A damning report from government inspectors has starkly exposed the
problems of outsourcing failing local authority IT and business
process services.
The Benefit Fraud Inspectorate (BFI) studied the impact of the
decision by the London Borough of Lambeth to outsource its benefits
and revenue service to Capita Business Services.
The report, delayed until after the general election, attacked most
aspects of the service, which was outsourced in 1997 and taken back
under Lambeth's control earlier this month.
Problems began with the contract specification: there were faults
in the due diligence process and "Lambeth's longstanding backlog of
work," got worse, according to BFI inspectors.
In 1999-2000, Lambeth assessed and paid 37,000 new claims - 16,000
fewer than in 1997-1998. This, however, only told part of the
story. In a dramatic indication of the loss of management control,
the council could not say how many claims were received.
The reduction in benefit recipients was partly due to a national
decline in the number of people claiming, said Lambeth, but it also
stemmed from problems in calculating the backlog and difficulties
with the introduction, in January 2000, of a new IT system.
Lambeth said the changeover to an Academy system slowed the
processing of new claims between November 1999 and March 2000. The
BFI said this was because staff were not using Academy
effectively.
Staff did not receive adequate training in the use of the system
and were unsure how to access data that had been archived after
conversion from the previous system, according to the BFI
report.
Failure to use Academy efficiently meant Capita managers could not
monitor staff and Lambeth could not monitor the terms of the
contract.
"Not all correspondence has been recorded, so it is not possible to
rely on the information recorded on the Academy system. Managers
have not used IT reports to control the work in their sections and
have created manual statistics to compensate," said the inspectors.
Lambeth was condemned for having an under-resourced contract
management team, which led to poor performance monitoring.
The contract between Lambeth and Capita failed to specify the
outputs required, the validation of data expected by the client or
proper disaster recovery provision.
The BFI was also concerned that local authority had left itself in
a vulnerable position because the IT system was owned by Capita,
though the company was contracted to hand over the database if the
contract was terminated early.
When Hackney council terminated its revenues and benefits contract
with ITNet earlier this year it was left without an effective IT
system for a month.
The BFI were particularly concerned about security. Investigators
found valid user names for members of staff that had left Lambeth.
Current employees had access to parts of the system they had no
reason to use and Capita staff not working on the Lambeth site had
inappropriate access to the system.
Following the inspectors' visit to the borough last September,
Lambeth decided to end the seven-year contract with Capita and
bring the 175 staff back in house, at a cost of £10m. Capita has
been retained for IT support and for a call centre it runs in
Coventry.
Lambeth welcomed the report as confirmation that it should take
over management of its benefits service. Capita's group operations
director Paddy Doyle said, "Capita is to hand back the
administration of a much-improved housing benefits service to
Lambeth whilst continuing to provide the council with key support
services."