Select committee inquiry
Capita's contracts with the Ministry of Defence
Closed
What the inquiry looked at
“Scope of inquiry The British Army needs to continually recruit new soldiers and officers to replace those who leave or retire from service. In July 2018, the Army was 5,600 regular soldiers and officers (7%) below its required strength and will not meet its 2020 target of 82,000 regulars. It has significant skill shortages in specific trades. The failure to meet its recruitment requirements can affect the Army’s ability to meet operational demands and new threats. In 2012, the Army contracted with Capita to transform its recruitment approach. The Army committed £1.3bn to a 10-year programme and partnership with Capita to manage its recruitment process. Since the contract began Capita has not recruited enough Army regulars and reserves in any year. In 2017-18, Capita recruited 6,948 fewer regular and reserve soldiers and officers than the Army’s target. The shortfall has been largest for regular soldiers. Since the contract began, Capita has missed the Army's annual target for regular soldiers by an average of 30%, compared to 4% in the preceding two years. In April 2017, the Army agreed to reduce Capita’s recruitment targets by around 20% for the next three years as it believed Capita was insufficiently incentivised to improve performance. Over the last year, the Army and Capita have introduced some significant changes to their approach to recruitment, although these have not yet resulted in the Army’s requirements for new soldiers being met. The cost of the Capita contract has risen by 37% to £677 million. The Project will not achieve its planned savings of £267 million for the Ministry of Defence. The Army has begun to consider options for the successor contract to start in 2022 and has commissioned a review to understand the lessons from the Project. A recent NAO report has found that the Army has not managed either the project, or contract, effectively. Moreover, it found that the Army and Capita underestimated the complexity of the proposed changes to recruitment. The Committee will challenge officials from the Ministry of Defence and Capita on why the Project is still failing to meet recruitment targets and how they plan to respond. Members may also wish to scrutinise the Army’s management of the Recruiting Partnering Project. The Committee may also wish to examine the performance of MOD’s other contracts with Capita and the performance of MOD’s contract with Annington Property Limited.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of 80th Report: Capita's contracts with the Ministry of Defence ↗
In 2012, the British Army naively launched into a 10-year partnership with Capita to recruit new soldiers, thinking it could leave Capita to manage recruitment. However, Capita entered into the contract without fully understanding the complexity of what it was taking on. Both parties entered into an over-specified contract and then introduced changes to centralise the approach to recruitment without trialling them. The Army and Capita also failed to simplify the recruitment approach and have only recently introduced the essential online recruitment system, over four years late. The Army has managed the Programme passively but Capita’s performance has been abysmal since it started, and it has failed to meet the Army’s recruitment targets every single year of the contract – an unacceptable level of service delivery.. Over the last year, the Army and Capita have introduced changes to the recruitment approach, but it is too early to detect any impact on enlistments and the Army still does not expect to fully meet its recruitment targets until 2022. We are not convinced that the Army will manage Capita strongly enough to improve performance or avoid Capita charging excessively for the continued use of the online recruitment system after 2022. We are also highly sceptical that the Army will achieve its forecast savings as a result of employing Capita.
If the contract does not deliver the anticipated savings, this waste of taxpayers money undermines confidence in MoD planning. Some of the problems establishing this contract are similar to those on The MoD’s other major contract with Capita on the Defence Infrastructure Organisation, which it will end five years early due to poor performance. We are disappointed to see the MoD replicate the contract management errors that our Committee sees all too often across government.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 15 November 2018 to 10 September 2019.
- Oral evidence 14 Jan 2019
- Report 1 Mar 2019
- Correspondence 4 letters
What it recommended 0 recommendations · 34 conclusions
1The Recruiting Partnering Project contract was overly complex and poorly implemented, and both the Army...
