DfES Approved Service Providers (March 2004)
Introduction
Outsourcing, or the delivery of services by specialist providers, usually private
companies, has grown dramatically in the public sector in recent years. It was
initially confined to areas such as school and nursery inspection services,
careers guidance and cleaning services. In the last three years, however, the
private sector has been given a role in the delivery and management of the
state education system.
According to Capital Strategies, an independent corporate finance house
which specialises in “people based” service sectors, LEA outsourcing is
expected to grow in the medium term and extend beyond failing LEAs. It
believes that it is likely that LEAs with good track records will increasingly
choose to outsource all or part of their work.
Surrey LEA are in the process of setting up a Joint Venture Company, (4S)
with a private sector partner to deliver the LEA’s education services and to be
in prime position to trade with other LEAs and Schools. Vosper Thorneycroft
Education, part of the VT defence and shipbuilding group, has been awarded
the £100m, seven year contract. Surrey will have a 20 per cent stake in the
joint venture company, which will be operating from September 2003 if, as
expected, the county council gives final approval. LEA staff will transfer to the
company on existing terms.
In April 2001 Capital Strategies, estimated that the education outsourcing
market currently worth £2.5b could increase to £4.9b per year within the next
few years. Its UK Education and training Index, measures the relative share
price performance of UK quoted companies with significant parts of their
income derived from the training and education sectors, £1,000 invested in
the companies making up the Education and Training Index at the start of
1996 was worth £2,931 in 2001, compared to £1,660 for an investment
tracking the performance of the FTSE All Share index.
As one example, Nord Anglia’s (Hackney, Waltham Forest, Sandwell, etc)
interim financial results to June 2001 showed that its annual turnover
increased by 9% to £34m and its pre-tax profit increased by 50 per cent to
£1.5m.
In January 2003, however, the Times Educational Supplement reported that
since December 2001 education firms had seen their shares fall dramatically.
It stated that an investor who brought £100 worth of shares in each of the nine
leading education firms would now be left with just £371 worth of shares – a
loss of £529. Leading PFI firms such as Amey, W.S Atkins and Jarvis have all
seen their share price fall. Education services firms such as Capita, Serco and
Nord Anglia have fared slightly better as local authorities continue to contract
out services. They have however lost around half of their market value.
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A TES report of 14 March 2003 reported that WS Atkins had been under
pressure since recording pre-tax loses of £32.8 million in December. A
takeover was mooted but its shares fell by 7 per cent to around 111p in
February after it was revealed that the company was no longer talking to
potential buyers. Its share price has since increased after it announced the
termination of its contract with Southwark LEA.
In March 2003 Amey posted a pre tax loss of £129.5m for 2002 compared
with one of £18.3m in 2001. The company stated that it had incurred
exceptional charges of £110.2m in 2002, mainly through writing down PFI
investments such as the Croydon Tramlink. In April 2003 Amey was sold for
£81m to Ferrovial, a Spanish construction and business services giant, which
will assume debts of £190m.
These figures illustrate the fluctuations in the stoke market which characterise
and influence private companies’ performance and viability. This makes their
clients, which now include schools and LEAs, vulnerable. Private companies
have no statutory responsibility nor public duty to provide education services
nor are they democratically accountable to their communities. They are bound
by contracts which can be varied or broken.
It is inevitable that any profits made by contractors will come from money
previously ear-marked for the benefit of schools and their pupils. Profit from
outsourcing can be achieved in two ways: by reducing the service through
efficiency gains or reductions in provision and by the addition of a profit
margin and the providers’ management/staffing costs to the contract. The
real cost of providing services must therefore be increased.
The private sector expects to benefit further from the Government’s Best
Value, Fair Funding and contracting out policies. The involvement of the
private sector is also highlighted in the Education Act 2002, which provides
significant opportunities for outside participation, including in the
establishment of new schools.
In March 2003 the Times Educational Supplement reported that education
companies were seeking involvement in the direct running of state schools. It
reported that Nord Anglia, Cambridge Education Associates and the Centre
for British Teachers were speaking to ministers regarding the taking over and
setting up of schools. The companies want control of teaching and learning in
schools contracted out to them for up to 30 years in deals that would enable
them to employ staff. They hope to take advantage of plans put forward by
School Standards minister David Miliband to extend the Private Finance
Initiative. Cambridge Education Associates will attempt to persuade ministers
to accept its proposals by the end of May 2003. Vincent McDonnell, CEA’s
operations director was quoted as stating “This could take private-sector
involvement in education to another level”.
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The Government has created a pool of contractors to take on education
service consultancy and provider roles. The companies listed below are
included in the revised list of Approved Education Service Contractors and
Consultants, issued in May 2000. The complete list includes for-profit
companies, charities and “successful” LEAs. The information on the
companies below has been gathered from those divisions which have
supplied information to the Privatisation in Education Unit on the LEAs
currently undergoing outsourcing and has been supplemented with
information gathered from UNISON and other independent sources as well as
the companies’ own bidding and other corporate documentation.
Bevan Ashford Consortium comprises Focus Consultancy Ltd (a
consultancy specialising in black and ethnic minority relations), Open IT Ltd
(an educational IT company), Full Circle Ltd (an educational consultancy). the
Wessex Trust for International Education (a not for profit organisation
including Bath and North East Somerset Council, City of Bath College, City of
Bristol College, Filton College, Bristol, Learning Partnership West, Norton
Radstock College, University of Bath Centre for the Study of Education in an
International Context and the University of the West Of England) and Bevan
Ashford, a large law firm with many public sector clients.
Bevan Ashford is based in Bristol and is one of the country’s largest regional
law firms, with 84 partners and over 600 staff and an annual turnover of more
than £30m. It website describes its principal activity as: “acting mainly for
employers, both private and public sector, and provides an innovative and
cost effective approach to solving HR and employment problems”. The law
firm is an approved legal advisor to Ofsted for six regions across England.
The appointment follows Ofsted taking responsibility for the regulation of
childminders and day care providers for under 8s. Bevan Ashford has a
growing national reputation for PFI and PPP projects, acting for both PFI
consortia and public sector clients
It has been involved in 186 schemes to date, including 12 educational
projects, 14defence, 44 waste/energy management and 82 capital assets and
related services. It is acting on the biggest NHS PFI to date, the £1billion NHS
Local Improvement Finance Trust (LIFT) scheme. It advised Canterbury
College on its £30m relocation and redevelopment PFI and is acting for Bro
Morgannwg Trust for a new District General Hospital PFI.
The Wessex Trust was formed in 1995 as a private, limited by guarantee, notfor-profit company with no share capital. It is supervised by a Board of
Directors which includes “senior level professionals and councillors from
member organisations”. Its website states that “Wessex International has
access to senior professional staff in several Local Education Authorities
across the south west of England. Some of these staff are involved in the
teams of consultants that Wessex International can put together”. Its Chief
Executive is Frank Courtney. Over the past four years, the Trust has focused
on education management consultancy, training for senior educationalists and
organising trips to the UK, based in central and Eastern Europe, the
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Caribbean and East and South Africa. In July 2000, it sold its trading
subsidiary Wessex International Services Ltd to QAA Education Consultants
to “enable a major expansion of the consultancy capability under the QAA
banner”.
Cambridge Education Associates (CEA) was awarded a seven year
contract to run Islington’s central education services, estimated to be worth
£11,500,000 per year or £86.6m in total, with a profit cap of £600,000 p.a.,
dependent on over 440 performance targets. The contract is held jointly with
the Mott McDonald Group, a construction company (annual turnover £220m)
which was necessary to provide financial backing for the bid. All Islington
education service staff have transferred to CEA: CEA are reported to have
attempted to increase their working hours from 35 to 37 a week, in
contravention to the TUPE transfer regulations. According to the local
UNISON branch, it is also planning to introduce performance-related pay.
