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BBC is set to renew a TV Licence outsourcing contract with Capita for eight years, at a value of £560 million, after selecting the supplier as preferred bidder.

BBC is set to renew a TV Licence outsourcing contract with Capita for eight years, at a value of £560 million, after selecting the supplier as preferred bidder.

The deal has proved controversial. Last year, the Information Commissioner demanded that the broadcaster reveal the incentives it was paying to Capita around how the services firm makes sure people pay their licence fee.

Additionally, all this week hundreds of Capita staff on the contract have been on strike over what they brand as a below inflation pay offer. The Communication Workers Union has urged Capita to use the contract win to make a higher offer.

The BBC contract renewal, covering the period from 1 July 2012, will be officially signed in the coming days and combines two separate contracts held with the firm.

Under the new agreement, Capita will improve data analytics and refresh some systems, in an effort to improve revenue collection for the BBC. It also aims to cut costs by some £220 million.

CSC and iQor will be subcontractors on the work, handling IT modernisation and cash payment respectively.

Zarin Patel, chief financial officer at the BBC, said Capita was chosen because of the "innovation and efficiencies" it offered. Some of the savings would come from successes so far in encouraging more licence payers to pay by direct debit and to use online administration services, she said.