Birmingham council reviews Capita outsourcing contract to find £20m savings

Birmingham City Council (BCC) is carrying out a review of its contract with outsourcing partner Capita to identify a further £20 million in savings.

Under a £1 billion contract that expires in 2021, Capita provides ICT, contact centre and revenues services to the UK’s largest council through the joint venture known as Service Birmingham. The Service Birmingham contract was designed to help the council cut costs and find some of the £300 million a year in savings that it needed to make over three years after the government cut the council’s funding in the 2011 Spending Review.

However, in its latest business plan and budget 2014, published this week, the council said it was facing even more council funding cuts up to 2018, which has led to the council reviewing its outsourcing contract and announcing the loss of 1,000 jobs across the local authority.

Leader of the council, Sir Albert Bore, said: “As a result of the grant cuts and other pressures, we have now had to identify a further £85.7 million of cuts in our budget for 2014-15, on top of the £375 million already made between 2010 and 2014.

“Next year, we will have to make even bigger cuts - currently estimated at more than £200 million over and above the £85.7 million for this year.”

In the budget plan, the council said it is carrying out a “full and detailed” contract review as it aims for a savings target of £20 million in the Service Birmingham contract.

“BCC and Service Birmingham will work together to identify efficiencies in operations and new ways of working that will drive out further savings through reductions in the amount of ICT work, changes to the way in which it is delivered, changes in the level of service quality delivered, new ways of smarter working as a result of emerging and developing ICT solutions,” it said.

“Service demand is monitored closely and will continue to be a method by which the contract amount is minimised.”

One initiative is to ensure that the variable IT costs of the council fall as the number of staff is reduced through redundancies.

“As a result of the 2013/14 proposed savings and efficiencies across the council, for example the number of users, the variable costs within the contract will reduce,” Birmingham said.

The council is also looking at how technology can cut costs in other areas, for example, in planning management, it is considering the use of mobile technology to reduce overheads, and in shared services, it wants to introduce a supplier portal that enables suppliers to submit invoice electronically.

ICT investments brought forward

In addition, Birmingham is bringing forward a number of projects to support its ICT strategy, which includes targets such as maintaining a highly reliable infrastructure.

For example, during 2014/15, the council is spending £1.3 million on replacing servers reaching the end of support and useful life, to ensure the reliability of the network and to avoid increased maintenance costs and compatibility issues.

It is also spending £1 million on replacing its VoIP telephony system and £1.2 million on getting a new back-up infrastructure, which are both nearing the end of their useful life.

“This will increase the back-up capacity to meet expected data growth, provide greater compatibility with new and existing hardware and improved customer support,” Birmingham said.

To support more agile working, the council is investing £400,000 on upgrading and increasing the capacity of its wireless infrastructure.

A further £500,000 will be spent on support for application upgrades and associated technology, while £1.4 million will be used to refresh the desktop and laptop estate, which is older than five years.

The council plans to continue its 'invest to save' strategy next year as well. Between 2015 and 2017, it  will spend £1.5 million (£750,000 each year) on replacing 1,000 network edge switches older than two years, to ensure the reliability of the network and to reduce maintenance costs.

Capita declined to comment on the review.

Copyright © 2014 IDG Communications, Inc.

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