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Capita has won a potential £40m four-year contract with the UK Borders Agency (UKBA) to assist it find and deport illegal immigrants from the UK (see press reports here and here), of which there are apparently some 174,000. Capita beat three other companies for the contract, including Serco, which had been involved in the original pilot.
This is a controversial and high risk contract for Capita to be taking on. UKBA is contracting with Capita solely on a ‘payment by results’ basis. According to UKBA CE Rob Whiteman: ‘Capita will be paid for the number of people they make contact with, and leave, and that's purely on a payment by results basis. If nobody leaves because they make contact with them, nobody will get paid’.
Payment by results is a form of outcome-based contracting, by which the client has an expected outcome (i.e. removal of immigrants), and the suppliers’ revenue is wholly dependent on achieving this. However it’s not clear how this will work in practice, since there could be many mitigating factors, such as legal challenges, that could thwart removal of immigrants - in which case will Capita be paid for its services? It is also unclear how Capita will actually find these people. Presumably existing databases and search procedures won’t be much use.
The contract highlights how much more innovative BPS suppliers have to be now in their contracting with the UK public sector. In the conversations we have with suppliers they tell us it is now impossible to get a deal in the public sector without some kind of payment by outcomes. This is largely the case in the private sector too, and points to the death of revenue certainty in BPS deals.
Suppliers need to be prepared to take on more risk, and staff up and down services according to demand. We discuss the implications for suppliers of these new contracting models in our new BusinessProcessViews research BPaaS in the UK: managing the opportunities and risks and UK Business Process Services Supplier Landscape, 2012.