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Censor makes sure detail of Capita’s £126m Birmingham council contract stays hidden

Censor makes sure detail of Capita’s £126m Birmingham council contract stays hidden

🕔03.Mar 2014

Sir Albert Bore was as good as his word when he told journalists that publishing the Capita-Service Birmingham contract would be “useless” because most financial figures would have to be redacted.

How right the leader of Birmingham City Council was.

The documents that have been presented for public perusal would do credit to the most enthusiastic of Army censors trawling through letters from the front line on the basis that careless talk costs lives.

A combination of trade secrets, commercially sensitive information, and the Data Protection Act has conspired to trump the Freedom of Information Act, which in theory requires councils to release details about the way public money is spent.

The biggest question about the contract, which can now be viewed on the council website, is why on earth it took so long to get to this stage when lawyers for both sides must have been aware months ago that they would end up putting a black marker pen through anything with a £ sign in front of it.

Even the formula for calculating the charitable payments Service Birmingham makes each month from its profits is redacted. That is odd since this cash has been used in the past to help run the Town Hall and the City of Birmingham Symphony Orchestra, and you may think that Capita would want to be positive about such generosity.

It is still worth looking, and wondering in amazement, at this contract, or contracts, which run to many hundreds of pages. Has such a testament to the handiwork of the legal profession ever been witnessed in Birmingham before?

Even in their censored state, though, the documents provide some important detail about the agreement the city has with Service Birmingham to provide ICT services, run a call centre and administer the council wages bill up until 2020.

That agreement costs taxpayers about £126 million a year – or, £345,000 a day – and must be viewed in the context of severe cuts in government funding that will require Birmingham city council to cut spending by about £300 million over the next two years.

During last year the council passed the £1 billion landmark in the amount it has paid to Service Birmingham since 2006. Service Birmingham’s operating profits were £60,000 a day in 2012, with 98 per cent of the company’s dividends being paid to Capita.

The cost to the council of hiring Service Birmingham may be reduced by £20 million following a renegotiation of the contract. A report detailing the revised contract was to have gone to a cabinet meeting this month, but has been delayed for a month to consider Capita’s “final proposals”.

The issue for the Labour group is simply whether a better service could be provided at cheaper cost by someone other than Capita. There can be no proper answer to this question until it is clear how much compensation the council would have to pay Capita for terminating the contract.

It is clear from the published documents that the council can cancel “at will” the contract by giving 60 days’ notice. It’s also emerged that a six month transition period may be put in place, requiring Capita to work alongside a new provider to ensure there is no sudden loss of service.

So the process for terminating the contract and hiring an alternative provider is clear and orderly.

When it comes to the compensation to be paid to Capita, the formula for working out the final figure has been published in redacted form. Termination compensation costs are detailed as outstanding council asset amount + written down asset value + lost opportunity value + breakage costs. But charts setting out lost opportunity value and agreed price reduction on a year by year basis are blanked out.

Details of the charges for Capita’s services are also redacted, as are the contact centre charges. This is important since several variations of the contract since it was first awarded by the city’s former Tory-Liberal Democrat coalition have reduced the ‘core’ services provided under the agreement, ostensibly to save money. But the result of this was a sharp increase in the cost of one-off non-core service work carried out by Service Birmingham.

Clearly, given the existence of a termination formula, it is possible to calculate a figure for compensation. Deputy council leader Ian Ward was correct when he said the contract does not state a figure for compensation, it does though set out an agreed way in which such a figure can be calculated.

As to what that figure might be, my understanding is that the council and Capita are miles apart when it comes to agreeing, with estimates ranging from about £20 million to £80 million.

The man behind a campaign to force the council to publish the Capita contract, Professor David Bailey from Aston University, is clearly not giving up. For an academic, Bailey has a knack for populism and has noted that the £345,000 daily fee paid to Capita is actually more than the value of footballer Wayne Rooney’s new contract with Manchester United.

He claims redactions in the published contract have little to do with commercial sensitivity and are instead designed to hide payments to Capita that the public would find objectionable.

Bailey said: “I will continue to challenge the redactions, as the redacted, hidden-from-view bits will, I have no doubt, be spurious – not commercially sensitive, but commercially and publicly embarrassing.

“It will take some time to go through the contracts, but on the basis of previous behaviour by Capita, they will be forced by further public pressure to remove much of the black-marker they’ve put all over the documents.

“It’s time for the piper to pay the tune. The citizens of Birmingham pay for this, not the council. They should see the contract in its entirety with only personally sensitive data removed.”

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