The chair of the UK Parliament's public spending watchdog has dubbed the Department for Work and Pensions' (DWP) decision to award Capita a £370 million shared service contract "extraordinary," given the outsourcing firm's "failings" in supporting the Civil Service Pension Scheme.
Sir Geoffrey Clifton-Brown's pointed question exposes a troubling gap in government coordination. Here's the core problem: when one department awards a major contract to a failing contractor, does it bother checking whether another department already knows the company is struggling?
Capita took over running the CSPS in December last year after winning a £239 million contract. The results were immediate and damaging. Scheme members, including around 1.5 million current and former public servants, soon began to complain of unrecognized passwords and usernames. They were forced to create new accounts, which were also unrecognized. Broken and circular links in a portal that appeared unfinished and untested also frustrated users.
The human cost tells the real story. Retired civil servants in the UK have had their income slashed after payments from the system run by Capita failed to arrive, according to the BBC. Some retirees went months without any pension income. Hardship loans became necessary. Yet within weeks of these failures dominating headlines, the same outsourcer won another major government contract.
The complication in Capita's case is that the company does point to real difficulties. When Capita inherited the pension system, it inherited around 20 million lines of corrupted database data and 86,000 case backlogs. This was not a clean handover; the previous administrator left genuine problems. Capita was expecting to handle around 7,000 calls per week, but at their peak, call levels reached 25,000 in a week. By early 2026, the call answer rate increased to 99% in the last week of February compared to 27% in January, and standard service levels had been restored for death-in-service and ill-health retirement cases. The contractor's argument that it inherited a crisis has substance.
Yet there remains a structural question about government procurement. The chair of the Public Accounts Committee sought reassurance that the Cabinet Office had shared details of Capita's performance on the CSPS before the DWP made its award to the outsourcing firm to provide HR, finance, and payroll services to the DWP, the Ministry of Justice (MoJ), the Home Office, and the Department for Environment, Food and Rural Affairs (Defra). This is not a small matter. It suggests that different departments purchasing from the same contractor may operate in isolation, blind to each other's experience.
The contract itself remains contested. Sopra Steria is suing the UK government, alleging it accepted a bid from rival Capita for an outsourcing contract worth up to £958.7 million that it failed to recognise as too low to comply with procurement rules, claiming the DWP failed to spot that Capita's bid was "abnormally low" relative to Sopra Steria's tender for the same work. The actual value of the contract is disputed, with official records showing £606.6 million but the DWP citing £370 million as a minimum before optional services.
The deeper issue extends beyond any single vendor. The Cabinet Office has not shown that it is able to effectively manage the outsourced administration of the civil service pension scheme, representing total future liabilities of £189bn. Whether Capita eventually delivers on this new payroll contract or not, the government's demonstrated difficulty in either selecting contractors or managing their performance represents a persistent failure of institutional accountability that spans administrations.
The watchdog is doing its job. Whether the government will actually listen remains to be seen.