In a highly unusual length of contract for the UK market, Birmingham signed a five year extension to the existing 10 years planned, adding £300 million to the value of the deal.
The original contract to provide ICT and contact centre service, was met with a raft of negative news stories a year after it began. In 2007, Birmingham's new SAP e-procurement system kept crashing - reportedly causing suppliers to send round bailiffs to collect unpaid bills.
At one point there was a backlog of 20,000 to 30,000 unpaid invoices. But last year, Councillor Paul Tilsley said the system was rescued and was working, praising the "radical and nationally acclaimed transformation programme".
In this week's contract extension, Capita will deliver the council's revenues service for a period of 10 years from 1 April 2011. 152 council revenues staff will transfer to Service Birmingham (the council-Capita joint venture) under TUPE regulations.
Capita said the extension and expansion of the partnership will allow Service Birmingham "to deliver further service improvements and efficiencies that will generate £55 million in savings for the council over the lifetime of the contract". This is on top of the £69 million already being delivered in the existing contract, it claimed.
Councillor Randal Brew, cabinet member for finance at Birmingham City Council, said: "At a time when we are facing an unprecedented financial challenge, we need to focus on driving efficiencies and getting value for money."
John O'Brien, research director at analyst house TechMarketView, said Capita had "come back fighting after issuing a revenue warning earlier this month". Capita's total value of business with Birmingham would now reach around £1 billion, he said.
Birmingham City Council recently announced it was expanding its large SAP deployments by adding a SAP BusinessObjects strategy maangement system, in an attempt to improve performance.