The complaint to OFT follows recommendations made in 2005 by Becta’s School Management Information Systems and Value for Money report, a number of which remain outstanding.
The key issues that arose in the report and which are still causing concern are:
- For many schools software costs have escalated significantly, with charges from the dominant supplier now between 2.5 and 3 times their 1999 levels;
- There are very significant barriers to the effective choice by schools/LEAs; and
- There is a lack of any significant contractual commitment between the dominant supplier and schools/LEAs as to the timeliness and quality of software provided.
Bromcom believes that its concerns in relation to the operation of the marketplace for MIS products and services are shared by Becta, and by other companies supplying software to schools.
Bromcom’s key complaints
Bromcom has made a range of complaints to the OFT in relation to Capita. Bromcom alleges that Capita is, and has been, in clear breach of its obligations under the Competition Act 1998, at least since 2003. In particular by abusing its dominant position in markets for the provision of software and software services for use in schools. The abuses by Capita alleged by Bromcom include,:
- Charging annual software maintenance charges to schools which are inflated in order to cover Capita’s costs of developing new software modules, which are then purportedly offered to schools ‘free of charge’;
- Tying and bundling together software products which can and should be sold separately;
- Pricing strategies which tend to exclude competitors from Capita’s entrenched position;
- An inadequate supply of interface facilities and interoperability;
Bromcom has put these points to Capita, which has given an inadequate explanation for its behaviour.
Bromcom also believes that the system under which software is procured for schools, either directly by schools or through local authorities, is not working effectively.
The overall position is that for certain software applications in schools, Capita has a market share well in excess of 80%. Capita itself claims that its products are in 2700 out of 3300 schools in the country. Schools do not have a real and wide choice of software, schools do not benefit from the innovation which results from effective competition between different providers of software and schools are probably overpaying for what they do get.
Corrective measures will have a major positive impact for schools and for the market
Bromcom is calling on the OFT to investigate whether Capita is in breach of its dominant position and, if it so finds, is also calling for an urgent decision to ensure Capita brings these practices to an end. If Capita is found to be abusing its position, then Capita should be required to reduce its maintenance charges and offer contracts which properly strip out the various elements which it offers and charge for them at stand alone prices.
Capita should also offer real and effective interoperability so the software of different suppliers to schools work well together. One solution would be for Capita to embrace the open standards of the Systems Interoperability Framework and to have a technically knowledgeable umpire/arbitrator with power to deal swiftly with interoperability issues promptly as soon as they arise.
In Bromcom’s view, Capita’s maintenance charges to schools may be overstated by about 25% or, for a typical secondary school, an overcharge of £2,000 per year. Bromcom believes that Capita should offer restitution to schools who have overpaid historically through annual maintenance charges so that they can choose to have alternative products. Bromcom believes that Capita so structured its annual maintenance charges to cover Capita’s costs of developing new software for use in schools. Schools, therefore, paid “up front” for new software. They then are unable to use that money to buy better or cheaper software elsewhere and are effectively “locked in” to Capita.
Millions of pounds should be refunded to schools
Should the complaint be upheld, Bromcom believes the overcharges should be returned to schools.
The practical effect of the measures which Bromcom calls on the OFT to take will be substantial. They would mean that schools would be able to have the real freedom to choose between alternative software to suit their needs.