Nine spectacular council outsourcing failures

Alan White and Kate Belgrave give us more reasons why you don’t want the private sector in the NHS.

One of the many concepts that free marketeers refuse to abandon in the face of all evidence is the idea that the private sector is better at providing public services than the public sector. Private companies have been cashing in on this fable for years at council and government level. As we file this report, another glorious outsourcing triumph is breaking: the Ministry of Justice has asked police to investigate alleged fraudulent behaviour by Serco staff in its Prisoner Escort and Custodial Services contract.

The national news stories are coming at such a rate we can barely keep up with them. But what happens at a local level often slips under the radar. That’s why we’re crossposting and adding to this False Economy blog by Kate, which features a list of some of the many spectacular council privatisation failures of the past few years (hat-tip to Barnet Unison for the idea - they published a Top Ten Commissioning Failures list last month).

The list below shows how much councils have spent to get out of private sector contracts and/or to deal with contract disputes and cost overruns. A lot of the companies featured on this and Barnet Unison’s list are sniffing excitedly around the NHS - to which they’ll doubtless bring this long-honed craft of getting heaps of public money, ditching service the second the contract is framed and delivering huge returns to their shareholders.

Feel free to add your own, or send them through to us at thesecretcuts@gmail.com

1) The Somerset county council and Southwest One dispute (via the eminently reasonable Barnet blogger Mr Reasonable)

This row was over savings not made by the joint venture partnership that the council had formed with IBM company Southwest One. The contract was to provide back office functions and services for Somerset, Taunton Deane borough council and Avon and Somerset Police.

As this Somerset County Gazette story observed: “Almost £5.5m of taxpayers’ money has been spent settling a dispute between Somerset County Council and an organisation it hired to cut costs.”

Mr Reasonable reported: “The dispute has now been settled, but the process has racked up a huge legal bill. As revealed in a Freedom of Information request, the total legal bill came to more than £2.6m. The lion's share of fees went to Pincent Masons, but it was interesting to see that Barnet's lawyers Trowers & Hamlin were also in receipt of fees in 2011/12.” (Barnet’s lawyers are worth a mention, as they’ve been much to the fore as Barnet residents, bloggers and campaigners have fought Barnet Council’s own mass privatisation plans.)

Somerset council cabinet member for resources, David Huxtable, told the BBC: "In this kind of dispute with a major international blue-chip company you wouldn't want to go forward with inexpensive lawyers."

The BBC reported overall costs to the council of the debacle of more than £5m. Tony Collins reports at Campaign4Change that some Southwest One services will be brought back into the council and run in-house.

2) Barnet Council vs Catalyst Housing

Shambles-prone Tory Barnet council is probably worthy of its own list and will doubtless continue to be as it pursues its ill-thought-out and unpopular mass-privatisation plan. But we start a few years back, nearer the dawn of Barnet’s disasters: In 2011, Barnet council was forced to pay out about £10m following a disagreement with private company Catalyst Housing over a contract dispute over care buildings.

This followed a very bitter two-year industrial dispute between careworkers and Catalyst Housing’s partner organisation the Fremantle Trust. The Trust cut careworkers' salaries by as much as £300 a month in a bid to “save” money and improve finances, but ultimately had to concede that the salary cuts and slashed leave allowances had not balanced the books.  

3) Bedfordshire County Council and the exit from the HBS contract

Still a loud warning to all in council circles. The outsourcing expert Dexter Whitfield investigated this in detail: In 2001, Bedfordshire County Council (BCC) and the HBS Business Services Group had a 12-year, £267m Strategic Service Delivery Partnership which covered financial, information technology, human resources, school support services and contracts/facilities management. There was also a loose notion of creating a regional business centre which would provide similar services to a range of public sector organisations. Unfortunately, a few years in, there was no sign of it (“no evidence of centre” Whitfield noted in his report).

