In May, Capita stated that some of its hottest opportunities were in the local government sector (see Capita: slow but improving picture). In an example of how Capita is using its muscle to gain a larger share of spend from its existing customers, the Group has announced that is has been selected as a preferred bidder by the London Borough of Lambeth for a new “collaborative partnership”.
Capita has counted the London Borough of Lambeth as a client since 1997. Its existing deal covers revenue collection, and, according to Capita, council tax collection rates have improved from 78.6% to 94.6% over the life of the contract. The new contract will result in Capita expanding its activities with the council to cover management of the Council’s call centre operations, ICT support services and a benefits resilience service. By expanding the contract, Capita is proving the logic behind its recent acquisitions of Sungard Public Sector (see Capita snaps up Sungard Public Sector), which added local government ICT managed services capabilities, and Call Centre Technology (see Capita acquires call centre partner). Capita projects that the council will achieve savings of more than 16.5% or £10 million over the life of the new partnership and generate an additional £5 million in council tax revenue.
The contract is expected to be worth £60 million over ten years with an option to extend for a further five years. The Council states that Capita’s proposed service model is “flexible and scalable over time, meaning it is future proofed for the way people communicate with us”. It also appears the contract is being constructed to allow the possibility of offering the services to “third parties” over time. Widening the scope of the contract could result in it being worth an additional £300 million. However, our analysis of the local government market (see UK local government: progress in shared services) would indicate that the ‘sharing’ of services (with Lambeth & Capita as the ‘sellers’) is by no means guaranteed.
The word “partnership” is often overused. However, in this case, Capita has committed to allocating £500K from its Community Development Trust “to provide targeted support for Lambeth residents including mentoring, training and employment opportunities”. Capita also states it is investing £6.5 million in new technology over the course of the contract (we assume, though, that this will be reusable across its other local government contracts). With an increasing number of IT and business services providers targeting the 'hot' local government market, many suppliers are looking to differetiate their offerings to win deals. Few, though, can beat Capita when it comes to experience of the sector.