Why Applied Language Solutions will never bring any profit to Capita
Here we have it, Applied Language Solutions won a contract with the Ministry of Justice (MoJ), allegedly worth 300 million pounds.
Do not be fooled by impressive sounding figures. The Framework Agreement is not a specific contract with a specific value. The 300-million figure is only a wild estimate of what the contractor would get over 4 years if the entire criminal justice system in England and Wales signed up to the Framework Agreement!
Please remember that at the moment, good 8 months into the 1st year of this Framework Agreement (FWA), only the HMCTS and 5 police forces have signed up to the FWA.
We know that the MoJ ESTIMATED that HMCTS used to spend about £25 million a year on interpreting.
The MoJ estimated that they would pay 1/3 less for a unit of interpreting under the FWA than they did under the National Agreement. This means that the estimated cash flow from the HMCTS Service Level Agreement is planned to be around £18 million (1/3 less).
But please also remember that the payments are only made to the contractor for the services actually provided. If ALS does not send an interpreter, ALS does not get paid. If we take a working assumption that ALS fails to provide any interpreter in 1 out of 2 instances, then their cash flow from the HMCTS SLA is halved!
And out of the ESTIMATED spend of £18 million ALS is only getting half of the cash flow! Out of that they still have to pay their fixed costs (staff salaries, rent, bills, etc.), they also have to pay their "linguists" something...
Then on top of that, they have to cover unexpected costs like getting somebody from Newcastle to Ipswich, the cost of which they are not supposed to pass on to the MoJ and only be paid for 10 minutes that "linguist" spends in the courtroom.
ALS will have to cover things like dealing with "wasted costs" claims. Even if they don't pay them, they still have to pay solicitors to fight those claims.
No, no, no. This contract is not going to bring in money and will cost a lot of trouble and hassle. ALS will not be making profit (it never was very profitable and turned to loss-making in the last 2 years) for Capita.
So what is the point of holding on to the supposed £300 million contract which is nowhere near £300 million in the first place, which causes a lot of hassle, negative publicity and does not generate any profit?!