BCC was forced to pay HBS £7.7m to terminate the outsourcing contract prematurely. According to The Register, the local authority was "deeply dissatisfied" with HBS's performance and served a written termination notice on the company for alleged breach of contract. The Register also reported that Unison produced a dossier of evidence to back up its claims that the quality of the council's services had suffered, not improved.

4) Barnet Council, again

Once you start looking at Barnet council, it’s hard to look away. This one is about IT.

Earlier this year, Barnet Council had to pay thousands of pounds for “emergency” IT services after its regular provider went into administration.

The local press reported:

“The authority has been forced into a costly interim arrangement with business processes firm Capita after IT company 2E2 Ltd called in administrators. Finance officers are now looking at how the authority can reclaim £220,000 in advance payments to 2E2, which passed a council credit check days before it collapsed.” (You could say this actually represented a slight procedural improvement from the council given that during another scandal - the council’s failed contract with security firm Metpro - it didn’t check the company’s finances at all).

As the excellent Barnet blogger Mrs Angry reports, the council decided that the way out of the 2E2 problem was to give more than £72,000 a month to Capita to pick up the “service”:

To get themselves out of a hole quickly, Barnet Council have appointed Capita, without any form of tender, on the basis that it was an emergency and they had already had discussions with Capita to take over the running of this service. This new contract will cost £72,595 per month.

Mrs Angry also made this interesting observation:

The Council states that they did undertake a risk analysis of 2e2 in January “using Experian reports” and that “the report stated the company was satisfactory”. However a quick check on the internet would have shown that suppliers have not been able to get credit insurance on goods supplied to 2e2 for some time and that 2e2 were handed a number of County Court judgements in 2012.

5) Swansea city council and contractor Capgemini.

A salient lesson in the importance of listening to staff, or indeed to anyone with any sort of expertise. Staff took strike action from the moment that Swansea CC revealed that it would outsource IT. The Register reported: “they warned that the move would lead to a less effective service and lost jobs.” Sadly, none of that stopped the council from cantering towards the inevitable conclusion - a conclusion that was so inevitable that even PriceWaterhouseCoopers was compelled to take the long view of the Swansea foray during a later analysis:

Said Computer Weekly in 2007:

Swansea City Council failed to apply key principles of IT management properly when it agreed an £83m outsourcing deal that is struggling to deliver anticipated benefits, a report by auditor PricewaterhouseCoopers has concluded.

The council's original outsourcing contract with Capgemini, to replace back-office systems and create online public services, promised to deliver £70m savings over its 10-year life when it was signed in 2006.

But:

the council scaled back the contract to a £40m project a year later, predicting savings of £26m over 10 years. To date, it has achieved savings of £6m, PwC revealed.

The Register quoted a Councillor Mike Hedges who said that after outsourcing, “the email system was so unreliable he has switched to using his Yahoo! account for council business. He said email notifications of shut-downs of up to 24 hours are now a weekly occurrence.”.

6) Cornwall council’s mega-outsourcing deal

Cornwall hit all kinds of self-erected hurdles with its plans for a mega-outsourcing deal with BT or CSC – and council leader Alec Robertson was ousted - before a smaller deal was finalised this year.

Tony Collins wrote on Campaign4Change about the costs of the fiasco:

The council’s own budget for the outsourcing project so far has escalated. An independent panel set up as a “critical friend” to scrutinise the council’s plans for outsourcing has learned that the costs to Cornwall’s taxpayers of planning for the scheme were £375,000 in July 2011.

In March this year the “Single Issue Panel” members were told that the costs for the project would need to be increased from £650,000 to £800,000.

The current estimate of the cost of the procurement process at the time of writing this report is £1.8m,” says the panel in its July 2012 report.

7) Birmingham, “Service Birmingham” and Capita

As large as it is unreal. We’re adding this one, because we don’t really know what is going on with it. There is a lot of confusion about how much the Capita “Service Birmingham” venture is costing, although people seem to know it’s costing a lot.

