A new court filing has revealed the UK’s Department for Work and Pensions accepted a bid from Capita to run its new Oracle-based HR and finance system at £272 million less than its own cost modelling. In March, the UK outsourcing company won the contract for running shared services for £370 million over ten years. The central government department had earlier produced a "Should Cost Model" — designed to protect against a bias towards low bids — which provided a total price of £642 million, according to court papers. Capita’s bid was 42 percent less than the “should-cost” estimate. Since January, the deal to run HR and finance systems for four UK government departments has been the subject of a legal claim from rival bidder Sopra Steria, which alleges Capita's bid was "abnormally low" and based on staffing "significantly below the current levels." Capita has already told The Register it took part in a robust procurement process and stands ready to work with the DWP to ensure a smooth transition of service and value for money. A DWP spokesperson has previously told us: "We have signed a contract with Capita to deliver the Business Process Service and are committed to ensuring a smooth transition. Our priority is continuity of service and value for money for the public." Through its subsidiary SSCL, Sopra Steria has been running back-office shared services for the DWP, the Ministry of Justice, the Cabinet Office and the Department for the Environment, Food and Rural Affairs, based on Oracle eBusiness Suite 12.2.6, since 2013. In 2024, the DWP led the procurement for a new Oracle-based SaaS system and awarded the deal to IBM and Big Red for £711 million ($950 million), with the Home Office set to join the shared service at a later date. Capita’s 10-year deal to run the Business Process Services (BPS) for the group of Whitehall departments — known as the Synergy cluster — is part of the government's shared services strategy it says will offer £4 billion in benefits. In its defense against the claim, the DWP alleged that Sopra Steria was in breach of an “Ethical Wall Agreement” by basing its case on a document the department sent in error. A Sopra Steria spokesperson told The Register: "Sopra Steria was not excluded by the DWP from the procurement, and we do not accept that there was any breach of the Ethical Wall Agreement." In its defense, the DWP also alleged that Sopra Steria’s bid was “excessively high.” In the recently disclosed reply to the defense, Sopra Steria denies that claim by producing evidence from the "Should Cost Model" the department developed during the procurement in accordance with Cabinet Office guidelines. The model put the contract price at £642 million. Sopra Steria notes its price was less than the model price, and not "excessively high" as the DWP alleged, although details of its bid are redacted. Cabinet Office guidelines state that complex outsourcing projects shall produce a “Should Cost Model Estimate” as part of the delivery model assessment. They refer to a Sourcing Playbook which states that the model can help “demonstrate value for money, to inform the development of payment mechanisms or to help protect government from ‘low-cost bid bias’.” The Playbook says that if a bid is more than 10 percent lower than either the average of the other bids or the “Should Cost Model” estimate, it should be referred to the Cabinet Office’s Government Commercial Function. The Register asked the DWP if it had referred the Capita bid in that way. Officials said it would be inappropriate to comment further, as the procurement is currently subject to an ongoing legal process. Last month, during a hearing of the UK’s Parliamentary spending watchdog, Labour MP Clive Betts questioned why the DWP would pick Capita after its performance on the Civil Service Pension Scheme, which has sparked protests. Users of the pension portal launched last year were quick to complain about login failures, broken links, and unfinished-looking pages after the launch. MPs later heard the system went live without full functionality in place and struggled to handle the volume and complexity of cases transferred from the previous administrator, MyCSP. Dianne Jeans, DWP Senior Responsible Officer for the Synergy Programme, told the Public Accounts Committee that the shared service award was “a very different scenario than from pensions.” She said the award to Capita followed all the government regulations and processes. “We also had strong legal and commercial oversight and subject matter experts from all four Departments assessing the competing bids throughout the whole process. Capita emerged as the clear preferred bidder under Government procurement processes,” she said. ®
