why the key performance Indicators (KPI's) were not in place when the contract was signed. Good question but no sensible answer. Cllr Cook asked how the contract could be identified as operating well if it was running over budget and customers believed it was underperforming. No real response. (Just wait till they see that HB Law billed the Council £1,078,247.08 in July).

It was then time for questioning of Barnet Homes. There was discussion about placing people in accommodation out of the borough and the rising debt of tenants who have been on the wrong end of the bedroom tax. Cllr Ross Houston made the obvious statement that the elephant in the room was the lack of affordable housing supply. Yes, he was right but the Councillors simply closed their eyes, held their noses and carried on regardless. Reference was also made to the tough new placement policy (potential tenants get one offer take it or leave it) and how this was affecting their ability to achieve their targets. Sadly tenants who have been hit by the bedroom tax are now £50,000 in arrears. That is a disaster for families who already struggling.

Next up were the NSCSO and DRS contracts. It was quickly established that this related to the pre-Capita stage so there was little questioning. Cllr Brian Salinger did remark that he had called the council and asked to speak to the Leader but no one knew what he was talking about. "We will look into it" was the response.

Finally we came to the highlight of the evening, the presentation from Capita which you can read for yourself here. Right from the start there was a tension, an unspoken sense of impending trouble. Mr Mark Wyllie introduced himself and his team. He started by talking about wanting to build a new relationship with residents . Oh dear, it was bit like treading on a landmine, an explosion of jeers from the public gallery. He then went on to talk about the £16 million Capita were investing in the services "Lies" was heard from the back (or was that me). We of course now know that actually it is Barnet Council who are stumping up that £16m for investment as confirmed to me in writing  by the Council's Chief Operating Officer. There were a number of questions from Councillors. Perhaps one of the most interesting related to the joint employment contracts. It relates to 82 staff who, for most of their time, will be Capita employees but for statutory duties will remain Barnet employees. When Mr Wyllie was asked how many other councils used these contract his reply was startlingly candid. "No other local authority has this type of contract, it is an entirely novel concept." He also disclosed that it was the Council's idea and the Council's legal advisors who had said it was legal so we know that when it all goes wrong Capita will take none of the blame. Capita then talked about all the proposals for increasing income. Oh dear tripwire coming up! "We are going to invest in Hendon cemetery and turn it into a green open space". Kerboom! Shouts of protest from the public gallery. Capita really do need to go back to tact and sensitivity classes. This was absolutely not the way to sell the idea of investment to the residents of Barnet.

Cllr Sury Khatri has obviously been reading my blog because he then asked about the £30 million that has already been paid to Capita. Oh dear, that really set off a grenade. Panic all round and lots of awkward looks. The council officer responsible said they would speak to Cllr Khatri outside of the meeting. I wonder how they explain that one away?

The meeting came to a close but I suspect Capita will have a debrief meeting to analyse just how badly the meeting went, why Conservative Councillors have at last woken up to the issues of One Barnet and are asking awkward questions and why so many of the council's officers who were responsible for this contract have now departed with no one around to blame except the leadership of the Council.

I look forward to the next meeting, sadly not until January, when the public will be able to start asking detailed questions about Capita's performance.

The Kafkaesque world of Barnet Council

Last week there was a Group Leaders Panel to investigate a complaint made by me and at least one other person. It related to comments made by Cllr Brian Coleman in a Council meeting where he said that Conservative councillors attending overview and scrutiny meetings were entirely whipped, especially in relation to One Barnet matters. Now failing to declare whipping arrangements at Overview and Scrutiny Committee (OSC) meetings is a breach of the constitution, a very serious matter, all the more so because Scrutiny is there to provide checks and balances on the executive, the ten members of the cabinet who make all the decisions in Barnet. According to the rather brief minutes which have been posted on the Council's website this morning.

1. That there was no evidence before the Panel that the Conservative Group where (sic) subject to the whip at Overview and Scrutiny Committees.
2. That there appeared to be some difference in the understanding of the whipping process and that Groups should clarify this to their Members at their Group meetings.

Digging a bit deeper it transpires there is a report, prepared by the solicitor from Harrow (where Barnet's legal services are outsourced) you start to see a fascinating picture that borders on the Kafkaesque.  Let's start with the investigation.

