Civil Service Learning Contract – More Flak for Capita and Crown Commercial Service

We covered yesterday the issues that have surfaced around the Crown Commercial Service (CCS) Contingent Labour contract; now let’s look at their Civil Service Learning contract, which has also hit the headlines recently. As the Independent newspaper reported;

“ .. a group of 12 companies involved in the scheme have now formed a group to take their complaints to the Cabinet Office and the National Audit Office and demand an investigation into Capita.The Cabinet Office said it was investigating the allegations about the contract – which may also be the subject of a National Audit Office inquiry. Among the claims being made by small suppliers are:

* Capita routinely paid invoices late, leading to crippling knock-on effects. Documents show Capita said it would only pay invoices within 40 days – 10 days later than the 30-day maximum required by the Government.

* The firm became a “runaway commercial monster” that undermined small businesses by hiring their sub-contractors to do work directly for Capita – effectively cutting them out of government business after they had already paid the start-up costs of designing training programmes”.

Like the contingent labour contract, the CSL contract is run by Capita acting as the Managing Agent / Prime Contractor. There are some similarities in terms of the issues, but a few different angles too.

Anyone in central government wanting to commission learning and development services was until recently forced to use the Capita contract. Capita then deliver around 40% of the training themselves, and sub-contract with a wide range of “approved suppliers”, many of them SMEs, for the rest. David Shields, who ran CCS when this contract was let, was proud of the fact that Capita were contractually obliged to give half of the business through the framework to SMEs.

As well as paying late, the firms accuse Capita of taking excessive fees, pushing up the cost of training, and of insisting on non-compete clauses. I’m pretty sure this is true, and it was designed to drive compliance, so providers can’t go through the back door to win work directly with clients. But I’m also pretty sure it was CCS or their predecessor organisation, not Capita, that insisted on these onerous terms to ensure compliance to the deal. However, it may be that some of these terms are actually illegal under competition law, and reports suggest this mandate has been withdrawn recently.

My discussions with various people on the supply side and with civil servants suggests that everyone hates this contract. I have also done a bit of training work for government that successfully bypassed CSL - because that’s what users want to do. Civil servants hate it in the main because of the “lowest price” mentality. My understanding is that if you decide you want a training course on, let’s say, “writing skills”, you tell Capita, they go out to their network (or possibly their own training arm) and basically choose the lowest priced course on writing skills that they can find. There is – so I am told – very little testing of quality. Even for venues, the same thing applies. You get told where your event will be held, and it is the cheapest location, even if (again based on recent personal experience) it doesn’t actually meet the specification!

Suppliers hate it because it has taken away their direct relationships with the customer, and has probably squeezed margins too. And other suppliers claim that Capita gest to choose which elements they want to keep for themselves. That’s a fundamental problem with these Managing Agents approaches, particularly when the Agent is also a direct provider rather than truly “vendor neutral”. On the accusation that Capita has been hiring the sub-contractors of supplying firms directly I have no evidence either way.

Now I don’t think we can blame Capita for all of this, and I have some sympathy also with CCS. In the age of austerity, spending money on expensive training courses does not go down well with the public or the media. This arrangement was introduced to deliver major savings, and keep SMEs in the market. But at times we have to look at value, rather than pure cost, as we often say in different contexts here.

I was shocked to hear Francis Maude’s comments the other day, when he described the situation as “not acceptable”. I would have expected him to defend the contract more vigorously, so maybe things really are bad, or perhaps it is just pre-election tactics – the voting public don’t exactly love Capita.

To finish for now, one of the sub-contractors summed up a fundamental flaw with these Managing Agent contracts. “What they’ve done is set up a monopoly – the contractor then has so little pressure on it to provide good service.”

We would argue that it is not impossible to make such contracts work, but they do require skilled procurement and contract management processes and approaches. And if you want to go down the managing agent route, then I’m an advocate of a “vendor neutral” approach where possible, which avoids having this situation of a prime contractor who also has a “dog in the fight”! That is often a recipe for dis-harmony in the supply chain.

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First Voice

  1. Stephen Heard:

    I find the use of the term Managing Agent interesting as it is terminology that grew up in the insurance industry and it was used during my time running Norwich Union International as someone who is invested with general power, involving the exercise of judgment and discretion. This set the Managing Agent apart from an ordinary agent who acts in an inferior capacity under the direction and control of superior authority, both in regard to the extent of the work and the manner of executing the same. It also has roots in the property industry when managing property leases etc.

    During my time at OGCBS (the predecessor organisation to GPS and CCS) we used the Management Services concept to describe the external third- party management of an organisation’s computers, networks, or software as services and equipment. This was used to great effect in some of the first IT framework contracts.

    Perhaps Capita are exercising too much of the agent and not enough of the service element of management.

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