Concluded (the committee's words)
The Recruiting Partnering Project contract was overly complex and poorly implemented, and both the Army and Capita must share responsibility for Capita’s terrible performance in recruiting new soldiers since 2012. The Army and Capita both under-estimated the complexity of the Army’s recruitment policies and processes at the outset. Capita admits that, at the time it bid for the contract it had been “chasing revenue”, being simply interested in booking additional contracts, and accepts that it should have pushed back far more on the Army’s requirements. The Army was concentrating on the war in Afghanistan, which was itself helping to recruit new soldiers, and naïvely assumed that it could just hand responsibility to Capita. Capita lacked the required specialist expertise in armed forces recruitment. And so, the Army’s ‘hands-off’ approach contributed to the contract’s failure.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 changes to the approach that the Army and Capita did introduce – such as the failed attempt to centralise recruitment – were not trialled before introduction and demonstrated a fundamental misunderstanding of the importance of face-to-face contact with applicants. As a result of these problems, Capita has missed the Army’s recruitment targets every year since the contract began. Recommendation: As they consider the options for recruitment beyond 2022, the Department and Army should demonstrate how they are applying the lessons learned, and how they are considering radical new ideas for recruitment across the frontline Services. We expect to see significant improvements when we examine this issue again. T he MoD should write to the Committee by September 2019 to share their updated recruitment plans.
2It has taken Capita and the Army far too long to address under-performance.
Concluded (the committee's words)
It has taken Capita and the Army far too long to address under-performance. The Army has been passive in its management of its partnership with Capita, and has been slow to respond to Capita’s under-performance in recruiting new soldiers. This is despite the problems being known for many years – indeed this Committee itself reported in September 2014 on recruitment shortfalls and how the expected savings were not being realised. The Army renegotiated the contract in 2017 – some 4 years after Capita began - but failed to use its leverage to secure additional benefits from Capita, in particular, missing the opportunity to renegotiate the contract to protect its rights to the online recruitment system after the contract ends. The Army has also failed to simplify the recruitment process. This has changed little since the start of the Capita contract and over half of applications still took 321 days or more in 2018, the same as 2014. It has also taken the Army and Capita too long to analyse why applicants voluntarily drop out of the process, despite losing 47% of applicants this way. They have only recently begun to think more radically about the recruitment process, including the sequencing of stages and the need for medical information. The Committee is disappointed to see the MoD’s poor contracts form part of the trend across government that we see too often. 6 Capita’s contracts with the Ministry of Defence Recommendation: The Department should report by the end of September 2019 on the specific actions it is taking to simplify and streamline the recruitment process, explaining how it is piloting these changes and demonstrating how they are helping to reduce recruitment times.
3Capita and the Army have introduced improvements to their approach, but it remains to be...
Concluded (the committee's words)
Capita and the Army have introduced improvements to their approach, but it remains to be seen whether they will be successful. The Army and Capita have introduced a number of changes over the last year, including the new online recruitment system, an enhanced package of face-to-face support for applicants and new arrangements for managing the contract. The new senior management teams are committed to improving performance and the Committee welcomes this commitment.. Capita tells us that the new marketing campaign –introduced in January 2019 - has led to an initial increase in applications. Nevertheless, to date, Capita has not yet translated this heightened interest into an improved performance in recruiting new soldiers, and forecasts that it will achieve only 60% of the Army’s target in 2018–19. Capita has performed poorly against the contract KPIs since 2015 but the Army and the Department did not convince us that it was ready to take clear and decisive action if Capita continues to under- perform. The Army stated it had a high degree of confidence that Capita will get close to to achieving 80% of its recruitment requirement by March 2020 and 100% by the end of the contract in March 2022. Recommendation: The Army should report to us at the end of each financial year with a breakdown of performance against key metrics, including enlistments, conversion rates, recruitment times and a breakdown of voluntary drop-outs. It should also provide an update on Capita’s performance against the contract KPIs and the actions it has taken in response to any under-performance.
4The Army has not yet altered its mindset to ensure recruitment policies keep pace with...
Concluded (the committee's words)
The Army has not yet altered its mindset to ensure recruitment policies keep pace with rapid changes in society, better understanding of certain medical conditions and the pressing need to attract cyber specialists. The changes in the external threat environment mean that the capabilities the Armed Forces require are evolving rapidly. As we have previously reported, the Army has long- standing skill shortages which recruitment is failing to address. There is a risk that the Army is artificially limiting the pool of people it recruits from. Certain medical conditions can prevent some people from joining, even though they may possess the skills that the Army needs. Its closure of half of its local recruitment offices creates a risk that the Armed Forces are under-represented in some areas and people in some areas now have to travel for longer during the recruitment process. The Department has begun to consider revisions to entry policies and is seeking to develop its cyber capability. It is essential that it does so. But we are not convinced about the pace and extent of change, and whether the Army is doing enough to target and attract the full breadth of the UK population. Recommendation: The Army should write to us within 6 months to explain how - while ensuring that recruitment standards are maintained - it is planning to revise its entry criteria to recruit the skills that are needed in the future; to ensure that new joiners reflect the breadth of society; and to take account of developments in the understanding of certain medical conditions. Capita’s contracts with the Ministry of Defence 7
5We are highly sceptical that the Army will secure the intended benefits – including financial...
