More than £1bn awarded to private firms by councils 7

More than £1bn awarded to private firms by councils

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Scottish councils have awarded contracts worth more than £1bn to private companies since 2015, The Ferret can reveal.

The firms profiting from public sector work include controversial outsourcing giants Atos, Capita PLC, Mears Group, and Mitie whose contracts collectively amount to at least £51,685,276. Contracts awarded to foreign multinationals totalled £988,594,347.

Critics said Scottish local authorities are “lining the pockets of shareholders in big business” and claimed that the outsourcing of public sector contracts has been a “failed experiment”. 

But councils said they procure goods and services in accordance with legislation and pointed out they are legally required to “deliver best value” for the taxpayer. The outsourcing companies said they provide good value for the taxpayer and deliver services to the “highest standards”.

The Ferret looked at hundreds of contracts awarded by Scots local authorities dating back to 2015. 

We found that Capita’s contracts amount to at least £17.4m. An international outsourcing company headquartered in London, the firm’s contracts have ranged from collecting the BBC licence fee to operating a jobseeker’s allowance telephone line. 

But Capita came under fire for a NHS England contract after 43,220 women did not receive cervical screening reminder letters, and the Ministry of Defence stripped Capita of a key contract running its military estate. 

In Scotland, Capita’s contracts include providing IT services for North Lanarkshire and Fife councils, among others, as well as maintaining a library management system for East Renfrewshire Council. 

Outsourcing means we waste money on shareholder profits and the cost of managing contracts; 78 per cent of councils say that insourcing gives them more flexibility, two thirds say it saves them money, and over half say it improves the quality of service.

Cat Hobbs, director of We Own It

A subsidiary of Capita called Stirling Park LLP has provided sheriff officer and debt collection services for several councils including East Lothian, Glasgow City Council, and Clackmannanshire.

Mears Group PLC – an outsourcing company working in housing management and home care – has won Scottish council contracts worth at least £18.7m. It has been contracted to provide services for numerous councils including Aberdeenshire and West Lothian. The Ferret has previously reported concerns over accommodation Mears has provided for asylum seekers in Glasgow. 

Mears was awarded a £1.15bn Home Office contract to provide asylum seeker housing in Scotland, Northern Ireland, and England. 

Mitie Landscapes, a subsidiary of outsource giant Mitie Group PLC, was contracted by North Lanarkshire and East Renfrewshire councils for gardening work. Mitie is a major Home Office contractor with public sector contracts totalling £2.55bn

In March the Competition and Markets Authority (CMA) launched an investigation into whether Mitie broke competition law with “suspected anti-competitive conduct” in relation to bids for immigration centres. In February its chief executive apologised to the UK Government after a series of racist WhatsApp messages shared between Mitie staff emerged. 

Atos – one of France’s largest tech groups – has been contracted by Glasgow City Council. The firm was responsible for conducting fit for work assessments on behalf of the Department for Work and Pensions, but was criticised for slashing the benefit payments of stage four cancer patients, terminally ill parents and wheelchair users. 

More Flexibility, Money and Quality of Service

Critics of contracts being awarded to these outsourcing giants include Cat Hobbs, director of We Own It, an organisation that opposes public services being run for profit. 

She told The Ferret: "It's absolutely shocking to see such huge sums paid out to private companies with terrible track records. Council outsourcing has been a 40 year failed experiment. Outsourcing means we waste money on shareholder profits and the cost of managing contracts; 78 per cent of councils say that insourcing gives them more flexibility, two thirds say it saves them money, and over half say it improves the quality of service.”

Scottish Labour local government spokesperson Mark Griffin said: “Huge sums of taxpayer money are going to multinational giants because of Scotland’s flawed public procurement rules.

“The SNP have failed to harness the power of procurement to ensure it delivers for the public good, instead of lining the pockets of shareholders in big business. Scottish Labour is committed promoting a ‘local first’ approach to procurement at every level of government, so that we can keep funding as close to communities as possible.”

Ross Greer MSP of the Scottish Greens said local services should be run for the public good, not to “boost the profits of multi billion pound companies”. He added: “These are not companies who can or should be trusted with vital services that we all rely on. 

“With Greens in the Scottish Government, we are introducing a requirement for all public contracts to pay at least the real living wage and expand other 'fair work' practices such as trade union recognition. Green councillors are pushing for their local authorities to take the same approach as well.”

A spokesperson for Mears said: “As one of the UK’s leading housing and care providers, Mears is proud to partner with the public sector in Scotland, providing good value and delivering the highest standards of care to people, their homes and their environment. We publicise all financial results at a group level, and we do not anticipate a profit of more than five per cent  from our public sector work.”

A Mitie spokesperson said: “We have a world-class net promoter score, demonstrating how highly our customers rate and recommend us, are an award-winning employer of 72,000 colleagues, and a leader in ESG, with one of the largest pure electric vehicle fleets in the UK. As a British business, we are proud of our support for local authorities in Scotland.”

Atos said it does not comment on its commercial arrangements.

Capita declined to comment.

A spokesperson for West Lothian Council said: “In general, public services purchase supplies, services or works from external organisations when our requirements cannot be provided by our staff. We are also legally required to deliver best value.”

A spokesperson for Aberdeenshire Council said: “A Mears Care Group subsidiary is 1 of 31 suppliers that form a larger multi-supplier framework agreement to provide care for individuals in their own homes alongside our own, in-house, care at home teams. All contract awards are closely monitored to ensure that vulnerable people in our communities receive high quality, person centred care”

A Glasgow City Council spokesman said: “The vast majority of services are delivered from within the council family. While these figures cover 32 local authorities across Scotland, Glasgow alone would have managed service expenditure well in excess of £10bn during this period.

“Where the council does work with contractors or suppliers, it follows the relevant procurement legislation.”

A spokesperson for North Lanarkshire Council said it operates in accordance with legislation.

The Ferret’s calculations are a conservative estimate because sometimes contracts have a total value but more than one supplier. The value that each supplier received is not always known. So, to be accurate and conservative, The Ferret discounted contracts where the value for a specific supplier was not stated. 

Are Councils Working? is an investigation by The Ferret, co-published with The Herald, exploring local issues, services, communities and more.

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Illustration by Peter David Kerr.

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