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Capita has now signed its largest ever contract, the £1.7bn 20-year education support services contract with Staffordshire County Council (see Staffordshire £1.7bn megadeal Capita’s largest ever).
Capita was awarded preferred bidder by Staffordshire in late November, and then the deal was approved by the council's cabinet in early December. Now Capita will begin the real work and transition 3,800 council employees to the new joint venture company from 1 April, 2013.
This contract is a big gamble for Capita, which is not only making a significant £24.9m upfront investment (Capita's total investment will be £31.5m) but also because the scope of the deal is so broad, taking Capita into areas such as catering, ground maintenance and even performing arts. This is far outside Capita’s core knitting in IT-enabled BPS, and takes it firmly into the territory of true support services providers like Serco and Interserve.
For Staffordshire, Capita's investment will be reinvested in a wide range of council projects and services including education, care for the elderly and looking after children in care. The deal is also going to ensure that around 4,000 existing jobs are protected, and an extra 1,600 are created.
Capita really needs to make this JV work. Its sheer size and scope makes it high profile in the market and material to Capita at c3% of annual group revenue. This will ensure that the spotlight remains firmly on how it progresses.
A key determinant will be how successful Capita is establishing a national education support services business, which sells services to other local authorities. Capita is targeting £2bn in new revenue from the JV over the next ten years - equivalent to £200m per annum. This seems hugely ambitious to us given the reluctance among councils to share services on a large scale.