CEA were financially penalised by Islington in November 2000, after six
months of the contract, for failing to meet contractual obligations in five areas,
including establishing complaints procedures, systems to support schools in
special measures and monitoring schools’ budgets and also in September
2001, when it lost £300,000, almost half of its management fee, after failing to
meet its targets for improving GCSE results. CEA needed to improve results
by 8.5% but only managed a 1.2% increase in five or more A* - C passes.
Vincent McDonnell, director of schools services for CEA in Islington,
commented, “The problem was, we had six of the nine secondary schools
showing improvement but three slipped back.”
CEA’s proposal to close Angel Primary School from July 2002, in order to
reduce the number of surplus places in the Borough, was approved by a
Government-appointed adjudicator in August 2001, despite outrage from
parents, objections by the Islington School Organisation Committee and the
school’s status as one of the most improved schools in the country. CEA’s
Managing Director, Brian Oakley-Smith, is reported as viewing the contract as
“an opportunity to gain a footing in what is clearly going to be a developing
market.”
In addition, CEA was an unsuccessful bidder for Haringey LEA’s outsourcing
contract and is OFSTED’s largest contractor (it has a network of 2,250
consultants and Registered OFSTED Inspectors). It has worked with the
following LEAs on preparation for inspection, service reviews and
development planning: Medway Towns, Wokingham, Surrey, Hammersmith
and Fulham, Greenwich and Westminster. In 1999 it won a £25m p.a. contract
to deploy over 3,000 regional assessors to monitor teachers’ performance
related pay arrangements for five years.
It has also provided interim management for Telegraph Hill School,
Lewisham. CEA are also on the DfEE approved list of education service
consultants. In addition, CEA is part of the North Somerset Education
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Partnership, established through a DfEE pilot project to develop a model
where the Partnership is given responsibility for securing and delivering LEA
services, which are likely to include School Improvement, Special Educational
Needs, Admissions, Transport and back office services. Cambridge Education
Associates have been appointed as the sole contractor for the elements of the
reform programme relating to the recruitment and deployment of Threshold
Assessors and External Advisers to governing bodies.
Brian Oakley-Smith, the company’s managing director, established CEA as a
private limited company in 1987. He was previously chief inspector and
deputy chief education officer of Cambridgeshire LEA. It is a small company,
employing approximately 30 employees, many of whom have a local
government background. Vincent McDonnell, CEA’s Director of School
Services in Islington and previously Chief Education Officer of Richmond LEA,
is being promoted to the company’s board. Bill Clark, currently an inspector of
schools in Scotland, will be taking his place. Two ex-assistant directors of
Haringey Council and senior officers from Luton and Lewisham have also
joined CEA. The company holds a database of more than 2,000 freelance
education experts it can call on.
Its 1998 – 99 annual turnover of £5m was considerably augmented by the
Islington and performance assessor contracts. In 2001 annual turnover was
£52m.
In November 2002 the Times Educational Supplement reported that
allegations regarding the tampering of Key Stage 2 maths papers at an
Islington primary school were ignored for a year by CEA.
In December 2002 The Guardian reported that CEA was likely to forego an
estimated an estimated £400,000 from its annual management fee after failing
to meet its performance targets for improving GCSE and Key Stage 2 results.
Bill Clark, director of CEA was quoted as stating that whilst the results were
bad for moral he was confident that Islington will get there by 2004.
In March 2003 the Times Educational Supplement reported that Cambridge
Education Associates were speaking to ministers regarding the taking over
and setting up of schools. CEA hope to take advantage of plans put forward
by School Standards minister David Miliband to extend the Private Finance
Initiative. Cambridge Education Associates will attempt to persuade ministers
to accept its proposals by the end of May 2003. Vincent McDonnell, CEA’s
operations director was quoted as stating “This could take private-sector
involvement in education to another level”.
In August 2003 it was reported that CEA would be fined again for failing to
meet its targets for improving GCSE and national test results. CEA will forgo
£518,645 of the annual management fee it receives from the Government.
The fine has been imposed because of lack of progress in primary schools
and failure to improve the percentage of pupils gaining five or more good
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GCSEs. CEA missed seven out of 11 strategic targets whiles also failing short
in five out of 29 operational targets, and failing four out of 33 assessments by
headteachers.
CEA recognise trade unions and consult with them: UNISON have reported
that “in negotiations they are inexperienced, they flag up issues but do not
seem to have a clear plan or objective”.
Cap Gemini Ernst and Young prepared the initial output specification for
Leeds LEA outsourcing, as it is also on the DfEE Approved List of Education
Service Consultants.
The consulting business of Ernst and Young was sold to Cap Gemini in May
2000, although it retained its accountancy business. Cap Gemini Ernst and
Young (CGEY) is one of the UK’s largest professional services firms and has
offices throughout the country. The Cap Gemini Group is based in France.
Cap Gemini’s businesses are organised into three divisions: management and
IT systems consulting, systems development and outsourcing. Its principle
markets are in northern Europe, although it also has a significant presence in
the USA. In November 2001 a consortium led by CGE&Y won a seven-year
contract from the Scottish Executive procurement service. The project will
provide e-procurement processes across the Scottish public sector, and will
particularly target local and central government and the NHS. The company
have also won a 3-year outsourcing contract valued at £19 million from
DARA, the Government’s Defence Aviation Repair Agency.
CGE&Y has seen its annual operating profits fall by 40 per cent, and its profit
margins halved to 5 per cent, despite drastic restructuring measures during
the course of 2001. The company stated the results were due to customers
delaying or cancelling orders as a result of the economic downturn
Capita is Britain’s biggest outsourcing company and relies on public funds for
more than half of its business.
Capita withdrew from the bidding for Southwark LEA’s services and was
unsuccessful in Bradford. It was named as Leeds LEA’s partner in a new joint
venture company to run schools’ services, Education Leeds, in April 2001. It
has provided two directors for the company and supports it with strategic
management, change management and other “capacity issues” in return for a
fee of £3.7m over five years. It provides management support and a Director
of Education for Haringey LEA. Capita works with 158 LEAs in total, mainly
providing customer support services. It was chosen as the preferred strategic
partner by Blackburn with Darwen Council in November 2000 to provide all
revenue collection and back office functions over a fifteen-year period for an
estimated £190m fee.
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Capita is part of the North Somerset Education Partnership, established
through a DfES pilot project to develop a model where the Partnership is
given responsibility for securing and delivering LEA services, which are likely
to include School Improvement, Special Educational Needs, Admissions,
Transport and back office services. In addition, it is involved in a further DfES
New Models pilot project with Oxfordshire, West Berkshire and Wokingham
LEAs, which aims to combine the authorities’ back office functions to achieve
economies of scale and explore collaboration on school improvement service
delivery. Capita will assist with the process of partnership working,
identification of markets, consultation with stakeholders and evaluation.
Capita was involved in the bidding for the strategic partnership contract for
Surrey LEA but has since pulled out. Surrey plans to transfer most of its
services to a new company to be set up by the council with a private partner.
It is also part of an alliance with the Local Government Association and the
Improvement and Development Agency, formed in July 2000, to provide
support and advice to LEAs and to manage their services. In May 2000,
Capita was named as the DfES's “preferred partner” to administer the
Individual Learning Accounts scheme: the contract was expected to be worth
more than £50m over five years but was closed down in 2001 after
widespread reports of abuse, mis-selling and fraud. Capita have said that this
was caused by the government removing key safeguards from the training
programme. Capita was described by a Commons select committee that
investigated the scheme as “culpable” in a debacle that was wide open to
fraud and “a licence to print money”.
In June 2002 the Times Educational Supplement reported that Capita is
playing a key roll in developing a successor scheme to replace Individual
Learning Accounts. The DfES have stated that they will continue to work with
Capita “subject to satisfactory progress and the outcome of negotiations with
them”. DfES will announce detailed proposals for the new scheme, including a
start date in autumn 2002.
