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More questions than answers for Councillor Ward over Service Birmingham

More questions than answers for Councillor Ward over Service Birmingham

🕔16.Oct 2013

The first thing that stands out in Cllr Ian Ward’s ‘Council continues to challenge Service Birmingham’ piece (Sub Ed note: link currently unavailable) in the Birmingham Post last week was that at no point did Cllr Ward challenge the headline that Service Birmingham stacks up £58,000 a day in operating profits (or that we’re paying for them). He can’t of course, as it’s a fact.

Also a fact is that, in the 3 years from 2010, £34,000 per day was paid out simply in shareholder dividends to Capita Business Services Limited. And next to nothing (if, indeed, any) to the other supposed shareholder group, the citizens of Birmingham.

But he does, perhaps unknowingly, let a few Capita cats out of the bag, and his response raises more questions than it actually answers. In fact, given that Mr Ward is so keen to defend the Council’s record on this front, here are 4 initial crucial question areas that I feel he must now answer, all arising from his piece. I shall ask further questions in due course.

1. Will the Service Birmingham Contract now finally be published so the citizens of Birmingham can see exactly what their net £342,000 per day is being spent on?

Cllr Ward keeps asserting that critics are not in possession of the facts and so are not in a position really to comment. You bet they are not in possession of the facts, Cllr Ward. Because you refuse to let them have the facts.

All we have to go on (and all I have commented upon) is what is allowed into, or cannot avoid being in, the public domain due to a cosy conspiracy of commercial and political secrecy. But those which are in the public domain at least raise the question as to whether things are working here.

Significantly, Barnet Council (of EasyCouncil fame) has placed its big outsourcing contracts with Capita in the public domain. Capita has waived its rights under those contracts to commercial confidentiality (and waived its rights to redact all but the most personal of details).

If it’s good enough for Barnet, Cllr Ward and Capita, why not Birmingham? I challenge Cllr Ward to put the contract on the web so we can properly start to understand it in the depth that Cllr Ward asks for. Until then, you Cllr Ward can’t criticise us for not being in possession of the facts as a defence for inaction.

2. Can the Service Birmingham Contract be cancelled early? Does it require cause (or fault) to do so? Or may it by terminated by either party at will? Upon what notice period and with what exit fees? Most commercial contracts provide mechanisms for early termination and its consequences and I am sure this one will. Can BCC cancel on, say, 6, 2, even 1 month’s notice?

It appears to be a councillor’s mindset that the world revolves around municipal years and annual April budget setting. But as this is a commercial contract, a cancellation can bring benefits in-year. There’s no need to wait until the next municipal year to dump unviable commercial contracts, Cllr. Ward. Cancel a contract in October and you’ve saved half a year’s municipal spending – in year.

An inordinately long time has passed and is continuing to pass without dealing with the sheer massive ongoing cost of this contract. And every day that goes by costs; £342,000 a day, in fact, on this contract. It ought to have been the first item of business in stripping spending out of Birmingham City council in response to austerity cuts and rising costs. We are told that a review took place last year and another one is taking place this year. Yet the contract remains in place.

There seems undue languor and relaxation in dealing with this. Especially so in comparison with the tremendous haste and urgency in seeking to deal with other areas of the council’s own spending. The elephant in the room has been pretty much left to sit there.

As a Birmingham citizen I do not have access to the Capita contract so can only guess what the exit fees might be. But with a core ICT contract of say £60m, as a very rough rule of thumb one might estimate that exit fees could be between a third and a half of this figure, hence my back-of-the-envelope estimates of £20m to £30m. Am I right? Unless the citizens of Birmingham know how much it will cost to get out of this contract how can they determine whether the outcome of a review in relation to the Service Birmingham contract is robust? Are we simply to take it on trust? That’s simply not good enough.

3. Has there been detailed and proper succession planning in order to strengthen negotiation or to allow for the practical possibility of cancellation and handover to others?

It is a poor negotiating position on behalf of the citizens of Birmingham to lead the other side of the contract to believe that it would be far too difficult to cancel the contract. Cllr Ward really should not have said that. Surely any skilled negotiator would have a number of fall-backs and have planned for a number of contract succession positions. Business professionals do it all the time.

To paraphrase Bevan, Cllr Ward, are you going naked into the negotiating chamber? If you haven’t got a succession plan, get one right now.

Under your own logic, Cllr Ward, if there’s no Plan B here, we’re stuck with Plan A, regardless.  And Capita can stick to the generous terms of the contract knowing that wolf is being cried. Plan B should have been made ready months ago, probably last year. To say cancelling a contract is not easy is rather a ‘given’, Cllr Ward, and at no stage did the Post or I suggest that it was.

4. How much is actually being spent on the Capita Contract? Upon what and to whom?

I was careful in my last Birmingham Post blog to point out that the £120m net spent last year (a sum confirmed by Stephen Hughes in April) was spent on ICT and other things such as business transformation, not just on ‘core ICT’. The actual invoices paid by BCC last year were £145m. Steven Hughes in April said Core ICT was just over £60m of this. Cllr Ward specifies figures of £20m on the call centre and billing, and £13m on Schools. We can assume they were similar in 2012. So what were the remaining £50m in invoices actually spent on?

If they were all ‘one-offs’, then for the last 5 years there must have been at least £50million in ‘one-offs’ each year, and counting. If you keep repeating ‘one-offs’ annually, they cease to be ‘one-offs’, by definition. They are hardwired into the contract.

Were the obviously large amounts spent on the New Library of Birmingham extra to the reported £189million spent, or part of that? Did the Library have no choice but to use Service Birmingham?

Answers on the above would be very welcome. There is urgency in dealing with this one way or the other, and I sense no urgency. Cllr Ward said that he set about this as soon as he came into office. And the contract remains pretty much intact 18 months later. And that’s £31million in profits and £18million in dividends to Capita in the meantime.

Professor David Bailey works at the Aston Business School.

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