Civil Service World: Cabinet Office explains 2021 outsourcing decision with 2025 contract fallout in view
The civil service world around the Civil Service Pension Scheme has sharpened into a test of judgment as much as delivery. A Cabinet Office letter now sets out why outsourcing was chosen in 2021, even though the contract’s later transition and performance have drawn sustained scrutiny. The key point is not simply that the department picked outsourcing. It is that officials say the choice was made through a formal assessment that weighed cost, risk and benefits, and found outsourcing to be the least risky option.
Why the outsourcing decision matters now
The decision matters because it sits at the centre of a wider argument about whether the state should run sensitive administration in-house or rely on a contractor. In the civil service world, that debate has become more pointed after failures under MyCSP and the crisis that has unfolded since the transition to Capita in December. Cabinet Office permanent secretary Cat Little has now laid out, in a letter published by MPs, the process behind the 2021 decision to continue outsourcing and later award the contract to Capita in November 2023.
Little had already been questioned on the issue at a Public Administration and Constitutional Affairs Committee session last month, where she was asked what factors the department had weighed when choosing between insourcing and outsourcing. Her follow-up letter, sent on 24 March and published later, says the 2021 decision followed a Delivery Model Assessment in line with the Sourcing Playbook and included analysis of insourcing options. That detail matters because it places the decision inside a documented framework rather than a discretionary judgment made in isolation.
What the Cabinet Office says the assessment found
The annex to Little’s letter is explicit. It says the decision to outsource was made in 2021 as part of Outline Business Case approval. It adds that the assessment included a cost, risk and benefits analysis of options including insourcing, and that the result offered a data-driven indication that outsourcing provided the best opportunity to realise defined benefits with the least risk. That formulation is central to understanding the department’s defence in the civil service world: the case was not presented as risk-free, only as comparatively safer than the alternative.
The letter also says the process led to a procurement under the Public Contracts Regulations 2015. the annex, detailed requirements were set out to improve on the previous contract, bidders were assessed on past performance at the pre-selection stage, and Capita passed that stage before winning at tender through technical and commercial evaluation by two independent teams. The Cabinet Office’s position is therefore that the award followed the stated methodology, not a short-cut around it.
Capita performance and the pressure on delivery
The current dispute is intensified by performance issues. Little’s update to PACAC set out Capita’s performance across 16 government contracts. In Q2 of 2025-26, 90% of Key Performance Indicator data was rated as Good, while 5% was rated Inadequate. The inadequate ratings were linked to the Recruitment Partnering Programme and the Teacher’s Pensions Scheme.
On the Civil Service Pension Scheme itself, Little said the contract includes 21 KPIs subject to service credits. She added that Capita has provided inadequate management information to date, but that based on available data the Cabinet Office maintains Capita has failed the majority of those KPIs. The transition was structured across 11 milestones and a final Contract Performance Point contingent on performance standards. Seven milestones have been achieved and paid in full, one was partially met with a part payment, and three remain unpaid. The final CPP payment will be withheld until standards are met.
That detail gives the civil service world a sharper operational picture: the issue is not only who won the contract, but whether the contract is delivering the service quality that justified outsourcing in the first place.
Expert perspectives and wider implications
Little’s figures also show the practical consequences for pension scheme members. She said 646 loans had been paid out as of 10 March, totalling £3. 5m. While that is only one measure of service activity, it shows the administration continues to handle real financial transactions even while governance and performance concerns remain unresolved.
The broader implication is that the Cabinet Office is now trying to defend two positions at once: that outsourcing was properly chosen in 2021, and that the current contract can still be managed through milestone withholding and KPI scrutiny. In the civil service world, that dual defence may prove difficult if the performance data continues to disappoint. The official record now shows a decision designed to minimise risk, but the current record of delivery suggests that lower risk at the point of procurement has not translated into calm after transition.
For MPs and officials, the remaining question is whether the framework that led to outsourcing can still be reconciled with the realities now unfolding under the contract, or whether the next review will force a harder rethink of how public administration is best delivered.