Concluded (the committee's words)
We are 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. 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 – this appears overly optimistic and unrealistic.. Achieving the savings is dependent on the Army delivering the remainder of the contract within budget and experiencing no further cost increases. As at September 2018, the cost to the Army of the Capita contract had already increased from £495 million to £677 million, so the Army has already used up its contingency of £199 million The Army’s forecast savings are also based on redeploying soldiers from recruitment duties to frontline operations. Any savings within the contract period to 2022 may also be offset if the Army has to pay Capita for use of the online system after the contract ends, despite co-funding its development There is also limited evidence of skills transfer from Capita which, with the reduction in the number of Army personnel, may limit the Army’s options post 2022. Recommendation: As part of the annual update to the Committee recommended above, the Army should provide a full breakdown of the savings from the Recruiting Partnering Programme and explain its progress in establishing whether it is able to adapt and use the online recruitment system after 2022, and at what cost.
6Capita and the Department also failed to work together effectively on the other major Capita...
Concluded (the committee's words)
Capita and the Department also failed to work together effectively on the other major Capita contract to transform the Department’s management of its estate, which has now been terminated five years early. The Department has 81 current contracts with Capita, as well as 49 more where final payments are still to be made. Together they are worth £1.28 billion. Of these, however, two contracts - the one for army recruitment and the one for managing the defence estate for the Defence Infrastructure Organisation - account for around 90% of payments. Most of the remainder are small contracts, where the Department says it is not so dependent on Capita as it could use alternative suppliers. Capita relies on the public sector as a whole for around 46% of its revenue, but just 4% from the Department. Poor performance by Capita on the defence estate contract has led the Department to end it five years early and take responsibility back in-house in 2019. A number of aspects of the inadequate set-up and management of this contract were similar to that for army recruitment including the delay to the necessary IT system and misaligned objectives. Both Capita and the Department state that their relationship is now stronger, with new people in post, and Capita is committed to the ‘living will’ concept, in case of contractor failure. Recommendation: As it reforms its commercial practises and capabilities, the Department should embed the lessons from its relationship with Capita, and, before the summer, write to us setting out how it is improving the commercial performance of all its constituents parts, and how it will measure this success.
7We remain very concerned at the slow progress in improving military housing and at the...
Concluded (the committee's words)
We remain very concerned at the slow progress in improving military housing and at the lack of transparency around the major developments currently under way. The Department’s Future Accommodation Model pilots to trial alternative ways of offering suitable accommodation for service personnel, due to start in 2018, have slipped and the Department now hopes that they will start during 2019 in three 8 Capita’s contracts with the Ministry of Defence locations. This is further prolonging the uncertainty for personnel. The Department’s negotiations with Annington Property Limited on an accelerated site review process have continued, and it is hopeful that agreeing this approach will avoid the need to review every site, which was due to start in 2021. It also claimed to be making good progress resetting the agreement with Annington to allow better management of the estate, particularly around voids, although the Department’s November 2018 update set out a plan to reduce empty properties to around 12% by 2022, rather than the 10% target that the Committee had recommended. Because negotiations are still on-going, the Department was reluctant to go into much detail. The Department assured us that it would not put service personnel and their families in homes which are not of ‘decent homes standard’, and was attempting to bring all homes to a higher standard. Recommendation: The Department should provide us with a further update on progress with its work improving military housing by 31 July 2019, given the slippage on the Future Accommodation Model and the close connection between this work and the ongoing Annington Homes reviews, which remain the subject of negotiation. Capita’s contracts with the Ministry of Defence 9 1 The set up and implementation of the Recruiting Partnering Project
8On the basis of a report by the Comptroller and Auditor General, we took evidence...
