Capita has beaten off stiff competition from BT to become the preferred bidder for a £320 million IT and business process outsourcing deal at London Borough of Barnet.

The ten year deal, which aims to save Barnet £125 million, is due to start in spring 2013, provided it gets approval from the council's cabinet.

Some 514 council staff will move over to Capita and be responsible for setting up and delivering Barnet's new support and customer service organisation (NSCSO), according to TechMarketView.

NSCSO will provide a range of services that include customer services, estates, finance, payroll, HR, IT infrastructure and support, procurement, revenues and benefits and commercial services.

The savings will be directed back into front line services, according to Barnet, and are split between core services (£70 million), procurement (£47 million) and collection of council tax and other debts (£8.4 million).

Capita has also committed an upfront investment of £8 million in new technology and telephone support for the customer services operation, including an 'Amazon' style account for residents to pay online for a range of services, from parking permits to allotment fees.

There is also an agreed level of support for schools.

TechMarketView's research director, John O'Brien, said that Capita has likely come out on top due to it accepting a certain level of risk on the project.

"Capita has clearly put significant 'skin in the game' here to secure the deal. This no doubt increases the risks if it fails to deliver against any of these guarantees and commitments, and puts pressure on deal profitability," he said.

"It shows the level of competition that suppliers face in the local government market, and particularly in those few remaining first generation deals, which are prized by suppliers for offering business revenue and potential long-term customer relationships."

Capita recently was awarded a £140 million contract for health and disability assessment services for the new Personal Independence Payment (PIP) benefit at the Department for Work and Pensions.

From 8 April 2013, the PIP will replace the Disability Living Allowance (DLA) benefit for eligible working age people aged 16 to 64.