NSCSO Outsource – When is a ‘Guarantee’ Not a Guarantee?

There have been many public sector outsourced contracts that have not realised the ‘guaranteed’ benefits. Barnet Council cabinet members and senior officers have made much of the ‘guaranteed’ financial benefits that would flow from the New Support and Customer Service Organisation (NSCSO) contract with Capita. Part of the ‘guarantee’ comes from improvements in routine procurement activities. Barnet’s record in this area is abysmal so it would be hard for anyone, including an in-house bid, to fail to deliver considerable improvement.

More problematic is the ‘guarantee’ of an increase in Council Tax collection trumpeted as a no-risk increase in income of £8.4m over 10 years. Unlike with procurement, Barnet is already good at collecting Council Tax so guaranteeing an improvement might be regarded as challenging. In answer to written question 47 at the pre-decision scrutiny committee, Budget and Performance Overview and Scrutiny Committee (BPOSC), on 29/11/12 the Council replied

‘Capita have guaranteed an increase in overall Council Tax collection by 0.1% in year 1, 0.2% in year 2 and 0.3% in year 3 (all of these increases are against the 2009/10 collection rate). The level of collection achieved in year 3 will be maintained through to the end of the contract. The current collection rate is 98.5%’.

 

Council Tax collection is never 100% because some debts are irrecoverable and have to be written off. To collect the maximum possible, debt recovery continues after the end of the financial year and the baseline recovery rate for the contract is set at 3 years after the end of the financial year 2009/10. So the Council statement says that Capita is ‘guaranteeing’ a collection rate rising to 98.8% and if they fail to achieve it they will forfeit the difference in fee income to make up the shortfall. There is no mention in Council documents available to the public of any limit on this ‘guarantee’. What if Capita perform worse than Barnet? Are we to believe that Capita negotiators have agreed to a potential liability that has no limit other than the Barnet Council Tax total over 10 years? To clarify this issue for the public I asked at Budget and Performance Committee whether the guarantee was capped and was told that the existence or otherwise of a cap was commercially confidential. It follows that the position is uncertain and not ‘guaranteed’ as far as the public are concerned. If there is a cap the £8.4m benefit is not guaranteed and the business case published for the public and the decision makers on the Cabinet is misleading. I have raised the question in writing to senior Council officers and I await their reply, hopefully before Cabinet makes its decision.

 

Whether Capita’s performance for a particular financial year warrants a contractual penalty will not be known till 3 years later i.e. for 2013/14 it will be 31/03/17 and so on. Presumably Capita will take over from Barnet the hard-to-collect debts from previous years and it is not clear what incentive, if any, they will have to collect those debts. Similarly there will be a transitional period at the end of the contract where collection responsibility will be split between Capita and someone else. If the contract runs for 10 years there will be 7 years for which Capita has sole responsibility and 6 years (3 at each end) for which responsibility is split with obvious scope for legal wrangling.

 

Before the Budget and Performance Committee meeting Labour councillors had a meeting with the Council’s legal adviser and the project commercial lead, both consultants not permanently employed by Barnet. Whenever we asked ‘what if’ questions the reply was ‘we’ could take a certain action. I was struck that the consultants were unlikely to be around if and when the contract goes wrong and neither will the main architects of the outsource proposal, former Council leader and now MP for Finchley and Golders Green Mike Freer, former deputy Council leader and now MP for Hendon Matthew Offord and former Chief Executive Nick Walkley. Whether the current group of council officers sticks around to deal with the consequences of their actions remains to be seen.

At the meeting I asked about an issue that seems to have been overlooked, that of Barnet’s Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) liabilities for Capita staff at the end of the contract. I am not a lawyer but my understanding is that under current legislation Barnet would have a TUPE responsibility for anyone whose main job was providing a service to Barnet Council if and when the work is taken away from that person’s employer. That liability would be direct if the work was insourced or indirect in what Barnet would have to pay to a new provider. It does not just apply to former Barnet Council employees. So redundancy costs are built into the contract for Barnet employees who do not wish to transfer to Blackburn or the other 10 Capita locations and the work will be done by other staff employed by Capita but at the end of the contract if those staff do not wish to move with the work to a different location with a different employer or be redeployed by Capita it is Barnet’s problem, not Capita’s. The legal adviser was not able to comment but when I raised the issue at BPOSC the Council’s Commercial Director agreed there was an issue but did not quantify the potential liability. BPOSC requested clarification in its comments to Cabinet.

 

Apparently the proposal to outsource to Capita has been agreed at a Conservative group meeting and now it will go through on the whip. According to the newspapers 23 voted in favour out of a group of 38 and the full Council of 63. So this huge gamble has been approved effectively by 23/63 i.e. 36.5% of councillors. It is not clear how much those 23 know about the detail of the contract which, of course, is where the devil will be found. Before BPOSC, councillors of all parties were given the opportunity to view for a couple of hours one shared copy of the unredacted draft contract. On the Labour side all the members of Budget and Performance Committee (Labour Group Leader Cllrs Alison Moore, Alan Schneiderman, Arjun Mittra and I) took the opportunity together with the deputy Labour group leader Cllr Barry Rawlings. We were joined towards the end of the session by one Conservative Cllr Hugh Rayner. This was democracy in action Barnet style.

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Better Barnet posted about NSCSO Outsource – When is a ‘Guarantee’ Not a Guarantee? on Better Barnet's Facebook page 2012-12-03 13:23:21 +0000
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