< This article has been updated; see final paragraph
The largest provider of the government’s National Citizen Service has lost a contract believed to be worth more than £60m a year to deliver the youth scheme.
The Challenge runs the programme for 16 and 17-year-olds in London, the south east and the West Midlands on behalf of the National Citizen Service Trust, the Royal Charter body that operates the government-backed scheme.
But the trust announced yesterday that it would no longer contract The Challenge to run the programme after it had been unable to reach an agreement over a contractual requirement to use a shared IT system that ensured value for money and protected young people’s data.
Separately, the NCS Trust said The Challenge had "let down" 4,000 young people who were not allocated places on their chosen programmes this summer.
The Challenge remains contracted to deliver the summer and autumn programmes in 2019, but its contract will end in December.
A spokeswoman for the NCS Trust declined to say how much the contract was worth, saying the information was commercially sensitive. But The Challenge’s latest published accounts, for the year to 31 October 2017, show it had an income of about £69m, of which it spent about £66m on the NCS programme.
The charity also spent some £65m delivering the scheme in 2016, according to its accounts.
The Challenge employs approximately 700 people and hires more than 4,500 seasonal staff to support its programmes each year, according to its website.
Michael Lynas, chief executive of the NCS Trust, said in a statement: "We need to ensure a consistent customer experience, secure value for money for the taxpayer and safeguard the data of the young people who take part. That’s why our contracts stipulate that all partners use a single shared IT platform.
"Unfortunately, since The Challenge is unwilling to use this important system, which is successfully used by all other partners in the NCS network, we are unable to award contracts."
He added that it looked forward to working with "outstanding and experienced organisations" to deliver the NCS programme from 2020 onwards.
The Challenge was founded in 2009 and ran the NCS pilot programmes in London and the south east.
"We were surprised to see this public statement because it relates to an ongoing negotiation between our two organisations as to how we might be able to resolve certain issues in order that we can continue to provide first-class, value-for-money NCS provision.
"The Challenge remains committed to the values of social integration through the provision of NCS to young people across the UK. It is important and necessary work.
It added that it would continue to seek a resolution with the NCS Trust.
< This article has been updated to include a quote from The Challenge