back to article UK gov grilled over massive exposure to struggling outsourcer Capita

The British government has received a grilling over its exposure to 1,000 plus Capita contracts, following a pre-tax loss of £515m reported by the outsourcing giant yesterday. In an urgent question to the House of Commons on Tuesday, Lib Dem MP Vince Cable drew the inevitable comparison with collapsed outsourcing provider …

  1. Blockchain commentard

    MP's obviously don't read el Reg - I thought Crapita was their real name!!!!

    1. Anonymous Coward
      Anonymous Coward

      "MP's obviously don't read el Reg"

      Private Eye have used that name for as long as I can remember

    2. Aebleskiver

      It's increasing in popularity... http://www.echo-news.co.uk/news/16180590.Giggles_as_MP_uses__Crapita__nickname_in_parliament/

      1. This post has been deleted by its author

      2. Anonymous Coward
        Anonymous Coward

        Time for a rebrand ?

        Please list below.

  2. Adrian 4 Silver badge

    babes

    I think there are a lot of habits I wouldn't want 6-year-olds copying from parliamentary discussions, the least of which is probably their language.

    Though sometimes I wonder if the MPs have been imitating the toddlers.

    1. IsJustabloke
      Trollface

      Re: babes

      "Though sometimes I wonder if the MPs have been imitating the toddlers"

      Seems unlikely because there's no signs of maturity in the MPs

  3. Joe Montana

    No new contracts?

    If they cancel any existing plans they might have had for new contracts, that will only hasten the demise of capita...

    There is ALWAYS a risk of suppliers failing, and a sensible exit strategy should be a standard requirement for any contract or procurement... Sadly this is almost never the case, as suppliers want to keep their customers locked in - not make it easy to migrate.

  4. nuked

    Cue bailout

    1. Anonymous Coward
      Anonymous Coward

      The shareholders have already took their money so that is usually the way.

      http://www.hl.co.uk/shares/shares-search-results/c/capita-plc-ordinary-2-115p/dividends

      Let the grand fleecing begin.

  5. Anonymous Coward
    Anonymous Coward

    Threat posed by failure of Capita?

    Threat to who?

    If Crapita were to fail, there'd probably be very little visible difference in service delivery in the short term in many places. The people forced to endure Crapita's alleged "services" would probably survive, and indeed the money saved by not having to pay for Crapita's alleged "services" might allow some restoration of unfashionable concepts like real "customer service" and maybe even "an honest day's work for an honest days pay (exclusions apply, please refer to our privacy policy on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying 'Beware of the Leopard.".).

    I write this as a former ratepayer in Birmingham, where once upon a time the Birmingham Post and Mail (a newspaper, for those who remember them) did a lot of digging to try to expose the truth of the City Council's joint venture with Crapita, and allegedly contributing to the eventual early termination of the Service Birmingham fiasco.

    https://www.birminghammail.co.uk/news/business/councils-controversial-service-birmingham-company-13916249

    1. James 51

      Re: Threat posed by failure of Capita?

      Everyone is going through PIP with them for a starter. They would get nothing until the mess was sorted out. Probably after being made homeless and their health suffering from the stress.

  6. Anonymous Coward
    Anonymous Coward

    Not just "Crapita"

    Also known in some circles as "Catheter" as they take the p*ss...

    1. Anonymous Coward
      Anonymous Coward

      Re: Not just "Crapita"

      That's a new one on me, I like it! It's just the Army either, it's the same in education.

  7. Crisp

    "Much hilarity ensued"

    I guess it must be funny if it's not happening to you and it's not your money that's getting wasted.

  8. Anonymous Coward
    Anonymous Coward

    a possible plan B

    Pray for plan A

    1. Rich 11

      Re: a possible plan B

      Pray for plan A

      In other words, a further application of the Brexit Doctrine.

  9. anothercynic Silver badge

    Aaaaaand...

    ... There we go. I guess someone in the HoP has *not* yet forgotten Carillion. I'm pleased.

  10. TseTT
    Coffee/keyboard

    Same old...