Capita also manages the Connexions youth service card.
Capita provides a range of professional support services including finance,
ICT, property consultancy and personnel. In October 2000 it established a
new service to provide strategic management support to LEAs, Capita
Strategic Education Services, led by a very experienced team recruited from
LEAs, OFSTED and other organisations associated with the education sector.
Capita has a strong influence in many schools, provided by the SIMS
management software and, to a lesser extent, by two teacher recruitment and
supply agencies, Capstan Northern and LHR and by an alliance with Microsoft
to provide educational Internet services. In addition, Capita administers the
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teachers’ pension scheme. Capita are also on the DfES's approved list of
education service consultants.
The Capita Group was born out of the Charted Institute of Public Finance and
Accountancy’s consultancy company CIFFA Computer Services in 1984. A
management buyout led by managing director Rod Aldridge in 1987 created
the Capita Group. Rod Aldridge became chairman and CEO of Capita, which
continued to provide outsourcing services, particularly in information
technology. He is now ranked 323rd in The Sunday Times Rich List. At the
time of the management buyout, Capita employed 33 people and had only 4
major customers. Today it employs approaching 15,000 people and deals with
a wide range of public and private sector clients. More than 70% of Capita’s
turnover comes from central or local government contracts.
Since 1989, Capita has bought over 30 companies or government agencies: it
has tended to use acquisition and public sector contracts as bases for
regional business centres for centralising outsourced local authority services,
which allows Capita to cluster groups of services to different councils at the
same time, such as Capita’s centres sited in Bexley, Bromley and Coventry.
In 1999/2000 the Local Government Ombudsman received 584 complaints
about the administration of housing benefits in Lambeth by Capita. In its
yearly report, the Ombudsman noted:
“In my yearly report, I drew special attention to the situation in Lambeth. In
1998/99 I received 296 complaints about the Lambeth housing benefits
service. As noted above, I received nearly double that number in 1999/2000.
When I met the Council and its contractor in April 1999, I was told that they
were convinced that there would be a major reduction in the number of
justified complaints over the next 12 months. There was not. In 1999/2000 I
accepted 319 local settlements of Lambeth housing benefits complaints and
issued 12 formal reports finding misadministration causing injustice.”
In June 2001 it lost this contract, due to continuing unsatisfactory
performance. Lambeth Council abandoned an £18m compensation claim for
poor performance in order to end the contract as soon as possible, even
though penalty clauses within the contract should have protected the authority
from any financial losses. It is reported that Lambeth will pay Capita £6.3m in
addition to the original contract price of £4.1m to bring 150 benefits staff and
the council tax benefits service back in house.
The company went public in 1991 and joined the FTSE100 Index in March
2000. In June 2001, it announced a 62% increase in interim operating profits
to £31.3m, as a result of securing more work in the first six months of 2001
than it did in the whole of the previous year (its 2000 pre-tax profits were
£51.2m): it secured £722m worth of new contracts and had made bids worth a
potential £1b. Capita’s Managing Director, Paul Pindar, commented at the
time that the company was able to reject 70% of all major outsourcing
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contracts it could bid for because of its current strong performance. Capita’s
shares rose by 34.5p on the day these results were announced.
Capita’s preliminary results for the year ended 31 December 2001 showed
that turnover had increased by 52% to £691m (2000: 453m) and its pre-tax
profits had increased by 41% to £72.1m (2000: £51.2m). In 2001 Capita
secured £744m of new contracts. Capita’s Managing Directors Rod Aldridge
and Paul Pindar both received large pay increases in 2001 – Rod Aldridge
was paid £426, 824 (an increase of 15.5 per cent) Paul Pindar was paid £396,
983 (an increase of 14.3 per cent). Capita have recently stated that they have
a pipeline of bid opportunities worth in excess of £1bn, spanning both the
public and private sectors.
More than half of Capita’s income comes from the public sector, with
education accounting for a fifth of the group’s turnover, mostly through
provision of information technology, services such as databases for financial
reporting and monitoring student performance – it provides educational
software services to approximately 23,000 schools (80%). The group has also
launched Capita Education Direct an on-line marketing and sales channel to
“market, sell and deliver the full range of our services directly to schools”.
Education has been targeted by the company as a growth area: Rod Aldridge,
in an interview with “The Times“, stated, “Education is one of our biggest
growth opportunities. It spends £38b and a radical change is about to occur in
the market. Our aim is to run all the school basic office functions and all their
IT, recruitment and financial activities.” Capita acquired EMIS, a leading
developer and supplier of management and administrative software, in 1999
to increase its capacity to provide such support services to LEAs and created
a new strategic education management department in September 2000,
headed by two ex-Newham LEA officers. It has also recruited the Directors of
Education of Nottingham and Merton LEAs and the Project Director of Leigh
EAZ. It has acquired Educational Support Services (ESS), another teacher
supply agency, for £12m. In the year to August 2000, ESS had generated
profits of £1m on a turnover of £17m and had assets of £1.1m.
In June 2002 Capita announced a 38% rise in half-yearly profits. Profits for
the six months to June 30 superseded forecasts at £40.2m compared with
£29.1m during the period in 2001. Turnover was up 21% from £323m to
£391m. The company stated that it was even more optimistic for the
remainder of the year as new contracts had come in at a record level: £1.1bn
compared with last year’s total of £744m for the first seven months.
In August 2000 Capita won a £400m deal to set up the Home Office’s
Criminal Records Bureau in a public-private partnership with the government.
It was supposed to streamline and speed up criminal records checks for
teachers and others who come in contact with children. It opened in 2002 and
within weeks was swamped with applications. In September 2002 the
government was forced to intervene when Capita failed to fulfil its promise
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that the CRB, could vet teachers in time for the new school year. The
Secretary of State described herself as a “very dissatisfied customer” of
Capita.
The Secretary of State was forced to supersede guidance, issued as a
reaction to Soham, that teachers should undergo a full check by the CRB
before being allowed into schools. Staff awaiting clearance will now be able
to work at the discretion of headteachers.
An article in the Birmingham Post reported that Capita was seeking
compensation for working overtime to clear the backlog of checks.
Lord Falconer, Home Office minister has threatened Capita with legal action
over the poor performance of the Criminal Records Bureau.
In November 2002 Capita was fined an undisclosed amount by the
Government after failing to fulfil its promise that the Criminal Records Bureau
could vet teachers in time for the new school year.
In February 2003 The Independent reported that the Government’s plan to
introduce criminal record checks from summer 2003 was to be shelved
indefinitely in an effort to rescue the Criminal Records Bureau from the chaos
caused by the backlog of teachers waiting to be vetted when the school year
began in September. The change – part of a package of measures,
amounting to complete reform of the bureau – was recommended by the
Home Office. Capita will have its contract renegotiated.
Capita has recently become involved in school inspections. In October 2002
the Times Educational Supplement reported that school inspections in
England could be provided by only eight companies with six year contracts
worth £45 million each under proposals being considered by OFSTED. Under
the proposals, one inspection provider could win the contract for each region
and be responsible for all standard inspections in that area. Independent
inspection companies have already started merging in the hope of winning a
regional contract. Capita has joined together with four existing inspection
companies (TWA, Lynrose, Evenlode and QICS) to form a new inspection
firm. Ian Harrison, managing director of Capita Strategic Education Services,
said “We haven’t been involved with school inspections before, but larger
contracts make it more attractive to us.” Concerns have already been raised
by MPs regarding the conflict of interest that would arise if a company were
asked to inspect the same authority that it was involved in improving its
services.
In January 2003 the Times Educational Supplement reported that Capita’s
share price had fallen from 468p in December 2001 to 247p in December
2002. Capita’s performance has been affected by problems with key
contracts such as the collapse of individual learning accounts and Criminal
Records Bureau delays.
