20 November 2008 | Paul Snell
The government has terminated the contract with the firm responsible for providing the Educational Maintenance Allowance (EMA).
In a letter to MPs on the Children, Schools and Families select committee, schools minister Jim Knight said the Learning and Skills Council (LSC) intended to end the deal with private sector provider Liberata and switch to alternative supplier Capita.
It follows long delays in processing applications for the EMA, a grant provided to students to continue learning at school or college. Liberata won the five-year contract in July 2007.
Grilled on the deal during Prime Ministers' questions yesterday, Gordon Brown said: "The private company responsible for delivering the EMA has not delivered."
Knight said: "There have been processing and other related problems since Liberata won the contract to deliver helpline, assessment and payment functions for EMA and other Learner Support Schemes. I have been clear from the outset that these delays have been totally unacceptable and I therefore fully back the LSC's decision to change contractor to Capita."
He added the withdrawal of the deal would cost Liberata more than £60 million in lost revenue. But since the firm has already spent extra money on temporary staff to deal with the backlog of applications, the minister said it would be "inappropriate" to impose further penalties.
The LSC is paying an extra £4 million to transfer the physical IT equipment and software to the new provider, but the government stressed this was less than the extra costs Liberata has experienced.
It is the second high profile case this year where the Department for Children, Schools and Families has dropped a contractor for poor performance. This summer exam-marking contractor ETS was fired from a five-year £156 million deal because of errors and delays (Web news, 18 August).
Liberata said the other services it provides to the public sector would not be affected by the cancellation.