Government ditches freelance IT contractors for Capita

A government department has bypassed its existing freelance IT contractors for Capita, cancelling contracts the state had with the workers’ SME providers to transfer them to the services giant.

The Ministry of Justice cancelled the agreements with its small and mid-sized enterprises that were supplying the IT contractors in March, at the apparent behest of the Cabinet Office.

The timing of the move, disclosed this week by Computer Weekly, is potentially awkward for the government, as it came 24 hours after the state said it would end the UK’s “ICT oligopoly”.

Then, a range of new measures designed to “open up the market to SMEs” were unveiled, all to promote the use of many small contractors, as opposed to favouring the few largest ones, like Capita.

The latest move, to add the MoJ’s interim staff supplier contracts that it had with SMEs to the IT company’s £123 Cipher contract, is being seen as evidence that the government’s actions are at odds with its policy. 

However the Cabinet Office has said the commitment to award 25% of central government contracts to SMEs remains, adding that the MoJ’s decision to rescind its SME staff agreements owed more to cost cutting.

IT analyst house TechMarketView agrees that, despite its appearance, the MoJ-Capita tie-up does not strictly go against the coalition’s  policy on SMEs.

Moreover, the firm said the implication of the move - that IT contractors are too costly - actually fits with the Cabinet Office’s other objectives, specifically to ‘reduce dependency on consultants (including freelance contractors).’

In awarding the contracts to Capita, the Cabinet Office is also sticking to the coalition’s ICT strategy by using framework agreements,  as they are quicker and a more cost effective route to market.

Georgina O’Toole, research director at TechMarketView, added: “Contracting with SMEs is easier said than done in many instances, as they haven't got the economies of scale to offer the sort of price levels of the bigger guys [such as Capita].”

As a result, she believes the government should put more effort into improving the way prime contractors deal with the SME community, rather than on dealing with SMEs directly.

“Often SMEs are unable to compete for the contracts due to their risk profile or the financial commitment involved,” she said. “Although there is a drive to reduce the size of contracts to under £100m, even that will be too big for some SMEs.

“And some types of work simply lend themselves to broad contracts as it allows the supplier to bring costs down further and, in turn, the relationship with suppliers is easier to manage for UK Government. I think a bit of realism is what's called for.”