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Capita expects to make about £28m from its five-year contract to run
London’s congestion charging scheme. Motorists will have to pay £5 to drive
into the capital from February 17. Capita will not receive income from
payments and fines. It will be paid a fixed management fee by Transport for
London, and variable charges based on the number of cars processed and
telephone calls handled. Paul Pinder, chief executive, stated that the
company expected to make a margin of 10%-12% on a turnover of £280m
over the contract’s five-year life. Capita also expects to recoup its initial capital
investment of £50m.
In March 2003 Capita announced that it signed a £62m contract with the DfES
to administer the Teachers’ Pension Scheme over seven years.
In May 2003 the Observer reported that thousands of people working with
children in the NHS would not be checked by police, in an attempt to ease the
growing chaos at the Criminal Records Bureau. At the same time Ministers
are preparing a multi-million pound bail out of Capita, which stands to lose
heavily on the Criminal Records Bureau contract. The Observer reported that
the company was thought likely to pull out of the contract altogether, leaving
civil servants to pick up the pieces.
The Guardian has reported that the Home Secretary, David Blunkett, had
tabled amendments to the criminal justice bill aimed at giving Capita the right
to process the compulsory vetting of applications for millions of jobs. The
amendment gives Mr Blunkett the right to delegate “as he thinks fit” to Capita,
and any other private company that might bid for the bureau, powers to
access the police national computer to vet applications.
In May 2003 the Times Educational Supplement reported that the Home
Office was expected to announce an increase in the cost of criminal record
checks. The fee for checking the backgrounds of new staff is likely to
increase from £12 to £36 from July 2003.
Capita faces further criticism over uncompetitive practices in schools, where it
provides 90 per cent of administrative software. In May 2003 the company
was forced by the Office of Fair Trading to sign an agreement to open up its
systems to other software manufactures. It had been accused by a small rival
company of withholding its source code for schools administration software to
prevent others from breaking into the market.
In May 2003 the Guardian reported that a dispute had broken out over a
decision by Capita to move Westminster council’s housing benefit offices from
London to Blackburn in Lancashire. Capita, which has responsibility for the
service, has been unable to recruit staff to run the service in the capital on the
wages it will pay. Housing benefit queries are already directed to a call centre
in Coventry. Information is collated in Kent, and claimants’ interviews are held
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in Brixton, in neighbouring Lambeth. Fraud investigations remain in
Westminster.
In February 2004 the Guardian reported that Capita was one of the two
companies left bidding for a little publicised £40m government contract aimed
at helping ministers hit their targets for literacy and numeracy. The winner of
the contract will manage the National Primary and Key Stage 3 Strategies,
which will involve hiring thousands of reading and maths consultants to advise
schools and local authorities on under-achieving pupils and how to raise test
scores at ages 11 and 14.
Capita’s profits rose by 27% to £51m in the first half of its current financial
year (03/04).
UNISON has had a national agreement with Capita since 1997. The majority
of its 6,700 staff have transferred from the public sector.
CEM Consultants was founded in December 1995 and is based in Preston,
Lancashire. As a small private limited company, it provides limited information
to Companies House.
Centre for British Teachers (CfBT) was an unsuccessful bidder for Islington
LEA and King’s Manor School in Surrey and is involved with the Lambeth
Education Action Zone. It had a contract, worth £65,000pa, to run the failing
Rams Episcopal School in Hackney, which was terminated due to lack of
progress: CfBT argued that the LEA and school’s governors had not acted on
its advice and that it had not been given sufficient powers to effect change.
CfBT’s sponsorship of the Lambeth Academy faltered when its chief
executive, Neil McIntosh, said that the trust could not afford a £2m donation.
It is currently project managing the National Literacy and Numeracy Strategies
in schools on behalf of the DfES’s Standards and Effectiveness Unit,
employing the National Directors and approximately 20 Regional Directors for
each of the two Strategies. It also manages the Key Stage 3 National
Strategy. CfBT has provided training for headteachers, assessors and
advisors for the DfES’s Threshold Assessment and Performance
Management Programme.
CfBT was established in 1965 and is based in Reading. It employs
approximately 1,016 staff. Its CEO is Neil McIntosh. Its principal activity is the
provision of education and training services in the UK, Europe, Middle and Far
East and SE Asia. This work is mainly funded by the British Government,
donor agencies, the EU and the World Bank. It is a grant-giving institution and
distributed £515,000 in 1998 –1999.
CfBT offers a number of educational services, including The Teaching
Agency, a teacher recruitment agency based in west London; careers
services, including its subsidiaries CfBT Thames Careers Guidance Ltd, CfBT
W London Careers Service Ltd and CfBT Bedford Careers Service Ltd; a
12
large number of school inspection contracts from OFSTED; education
management and training. CfBT has also been awarded the contract to
manage the National rollout of the Connexions Service Accredited Training
Programme.
CfBT’s strategic objectives in 1997 included “to establish a stable UK base for
the company in the provision of services to schools. This should reflect our
belief that the development in the UK market is the top business priority for
the company in the coming period.” In 1999 it noted, “ CfBT should be moving
steadily towards more direct delivery of education..we should be managing
schools ourselves or at least providing direct services to learners.”
CfBT is a registered charity and not for profit company, limited by guarantee
with no share capital. It “uses commercial disciplines to encourage efficiency
and generate surpluses”, according to its own PR material. The company is
overseen by a board of unpaid trustees who form a Council of Management.
Its trading subsidiaries are profit making and covenant their taxable profits to
the charitable parent company. Any surplus generated is applied to furthering
the company’s charitable aims and objectives. In 1998 – 99, £761,000 was
transferred from CfBT’s three careers service subsidiaries: since their
formation in the mid 1990s, £2,823,000 has been covenanted in this way. Its
annual turnover in 1999 was £35.61m, which yielded a pre-tax profit of
£1.59m. In 2001 CfBT’s annual turnover was £70m.
The company’s 1999 Annual Report expresses frustration that it is working to
the agenda of others and concludes “Instead of managing projects designed
by others, or placing teachers in schools managed by others, we should be
managing schools ourselves or at least providing direct services to learners.”
In its 2001 Annual Report CfBT outlined the progress they had made in
school-based education through ownership of St Andrew’s School
(independent) in Rochester. CfBT have also agreed a strategy for the
acquisition of “a modest portfolio” of fee-paying schools (initially primary
nursery schools). Two nurseries have already been purchased in Lancashire.
CfBT want to keep open the possibility of the schools “’opting in’ should CfBT
publicly funded schools become a viable option”.
In March 2003 the Times Educational Supplement reported that the CfBT
were speaking to ministers regarding the taking over and setting up of
schools. CfBT hope to take advantage of plans put forward by School
Standards minister David Miliband to extend the Private Finance Initiative.
UNISON has had a national agreement with CfBT since 1995. CfBT operates
both defined benefit and defined contribution pension schemes. Its
subsidiaries participate in LEA pension schemes.
Deloitte and Touche is also on the DfEE Approved List of Education Service
Consultants. It is currently involved, in partnership with Windsor and Co and
Serco, in a DfEE pilot project within Essex LEA, which is designed to review
13
the potential for “externalisation of the delivery of school services”, with the
preferred option of establishing a local authority controlled/influenced
company in partnership with the private sector. It is the UK arm of Deloitte and
Touche Tohmatsu, one of the largest professional services organisations in
the world, which employs more than 95,000 people in 130 countries. It
provides accounting, consulting and tax services to some of the largest
multinational companies as well as local and central governments. In
November 2001 the company announced global revenues of $12.4 billion for
the fiscal year 2001. In the UK, Deloitte and Touche is one of the country’s
largest firms of charted accountants and management consultants, with 24
offices and over 6,500 staff.