The Birmingham Mail reported earlier this year:

The venture, run by the council and private sector contractor Capita, operates the authority’s call centre, IT infrastructure, Library of Birmingham IT and support and the collection of debts and council tax until 2020. The arrangement was formed in 2005 with £55 million-a-year running costs. But costs were thought to have spiralled to about £120 million-a-year following a renegotiation in 2011 and the addition of extra services, including council tax collection.

That story also said that “new checks will be carried out on Service Birmingham’s accounts amid complaints that councillors had 'little idea' of how much the arrangement was costing.”

In an extraordinary statement which we trust is genuine (it was made close to 1 April), Councillor John Clancy said Birmingham City Council members were being “deterred from getting a grip” on the nuts and bolts of the “complex” deal because the facts were unclear.

“Nowhere is there a clear, total figure for what we are paying and what we should be paying,” he told a scrutiny meeting.

“The biggest issue is transparency, we have little idea of what is going on.”

8) North Tyneside council and Capita

As recently reported in Tim Minogue’s excellent “Rotten Boroughs” page in Private Eye, Jim Allan, the Labour group leader at North Tyneside council has been found guilty of bringing the council into “disrepute” after a standards investigation by law firm Eversheds on behalf of the council and its consultant chief exec, Graham Haywood.

Allan expressed disappointment over social media last year that the council’s then-Conservative cabinet hadn’t investigated the risks linked to an outsourcing contract worth £260m with Balfour Beatty and Capita Symonds.

He claims he was merely stating facts. As Minogue reported: “Part-time chief exec Haywood had told him members needn’t worry about the risks in the contract because they were the ‘responsibility of officers’. Haywood was previously chief exec at Sefton council, where in 2008 he helped negotiate a £70m outsourcing contract with, er, Capita Symonds. This year Sefton brought services back in-house after cutting short Crapita’s contract years early.”

And as Minogue points out: “The report into [Allan’s] three tweets ran to 223 pages, took more than six months to prepare and cost an estimated £15,000. Terrific use of taxpayers’ money at a council seeking to make more than £21m savings this year.”

9) And a recent big one: Sandwell Council to part ways with BT and end £300m contract

Said the local Express and Star paper:

Sandwell Council has been in a 15-year partnership with BT called Transform Sandwell, in which the company manages services such as finance, customer contact and communication. The current deal, signed in 2007, sees the council paying BT around £15m a year.

In July, the authority told the telecommunications giant it wanted to bring its contract to an end, unless BT addressed issues raised by the council within 30 days.

And today it can be revealed that both parties have begun to thrash out how they will end their contract by March next year.

Those details will be interesting.

The council was apparently unhappy with BT’s service and began dispute proceedings last September.

Ones to watch (feel free to send others):

There’s a growing list here of local and council services that have been privatised this year. One potential wreck is Capita’s new contract with Lambeth council. Undeterred by the famous failure of the ALS-Capita court interpreting service, widespread loathing of the company at Barnet, or whatever is going on with Service Birmingham, Lambeth council and Capita signed a nine-year deal last week. The contract is for, among other things, ironically-named “customer service support.” Time will tell whether the customer is first served, or Capita. Lambeth has cut tens of millions from its budgets in the last three years, too. You can see why people mutter that there is always plenty of money around for companies like Capita, if not for children’s services, etc.

There’s also Cheshire council’s outsourcing of youth services. In July, Children and Young People Now reported:

Cheshire youth services will be delivered by independent organisations in the future, following a local authority decision to outsource its youth work provision.

We’ll be watching that - when you remove services from council, you remove a lot of the democratic accountability around them, as those of us who report on these things know too well. Earlier this year, we and families of service users were chucked out of a care cuts meeting when the board in charge of the service said it didn’t have to speak to people because it represented a private company.

And. . .

We might as well finish with Barnet council. Two major contracts worth (price tag varies) £500m with Capita. Service users hate it, residents hate it, staff hate it and local journalists hate it. This can’t end well. Or cheaply.

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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle