Capita's £370M Whitehall outsourcing deal challenged as 'abnormally low'
Capita confirmed today it won a business process outsourcing deal for multiple UK government departments for £370 million over ten years, less than 40 percent of the estimated value outlined during the tender stage.
The shared services deal to run HR and finance systems for four departments is already 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."
Sopra Steria is the incumbent provider for some of the departments through SSCL, which the French tech firm owns.
In a statement, Capita said it would deliver tech-enabled back-office services for civil servants across four major government departments: the Department for Work and Pensions (DWP), Ministry of Justice (MoJ), Home Office, and the Department for Environment, Food and Rural Affairs (Defra). It represents the so-called Synergy cluster of the government's shared services strategy, which has seen around £2 billion in contracts awarded to migrate HR and finance systems to SaaS.
Using a system being built by Oracle and IBM, Capita said it would support a suite of services including HR, payroll, recruitment, finance, procurement, and service desk support for around 250,000 civil servants. The UK outsourcer said the contract would start in March 2026, and run for seven years, with the option of three one-year extensions. The £370 million price covers the full ten-year period.
The DWP and Capita were asked to comment on the value of the accepted bid, which is less than 40 percent of the estimated procurement value.
A spokesperson at Capita told The Register via an emailed statement: "We took part in a robust procurement process and stand ready to work with the DWP to ensure a smooth transition of service. Our priority remains to ensure value for money for the public."
A spokesperson at the DWP, 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."
The DWP is the lead department in the Synergy cluster. In September 2024, it launched the competition for a supplier to develop and run business process services (BPS) for the cluster, estimating the deal at £958.7 million for ten years, including extensions.
According to court filings accessed by The Register, Sopra Steria launched a legal claim against the DWP, alleging it failed to recognize Capita's bid as too low to comply with procurement rules.
It also alleges that after the outsourcer was named preferred bidder for the contract, the DWP conducted further renegotiations around Capita's tender. Sopra Steria argues it was excluded from any such process.
A DWP spokesperson told The Register last week:
"We are aware of the legal challenge and are cooperating fully with the relevant processes. As this matter is currently subject to litigation, it would be inappropriate to comment further at this time. Our priority is to ensure continuity of service and value for money for the public." Capita declined to comment.
According to the legal papers, the DWP confirmed in December 2025 that Sopra Steria had been unsuccessful in the procurement and Capita had won the tender.
The legal papers allege, based on information Sopra Steria says it received, that "Capita was not able to satisfy the requirements" set out in the selection process because of its "limited business in payroll and HR services" and because it could provide "few examples of design, deployment and operation of BPS Services running on... an Oracle SaaS ERP" system.
Sopra Steria also alleges Capita's pricing implies that "Capita's proposed staffing solution is significantly below the current staffing levels for the BPS service, and that proposed by the [DWP]. Such low staffing levels raise serious and legitimate concerns as to the ability of Capita to provide the Synergy BPS in line with the [DWP's] requirements, both in themselves and in conjunction with the apparently low level of technology investment from Capita."
Last week, the Public and Commercial Services (PCS) union claimed Capita's winning bid was £700 million, calling the award a "reckless gamble."
Capita has come under fire for its handling of the Civil Service Pension Scheme, which has seen a string of complaints from members after it took over the service under a £239 million contract. It has apologized for the level of service, promising "interim support measures" to slash the backlog of 86,000 cases inherited from the previous provider.
PCS general secretary Fran Heathcote said: "Capita is already at the center of a pensions crisis that has left retired civil servants in distress. Privatization is a failure, so why does the government continue to reward those responsible with yet another massive public contract?" ®