    But don't worry, with their snouts deep in the trough at the top, will still do very nicely out of it whatever the outcome.

  11. Chris G

    Maybe

    It's time to remodel Thatcher's economic experiment, after thirty odd years of CCT or whatever the current buzzword is for outsourcing, expecting a service provider to offer a better service more efficiently and cheaper than in house while still making an acceptable profit has pretty much been debunked. The only winners are those who have gained villas in the sun and CEOs who get inversely proportionate bonuses to the losses made.

    1. Rich 11

      Re: Maybe

      Let's not forget that the lower tiers of former public servants now employed on rolling Crapita contracts have suffered from a reduction in salary and a worsening of terms of employment over the years, even in comparison to their former colleagues who have barely seen a pay rise since the imposition of austerity eight years ago. Not only is the taxpayer paying for poor results, but we're also obliged to top up the earnings of many of the increasingly lower paid through working tax credits and the like.

      The system is screwed from beginning to end -- unless of course you're a Tory grandee with time and money to spend dabbling in the Stock Market to boost your wealth, in which case it's working wonderfully.

      1. Long Time Gone

        Re: Maybe

        Over the years I have been involved in a lot of bids where the point of the outsourcing contract was to 'modernise' an IT department that was clearly failing to deliver for the business. We can argue why that was (weak IT management, CFO in charge of IT etc.) but it has been one of the drivers.

        Of course the expectation is that contract winner is the bidder who can deliver it at the lowest cost - service, quality, cost - pick two. That equation never changes.

      2. Anonymous Coward
        Anonymous Coward

        Re: Tory grandee with time and money

        "a Tory grandee with time and money to spend dabbling in the Stock Market to boost your wealth,"

        Or dabbling in the property market, as recently reported in various usually loyal Tory media.

        http://www.dailymail.co.uk/news/article-5536123/Jeremy-Hunt-slammed-setting-buy-let-business.html (23 March 2018)

        https://www.thesun.co.uk/news/6040937/jeremy-hunt-property-firm-broke-rules/ (13 April 2018)

        https://www.telegraph.co.uk/politics/2018/04/22/jeremy-hunt-saved-100000-tax-bulk-purchase-seven-flats/

        And of course it's only an accidental oversight. Except he has been at it for years:

        https://www.telegraph.co.uk/news/politics/9232692/Jeremy-Hunt-avoided-more-than-100000-on-property-deal-weeks-before-the-election.html (article dated 27 Mar 2012)

        "The Culture Secretary was paid a dividend by the company he founded in the form of half the firm’s office building. The offices were then immediately leased back to the same company.

        Accountants say that the deal allowed Mr Hunt to legally reduce his tax bill by more than £100,000 because it was completed completed just days before the tax on dividends rose by 10%. "

        There you have it. Actions speak louder than words, rules are for the little people.

        Maybe this time round it's not going to be just James Naughtie who's calling the former Culture Secretary by his real name in public:

        https://www.youtube.com/watch?v=YS5mVoqJpUk (6 Dec 2010)

  12. Anonymous Coward
    Anonymous Coward

    I was fairly sure they did a lot of local government stuff too

    not just the big stuff for central government.

    It exists purely to reduce the apparent size of government and give a few friendly shareholder divvies at our expense.

    1. Terry 6 Silver badge
      Unhappy

      Re: I was fairly sure they did a lot of local government stuff too

      Barnet

      AKA London Borough Of Crapita

      1. Anonymous Coward
        Anonymous Coward

        Re: I was fairly sure they did a lot of local government stuff too

        West Sussex too. Ask how I know :(

    2. Dr_N

      Re: I was fairly sure they did a lot of local government stuff too

      As part of the years of austerity, one wheeze Crapita has had is to ink deals with local authorities whereby they get a percentage of the cuts... errr I mean "savings" they suggest to be implemented by the authority.

      Trebles all round!

  13. Paul Johnson 1
    Holmes

    Core competence: getting contracts

    The idea behind outsourcing something is that instead of a government department bumbling its way through, costing whatever it managed to spend, you get a specialist company doing it and bidding in a competitive marketplace to keep prices down and quality up.

