Capita Agree Significant Failings on NHS Outsourcing Contract; PAC Interview Capita CEO

By Allan Watton on August 7, 2018

In June we wrote an article titled NAO Report: NHS England and Capita Outsourcing Challenges, 4 Lessons which looked into the outsourcing contract issues faced by both NHS England and Capita when they tried to transform primary care support services for around 39,000 primary care practitioners, including GPs, dentists and ophthalmologists. The NAO report at the time suggested that both parties had “misjudged the scale and nature of the risk in outsourcing these services” which had the “potential to seriously harm patients”.

PAC Digs Deeper into the Issues Experienced with NHS Outsourcing Contract

Things have moved on swiftly from the NAO report to a deeper investigation into what happened on this project and what could be learned from the experience. The Public Accounts Committee (PAC) has undertaken a number of interviews with individuals from Capita and NHS England. They have revealed some interesting facts, not least that the Capita CEO, Jonathan Lewis, appears to have agreed that failings occurred and Capita were willing to work with the PAC to fully investigate what could have been done differently.

In 2015, Capita’s Primary Care Support Services agreement began, but according to the NAO report, within months complaints had started to come in which included:

• Issues with “thousands of patient records that went missing”
• Dozens of women left off cancer-screening lists
• The qualified GPs who were unable to work for months while the system delayed verifying their entitlement to go onto a “National Performers List”
• The GPs who ran short of basic supplies
• The GPs and ophthalmologists who suffered financial detriment because of “delayed payments” as listed by Campaign4Change in their review of the new PAC assessment of the challenges faced by both parties to the agreement.

The PAC Review Highlighted Three Main Issues:

1. There was a lack of clarity on the scope of the services that needed support from being outsourced.

2. End users were not consulted widely enough on the design and development of practices that would directly affect them.

3. Not enough due diligence was carried out to determine the scale of the project and risks involved.

Lack of Clarity

The Campaign4Change review states that:“One mistake was that Capita tried to save money too soon by folding the work of 47 local NHS offices with 1,650 staff into three offices without fully understanding that each office had a different way of working and a different way of delivering NHS services.”

Stephen Sharp, who reports directly to Jonathan Lewis on public sector contracts is reported to have said at the PAC interviews: “I think mistakes were made. During the bid stage, NHS England did say there were some inconsistencies and differences within the various operations. But once Capita got into all the offices and looked at it, the inconsistencies and differences were not inconsequential. It was more or less 45 different services being run from 45 different offices, so the closure programme, which we adhered to and carried on with, we maybe should have stopped. We just made the problem worse as we went along.”

When asked why they didn’t stop the office closures, Mr Sharp replied that they were “working blind for a period of time” and that the bigger issues were only recognised “once the service had been running under our control for a few months that complaints started to come in”.

End User Consultation and Due Diligence

Unfortunately, as the PAC notes, rushing in to attempt to save money without proper consultation of stakeholders or end users, along with a lack of clear articulation of the realities of the current situation was not helpful. Both PAC and NAO reports clearly indicate that by both parties failing to carry out adequate pre-contract due diligence, this will always impact on the potential of a complex service delivery relationship to achieve its stated and expected outcomes. We ourselves have seen this time and again in our work with public and private sector clients. Similar issues were reported in the media, the largest of which being the notable example of the National Programme for IT in the NHS (NPfIT).

It was identified within the PAC interviews that the GPs, dentists and ophthalmologists who would be impacted by the decisions Capita would make, were not involved enough in the consultation process, either by Capita or NHS England. This meant that neither party understood the full situation on the ground, and because each of the local offices the NHS and Capita were looking to align into a standardised practice had its own way of doing things, this meant the task to bring them all onboard with the new processes was far more difficult than initially realised. It was even suggested in the report that “they failed to test new national, standardised working practices and services before they asked a supplier to implement this strategy”. It’s reported that Capita said: “If it had understood how much work was involved, it would have bid a higher price or not bid at all.”