Deloitte Consulting is working in partnership with the Employment Service,
Benefits Agency, Local Authorities in Leeds and Suffolk and several leading
voluntary sector organisations in a pilot project to provide a single point of
entry to the benefits system for people who are not working (or working less
than 16 hours per week), making a new or repeat claim. The pilot went "live"
on 29 November and is planned to run until March 2002. A subsidiary
company, CSL, provides benefits collection services to numerous local
authorities.
Deloitte and Touche is a partnership rather than a limited company and
therefore does not file annual accounts or report in the usual way.
The Education Partnership withdrew from the bidding for Kings Manor
School in Surrey, as it believed that the school’s governance arrangements
would make it difficult for the company to exert sufficient control over the
school. According to the Registrar of Companies House, the company was
dissolved in September 2000. However, Education Partnership (UK) limited
was established, operating from the same address as the previous company,
in May 2000: the only significant change in status was that James Tooley is
now the sole shareholder. It lists its business as research and development in
the social sciences and humanities, business and management consultancy
and adult and other education. Its first financial accounts are due next year.
The Education Partnership was a consortium of organisations including
businessman Wynford Dore and Brooke City Technology College. The
company’s address is also the home address of James Tooley, a professor at
Newcastle University and Director of Education and Training at the Institute of
Economic Affairs, one of its directors. He has also acted as a British
consultant for the American education company Edison. He is a well-known
critic of the public sector and advocates wider private sector involvement in
education.
Ensign/Tribal’s resubmitted bid for Haringey LEA, in partnership with the
Secondary Heads Association and a number of other organisations, was
rejected by the DfES. It was unsuccessful in Bradford and withdrew from the
bidding for Waltham Forest following accusations of a conflict of interest. PPI,
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the company temporarily running Waltham Forest, was bought by the Tribal
Group on 1 December 2000: its prospectus revealed that £10,000 would be
payable to PPI if Ensign was awarded the Waltham Forest contract, with PPI’s
manager, the borough’s acting Deputy Director of Education, due to receive
£5,000.
PPI was established in 1996. Its early focus was the provision of professional,
quality support for Registered Inspectors of schools. This rapidly developed
and PPI Group became an approved OFSTED contractor, operating in the
primary and secondary phases. During 1997 and 1998, PPI Group began to
diversify into other areas of operation, namely research and consultancy.
PPI was initially formed to service schools in the former county of Berkshire,
subsequently expanding to other counties and a number of London boroughs.
Specific projects include: project management of the out-sourcing of the
Islington Education Service, review of the provision for SEN within the
Borough of Lewisham, contribution to the development of the EDPs for
London Boroughs of Tower Hamlets, Waltham Forest and Lewisham and
consultancy with regard to Excellence in the Cities for DfEE. During 2000, PPI
Group became part of Tribal Group Plc
Ensign is a vehicle used specifically to bid for outsourcing contracts in failing
LEAs, based on a 50:50 equity partnership between Tribal Group United and
Group 4 Falck. It also has links with “preferred suppliers” Ernst and Young, a
consultancy company, Eversheds, a law firm, Admiral, IT specialists and Scott
Wilson, a facilities management company.
Group 4 operates worldwide and has an annual turnover of £1.25b, following
its merger with a Scandinavian security company Falck, which also has links
with domestic outsourcing and PPP initiatives. In the UK, Group 4 has won a
substantial amount of public sector contracts for security, cleaning, training,
prisoner escort, the management of private prisons, detention centres, staff
training, GCHQ, the strategic rail authority, the Benefits Agency and the
inspection of nursery schools. It manages the reception centre for asylum
seekers in Oakington, Cambridgeshire. It also has a £12m PFI contract with
Wiltshire County Council for building and operating a secondary school and
extensions to two other secondary schools and won the £12m contract to
administer the inspection of up to 20,000 nursery schools and playgroups
participating in the Conservative Government’s Nursery Voucher scheme.
According to an interview with Henry Pitman, Tribal Group’s CEO, in “The
Financial Times”, Group 4’s record of dealing with young offenders would be
useful experience in dealing with difficult pupils.
Tribal Group Ltd is an outsourcing company which provides support services
and training to schools and the education sector. It was established in 1999 to
provide “white collar” outsourcing services, focusing initially on education
services. It aims, through a policy of acquisition, to be able to offer a portfolio
of outsourced services. With a £15m banking facility in place, the group has
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enough funding to continue this strategy for some time. It has already bought
a considerable number of companies, such as SfE, Instant Library, Network
Training and Dundas Consulting. In May 2001 alone it purchased an
additional three firms – Austin Mayhead (public sector consultancy services,
especially housing, procurement and regeneration), Top Network Partnership
Limited (specialist publisher of FE distance learning materials and
consultancy services to colleges) and Cambridge Partnership (OFSTED
inspections, management training and consultancy to LEAs and schools).
Tribal has five trading divisions: ICT including e-learning, consultancy,
professional development, information services and managed services. It
changed its name to Tribal Holdings Ltd in January 2001 and filed its first set
of accounts for the year ending 31 March 2000: these revealed turnover had
doubled to £24.1m, yielding profits of £2.8m. This, in the main, was due to the
number of acquisitions during this period. It is believed that this growth will
continue by increasing the number of outsourcing contracts while it is likely to
target other sectors, such as local authorities and health trusts: currently, over
80% of its sales come from public sector contracts. Broker Granville Baird
forecasts profits of £6.1m this year, rising to £7.2m next year.
It works with a number of central government departments, including the
Department for Education, and has a strong presence in the local government
sector, working with over 60 authorities and 20 LEAs, delivering specialist
consultancy projects such as Excellence in Cities, SEN and school transport.
It is now the leading school inspection company for OFSTED and provides
NOF training for 12.5% of English secondary schools.
On 23 February 2001, Tribal Group Plc floated on the Alternative Investment
Market (AIM), where its share price almost doubled. It raised net proceeds of
around £10m. At the placing price of £1.65 per share, Tribal had a marker
capitalisation of £56.3m. 24.9% of Tribal’s equity was placed with institutions.
The placing was significantly over-subscribed, reflecting the level of investor
interest in the education and outsourcing markets. The share price has since
performed well, with Tribal having a market capitalisation of over £80m by
June 2001. Tribal currently has a market worth £2.5bn, although this is
believed likely to double within the next three years. Henry Pitman’s statement
to accompany the 1999-2000 states “our initial focus is on the £2.5b UK
education outsourcing market”: Tribal are currently third largest company in
this market.
The company’s Annual Report also quotes extensively from the Labour
Party’s 2001 Manifesto, in particular “Where private sector providers can
support public endeavour, we should use them”, to support the optimistic
forecasts for Tribal’s future performance. On 21 November 2001 the Tribal
Group announced that it wanted to raise £21m for further public sector
acquisitions, Henry Pitman’s statement to accompany the announcement
states “ I believe that Tribal Group is in the right place at the right time and
this fundraising will assist us in achieving a leading position in the public
16
sector outsourcing market.” The company has said that it will go increasingly
for large contracts and look at contracts that outsource the work of local
education authorities that are not failing.
In March 2002 Tribal announced the acquisition of Secta, the largest
specialist healthcare consultancy in the UK. Secta has long standing
relationships with central government and NHS bodies as well as private
sector companies working in the healthcare field. Tribal announced that the
acquisition was its first move into the healthcare sector and would
complement its strong presence in education and local government. Tribal
stated that it would enable the group to increasingly provide integrated
support services across the public sector.
Hexagon Education provides consultancy work across the public sector,
including IT, Education and Human Resources. Full Circle Ltd (an educational
consultancy and part of the Bevan Ashford Consortium) is a founder partner.
Include is a registered charity also known as “Cities in Schools”. It was
established in 1990 and is based in Cambridge. Its objective is “to advance
the education of the public by all charitable means”, specifically focusing on
tackling social exclusion amongst young people. It is involved in a number of
projects in Education Action Zones and is a member of Bristol EAZ Action
Forum. It is part of the CfBT group.