    This is a nice theory, but in practice it isn't working. When you look at companies like Capita, they are obviously not specialists in any of the things they get paid to do. What they are really specialists in is navigating the complex world of government procurement and jumping through all the hoops in the bid process. Since you need to be a big company to do this there aren't many of them around, so its not surprising that the same few names keep cropping up in government outsourcing contracts. Because there are so few there is no real pressure on prices, and quality is measured by short term numerical targets rather than long-term desirable outcomes, so the desirable outcomes tend not to happen either.

    1. sandman

      Re: Core competence: getting contracts

      You missed out an obvious advantage though - any failure can be blamed on the outsourced provider, not the government department. You'll see the same policy with regard to local councils. Central government hives off responsibility for something like social care to local authorities and makes it a legal obligation, but then cuts their grants. This results in other services being cut, but it's the fault of someone else, not the government.

    2. neilfs

      Re: Core competence: getting contracts

      Whilst said specialist companies make a choice:

      1) make do with small scraps of work, unable to compete for complete contracts.

      2) become subcontractors for the likes of Crapita, told what to do, how to do it and for almost below cost. Specialism is completely thrown out of the window.

      Tendering was great, it served a purpose to ensure best value was gained in a transparent and corrupt free way until frameworks and unrealistic financial requirements put many and then almost all contracts outside of their reach. Frameworks have made the system corrupt by design, only a select few ever win the contracts, like actually having a real money tree.

      What amazes me is how can they be struggling financially?

      1. Terry 6 Silver badge

        Re: Core competence: getting contracts

        There's the real question. Crapita (or other) outsourced services are generally terribly, inflexible and inadequate. They charge for everything outside a tight contract, which they get paid for. No money seems to get saved or freed up for other services, which are closing ( libraries etc) and they still can't make a profit.

        Clearly not the people to arrange a pi** up in a brewery.

        1. Anonymous Coward
          Anonymous Coward

          Re: Core competence: getting contracts

          >They charge for everything outside a tight contract, which they get paid for

          And since the contracts are derived from the Government frameworks, the end-user body generally has very little room to negotiate changes to it.

          Some might speculate that those contracts were written with the assistance of the outsource companies in order to maximise their profits. I couldn't possibly comment.

          1. Terry 6 Silver badge

            Re: Core competence: getting contracts

            were written with the assistance of the outsource companies in order to maximise their profits.

            I'm sure they were. For starters the commissioning bodies are usually pretty clueless and need help from someone. And who else is there?

            Which makes their failure to make a profit even more damning.

      2. Anonymous Coward
        Anonymous Coward

        Re: Core competence: getting contracts

        >What amazes me is how can they be struggling financially?

        If they are anything like our current crop of outsourcers they:

        1. Bid too low on the initial tender, knowing that 35% of the scoring is based on price alone.

        2. Once the tender is won, put the minimum resources into the contract since as the consequence of (1) they can't afford to do otherwise.

        3. Complain to us that they are not making any money.

        4. When we are unsympathetic, try to convert anything and everything into a 'project' (ie, something that they can charge lots more for since it's outside the 'framework'

        5. Will eventually lose the contract come renewal time as a direct consequence of {1,2,3,4}. Unfortunately, all the other outsource companies on the framework are playing the same game since most of the poeple running them learnt their trade in one of the big outsourcers, it's 'welcome to the new outsourcer, same as the old one' and the whole grim fandango starts again.

        Makes me nostalgic for the old days where only very specialist stuff (like WAN provision) was outsourced and everything else was done in-house. But, since the beancounters are in charge now, that's not going to happen again.

  14. Wolfclaw
    FAIL

    I bet Crapita have already started a refinance initiate and job culls in the pipeline and when that all fails, cap in hand to government with some vague story of massive disaster to staff pay packets and contracts going tits up !

  15. Anonymous Coward
    Anonymous Coward

    Race to the bottom

    As someone who works for an organisation who provides BPO and IT outsource services (and don't forget this can range from global organisations to a sole trader who provides backoffice services like HR to small organisations), one of the biggest problem is that most contract decisions are based solely on price. Large amounts of time and effort are taken developing estimates of the service needed to support the proposed contract and the number of people needed to deliver it properly.