We recently wrote an article about similar issues faced when an appropriate ‘terms of reference’ is not issued by a client for a supplier to undertake fit for purpose due diligence prior to embarking on a complex service delivery project.

Due Diligence Lessons

While there are many other fundamental considerations in putting into place a fit for purpose due diligence process, we have listed below three equally relevant and important points related to due diligence to identify whether they are on your client team’s radar prior to finalising your supplier selection process:

1. Clarity of purpose

Fundamental to the success of any major outsourcing/service delivery relationship is a strong and properly interrogated business case. This would need to include a detailed understanding of the current situation in order to define a quantifiable difference between where you are today and where you expect to be once the project has reached its conclusion (the Future State or Target Operating Model).

While NHS England had identified a financial savings figure they wished to save over the lifetime of the project, neither they nor Capita had carried out enough analysis of the current situation on the ground to determine the real-world issues with the project that would have to be overcome for it to achieve those outcomes.

Clarity and detail at the outset will always minimise risks in complex service delivery and should be encouraged. This may sound obvious, but more than a few major outsourced projects have suffered as a result of a lack of clarity and evidence in their business case – Capita’s Primary Care Support Services among them.

2. Clarity of communication

While a clear business case is vital, it does not provide enough visibility of expectations on its own. All parties must be given the opportunity to review, analyse and understand that business case. Everyone must understand the role they have to play in achieving the outcomes stated in the business case and any weaknesses should be highlighted to strengthen that business case and the project’s chances of success.

As seems to have been established in the PAC interviews, not only did NHS England not involve all the people it should have in the evaluation of a business case, but this lack of current situation analysis was not communicated adequately well to Capita so they were unaware of the gap between perceived and actual project scale. In fairness, the NAO report also implied that it would have been helpful if Capita had provided better warnings to NHS England of the areas it was unclear about rather than just ‘pushing ahead’.

3. Commercial sustainability analysis

Without clarity of purpose and clarity of communication, the financial and commercial risks to each party cannot be adequately assessed and a fair and amicable bid cannot be formulated or expectations on parties be adhered to. Capita are reported to have stated that they would not have bid so low for the project or may even have not bid for it at all if the risks inherent in the project had been explained in more detail to them.

However, the question is whether Capita suggested to NHS England that they would need to validate/evidence the assumptions provided by NHS England by undertaking an appropriate due diligence process in the first instance. If they did suggest this and were clear to NHS England about the impact/consequences if such due diligence was not undertaken, but NHS England refused to allow them to undertake this type of diligence prior to the contract starting, then NHS England need to take lessons learned from this refusal.

However, if Capita did not suggest any service bid would be subject to gaining that evidence early into the project, then that would normally be Capita’s responsibility to remediate at their own cost, due to their ‘expert responsibilities’ in taking such a complex service delivery project on.

But while commercial sustainability may not have been achievable in this instance, Capita was asked why they decided to continue working on a project they are unlikely to make any money from. Mr Lewis answered: “Because we made a commitment to deliver this service and reputations depend on that commitment.” In this respect, Capita have expressed their commercial responsibility to the project and due credit should be given to them for doing this.

Conclusion

The NAO and PAC reports clearly indicate there have been failings on both sides. NHS England did not involve stakeholders and end users enough in their assessment of the scale of the project and the development of its solutions, and Capita seem to have not carried out enough pre-contract due diligence on the project. This has reportedly resulted in Capita “working blind” and to being too slow to change the course of the project once complaints had started to flood in.

However, Jonathan Lewis, relatively new captain at the helm of the Capita ship seems to be a man on a mission. Tony Collins of Campaign4Change said of him: “He gave the impression to public accounts MPs of being a CEO who is determined to put right the failings for the sake of Capita’s reputation. The cost of correcting the problems seemed a secondary consideration.” At the PAC interview Mr Lewis was reported as stating that “our initial execution on this contract was not good and for that we apologise unreservedly”.

According to Campaign4Change’s review of the PAC interviews, “Capita is now meeting 41 of the 45 KPIs and, […] the company is making good progress against the remaining four KPIs”, so it does look as though services are finally moving in the right direction.

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