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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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

***

Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.