    This then gets shaved down to fit the 'win price' that it is thought that the client wants to pay. Now all that is fair enough, this is a business deal, and any outsource provider will be looking to provide efficiencies in delivering that service, sometimes sharing them with the client, so building that into the up-front cost is a reasonable decision, as long as the numbers add up. Downselect follows downselect until you are in the last 2 or 3.

    Unfortunately it is at this point that one of the bidders often 'drops their trousers' and lowers the price by a massive amount, in some cases i have seen them go below what internally we think it will cost us to run the service. Often this is an attempt to 'buy business' - I have seen Indian pure plays doing to to get a foothold in the market, while others (and I would include Captia in this) do so to win work. Clients have told me in post bid that our bid price was good, their experience with lowest cost providers in the past has been terrible, but because x has dropped their price by £y million they had to chose them.

    Cue a bad service made worse by everything being change-controlled to death. I wish I had an answer but as long as price is the prime reason for choosing an outsource contractor then you get what you pay for (literally).

  16. Anonymous Coward
    Anonymous Coward

    Crapita was always terrible

    I worked with their IT security team (which was SC cleared) and both the way they treated their staff and customers was horiffic. They wouldn't pay vendors for support, they never gave staff pay rises and their usual answer for missing staff was to hire temporary contractors which likely cost a fortune.

    Case in point, we had issues with an old Checkpoint firewall that caused a P1 outage - our manager had to get the corporate credit card to pay Checkpoint for support to fix the issues - all while NHS services were down for a good day.

    Their services are crap as they treat their staff like crap, all while having more directors and managers than front end support staff. I know before I left we had 3 staff working 9-5 normally and supporting two data centers and at least 15 seperate contracts, not once were we thanked but they were always quick to critisize when you made any mistakes - partly as that was their excuse for not giving out pay raises.

    Trust me they deserve the name Crapita, all the staff still stupid enough (or stuck) working for them know of the name - same also goes for the spinoff Updata (the network part that actually makes good business they seperated to remove them from the crappy Crapita name).

    Crapita does everything on the cheap, cheap service, cheap to staff, and actually factor in SLA payments in the contract as they know they are crap.

    Of all the companies that deserve to die - Crapita is one of them. I just feel for all the staff that will lose out as they don't deserve it as they try to keep the monster working, even if the directors and shareholders have bleed it dry.

    1. 0laf

      Re: Crapita was always terrible

      I knew someone who worked for them and her stories backed that. "Good people, Shit company" was ger general comment.

      also Crapita has a lot more than 1000 contracts, that will just be the central government biggies. They also run many critical services in councils as a monopoly supplier. And they run them as a monopoly, gouging prices and not providing support and effectively putting entire organisation at risk because they refuse to maintain products beyond the minimum. Even where legally required.

      1. This post has been deleted by its author

  17. Terry 6 Silver badge

    By way of example

    According to the Barnet (pdf) https://barnet.moderngov.co.uk/documents/s19249/DPR%20Award%20Public%20Report%20v5F%20Nuisance%20Vehicle%20Contract.pdf record posted online for it's abandoned car contract only one company tendered.

    The criteria for judging tenders was 40% quality 60% cost ( not even 50/50 ) But in fact the winning (only) tender scored just 28% quality and 40% on price ( I have no idea how that is evaluated - 40% of what ?)

    When we ( a community run Barnet service operating out of a Barnet building, ) tried to report a vehicle abandoned in the slip road outside our door they said they couldn't remove it because it wasn't on council property and that the responsibility was ours. They wouldn't listen to our trying to explain that a) the slip road was a piece of Barnet roadway complete with Barnet pavement, Barnet bins and Barnet signs b) that it was not part of our building and C) It was a Barnet building anyway. They just didn't want to know. It was pretty obvious that they were working hard to avoid dong the job they were contracted to do. Not Crapita this time. But it tells you how the system works .

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