Barnet and the Dodgy Business Case

Today some Barnet Council staff are on strike about the continued outsourcing of services in Barnet. Already we are starting to see the wheels are starting to come off existing outsourced contracts with over grown cemeteries and the "Inadequate" rating given to an outsourced care home (read the damning Care Quality Commission report here).

What makes this situation much worse are the entirely dodgy business case reports that have promoted outsourcing as the answer to all our woes. In the original CSG business case it was based on Capita making a major investment in IT because Barnet didn't have the money. Yet once the  contract is signed we find the Council advanced a massive capital sum of £16 million to invest in the IT. For the Your Choice Barnet contract, which involved outsourcing adult social care to Barnet Homes, the business case was predicated on generating income from other local authorities which, surprise surprise, failed to materialise.

In the latest outsourcing scheme, which focuses on educational services we have another dodgy business case which uses assumptions which are entirely unsupported and without any benchmarks to justify a joint venture. The business case is here

The services being outsourced include:

• 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)

The problem is that 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 would have thought that whoever put the business case together would have made sure their assumptions were accurate or at least supported by benchmarks. 

The problem is they have used very generic assumptions, specifically around the profit margin that school meals generate. In the business case they have assumed that school meals generate a 20% margin and the Council's justification for this is that the current service will pick up most of the fixed overheads. However, speak to anyone in school meals and they will tell you that a 20% margin is a complete fantasy and many school meal services just about break even. Indeed Barnet's in house school meals service is well regarded and generates an operating profit of £190,470 on a turnover of  £7.1 million or a margin of approximately 2.7%.

Having asked the council to tell me what school meal service in the UK operates at a margin of 20% the answer came back none, or rather we don't know. By using a profit margin of 20% that generates a forecast profit of £963,000 it suggests a turnover target of £4.8 million. However, if they have got the margin wrong and it is 5% then to generate the same level of profit they will need to generate £19.26 million of additional school meal sales or approximately 9 million school meals, a huge increase which seems entirely unrealistic. I have brought this to the attention of the council including Richard Cornelius but no one seems particularly concerned.

We are being pushed down an outsourcing path, not because it makes financial sense but because of political dogma and anyone who challenges the financial logic is branded a troublemaker. If the outsourcing follows what happened with Your Choice Barnet, where all the promised revenue growth failed entirely to materialise, then the risk is that staff will be forced to take pay cuts and services will be reduced in the same manner as YCB and that is unforgivable.

Barnet Council where are the savings - Who pays for the interim staff?

As I blogged about yesterday, I am challenging Richard Cornelius, Andrew Travers and Capita to show me where are the promised massive savings.

One area where it is difficult to pin down savings is the whole subject of interim staff. Comensura supply interim and agency staff to the Council and in March  billed the council a whopping £1.9 million bringing their grand total for the year to £15,538,090.25.

In 2012/13 Comensura billed £12.5 million, In 2013/14 it rose to £13.8 million and this year, 2014/15 it has jumped again to £15.5 million. One major area of concern I have is that former council staff who used to work for a salary have been made redundant or left the council payroll cutting costs for Capita and then coming back as consultants on much higher rates, paid for out of the Comensura contract.

Perhaps part of the £3 million per annum increase in the Comensura costs is a switch between contracts and if that is the case are we, the Barnet residents seeing the benefits?

Barnet payments to Capita - £250 to charity if Richard Cornelius can show me the evidence of how Capita are actually making the savings promised

Sorry to raise the issue of payments to Capita yet again but I still cannot reconcile how we can pay so much to Capita for a service that is supposed to be generating savings.

For the financial year 2014/15 Barnet paid Capita via the CSG and Re contracts £51,787,011.34. This should be set against a background of the service costing £53 million before it was outsourced. (Source the business case used at the meeting when the two contracts were awarded to Capita. For further details see this blog

Based on information supplied to me in February (see below) the contracted payments should have been £53,654,000 which is slightly more than what it cost before the service was outsourced. Now I have no corroborating evidence that these payment were ever specified because all the commercially sensitive elements of the contract are redacted and indeed there are numerous clauses relating to incentives and penalties which would have made publishing a single payments schedule almost impossible. What is also important to bear in mind is that in the schedule below it states that £14,933 million was paid for an interim service we we know cost less than £1 million to deliver as the period was less than a month before the main contract started. So what happened to the remaining £14 million?  I would also draw your attention to the lack of additional payments from 2015/16 till the end of the contract. Is this because there will be no additional payments or because Capita haven't billed it yet?

I have asked repeatedly to see the evidence of precisely what we are paying for and a detailed explanation of why the payments are so high. Whilst a few promises of evidence were made when the previous COO was in place, none actually materialised.

If Barnet Council are serious about openness then why not host an open day where they go through the contract in detail so that we can understand exactly what we are paying for. I would have thought it would have made sense for Capita to get involved with this, to work through the contract with interested citizens and to demonstrate clearly how much money they are saving.

So I hereby throw down a challenge to the Chief Executive Mr Travers, to Richard Cornelius and to Capita - host an open day, bring bloggers and critics in and show them what you are doing, how the contract is working in reality what money is being paid to whom and how much is really being saved - evidence is essential.  Indeed a few Conservative councillors might want to come along as well seeing as they voted for this contract. I know some of them privately had serious concerns about the contract but were worried about making those views public.

And to put my money where my mouth is, I will donate £250 to a charity of Richard Cornelius' choice if he makes this contract open day happen.

£11 million down the drain - Barnet's Blue Bin Failure

Back in 2013, Barnet convinced everyone that a shift to blue bins for recycling was the answer to driving up recycling rates. Previously we had a presorted curb side collection which generated high value waste that could be easily and effectively recycled. Convinced that co-mingled waste was the way to drive up recycling from the then level of 35.99% as reported in council documents, see below, the council spent £11 million buying new blue and brown bins, a huge advertising campaign, people to visit every household telling them about the change and a new fleet of bin lorries to accommodate the new bins.

Roll forward two years and what do we find? After the initial honey moon period, recycling rates are now slightly lower than before the blue bins were introduced see below.

I wonder if Councillor Cohen will be trying to explain why after such a huge £11 million investment we are back to where we started?

Capita Special Projects - The Barnet Moneyspinner

The Capita contract in Barnet was supposed to help save money yet, as reported repeatedly on this blog, Capita get paid significantly more than the contract price. The forthcoming Performance and Contract Management Committee meeting discloses the most recent Capita payments.

I have highlighted all the "special project" payments which in this statement amount to £3.95 million, or almost half the total quarterly payments. It is also important to point out that the Capita contract is automatically updated for inflation. Now in my naive world I though inflation was currently zero but not in Barnet. As a result Capita's CSG bill was increased by £90,912 for the period 1 January 2015 - 31 March 2015.  The Re contract was increased by £94,865.92 for the year.

In total that is an annual uplift £458,000. Now given that Barnet last year cut council tax by 1%, that additional £458,000 has to be paid for by a cut to another budget and that is the one of the key reasons why freezing or cutting council tax is such a short sighted strategy.

We have also been charged an extra £702,317 for "additional service provider costs". I thought the contract price was supposed to be guaranteed but as with complex contracts of this nature, and as Cllr Hugh Rayner pointed out, contract variations are where contractors makes their money.

It is also interesting to note that we ended up paying £14,268 for occupational health assessments for just 2 months, a cost which was minimal before the Capita contract.

And guess what, the Conservative councillors who voted for this Capita contract never seem to ask a single question about what we are paying.

Barnet financial year end shows a bumper year for Capita and Comensura

Today sees the publication of March 2015 supplier payments and marks the end of the financial year. Unsurprisingly Capita have picked up a large chunk of revenue. In total in 2014-15 Capita have been paid £51,787,011.34. According to my reckoning we shouldn't be paying more than £36.56 million plus inflation which as we know at the minute is zero %.

The other beneficiary is Comensura who supply interim and agency staff to Barnet. In March they billed the council a whopping £1.9 million bringing their grand total for the year to £15,538,090.25. This is without a doubt a contract entirely out of control rising inexorably at a time when agency costs should be plummeting. Not one Conservative councillor has done anything to rein this contract in. Indeed Cllr Shooter foolishly planted a question back in July last year about how the Comensura contract was declining. Sadly he was told a whopping great lie.

In 2012/13 Comensura billed £12.5 million, In 2013/14 it rose to £13.8 million and this year, 2014/15 it has jumped again to £15.5 million. Instead of cutting libraries Barnet should get a grip of this contract and start saving money.

More updates on the financial year end to follow.

Please read why Barnet Council workers are on strike today & tomorrow