The Public Accounts Committee (PAC) has raised questions over Capita’s suitability for the £370m contract to run back-office services for four major government departments.
Capita’s botched Civil Service Pension Scheme (CSPS) contract, as well as uncertainties over value for money, were compared with in-house delivery.
The PAC examines the government’s shared services strategy, which includes a huge back office outsourcing contract with Capita for major government departments.
The shared services strategy has seen departments placed in five clusters. The largest of these is Synergy, which provides services, such as HR and payroll, to the Department for Work and Pensions, Ministry of Justice, Home Office, and the Department for Environment, Food and Rural Affairs.
While the Synergy contract was awarded to Capita in March, other clusters, such as Unity, which includes HMRC and the Department for Transport, are delivered in-house.
“Given Capita’s poor performance in administering Civil Service Pensions, the PCS has expressed concern over the Synergy cluster’s decision to award an outsourcing contract for providing HR and payroll services to over 250,000 civil servants to the provider,” MPs wrote in the report.
The PAC listed Capita’s government contract performance shortfalls. “Capita has performed poorly on a range of government contracts, including with the Ministry of Defence for handling recruitment, with NHS England for supporting primary care services, and its ongoing poor performance managing the Civil Service Pension Scheme,” it said.
Raised eyebrows
When the Synergy contract, which could run for a decade, was awarded in May, eyebrows were raised with the backdrop of the ongoing CSPS problems.
Beyond Capita’s poor performance, the PAC questioned the decision to award it the contract based on value. “[The government] has not quantified the value-for-money case of the Synergy cluster outsourcing to Capita relative to the Unity cluster’s in-house service model,” said the PAC.
It also called for details regarding an alleged cut-price deal offered by Capita. “The committee’s report calls for additional details about the contract that was awarded to Capita, including confirmation of whether the contract was awarded at 40% below the model of what it should have cost…”
The PAC requested details on steps taken to provide assurance that Capita will deliver fully on its contract commitments under the Shared Services strategy.
Questions are being raised in parliament and beyond about Capita’s continued success in winning public sector contracts in the light of its failures.
During a joint PAC and Public Administration and Constitutional Affairs Committee meeting last week, chair Simon Hoare MP lamented on rewarding failure. “Isn’t the stark issue, in essence, a company like Capita has the private parts of HMG [His Majesty’s government] very firmly in its grip?” he said.
This comes at a time when the government is attempting to move away from outsourcing in the public sector. Through a value for money test, it hopes to “end the era of outsourcing”.
In March, Cabinet Office parliamentary secretary Chris Ward said “the age of outsourcing will end”.
“For decades, successive governments have been, at best, ambivalent about whether public services are delivered in-house,” he said. “At worst, we’ve had outsourcing by default, with public services hollowed out and sold off to the lowest bidder. That era ends today.”
From 1 April 2027, any central government outsourcing contract with a value of over £1m, including IT and business process outsourcing (BPO), will be put through the government’s Public Interest Test.
The Cabinet Office said: “Before any IT or BPO service is outsourced, departments will evaluate individual contracts on a case-by-case basis – holistically assessing value for money, economic and market impact, and social value goals.
“Departments will make the final decision for each contract,” it added.
