Service Birmingham is dead, but Capita and Birmingham give it another go

Profile picture for user slauchlan By Stuart Lauchlan June 26, 2017
Birmingham City Council is set to sign off on a new deal with Capita today as the lessons from the now-terminated Service Birmingham are taken onboard.

Birmingham's Bullring

Plus ca change, as the saying goes. Last month Birmingham City Council decide to wind up its long-standing Service Birmingham partnership with Capita, one of the most high-profile outsourcing deals in UK local government, three years earlier than its contract was due to end.

Having already intimated that it intended to carry on working with Capita in some form to support core digital services, it’s perhaps no surprise then that the two have now announced a new formal relationship that heads to the council's cabinet for approval today.

Service Birmingham dates back to 2006 when it was set up to run the city's ICT, council tax collection services and, at one point, its call centre operations. But the running costs of the joint venture caused concern as did a number of controversial decisions. Pain points included:

  • In its first six years, Capita was paid £6 billion.
  • In 2011, Capita attempted to offshore Service Birmingham IT developer roles to India, a decision which was reversed at a cost of £1 million a year to the council.
  • In 2013, it was alleged that Capita charged the council’s catering provider £7,000 a year for a single computer.
  • The council also faced a bill of £1.2 million to develop a new website for the new Library of Birmingham, as well as ongoing running costs of £190,000 per annum.

The current Labour leader of the Council John Clancy was a long-standing critic of the Service Birmingham set-up, dubbing it a “Rolls Royce contract” that wasn’t appropriate in a time of cutbacks and austerity. So the early terminaton of the deal is hardly surprising. He told the Birmingham Mail:

I made it clear upon becoming council leader we could not continue to spend a vast amount of money on ICT given the tough decisions that have to be taken about cutting spending in other departments. This agreement means that Birmingham City Council will have more to spend on frontline services and to deliver key policy priority pledges on inclusive growth, housing and social services. It is intended to bring about 200 Capita employees back to the city council and we are also committed to putting future ICT projects out to the market so that Birmingham and West Midlands companies can bid for the work.

For its part, Capita took the news of the early end of the contract with public grace:

To enable Capita to support the council's further cost savings objectives, we have jointly worked up a proposal to reshape our commercial arrangements to allow greater flexibility to better cater for the future needs of the council and its residents. The proposal, although keeping the core services contract in place until 2021, allows for the joint venture arrangement, which has some commercial restrictions, to be dissolved.

That said, the alternative for the outsourcer could have been considerably worse. Clancy had made it pretty clear that he was prepared just to kill the deal completely. At least this way, Capita was left in a position to reshape an alternative arrangement and keep its foot in the door, which is precisely what has now happened. As Dale Peter of analyst firm TechMarketView puts it:

Whilst far from being ideal for Capita—the Service Birmingham contract has been a lucrative one—it could have been worse. It will still maintain a position at the heart of Birmingham City Council’s digital transformation agenda.

The future

So, with that in mind, a new proposed deal goes before the council for approval today that will keep the core services contract in place until March 2021. The new deal will deliver a mix of services currently provided under the joint venture, plus project based work aimed at providing extra savings, with forecasts of £10 million of savings in the current financial year and £43 million by 2020-21.

So what’s different here? According to the council in the by-now-traditional “lessons have been learned” spiel, what’s changed is that Capita now recognises a need to be more flexible. Councillor Ian Ward, deputy leader of the council, says:

As is widely known, the shape and objectives of the council are changing due a wide range of factors including reduced funding for local government, changes in population profile and an ever-altering technological landscape. Our ICT and digital service needs to support and lead in achieving those objectives, whilst providing flexibility, added value and having the ability to continue delivering a ‘day-to-day’ service whilst making this transition.

This deal will see the council gradually take more control of its ICT and digital strategy over the next four years with Capita and the council working together. Through these negotiations we have been able to secure the savings we need to protect frontline services and start the ball rolling on the process that will enable us to meet the challenges of the future.

The main objective of the new partnership will be to implement the council’s ambious five year IT delivery plan, the ICT and Digital Strategy 2016-21. This envisions six main themes around which ICTD services will be redesigned:

  •  Integrated ICTD services.
  • Digital facilitation.
  •  Insight.
  • Commissioning.
  • Governance.
  •  Innovation.

Source: Birmingham City Council

The strategy document highlights some of the limitations of Service Birmingham, noting:

Our current Operating Model is an ICT centric service with limited Digital Capabilities…Driven by the ICTD Strategy, the requirements for future Council services are being considered as the Council transforms to be a more intelligence driven, agile and leaner organisation…Historically, incentive structures for our commercial relationship with Service Birmingham have been such that innovation has been low, and risk-aversion high.

It also outlines the rationale for creating a combined ICT and Digital strategy:

Every technology with transformation potential starts in isolation and digital is no exception; ICT, customer access, HR, waste and finance etc. each develop a strategy, which then blends into our Business Plan and future Council vision. Typically, an ICT Strategy defines the future use of Information and Communication Technology assets - a Digital strategy focuses on the Citizen experience which results in changes to organisational design, the culture, policies and priorities needed to embed new and emerging technologies. The convergence to one ICTD transformation strategy and associated ICT and Digital Technology roadmaps will enable us to make ‘strategic’ investment decisions, based on agreed objectives and outcomes, as opposed to ‘tactical’ business priorities.

My take

For better or worse, Service Birmingham has been up there with HMRC’s Aspire as high-profile examples of supposedly innovative outsourcing delivery in the public sector. The new deal in Birmingham will inevitably retain the high level of scrutiny that its predecessor attracted. For the sake of the Birmingham council tax payer, it’s to be hoped the the ‘lessons have been learned’ really have been learned on this occasion.