Crown Commercial Service and Capita – Government Contingent Labour Contract Criticised

We have not written much about the UK government's central procurement body Crown Commercial Service and its Contingent Labour One framework (ClONE or CL1 to its friends) since it was put in place over a year ago. That was because my consulting firm, Procurement Excellence, was somewhat involved in the process and we try and keep that separate from Spend Matters reporting. However, now that the contract is hitting the national press, it is perhaps appropriate to comment. As the Independent reported last week;

Capita is facing a second investigation into its handling of a major government contract after the controversial outsourcing giant was accused of imposing “absolutely appalling” terms on small businesses. Dozens of companies have complained about a £1.5bn contract between the Cabinet Office and Capita, which allows the firm to control the recruitment of specialist contractors and temporary staff across government, and are now refusing to take part at all.”

Procurement Excellence (ProcEx), my consulting firm, was on an old OGC (Office of Government Commerce) framework for providing Gateway and Procurement Capability reviewers. That was named consultants only (we could not just supply any old interim) to do top government reviews, and we got into it initially really as a service to OGC and a bunch of our friends who did this sort of work. So we weren’t very commercial – we took a margin of around 5%, which as anyone will tell you barely covers the professional indemnity insurance and other direct costs.

Then Crown Commercial Service (CCs) created a new framework, CL1 , and we were told that all “interims” being provided to central government – including Gateway Reviewers – would have to go through Capita, who won the competition to become the CL1 managing agent. But, to be fair to CCS, they clearly did not want to just squeeze providers like ProcEx out of the market, so we were allowed to retain our place in the supply chain.

That was understandable, but it led to the first problem with CL1. In most cases it actually introduced an additional layer in the supply chain. So a Gateway reviewer (who may well have her own limited company anyway) would now be working through and invoicing ProcEx, ProcEx would contract with and invoice Capita, and Capita would contract with the Home Office or whoever. So that doesn’t sound like a particularly slick supply chain, does it?

Then we had all sorts of issues around fees and margin. How much could we make on “our” consultants, how much would Capita make, etc. Maximum rates were introduced, I suspect some interims saw their rates drop and providers had their margin cut. Now the Independent reports that Capita are making “a 20 percent cut of the value of all the contracts.” I don’t think that is true – I heard much lower numbers being discussed, perhaps half of that or even less for Capita (but that is only hearsay).

Having sorted out something that was acceptable to us, perhaps easier for ProcEx than it was for firms that were used to margins much bigger than 5%, we proceeded with the new arrangements. But after a couple of months we pulled out. The administration under the new scheme was just far more burdensome than previously. To begin with, we had to provide all sorts of information to Capita, who were frankly not on top of the process in those early days – onboarding as a supplier to Capita was painful, we were asked to submit the same forms multiple times, for instance. Capita’s staff handling this appeared to be pretty junior, and the systems for registering as a provider were not straightforward.

Then the ongoing admin was also going to be more of a burden, so in the end, given the (minimal) margin we were making, and the fact that dealing with Capita was causing our Director of Administration (my wife) to become increasingly stressed, we pulled out. Now to be fair to Capita, this initial hassle may have been teething troubles - they may have initially under-estimated the scale of the handover activities. I suspect admin may be much less painful now, but we just didn’t hang around to see if things were going to improve!

We didn’t see any evidence however of Capita wanting to deal direct with contractors, which is an accusation in the Independent article. It would be interesting to see evidence for that; indeed, when we pulled out, our Gateway people were asked by Capita to find another sub-contractor to work through. The somewhat misleading claim in the article is around sub-contractors not being allowed to get their contractors to sign “restrictive covenants” - but that is very different to Capita actually ‘stealing’ their staff! And those covenants may well not be legal anyway. So I may be on Capita’s side of that argument.

Reports also suggest that Capita can give up to 20% of the work to their own recruitment and interim businesses. That’s a whole can of worms in itself, and worth a separate article to look at the reality of “vendor neutral” arrangements in this sector. I can’t comment personally on how Capita are working in that sense here.

So, I don’t actually think Capita are making a fortune from this contract, and I would be surprised if the firm is trying to steal contractors from their usual home – although things may have changed of course in that respect. And I do understand why CCS did this in the first place. The argument for a single Managing Agent is all about control, better MI and so on.

But the design of the supply chain has some inherent issues, as does creating a de facto supply monopoly, and of course your sub-contractors are going to hate being distanced from what they see as their ultimate clients. I also don't like the Agent also being a provider, as we see here. That just brings some inherent tensions.

However, I suspect that some providers, seeing Capita being beaten up about the Civil Service Learning contract, have taken the chance to stick the boot in here too. But in this case, much as we hated the whole CL1 concept for basically leading to the end of a big chunk of ProcEx business, the criticism of Capita may not be not completely fair!

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  1. life:

    As you know, you are not the only one! How was this ever going to work? I personally don’t overly blame Capita other than they bid for the work, as you point out the arrangements appear structurally flawed and of course the procurement was subject to the usual very tight focus on cost (20% margin?! – I don’t think so) with as ever the subsequent resource allocation necessarily being in alignment with the price. Hands up anyone who thinks Clone has delivered?

    I can imagine someone in CCS having an on message caffeine fuelled vision of admin head reduction but “long chain” vendor neutral (no such thing) arrangements were always going to fail, particularly for the demo that is Gateway reviewers and their typically very transparent long in the tooth SME sponsors. In fact, I believe the only reason “Gateway–in-Clone” has gone on so long with so many is the trust between the reviewers and their sponsors, particularly when it comes to late payments, late POs etc. I’m not saying any of it works well, but perhaps CCS (MPG?) also overlooked the fact that procurement structures for interims won’t work so well for what is in effect a consultancy “SWAT” team made up of individuals that organise themselves both professionally and personally to deliver in five day bursts.

    It’s a real shame, because surely one of the best things out of the central procurement experiment in Government over the last 20 years has been the Gateway process – vetted, experienced, truly independent (often near retirement) experts reviewing the most important and sensitive work in Government. Timed precisely at the points that such reviews can make a real difference. This is such important work – what should be the ultimate in distilled “Eau de CCS” – it’s hard to understand the priority it has been given.

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