Capita, the private firm behind a new billing system that resulted in a backlog of nearly 30,000 invoices at Birmingham City Council, has won a £110 million contract to run the authority’s customer call centres.

The outsourcing group, which is responsible for London’s congestion charging, is one half of Service Birmingham, a partnership with the city council set up two years ago to streamline the authority’s ICT systems.

It is one of nine projects aiming to make Birmingham City Council run more efficiently with a target of saving £1 billion by 2016. However, Capita have come under fire after a new electronic method of paying invoices for which Service Birmingham had responsibility failed to work properly, resulting in the backlog and some traders threatening the council with bailiffs.

Union leaders also described the £20 million fees pocketed by Capita under the joint venture as “a dreadful waste of public money”.

Last October it was announced that Capita is to be replaced as administrator of London’s congestion charge zone from 2009.

Yesterday’s announcement means Service Birmingham will have responsibility for two call centres which will handle all calls to the authority - one in the city centre and a new one at Fort Dunlop in Erdington.

Councillor Paul Tilsley (Lib Dem, Sheldon), deputy leader of Birmingham City Council, said: “Improving the quality and standard of contact with our citizens is a vital aspect of our Customer First programme.

“Service Birmingham will ensure that the contact centre operation is fully integrated with our overall business transformation initiative.”

Paul Pindar, chief executive of The Capita Group, said the company was helping the city council improve “citizen services to place them at the forefront of public services in Europe”.

The new contract is initially for four years and worth £52 million, but is expected to rise to £110 million over eight years if Capita continues with the service.

Service Birmingham claims to have already achieved savings of £28 million of which, the authority claims, £9 million has gone towards allowing the council tax increase for 2008/09 to be kept below the UK average, at just 1.9 per cent.

Capita has been at the centre of a number of controversies over the last decade.

Six years ago it was heavily criticised for its involvement in managing checks on new teachers by the new Criminal Records Bureau which resulted in many staff unable to start the new term and schools forced to remain shut. The fiasco resulted in then Education Secretary and former Labour MP for Birmingham Yardley Secretary Estelle Morris resigning.