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28 November 2012 | Education | Capita Plc

​Capita Preferred Bidder for £1.7bn Educational Services Contract

Capita plc, the UK’s leading outsourcing company, has confirmed it has been recommended as preferred bidder to create an educational support services joint venture (`JV') with Staffordshire County Council, subject to the Council's Cabinet approval.

The Staffordshire JV

The JV, in which Capita will hold a majority stake, will initially deliver a range of educational support services for schools and academies in the Staffordshire region. These services are expected to generate revenues of approximately £1.7bn over 20 years (approximately £85m per annum). It will be the biggest public sector contract ever won by Capita. Under the agreement, Capita would take responsibility for improving schools, with grounds maintenance, catering, HR, finance and ICT being provided by the group.

The JV has ambitious plans to bid for more educational service contracts across the UK in a market estimated to be worth £16bn a year. The JV will target other local authorities, schools, academies and further and higher education clients. The JV plans to generate at least £1.15bn in revenues over the next decade outside of the Staffordshire region.  

The JV will harness both the Council's expertise and customer relationships and Capita's infrastructure and proven commercial experience to create a national education support services business.

The UK schools education support services market has been undergoing significant changes in recent years as the growth in academies and free schools has decentralised purchasing decisions for a whole range of services and scaled back the involvement of local authorities. 

Capita believes the changes in Government policy will lead to a significant opportunity for the provision of quality, industry leading support services on a national level.

Subject to approval by its Cabinet at a meeting on 5 December, the Council will commence detailed negotiations with Capita to formulate the JV. As part of the agreement, Capita will acquire its controlling stake in the joint venture with an initial investment of £24.9m in the first year and a further £6.6m over the following 3 years.

Some 3,800 staff are expected to transfer to the newly formed organisation.

Capita already a force in education

Capita is already a major force in the education market with 13% of its £3bn revenues coming from the sector. Its school information management software is the market leader and is used by 22,000 schools and 80% of academies to manage tasks such as attendance records, student and financial administration, student progress tracking and analysis, curriculum planning and whole-school communication.

The Company also provides a full range of HR services includes payroll, recruitment, learning and development, and practical advice on employee relations, health and safety and policy development.

The Company also offers a range of ICT services including network infrastructure and communication, system and application integration, learning platforms, software licencing and fully managed solutions. Additionally, the Company offers legal, insurance and a wide range of property services to educational establishments.

Comment:

​This is a transformative deal for Capita boosting its education related revenues by 22% in the short term and by 60% in the medium term as it successfully leverages its expertise, products and services to secure contract wins with other local authorities, schools, academies and higher education establishments.

The JV makes huge sense for Staffordshire Council. By taking action ahead of the inevitable and severe contraction in demand for centrally delivered educational services as local schools gain greater freedom, it has managed to secure the employment of almost 4,000 staff and avoided the cost and pain of making significant redundancies further down the road. Additionally, it has received a useful cash infusion.

Capita should be able to avoid redundancies by redeploying surplus staff on the Staffordshire contract to work on new educational services contracts or elsewhere in its existing education business.

The pressures on public sector funding are not going away. Across the education sector from primary schools to universities budgets are under pressure. Public institutions need to save money and make spending more effective. Capita has a proven track record and is well placed to benefit from these trends.

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