Ministry of Defence and Capita’s management of contracts slammed in damning report

Profile picture for user ddpreez By Derek du Preez March 3, 2019
Summary:
The Ministry of Defence - specifically, the Army - has to share blame with Capita regarding mishandling of two contracts that are likely to end up wasting taxpayers money.

British army
The influential Public Accounts Committee has released a damning report of the Ministry of Defence’s management of Capita contracts, two of which account for approximately £1.1 billion. MPs on the Committee said that both Capita and the MoD share blame for the poor performance of the deals, where common government outsourcing mistakes of the past have been allowed to be repeated.

The two contracts in question are the 2012 Army Recruiting Partnering Project, which has already been found to be four years late, cost triple the budget and will ultimately be owned by Capita. The other is a contract for managing the defence estate for the Defence Infrastructure Organisation. The estate contract saw similar mismanagement to the army recruitment deal, with IT delays and misaligned objectives.

Chair of the Public Accounts Committee, Meg Hillier, said:

“The Recruiting Partnering Project was intended to meet the Army’s annual recruitment targets and save money in the process. It has failed dismally at the former and has a mountain to climb in order to hit its target for the latter.

“It has taken Capita and the Army far too long to address under-performance. In particular, it beggars belief that more than half of applications still take around ten months or longer to process. Almost half of applicants are voluntarily dropping out of the process but action to address this has been inadequate.

“The Army and Capita have introduced a number of changes over the past year and Capita told us that the new marketing campaign launched in January has led to an increase in applications.

“While we welcome these developments, it remains to be seen whether they will deliver concrete results, address long-standing skill shortages and ensure the Army has the capability to meet both pressing challenges and those in the future.

“This is too important to get wrong and we expect the Army to demonstrate it now has a grip on this contract, including what action it is taking when performance falls short.”

The Committee’s Recommendations

What’s so shocking about the Committee’s report, is that it highlights a number of missteps in government contract management, which have been commonplace in Whitehall for over a decade. In other words, these mistakes have been replicated all over government for many years and lessons should have been learned.

For example, the Army and Capita both underestimated the complexity of the Army’s recruitment policies and processes at the beginning of the recruitment contract. In addition, Capita said that at the time it was “chasing revenue” and should have pushed back far more on the Army’s requirements. The Army assumed it could just hand responsibility to Capita, but Capita lacked the required specialist expertise in armed forces recruitment.

The contract was also overly prescriptive and restrictive, containing 10,000 requirements, making it “overly complex and negatively impacting on the innovation of the recruitment process”.

The Army has also been passive in its management of its partnership with Capita and has been slow to respond to Capita’ sunder performance in recruitment. The Committee said that it is disappointed to see the MoD’s “poor contracts form part of the trend across government that we see too often”.

Since the Army introduced a number of changes over the last year, including the new online recruitment system, it has stated a high degree of confidence that Capita will get close to achieving 80% of its recruitment requirement by March 2020 and 100% by the end of the contract in March 2022.

However, the Committee has said that it is “highly sceptical” that the Army will secure the intended benefits - including financial savings - before the contract ends in 2022. The Army initially forecast that it would save £267 million over 10 years as a result of its partnership with Capita, but has now reduced this to £180 million.

However, it claims to have saved £25 million in the first six years, which means it expects to save £155 million in the remaining four years - which the Committee states is “overly optimistic and unrealistic”.

My take

It’s disheartening, but unsurprising, to see that government departments continue to fall short of expectations when it comes to outsourcing arrangements. Whilst it’s easy to place the blame on Capita, I would argue that it’s important to look at the expectations, skills and performance of the Whitehall departments too. This is exactly why the Cabinet Office has released a new ‘Outsourcing Playbook’ for buyers to follow.