Sheffield extends Capita outsourcing deal

Sheffield City Council has signed an extension of its ICT outsourcing contract with supplier Capita, partly due to costs and disruption which would arise from changing the model.

The council has opted to extend its existing seven-year partnership with Capita, which began in January 2009, by up to a further six years, as allowed by the initial contract.

A report by the council said that moving to a different model would cost the council around £800,000 in 2015/16, which would relate mainly to ICT.

It said: “Therefore, in year one, the proposal from Capital would result in a net benefit to the council of at least £3.1m (£2.3m saving plus £0.8m avoided cost).

“In future years, an alternative delivery model might save slightly more than the minimum guaranteed saving from Capita of £2.7m, but would be unlikely to equal the maximum potential saving on offer.”

The extended contract includes flexibility for the council to approach more suppliers for ICT services at some point in the future.

However, it said that “moving to a multi-source ICT environment at the current time would risk service instability and could undermine front line service delivery”.

In addition to ICT, the contract covers human resources and finance transactions plus revenues and benefits processing.

The extension will have break point every two years after it begins in January 2016.

In an announcement to the Stock Exchange, Capita said the extension will generate additional revenue to Capita of approximately £140 – £170m.

The council report said that ICT performance and stability has been “substantially improved” under Capita.

Across the whole contract, Capita has reduced costs by 30% between 2009 and 2014, it said.

Capita chief executive Andy Parker, said: “The extension of Capita’s partnership with Sheffield City Council reflects our commitment to build on our strong working relationship, and to deliver further significant transformation in the way services are provided by the council. This extension will enable the council to benefit from Capita’s wealth of experience and its capacity to drive innovation and change.” 

Colin Marrs

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