Council set to take IT systems in-house as Capita contract expires

The council’s chequered relationship with the outsourcing giant is finally coming to an end, reports Joe Ives, Local Democracy Reporter

Barnet Council's Colindale office — Barnet Council’s Colindale office

Barnet Council has just over two weeks to finish taking key IT systems in-house after a multi-million pound deal for the services was cancelled.

The “urgent action decision” by the Labour administration came after a deal with Ultima Business Solutions Limited to replace the council’s existing provider, Capita Business Services, fell through.

It comes as the council has been winding down its contracts with Capita, one of the UK’s biggest local government outsourcing services, due to “poor service delivery” over many years. While most contracts had ended by 2023, contracts for IT and customer services were extended until the end of this summer to avoid any disruption to the local election earlier this year.

In February the local authority’s cabinet agreed to begin a “mini competition process” for the IT management contract. Following a procurement exercise, the council agreed in May to replace Capita with Ultima Business Solutions.

The value of the contract, scheduled to begin on 1st October, was set at just under £6.2million for an initial three-year term. An option included in the deal for an additional two-year extension would have taken its “estimated’ total cost to £10.1m

However, in October last year, Ultima Business Solutions announced that it had agreed to a merger with Trustmarque Group, “a leading technology services partner”.

The local authority says that, despite an agreement being reached, the merger contributed to the company seeking to “substantially increase its submitted bid costs post submission and evaluation”.

In response, the council conducted a “service requirement review”, looking into the financial and operational benefits for insourcing its IT services. The review, it says, “confirmed the viability” of doing so.

Part of the reason the council did not go for an in-house operation initially was due to additional pension costs and “concerns about loss of economies of scale in respect of cyber security in particular”.

Speaking at the urgent decision meeting regarding the IT contract on Thursday, 3rd September, Cllr Rawlings explained how some of this reasoning no longer applied. Negotiating a new deal with Capita, the council leader argued, “would have cost more than the in-house option, even taking into account the pensions”.

It was also explained that, in its renegotiation, Ultima wished to make all existing Capita staff redundant “on day one” and to pass the costs of doing so – thought to be around £1m – to the council.

Conservative opposition leader Peter Zinkin said: “Clearly for the merged company to have decided to ask for substantially more money suggests that, on reflection, they didn’t like the risks of the contract at the contracted price”.

Nevertheless, the local authority says that insourcing its wider IT service will “allow the council to retain ownership of its technology operations, priorities and decision making”.

It also hopes that this will “provide clearer accountability, greater control over security decisions and improved alignment” on cyber security.

By reducing “dependency” on an additional company “to co-ordinate or interpret the council’s requirements”, the council says it can, instead, create “a more responsive and flexible approach to managing cyber risks”.

In a report, the local authority explained that, following the decision, it “now has limited time to de-risk the planned transition on 1 October 2026”.

Retaining existing IT staff, currently employed by Capita, is part of the desired outcome. This, the council says, gives it “the greatest level of service continuity, reduces operational disruption” and gives the local authority “flexibility to respond to any transition challenge”.

Deborah Hinde, the council’s executive director for strategy and innovation, has been given authority “to take all necessary steps to deal with the implementation” of the decision.

Hinde has also been asked to “deal with the implementation” of Transfer of Undertakings (Protection of Employment) regulations “for the whole workforce” from its existing supplier, Capita Business Services Ltd.

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