One Barnet - when is a saving not a saving?

You may well ask why I am so suspicious of the "savings" identified in the One Barnet project. I'd like to share with you a little fact I've never mentioned on this blog before. As well as running a very successful music facilities company, I've worked as a freelance technical consultant, working on communications and message switching systems. What has that got to do with One Barnet and whether or not there will be savings? Well, I'll try and explain how organisations use savings from completely unrelated areas to claim that projects have been successful and delivered huge benefits.  Let me explain, based on my experiences. As technology has moved on and developed, much of my work has been for blue chip organisations, moving legacy (ie old & outdated) systems onto newer, more efficient technology. This usually also means outsourcing some parts of the service.

The way the projects tend to work is that a business requirement is identified to change the way the service works. This is usually driven by the fact that there is a need to keep up with market developments and provide new services which old technology cant support. A study of requirements is made and then a business case is drawn up. Commercial organisations never give business sponsorship unless a solid and watertight business case can be produced. Once this is signed off, a project team is set up to implement the project.

I worked on one major project to update a communications network. The organisation I worked for had a legacy system which involved hundreds of modems for communicating with customers networks. These were being replaced by an outsourced supplier, who  replaced the 250 modems with links to their communications network. They were able to allow the company I was working for to plug into their state of the art system and deliver transactions. This freed up space in datacentres, got rid of the need for 250 BT landlines, allowed cancellation of maintenance contracts on 250 old and outdated modems and allowed use of high speed data transmission (the old modems were very slow). It also meant that dozens of specialised and outdated line controllers on IT systems could be dispensed with. All in all the cost savings were approx £250,000 per annum and a better, faster and more reliable service was provided. All sounds good?

One of the tasks I had to perform, as part of constructing the business case, was to quantify these savings. I contacted the people at the datacentres where the old equipment was housed and asked them to supply me all of the details for the equipment we were replacing. I knew that there were 250 modems being replaced. I was rather surprised to find that they supplied me details of 600 of these devices. I contacted the department responsible for managing them and sought details as we didn't want to discontinue other peoples services. They responded saying that they didn't know who the extra modems belonged to and weren't inclined to bother finding out. They eventually supplied me with the associated telephone numbers and bills for each modem.

This allowed me to identify the ones associated with the services we were replacing. Out of curiosity, I spoke to one of my contacts at the datacentre and asked if they could tell me what systems the other modems were connected to. They went and had a look and stated that they were not connected to anything. We eventually identified the fact that the system they had formed a part of had been replaced 3 years previously. The way the organisation was structured, meant that the project and the telecommunications department were separate cost centre areas and so there was no incentive for the project to bother to get the modems decommissioned. I immediately contacted the area responsible and got the redundant equipment decommissioned and removed. This added a one off saving of approx £300,000 to the budget of the project I was working on.

Being a freelance worker, the guy I was working for thanked me for my efforts (he got an award and a big bonus). The project was deemed a great success, because  the savings had more than doubled those identified in the original business case. It was used as a model argument for outsourcing further services.

The thing was that the additional savings were nothing to do with the outsourcing or the suppliers. They were down to an internal efficiency which should have happened three years previously. All we had done was a sensible audit of what we were paying for. The savings were used by management as an example of why services should be outsourced, wheras in fact they were nothing of the sort.

This is exactly what I suspect is happening with One Barnet and the savings identified in the Capita contract. When the Metpro scandal blew up, the council found that they didn't need 30% of the services that Metpro were providing. Barnet has been overrun with consultants for four years. If they haven't identified massive savings that could have been achieved with in house reform, then we should ask for our money back.

The project I described above was a textbook outsourcing project. It delivered benefits and savings and a better service. It had a rock solid business case and I am proud of the work I did. The reason it worked was because the organisation I was working for would have had to invest millions to achieve the same result, wheras the supplier had the network ready built. In the case of One Barnet, they are simply moving people around. The savings that are claimed are based mainly on sacking people in Barnet and replacing them with people on near minimum wages in depressed parts of the country. This will not be good for the Barnet economy, of which Barnet council are supposed to be the custodian. Capita will pay people less money, then add on a markup, which is their profit margin. If it works as they claim, they will make 17.5% profit, on these cut priced staff and Barnet will get charged less overall. If it doesn't, Capita will make 17.5% profit and we will get shafted.

My experience of outsourcing projects tells me one thing. Management are always keen to claim all savings are down to their pet project. In terms of One Barnet, I suspect this means that most of the savings could have been realised without actually signing a contract to outsource and lose 300 jobs. The management will also be keen to ensure that costs are shunted elsewhere. We won't know the true costs of One Barnet until we can do a forensic audit of the Councils accounts, when the bills roll in. I fully expect the headline figure to support the savings Capita claim (at least initially). I guarantee that all manner of new costs and expenses will pop up in the accounts, that weren't there last year.

The sad fact is that by the time we really know what the costs are, we will be tied into the contract and stuck with it for ten years.