Lorien is on the DfES approved list of education service consultants. It is a
mixed service business and previously operated in four divisions: IT
resourcing (contract and permanent recruitment), consulting, engineering
solutions and training and development. Lorien was founded in 1977 as an IT
resourcing company, which is still its main activity (69% of turnover in 1998).
In 1996 it bought the consultancy businesses of P-E International to expand in
the area of management consultancy.
After a sharp fall in profits in 1998 the Chairman and Chief Executive was
demoted to a non-executive directorship and other executive directors were
shuffled around. The company blamed the fall in profits on market conditions
but commentators noted that Lorien appeared to be struggling in an otherwise
dynamic IT recruitment market. It has also been remarked that the obviously
poor management does not reflect well on a company selling its services as
management consultants.
In February 2002 Lorien Consulting was acquired by Anite Public Sector
Limited, a subsidiary of Anite Group PLC the European consultancy and
services company. Anite Public Sector offers services to local and central
government covering social services, revenue, benefits, housing applications
and criminal justice, principally in the UK. Existing contracts between Lorien’s
clients are being transferred to AnitePS Consulting. The acquisition took place
following the agreement of shareholders. It was felt that the size of the Lorien
consultancy business relative to its competitors was such that its ability to
compete in the longer term was under question.
17
Amey is a FTSE 250 construction company which, in the last few years, has
metamorphosed into a support services business. It is involved in a large
number of public sector services, including Railtrack (it was a contractor at the
time of the Hatfield crash). Amey has also announced plans to expand into
the health sector, specialising in the provision of back-office and
administrative systems for hospitals rather than front-line medical care.
Amey restructured in January 2001, adopting a similar structure to Serco, to
allow it to “focus more closely on specific market segments and reduce
operating costs”.
Amey is providing sponsorship of £2m for the Unity City Academy in
Middlesbrough. Amey has said that whilst they do not expect to make a profit
from the project they see it as an opportunity to develop their portfolio of
education projects, which they see as being a growth factor in the 21st
century.
Amey is the lead partner in the 3ED consortium, put together to provide £1.2b
for the Project 2002 schools’ modernisation programme in Glasgow, the
largest PFI scheme in British education. In August 2001 an article in the
Guardian reported that teachers at one of the Glasgow PFI schools were
threatening strike action due to the poor standard of rebuilding and
refurbishment work. Staff complained that on returning to the school for the
new term building materials and equipment still lay in the corridors. Five
schools involved in the scheme had failed to open on time and teachers
reported that classrooms were smaller and that there were fewer of them.
Poor school design has led to soaring temperatures in classrooms. The
highest recorded temperature has been 38 degrees in Home Economics
depts. The designs have not taken into consideration that the departments have
ovens. Children have been fainting in the heat.
In March 2002 Amey announced radical changes in its accounting policies.
Under the changes, Amey will write off all bidding costs and similar costs
incurred in winning work as and when they are incurred. In addition Amey will
now spread the income it would have received at the closure of a project over
its early years, so deferring this income. Previously, it had deferred or
capitalised costs when it was named preferred bidder. The changes led to a
17% decline in Amey’s share value and turned the company’s £55m profit for
2001 into a pre-tax loss of £18.3m. It also highlighted concerns that the
Government’s for PPPs could be jeopardised by the City’s concerns over new
accounting standards.
In November 2002 The Guardian reported that Amey had reversed an earlier
decision, announced to the City, to pay a 1.16p interim dividend costing
£2.9m because it had “insufficient distributable reserves”. Shares in Amey slid
a further 15% to 26p; meaning 90% of the company’s market value has been
18
lost. Amey is trying to offload its equity stakes in all of its PFI contracts – with
the exception of its one third share in the Tube Lines consortium.
In December 2002 Amey announced plans to slash £85m from the book value
of its assets and warned shareholders that pre-tax results would take a further
hit this year because of contract delays on the London Underground publicprivate partnership. Amey is hoping to offload its PFI contracts to John Laing
before the year end. The disposal is expected to raise around £50m – some
£30m less than book value.
In March 2003 Amey posted a pre tax loss of £129.5m for 2002 compared
with one of £18.3m in 2001. Amey has shed its chief executive, Brian Staples,
and two finance directors. The company stated that it had incurred
exceptional charges of £110.2m in 2002, mainly through writing down PFI
investments such as the Croydon Tramlink.
In April 2003 Amey was sold for £81m to Ferrovial, a Spanish construction
and business services giant, which will assume debts of £190m. Ferrovial
Servicios, whose British interests are limited to a half-share in Bristol Airport,
said that it wanted to use Amey as a stepping stone into the world of PPP in
the UK and further afield.
Amey sold its stakes in eight PFI projects to rival John Laing in January 2003
– including 30-year building and maintenance contracts for Glasgow and
Edinburgh schools but it is still subcontracted to provide cleaning and IT
services for them.
On 18 April the Herald, Glasgow, reported that that the Financial Services
Authority is to examine possible insider dealing following unusual share price
movements before the takeover of Amey by Ferrovial Servicios. Shares in
Amey changed hands in unusually high volumes prior to the takeover by the
Madrid firm.
Nord Anglia was the first company to win an outsourced LEA service
contract, for Hackney’s School Improvement and Ethnic Minority Achievement
services. In addition, it won a three year contract to provide Westminster’s
school improvement services, providing a Secondary Curriculum
Development and Subject Leader consultancy team and a nine month interim
management contract with Sandwell LEA: this was the first such contract to
be arranged by the DfES. Nord Anglia has responsibility for the appointment
of a new Chief Education Officer and other senior posts and for the
development of short term improvement plans using the post-OFSTED
consultancy report produced by KPMG. It is also working with over 100
schools in the Milton Keynes area, many of them in partnership with the LEA.
It established the senior management team which “turned around” St
George’s RC Comprehensive School in Maida Vale and has also been
19
awarded a seven-year management consultancy contract for the Abbeylands
School in Surrey, providing a range of support services to the governing body,
acting as promoter of the school and running business and other services.
The contract is estimated to be worth approximately £500,000. It was an
unsuccessful bidder for Islington, Walsall and Bradford LEA’s services and for
Kings Manor School in Surrey. As the only remaining bidder, it won the
contract to run most of Waltham Forest LEA’s functions from September
2001, in partnership with Amey Construction. The Waltham Forest contract
is estimated to be worth £200m over 5 years. The joint venture company will
take responsibility for direct pupil services, such as SEN, pupil welfare; school
development and review, including performance monitoring and
developmental planning; and literacy and numeracy strategies. Core support
services, such as budgetary and financial management, HR and ICT are also
included in the contract
Nord Anglia is probably the largest for-profit specialist education company in
the UK. The Nord Anglia Group consists of 54 companies and employs
around 2,500 members of staff. It has recruited the Deputy Director of
Education of Hillingdon, Sheffield’s Assistant Director and Wolverhampton’s
Head of School Improvement. In addition to private schools, language schools
and other educational activities, the company provides management and
consultancy services and has won a large number of local education provision
contracts; it has five LEA careers education contracts and over 200 OFSTED
inspection contracts. In addition, it has a company which supplies lecturers to
FE colleges. Nord Anglia is also on the DfEE approved list of education
service consultants.
In anticipation of further Government education outsourcing initiatives, it is
developing a facilities management service for schools and colleges, which
will supply catering, cleaning, routine maintenance, personnel and educational
support services.
