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Having announced preferred bidder status on a £320m IT/BP deal at Barnet Council last week (see Capita beats BT at Barnet), Capita has secured preferred bidder status on another, even bigger deal for education services at Staffordshire County Council, which could well be the largest in its history.
Worth some £85m per annum over 20 years, Staffordshire's TCV stands at £1.7bn. This will make Staffordshire a new ‘material’ contract for Capita, worth c3% of total group annual revenue. Welcome news for the UK BPS market leader following its loss of the other material contract recently at the Criminal Records Bureau to TCS (see TCS ousting Capita at DBS changes everything). This deal is twice the annual value of Capita’s current CRB contract, so should more than make up for the shortfall next year.
The deal itself is waiting approval from Staffordshire council’s Cabinet on 5th December. If it is given the green light Capita will then pay £24.9m in year one to take control of a new joint venture organisation, and then invest a further £6.6m over the following 3 years. It will also see some 3,800 staff transfer across to the JV, presumably under a secondment model.
Capita will then assume responsibility for delivering educational support services to schools and academies in the Staffordshire region, and create a ‘national education support services business’, which will seek to win work with other local authority, school, academy and further and higher education clients. Capita said the JV is targeting £2bn+ in revenue in the first ten years.
That £2bn figure seems very ambitious. Even including current spend with Staffordshire the JV will need to generate £115m in additional third party annual revenue to hit this target. Without any firm evidence of interest from other authorities it’s hard to believe that is achievable – certainly we seen very little evidence of similar shared services programmes taking off anywhere near to that degree. There is sure to be plenty more on this as the detail comes out over the coming weeks and months.