columnists
Bringing troubled contracts in-house requires skills Whitehall is already struggling to recruit
OPINION Capita's share price tanked 9 percent last week after it told investors it was taking a hit on its contract with the UK government's Civil Service Pension Scheme (CSPS), which has left some of its 1.7 million members unpaid following a disastrous launch. A trading update said operating profit would be down between £25 million and £40 million in 2026 as a result. Sage voices were soon on hand to calm fears, though. "The scale of the reaction sits oddly with the contract's modest financial weight," said Ian Lyall of Proactive Investors. The hit to revenue was "a sliver of Capita's roughly £2 billion turnover." For the first four months of the year, Capita reported £750 million of total contract value won, up 20 percent on a year earlier. "For now, there is no sign that reputational damage is denting that momentum," Lyall added.
The assessment that Capita's CSPS troubles may barely dent its long-term prospects will be of little comfort to scheme members left struggling to make ends meet. But they do suggest the wider problem.
In the House of Commons last week, Minister for the Cabinet Office Nick Thomas-Symonds said the Capita CSPS contract "could be a prime candidate for insourcing in the future."However, he also admitted that option would have to wait. "If I were to terminate the contract straightaway, that would clearly cause severe disruption to the payroll. I cannot replace a complex pension operation overnight," Thomas-Symonds said. So, for now, the government is stuck with Capita, and its performance will be of concern on other contracts. It has a deal to work on CSPS cases to provide the so-called McCloud remedy removing age discrimination from public service pensions. That work is expected to be completed by March next year, through a separate contract at an additional cost of £45 million.Then there is the promise to take over running finance and HR services for the Department for Work and Pensions (DWP), Ministry of Justice (MoJ), Home Office, and the Department for Environment, Food and Rural Affairs (Defra). Its £370 million contract win is being challenged in court by rival bidder Sopra Steria, which alleges the winning bid was "abnormally low" and based on staffing "significantly below the current levels."At the time, Capita told The Register it had taken part in a robust procurement process and stood ready to work with the DWP to ensure value for money. A DWP spokesperson said its priority was continuity of service and value for money for the public.Nonetheless, concerns about staffing levels echo the CSPS contract. In October last year, a report from Parliament's spending watchdog said Capita planned to employ 332 staff on the scheme, 33 less than the previous provider, MyCSP. The Public Accounts Committee (PAC) report said estimated resourcing levels assumed that "more automation and increased functionality of its IT system will require fewer staff."Speaking to the PAC last week, Government Chief Commercial Officer Andrew Forzani said Capita made a series of commitments about its ability to deploy technology and automate the service as part of the selection process.Chris Clements, managing director of Capita Pension Solutions, said that Capita employed additional staff in a "surge" before go-live "because we identified that some of the technology was not going to be there on time."