The company was founded in 1987 and Nord Anglia Education Plc was listed
on the London Stock Exchange in 1997. In 1999 it reorganised its business
into two divisions, Education Delivery and Education Outsourcing. Nord Anglia
Partnerships in Education was established to capitalise on the increasing
involvement of the private sector in education, offering facilities management,
financial management, personnel and education support to schools, colleges
and LEAs. Its founder and chairman, Kevin McNeany, holds 25% of the
company’s shares. Its directors include Derek Green, who is also chief
executive of United Utilities and Sir David Trippier, an MP from 1979 – 92,
former Deputy Chairman of the Conservative Party and director of Mowlem
Properties.
In August 2000 Nord Anglia disposed of its language division. Nord Anglia’s
Annual Report for 2001 shows that its turnover from continuing operations
was £66.6m and its profit before tax was £4m. (Nord Anglia’s turnover in
2000 was £67.7m and its pre tax profit was £5.57m). In 2001 Education
20
Outsourcing turnover increased by 16.7% to £27.9m (2000: £23.9m) and now
accounts for 42% of Nord Anglia’s profits.
In January 2003 the Times Educational Supplement reported that Nord
Anglia’s share price fell from 257.5p in December 2001 to 150p in December
2002.
In February 2003 Private Eye reported that governors from two schools in
Kensington and Chelsea had sacked Nord Anglia from administering their
payroll and personnel services after only a few months. The schools Staff
reported that they had to do work Nord Anglia had contracted to do, and then
hidden charges were suddenly exposed.
In March 2003 the Times Educational Supplement reported that Nord Anglia,
were speaking to ministers regarding the taking over and setting up of
schools. They hope to take advantage of plans put forward by School
Standards minister David Miliband to extend the Private Finance Initiative.
In April 2003 the Guardian reported that Nord Anglia had been awarded a
contact to provide 276 school inspections for OFSTED during the 2003
academic year, 40 per cent up on 12 months ago. Its shares have risen 4 per
cent to 136p.
UNISON has had a national agreement with Nord Anglia since 1996. Nord
Anglia’s bidding information states that, “it recognises unions in a number of
its contract areas, notably in those where local authority staff have been
transferred”. In March 2000 an Employment Tribunal found that Nord Anglia
had instigated and encouraged race discrimination and had unfairly dismissed
Srian Perera, head of the School of Finance and Management, in Southwark
FE College. Nord Anglia challenged and won its appeal against the Tribunal’s
verdict. However, evidence alleging that Kevin McNeany made racist remarks
was not overturned. The chair of the Tribunal was reported as describing
McNeany as having a tendency to “categorise individuals by reference to
racial stereotypes” (Sunday Express, 03/06/01)
Prospects/Pannell Kerr Forster/Nabarro Nathanson consortium
Educational expertise is provided by careers and recruitment service
specialists Prospects, which provides careers services to schools and
colleges and recruitment services to the private sector. Prospects Education
Services (PES) was set up in 1999 to address the growing outsourcing
market. Pannell Kerr Forster is a global accountancy firm and Nabarro
Nathanson is a leading City law firm.
Prospects was established in 1995 as a company limited by guarantee with
no share capital. It employs approximately 500 people. The company almost
trebled in size in 1997–98 and has continued to grow: its current annual
turnover is £13.6m, up 217% from its 1996 figures. Its pre-tax profit was
21
£528,787, an increase of 25% from the previous year. Accounts for PES are
due to be filed in April 2002.
It has made several local recognition agreements. Most of its staff are in the
London Pension Fund Authority Superannuation Scheme.
QAA Education Consultants withdrew its bid, in partnership with Serco, for
Haringey LEA. It is a private limited company which was established in 1997
and is one of the UK’s largest providers of school inspection services and
headteacher leadership training. According to Companies House, its accounts
have been overdue since June 2000. In July 2000, QAA acquired Wessex
International Services Ltd to “enable a major expansion of the consultancy
capability under the QAA banner”. In December 2000 QAA was bought by
Serco for £2.55m in cash and Serco shares.
Serco withdrew its bid, in partnership with the QAA consortium, for Haringey
LEA. It has been awarded the outsourcing contracts for Walsall and Bradford
LEAs to provide “education improvement services” including management
consultancy advice.
In December 2002 an article in the Birmingham Post stated that Serco would
be taking over full control of Walsall’s LEA services from 1 January, effectively
becoming the employer for 450 LEA staff. Its original contract with the LEA
would be extended to include the full range of services, such as SEN,
inclusion, lifelong learning, finance, admissions and pupil referral. The new
contract will run over a five and a half year period. Serco has stated that it
sees private firms proving education services as an expanding market. A
spokesperson for the company stated: “we see it as an expanding area. LEAs
are now not just coming to us because they are compelled to due to underperforming, they are voluntarily looking at the private sector to provide best
value for their customers.”
Serco is involved in a DfES pilot project with Tower Hamlets, in which the LEA
will be treated as an operational unit of Serco, subject to its business
disciplines and management systems and with access to Serco support
services. It is also currently involved, in partnership with Windsor and Co and
Deloitte and Touche, in a DfES pilot project within Essex LEA, which is
designed to review the potential for “externalisation of the delivery of school
services”, with the preferred option of establishing a local authority
controlled/influenced company in partnership with the private sector. It has
over 70 contracts for local authority services. Serco also part-funded the IPPR
Commission into the role of the private sector in public services in 2000. In
December 2000 it bought QAA Education Consultants for £2.55m, in cash
and Serco shares, to strengthen its proposals for partnership arrangements
with LEAs.
Serco operates in two divisions, facilities management and systems
engineering; approximately two thirds of its turnover comes from the UK. It
22
has close links with the defence industry and the Ministry of Defence. It was
an early participant in PFI schemes and has expanded its facilities
management arm to gain contracts in other parts of the public sector. Serco
has won 12 PFI contracts, including prisons, young offenders institutes, a
hospital and metro railways in Manchester and London Docklands. It was a
Railtrack contractor at the time of the Hatfield crash. Serco also has a 10-year
management contract at the Atomic Weapons Establishment.
Serco operates Doncaster Prison with American correction company
Wackenhut. This joint venture is thought to have yielded £7m profit simply by
bundling together separate loans, which totalled £185m.
Serco was founded in 1929 in the UK and now has more than 30,000
employees operating in 30 countries. In its preliminary results for 2001 Serco
reported that turnover had increased by 19.1% to £1,141.2m and its pre-tax
profits by 22.9% to £46.4m. The UK accounts for 60% of its sales and 50% of
its earnings come from Government contracts.
It has 25,000 UK employees, the majority concerned with facilities
management. It has recruited a number of staff from the public sector,
including Tameside, Bath and Somerset and South Tyneside LEAs’ Chief
Education Officers, Bedfordshire’s Director of Education and Berkshire’s Head
of Education. During the period 1998 – 2000, 32 Employment Tribunal claims
were made against Serco, 27 of which were for unfair dismissal. 20 claims
were resolved before Tribunal and only one judgement was made against
Serco. Serco will meet with trade unions or staff associations where
recognised or where works councils are constituted. Serco Health Services
(part of its facilities management branch) signed a national framework
agreement for local agreements with UNISON in 1998.
In January 2003 the Times Educational Supplement reported that Serco’s
share price had fallen from 377.5p in December 2001 to 163.5p in December
2002.
The Division had also reported that Serco is currently seeking contact with
schools in Essex to provide human resources, legal and payroll services.
In April 2003 The Times reported that Bradford LEA is to lower its exam
targets to give Serco a greater chance of earning £2m in bonuses.
In 2003 Key Stage 2 results in Bradford fell even further behind the national
average with the proportion of pupils reaching the expected standard falling in
English and maths and standing still in science. The results were also well
below the average among a group of 11 statistically comparable LEAs, with
only Nottingham finishing lower.
Mark Pattison, Education Bradford’s managing director, said significant
progress had been made in both exam results and attendance but the scale of
23
the challenge remained considerable. Around 10% of schools in the district
are in special measures or have serious weakness. Mark Pattison was
reported as stating that the scale of this problem was hidden when Serco
started work because inspections were suspended for a year during a
school's reorganization.