 "The focus of the investigation is whether there was a failure to declare whipping before Overview and Scrutiny Committees. A point made by Councillor Coleman to me has been that this is a political matter and not suitable for standards investigation. I take Councillor Coleman’s point to some degree and have made redactions to some appendices where I feel appropriate including details of discussions at Conservative Group meetings". 

Well hang on just a minute. Failing to declare whipping arrangements before a OSC is a breach of the constitution it is therefore not a political matter it is a constitutional matter so why treat it with kid gloves.

And what were these investigations? my comments are in RED.

"The email at Appendix 6 was sent to 19 Councillors. I received 9 responses. So more than half the councillors concerned simply ignored the investigating officer completely. One member did not respond directly to me but had responded to the Monitoring Officer following notification of the allegations and so I have included this response in my considerations. The responses did not always address the specific questions asked but did comment to some degree on the issues raised.  Sorry but if they don't answer the questions ask them again. A summary of the responses is below:

a. Nine respondents said that they had never been whipped in relation to overview and scrutiny. One member referred to being whipped in relation to the Budget in the sense that it was automatically Group Policy;
b. One member stated that where an issue was declared policy the whip only applied in relation to group policy at full Council meetings. Another member said that it ‘usually’ only applied at full Council in relation to declared policy;
c. Conservative group policy is determined at group meetings;
d. It is rare for a matter to become group policy other than the Budget (see below); and apparently not One Barnet. "Apparently"! Is this an investigation or a cosy fireside chat? It either is or isn't; apparently just will not do.
e. The Budget automatically becomes Group policy;
f. One member stated that they presumed One Barnet to be group policy but was not sure. Three other members stated that it was not group policy. All others did not address the question; So only 4 out of 19 councillors answered this question and one made a presumption that was wrong.
g. There were some differences in the answer to the question whether the whip is applied on declared policy. This may be because the rules state that a member may not vote or speak against group policy and this may not be understood as whipping; Well if Councillors don't understand the rules how the hell do they expect members of the public to understand them and given they are paid £10k a year then perhaps they ought to make it their business to understand.
h. The whip is communicated either in writing or orally; so if orally there is, rather conveniently, no paper trail.
i. One member stated his understanding that there are no pre-meetings of the group prior to overview and scrutiny meetings and therefore felt there was no mechanism for whipping; oh so whipping can only take place at a pre-meeting I don't suppose people use the telephone or email then.
18. In relation to a. above, I sought further clarification from the member concerned who stated that he had been whipped. He could not recall a specific instance of the whip being declared at the Budget and Performance Overview and Scrutiny Committee but his understanding is that the chair of the committee (currently Cllr Finn) would declare the whip on behalf of the Group. Which is wrong as surely it is the responsibility of individual members if they have been whipped to say so otherwise what's the point of having scrutiny.

Cllr Finn was interviewed during this process as he is chief whip yet amazingly, he also sat as a member on the Group Leaders Panel, although he didn't vote. Surely good governance would require that he should have been excluded from the panel altogether. 

On the issue of group policy it transpires that once a matter has been declared "group policy" no member can speak or vote against it. As such this appears to render the OSC entirely impotent on any matter which is directly, indirectly or tangentially policy in which case just scrap the whole scrutiny system rather than give the entirely false impression that ruling group councillors actually have any independent thought.

The conclusion of the investigation is:

23. There does appear to be some difference in the understanding of the whipping process amongst those Conservative members responding.
24. However there is no evidence that One Barnet was declared policy of the Conservative group and therefore subject to the whip.

Run that one by me again, One Barnet was not policy and therefore not subject to the whip. That is nothing short madness. 

I made the complaint because Overview and Scrutiny is an essential mechanism to provide checks and balances to way the council operates. I have, for a very long time, felt that the committees are a joke with the ruling group out voting any concerns raised by the opposition members irrespective of the seriousness of the matter.  This investigation underpins all my worries and suspicions are born out by this result. Governance in Barnet is morally bankrupt and bereft of any sense of decency and morality. The scrutiny system is entirely discredited and soon to swept away yet I suspect that any replacement will be equally deceitful, devious and devoid of democracy because that's the way politics works in Barnet.