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MARKET FORCES

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£100m deal founders as Croydon and Capita end negotiations ...
£100m deal founders as Croydon and Capita end negotiations

Contract negotiations for a£100m customer services overhaul between Croydon LBC and Capita have collapsed in acrimony after two years.

The dispute centred on service guarantees and penalty clauses. Leader Hugh Malyan (Lab) said: 'One of the major stumbling blocks has been the company's expectation to be paid irrespective of the quality of service it provides. This is unacceptable to us and has left us with

no alternative but to discontinue negotiations.

'We believe Capita was seeking to exploit the competitive advantage of being a preferred bidder and to manipulate the procurement process.'

Capita said it believed it had reached an agreement with Croydon on 19 October, but on 31 October 'the council asked Capita to agree to a number of substantial changes to the agreed approach. These changes would have required Capita to assume an unacceptable level of risk'.

Capita executive chairman Rod Aldridge said the firm was asked to agree to over 40 performance targets.

'Many were unreasonable, demanding extremely high levels of service with very hefty penalties,' he said. 'These high levels of service were required irrespective of the major change programme and the infrastructure that had to be implemented to transform the council's operations.

'The council's extreme position created unnecessary tension throughout the final negotiations. There was no true recognition of how existing operations would be temporarily affected by such a massive overhaul. Pragmatic compromise and mutual understanding was required, but was not forthcoming.'

Mr Aldridge said the two-year negotiations were the firm's longest. He said the weakness in Croydon's approach was that 'they were externalising a service then holding the contractor to account, not sharing their aspirations with a partner. We are very happy to be held to account, but it depends how you do it'.

He felt the council's approach had been complicated by including a private finance initiative project. Croydon had allowed Treasury guidelines to 'dominate their whole approach'.

Mr Aldridge believes councils could go further in establishing true partnerships with the private sector, moving away from the contractual, confrontational approach prevalent under CCT. To achieve this councillors need to commit themselves to a new way of working, a commitment he believes was lacking at Croydon.

The council said it still intends to seek a private partner.

£58m PFI to revamp oldham's housing

Oldham MBC has approved an outline business plan for a£58m private finance initiative to refurbish the borough's sheltered housing.

The project expects final funding approval from the government next month.

If approved, more than 1,700 sheltered housing properties will be upgraded.

Executive member for housing John Anchor (Lib Dem) said: 'This funding would enable us to create both self-contained and supported accommodation

for both present and future tenants.'

PFI co-ordinator Rob Farnos said tenants were consulted and given assurances about the maintenance of the council's warden scheme and minimising disruption.

Wendt to review funding for PPP

Former Association of County Councils secretary Robin Wendt is to review central funding for private/public partnerships.

The review will look at the Byatt report into procurement.

OXON selects ITNet for£1.8m Deal

ITNet has signed an£18.8m, 11-year deal with Oxfordshire CC to improve its IT systems. County treasurer Chris Gray said: 'We selected ITNet for its overall ability to enable the council to meet the outcomes demanded by best value and e-government.'

Private input vital for school system

Education secretary Estelle Morris has praised the role of private companies in the state education system.

Ms Morris told the Confederation of British Industry's annual conference the management and financial skills of private companies could provide better schools.

Her comments come as the Department for Education & Skills said the value of school private finance initiatives with signed deals is reaching£1bn and involves 480 schools.

'We have recognised that if we are to deliver what will be the greatest programme of school building and modernisation this country has ever seen, we need the support and skills of the private sector,' she said.

Money market funds face delay

The government is refusing to introduce long-awaited money market funds for at least a further three years.

The Local Government Association hoped the system would be introduced before the framework is brought in.

It has already been delayed until 2004 and there is no guarantee even then.

Ministers had expressed enthusiasm for money market funds, which would allow councils to invest smaller sums of short-term cash than would usually be accepted and reap higher rewards.

But councils will have to wait until 'Parliamentary time allows' for regulations to be scrapped.

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