National Audit Office – NHS and Capita Both Culpable in Contract Failure

The UK National Audit Office released a report recently on the NHS England (NHSE) contract with Capita for primary care services, which joins the long and dis-honourable list of public sector outsourcing fiascos.

Capita took on a whole range of back office tasks supporting the national network of GPs (“family doctors”). The contract seems to have been totally driven by the desire of NHSE to save money, without much consideration for quality and without much in the way of checking that Capita could actually do the work half-way competently for the price offered.

All sorts of problems emerged; for instance, “an estimated 1,000 GPs, dentists and opticians were delayed from working with patients and some of these practitioners lost earnings. The failure to update performers lists also potentially compromised patient safety in cases where practitioners should have been removed”.

As the report say, “neither NHS England nor Capita fully understood the complexity and variation of the service being outsourced. As a result, both parties misjudged the scale and nature of the risk in outsourcing these services. The service to primary care practitioners, including Capita’s delivery of PCSE, has fallen a long way below an acceptable standard. This had an impact on the delivery of primary care services and had the potential to seriously harm patients, although no actual harm to patients has been identified”.

When things started going wrong in terms of performance, “NHS England was unable to stop Capita’s aggressive office closure programme, without cancelling the contract, even though it was having a harmful impact on service delivery.”

That’s a real shocker – Capita just kept on closing offices, despite the fact the client didn’t want them to, because “that’s what the contract said”.  So next time you see a bid from Capita talking about “partnership working”, just remember that fact. But really, the buyer should have made sure that sort of flexibility was embedded in the contract.

And while things have improved, almost three years into the contract, NHSE and Capita still haven’t reached any sort of “partnership working” to make this contract effective.  “Although NHS England has saved significant sums of money, value for money is not just about cost reduction. NHS England will need to address the current service failures over the remaining life of the contract if it is to achieve both the savings and service improvements it intended”.

Interestingly, the “procurement was supported by commercial experts in the Cabinet Office, and subject to reviews by the Major Projects Authority which considered it a well-run programme”. So, as well as an NHSE fail, a black mark there to Gareth Rhys Williams’ team of well paid “commercial experts” on this one.

Fundamentally, we had a buyer who only cared about “savings” and just trusted or hoped that the supplier would be able to do the work, without any real checking or evidence that was the case. The buyer clearly did not really understand the baseline of services in terms of activities and volume, so could not set the right specifications or performance standards.

In addition, asking the supplier to run the existing services and totally transform those services in parallel was a huge risk. And we have a supplier who refused to deviate from the contract even as problems emerged, and who similarly signed up to it without really understanding the work, presumably working on the basis that “the public sector is always inefficient, so once we win the contract, we’ll find a way of making some money from it”.

Frankly, that’s how many providers have worked over the years, which is one reason why Carillion, Serco, Capita, Interserve and others have found themselves in financial trouble. Capita have lost a lot of money on the contract too, and there is still an ongoing dispute between the parties around fees since last September – watch this space, there could still be more trouble to come.

As usual, NAO has lots of good advice in their report too. But, while we’d love to think things might change, bear in mind this happened after years of Crothers, Manzoni, Rhys Williams et al all assuring us that the government has got to grips with commercial matters and knows what it is doing. Clearly that wasn’t true here.

But the problems started with the blinkered view of NHSE, who were so focused on savings, they failed to see the potential service and quality issues. To be fair, the scope of government contracting is vast and disparate, and many projects are really difficult to execute - we do have sympathy with the buy-side, based on some painful personal experiences. But this is another “not good enough” example, another notable failure and another example of how not to do outsourcing,

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Voices (5)

  1. Final Furlong:

    Great article.

    “procurement was supported by commercial experts in the Cabinet Office, and subject to reviews by the Major Projects Authority which considered it a well-run programme”

    Let’s deal with the two concepts buried in this single sentence.

    1. Considered it a well-run programme. As we all know, in Central Gov, running and delivering a programme (we have a plan, we have a budget, and resources, and we met milestones) is a key metric, even when it subsequently fails (think of the DWP and its child support system – over £450m sloshed up the wall on a programme which won awards but didn’t deliver a working system)

    2. Commercial experts. I’ve worked with some of these. Some are very good. Some are not. When Bill brought in the CSRs, it was a similar picture. Some were really quite excellent. Some were unbelievably dire. I could never understand the inconsistency until I was exposed to what was clearly instances of complacency, convenience, and nepotism.

  2. Secret Squirrel:

    Commercial expertise, as any expertise is, is a combination of content and context. Gareth Rhys Williams may well be a commercial expert in FM from his work at PHS is but I doubt he has any expertise in primary health services, nor would I expect many of his team to have either of any.

    This notion of ‘commercial expertise’ that can (must) be pulled for a central resource for something that isn’t common is, IMO, dangerous. An IT refresh, yes. A buildings contract, yes. A primary health service isn’t one of those. The outcome is therefore predictable as the client takes on the advice of a (non-)expert and consequently adds in risk, not mitigates it.

  3. Sam Unkim:

    I think sometimes we get over stressed about these ideologically driven procurements.
    The powers that be, wanted something hideously complicated outsourced (without having to understand it first) and that has been achieved. The rest is just SRM & contract management.

    The next iteration of the contract will be far better and probably let by Robots

  4. Mr Grumpy:

    All that not withstanding the extortionate amounts NHS Property have been charging GP’s in rent!

    Cue the “We will learn from the mistakes made with this contract” line. Which mostly now is a token gesture given the mistakes made here will no doubt re-surface somewhere else.

    Hopefully we’ll see more positive stories come to light. Public Sector procurement seems to be taking a bit of a stiff kicking lately.

  5. Bob Beveridge:

    It is particularly worrying that the contract was overseen at a very senior level so goodness knows what other horrors are round the corner. It really is a hostile environment now isn’t it?

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