In October 2003 it was reported that the Secretary of State, Charles Clarke,
was “very concerned” about education in Bradford. Charles Clarke stated,
“there has been massive government investment in Bradford but there remain
very serious issues”. The idea of a school improvement partnership board is
being explored.
Vosper Thornycroft, in partnership with Hampshire LEA, was unsuccessful
in its bid to provide strategic partnership support to Swindon LEA. Vosper
Thornycroft is currently working with Hampshire LEA’s School Improvement
Services as part of the DfES New Models Pilot. It is also bidding for the
strategic partnership contract for Surrey LEA. Surrey plans to transfer most of
its services to a new company to be set up by the council with a private
partner.
VT is a leading defence and civil contractor focusing on technical and other
related support services, shipbuilding and marine products. The company
employs around 8,000 people in a global network covering the UK, Europe,
the United States and the Middle East. Vosper Thornycroft’s support services
have been growing at a rate of 40% a year and now account for over 50% of
the company’s turnover. The Company’s support services are divided into
Military Support, which includes training and equipment maintenance, and
Civil Support, which focuses on training and education, careers guidance and
specialist engineering. VT has won several contracts to train teachers and
other public sector employees. It has a number of careers guidance services
and is providing competency-training programmes for headteachers in
Hampshire. In August 2001 Vosper Thornycroft bought Westminster Training
Consultants, a leading supplier of schools inspection services to OFSTED and
provider of a range of education consultancy services to the DfES and LEAs.
In its Annual Report for 2001 VT announced that turnover had increased by
38% to £379m (2000: £274m) profit before tax was up by 2% to £36.3m
(2000: £35.5m). In his 2001 report Vosper Thornycroft's Chief Executive,
Martin Jay, comments that the company has successfully transferred its skills
in the military training market to careers guidance, education, training and
technical services and hopes for an increased role in the training and
education market in response to Government initiatives.
In May 2003 it was announced that Vosper Thornycroft Education had agreed
a £100m seven year deal with Surrey County Council to run a joint venture
company aiming to win contracts from failing LEAs. Surrey will have a 20%
stake in the joint venture company, to be named Four S.
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Windsor and Co, in partnership with Essex County Council, were awarded
the contract to run a schools’ brokerage service for Rotherham LEA in
January 2001, under the name Transformational Education Services. All
charges will be met by the suppliers, with any future profits shared between
the company and schools. It is currently involved, in partnership with Deloitte
and Touche and Serco, in a DfES pilot project within Essex LEA, which is
designed to review the potential for “externalisation of the delivery of school
services”, with the preferred option of establishing a local authority
controlled/influenced company in partnership with the private sector
Windsor and Company is a specialist consultancy providing advice and
consultancy services to LEAs and other national educational agencies,
including the DfES and Learning and Skills Council. Since it was established
in 1989, it has worked on a consultancy basis with almost all English and
Welsh LEAs. Over the last four years the company’s work has diversified to
include setting up a new LEA, interim management of a failing LEA,
partnership with an EAZ and direct assistance to schools causing concern.
The company established and runs two national benchmarking clubs for SEN
and advisory services.
WS Atkins won a five year contract for the Southwark LEA Key School
Improvement Services, which is worth £20m per year and may be extended
for an additional five years if the company meets all its targets. Depending on
how well the company performs, WS Atkins could also take responsibility for
the direct management of all education support services in the borough by
2003. It also has Business Process Outsourcing (BPO) contracts with eight
local authorities and over 20 local authority contracts, ranging from ICT,
facilities management and payroll to council tax collection and vehicle
maintenance.
It has entered into a 50/50 joint venture company with Innisfree, an
institutional investor, to bid for PFI projects, operating under the name
NewSchools. This offers a complete package to LEAs, including the design,
construction, operation and maintenance of new schools. WS Atkins carries
out the design and provides facilities management services on the projects. It
has won school PFI contracts in Aberystwyth (£20m), Cornwall, (£200m)
Leyton (£10m) and Waltham Forest and is actively bidding for others. In
addition, as a service provider, it won a £70m contract to act as managing
Pagent for the Falkirk Schools PFI project in Scotland, where it will supply
catering, repairs, computer services, cleaning and security over a 25 year
period. It refinanced its Bridgend Prison PFI scheme with a £77.5m loan at a
4% cheaper rate, gaining a profit of almost £5m.
WS Atkins was founded in 1938 by Sir William Atkins as a civil and structural
engineering consulting firm. It was floated in 1996 and is now organised into
four divisions: transport, property, management and industry and
international, providing a range of consultancy and support services. It
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operates in 85 countries throughout the world and employs approximately
11,500 staff. It has recruited Havering LEA’s Senior Education Officer, West
Sussex’s Senior Education Officer and Hackney’s Deputy Director and
Education Finance Officer.
Its interim turnover, reported in June 2001, was £674m (up 16%), which
yielded a pre-tax profit of £19.2m, representing a profit growth of 9.5% on the
previous year.
In November 2002 WS Atkins announced that it was disbanding its education
outsourcing department as part of a restructuring exercise in the wake of poor
interim results. The move follows the departure of chief executive Robin
Southwell after the announcement that 400 staff are to be made redundant as
part of cost cutting measures aimed at saving £15m a year. A number of
directors have been sacked, including the company’s head of education Jill
Barrow. The firm’s current difficulties are thought to be down to a range of
issues including poor management, complex accounting rules and high
private finance initiative bidding costs. Net debt at WS Atkins has risen from
£57m to around £120m. Atkins’ head of business services Mick Foote has
stated that the firm will not be signing any large-scale education contracts in
the foreseeable future but said that this was due to the comprehensive
performance assessment. He added: “There aren’t any such contracts in the
market to bid for. Under CPA, the government is looking for councils which
are poor performing to look at the authority as a whole rather than identifying
one service.” The firm is to merge its education division with local
government outsourcing and management consultancy.
In December 2002 WS Atkins recorded pre-tax loses of £32.8 million. A
takeover was mooted but its shares fell by 7% to around 111p in February
2003 after it was revealed that the company was no longer talking to potential
buyers.
In March 2003 the Times Educational supplement reported that two thirds of
Southwark’s management team had left after little more than a year. It also
reported that headteachers had sighed a motion of no confidence in Atkins
Education.
Following a number of changes and vacancies for senior personnel the DfES
intervened and undertook an analysis of the situation in the LEA with very
critical outcomes which resulted in the decision that WS Atkins contract would
end in July 2003, two years earlier that the original five year contract.
Michael Foote, managing director of business services at Atkins has claimed
that the terms of the Southwark contract have changed and that it no longer
makes economic sense for the company. “The contractual arrangements have
been increasingly financially challenging at a time when additional investment
is required to deliver meaningful improvements to educational standards”.
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Atkins Education have stated that they will work with Southwark and DfES to
make a “seamless transition” to new arrangements. Staff presently employed
by Atkins Education will transfer back to the borough nearly two and a half
years after the contract was won.
In July 2003 The Guardian reported that Southwark council had been told to
pay £1.5m to cover the cost of the termination of WS Atkins contract. The cost
of WS Atkins withdrawal is reported to be £2m – much of it in lawyers’ fees –
of which the DfES will pay £500,000. Southwark council has said that the
costs incurred by the termination would leave a £1.5m shortfall in the
education budget. Council leader Nick Stanton was quoted as stating: “The
DfES made us sign the contract and we believed it was their contract, so it
seems ludicrous that the lion’s share of the cost will have to come out of our
schools budget.”
WS Atkins have stated that they remain committed to public-private
partnerships in general and to the education sector in particular.
The company’s share price has increased as a result of its termination of its
contract with Southwark.
WS Atkins does not recognise trade unions for collective bargaining.
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