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Service Birmingham chairman trashes his own company

Service Birmingham chairman trashes his own company

🕔13.Dec 2012

Birmingham City Council’s private sector IT provider is enjoying profit margins two and a half times greater than set out in an initial agreement and can expect to be paid almost £1 billion over the remaining nine years of its contract.

Service Birmingham, the Capita-led company responsible for transforming IT services, running the council call centre and operating the local authority pay roll, is able to charge for hiring consultants at up to £2,000 a day – while ensuring it profits by adding a 17 per cent mark up to the council’s bill.

Details of Capita’s contractual arrangements have been revealed by Service Birmingham chairman, Labour city councillor Barry Henley, a computer expert who was appointed to the post in May.

Cllr Henley, a longstanding critic of Service Birmingham’s performance, disclosed that the 17 per cent mark up even applied to refreshing software “for which they are already paid for support in the original contract”.

The mark up meant that Service Birmingham had a “perverse incentive to inflate work, delay the project and do it by the most expensive route,” he claimed.

He added: “When the council buys some new computers we send an invoice to Service Birmingham, they send it back with a 17 per cent mark up and we have to pay the bill.”

Cllr Henley said: “I cannot divulge the margin made by Service Birmingham, however as Chair I authorised the payment of a substantial dividend to Capita which was generated because the business does not break even as envisaged in the original contract at year six which is where we are now but is profitable through margins over two and half times higher than the original agreed financial model.”

He released a 2,000-word analysis in response to Labour’s health check into Service Birmingham, which was conducted by the Best Practice Group. BPG concluded that Service Birmingham had broadly given value for money although its relationship with the council had broken down with mistrust on both sides.

Cllr Henley was careful to stress that all of the information contained in his report is publicly available, either through the council’s accounts or from press statements issued by Capita.

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