Contractor body backs NAO probe into Capita

An investigation over claims that outsourcing giant Capita breached terms of a government contract and froze out smaller businesses from the procurement process is being backed by IPSE.

Speaking on Friday, the Association of Independent Professionals and the Self-Employed (IPSE) welcomed the National Audit Office’s move to probe the claims, which have been made by 12 small firms.

According to the firms, they were routinely paid late by Capita and were undermined by the company when it hired their own sub-contractors to work for it, under its £250m contract with the civil service.

The firms, which first disclosed their allegations to The Independent, also say that Capita took excessive fees for administering contracts – one of four aspects of their allegations that the NAO says it will scrutinise.

The other three areas that the spending watchdog will look into are the payment of subcontractors within 30 days; the amount of training that goes out to open competition and any use of non-compete clauses.

Although Capita has reportedly revised its payment terms and removed the clauses (while insisting that almost 60% of contracts via the civil service deal went to SMEs), IPSE is pleased that the company will be examined.

“The NAO are right to investigate accusations of supply chain bullying and anti-competitiveness in government contracts,” said the association’s Andy Chamberlain.

“The government should be supporting the UK’s small businesses by making contracts as accessible as possible.”

He reminded that the government aspires for a quarter of its spending to flow to SMEs, but said the association’s goal is for a quarter of that flow to be reserved for micro-businesses.

In the meantime, such businesses are likely to welcome remarks from Whitehall officials (albeit unnamed) that they are “looking into” the Contingent Labour1 (CL1) contract.

The contract, in place between the Cabinet Office and Capita, has been complained about by SMEs on the basis that it allows their temporary personnel to work directly for the company.

The result - that SMEs are effectively cut out of the supply chain - appears to be why the contracts have been boycotted by some, even though doing so has lost the SMEs revenue.

CL1 has also unsettled contractors because, despite efforts to redraft them, those who sign the standard version have been warned by IPSE that they face a “very high risk” of being inside IR35.

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