Is Barnet Council Capable of Managing Capita Contract? Auditors Not Sure …

Regular readers will know of the IBM Southwest One public sector outsourcing contract in Somerset which was beset by problems and according to campaigner Dave Orr has ended up costing taxpayers some £71 million. But now attention is focusing on Barnet Council and their major deal with Capita, which according to a very critical external audit report from BDO seems to be running into problems.

Another good article from Tony Collins of the excellent Campaign4Change website highlights the council audit committee meeting last week, which amongst other issues identifies a “significant risk” in relation to the council’s contract management and monitoring. There are “numerous issues”, says BDO.

Barnet is attempting to become a “commissioning council”, which means outsourcing pretty much everything it can. That is conceptually an interesting idea; it would leave the two key “internal” activities for the Council as setting policy and managing contracts / suppliers. It’s not a new idea; I was involved in discussions along those lines in central government back in the 1990s. But it’s absolutely clear that if such a model is going to work, you have to be good at procurement and contract management.  The more activity, risk and delivery you put in the hands of third party suppliers, the more important it is that they are managed properly.

BDO agrees with this diagnosis in their report. However, and unfortunately, this does not seem to be actually happening in Barnet.  BDO talks about contract management and monitoring like this;

“During the course of 2016/17 we have noted a number of internal audit reports which have raised significant findings in this area. In addition, further concerns have been identified through our own audit work. As such, we have recognised a significant risk to our use of resources [value for money] opinion.”

Worryingly for citizens and taxpayers, the council’s financial reserves are being depleted, and there was an overspend on services of £8.3 in 2016/17. “Savings targets remain significant and achievement of these will be inherently challenging, as evidenced by the overspend in 2016/17.”

This is a similar pattern to that we saw in the Southwest One deal – big savings promised (£180 million over ten years in that case) but never materialising. And scrutiny of Capita seems to be coming mainly from local activists and bloggers like Mrs Angry and Mr Reasonable, who do an excellent job, rather than from the internal council team. That may be because as far as we can tell, procurement has also been outsourced to Capita! That begs the question – who is managing the supplier who is managing your suppliers? That is always the conceptual problem we have with wholesale outsourcing of procurement!

Since Eric Pickles decided to scrap the Audit Commission in an act of political vandalism in 2010, the National Audit Office has picked up some of that organisation’s governance and auditing role, but NAO is still not as active in local government as it is in central. However, instead of waiting for things to go horribly wrong, we’d suggest that NAO might like to take a look now at Barnet. For a start, a review  could see if Barnet is following the excellent guidance on commercial and contract management issued by NAO itself last year (and that we have been writing about regularly on the Public Spend Forum site).

We’ll keep an eye on developments in Barnet anyway – and do read the full Tony Collins article here.

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