Concluded (the committee's words)
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Defence (the Department) on the problems that the British Army (the Army) has encountered in establishing and implementing its partnership with Capita to recruit soldiers, and the steps that it is taking to achieve the intended benefits.1
9In 2012, the Army sought to reform its approach to recruitment by entering into a...
Concluded (the committee's words)
In 2012, the Army sought to reform its approach to recruitment by entering into a partnering agreement with Capita Business Services Ltd (Capita). It established the Recruiting Partnering Project and committed £1.36 billion over ten years. The Programme’s aim was to recruit the quantity and quality of soldiers that the Army requires each year (including regular and reserve officers and soldiers), and to save money. In March 2012, following a competitive process, the Army awarded a £495 million contract to Capita. It believed that contracting-out to a commercial provider would bring new expertise in recruitment and marketing.2
10However, Capita has missed the Army’s annual targets for recruiting new soldiers and officers every...
Concluded (the committee's words)
However, Capita has missed the Army’s annual targets for recruiting new soldiers and officers every year since it began in 2013. The shortfall each year has ranged from 21% to 45% of the Army’s requirement. In 2017–18, Capita recruited 6,948 fewer regular and reserve soldiers and officers than the Army needed. Capita missed the Army’s annual target for recruiting regular soldiers by an average of 30% over the first five years of the contract, compared with a 4% shortfall in the two years before Capita started. Recruitment shortfalls result in the Army placing greater strain on existing personnel to maintain operations and limit its ability to develop the capabilities it needs in the future.3 The set-up of the Project
11The Army stated that at the time it entered into the partnership with Capita in...
Concluded (the committee's words)
The Army stated that at the time it entered into the partnership with Capita in 2012, it was pre-occupied with the war in Afghanistan, which had helped with recruitment. It told us that it had been naïve to think it could just contract out recruitment to an organisation that was not military.4 Capita also accepted that it made mistakes entering into the contract. It had been more interested in “chasing revenue” and winning new contracts rather than its partnership with the Army.5 As a result, Capita under-estimated the complexity of the Armed Forces’ requirements. It did not, for example, recognise the level of customisation that was required to develop the new online recruitment system and, as a result, could not use an ‘off-the shelf’ commercial solution.6 The delays in developing a bespoke application meant Capita could not introduce the digital recruitment approach as originally envisaged at the outset.7
12The Army and Capita entered into a overly complicated contract, with the Army insisting on...
Concluded (the committee's words)
The Army and Capita entered into a overly complicated contract, with the Army insisting on 10,000 areas of contract compliance (i.e. contract specifications). The level 1 C&AG’s Report, Investigation into the British Army Recruiting Partnering Project, Session 2017–19, HC 1781, 14 December 2018 2 C&AG’s Report, paras 2, 1.5 3 Qq 10,13; C&AG’s Report, para 5 4 Qq 3,16 5 Qq 39, 75 6 C&AG’s Report, para 10 7 Q 86 10 Capita’s contracts with the Ministry of Defence of complexity reflected the Army’s career structure, which had 240 career employment groups, and the Army assumed that Capita would be able to work within this structure.8 This constrained Capita’s ability to innovate but the company did not push back on the level of contract specification.9 The Army’s management of the Programme has also limited its ability to refine the recruitment process. Between 2013 and 2018, it responded slowly to Capita’s proposals to streamline or change the recruitment process.10 The Army told us that it had now reduced some of the complexity of the contract to allow Capita to innovate.11
13At the outset, Capita introduced a centralised, call-centre approach to recruiting, using Upavon as the...
Concluded (the committee's words)
At the outset, Capita introduced a centralised, call-centre approach to recruiting, using Upavon as the national recruiting centre. The Army acknowledged that, as a result, it lost its ability to support candidates through the application process.12 Capita did not trial this approach before its introduction and the Army accepted that it was a mistake not to recognise the importance of face-to-face contact with applicants. They have now ended this approach and put the onus back on local recruitment centres and local engagement with schools and colleges. It is also using military ‘role-model’ soldiers to promote a career in the Army and an enhanced package of support for applicants to help them through the process.13 Problems with implementation
14Capita has missed the Army’s targets for recruiting new soldiers each year since 2013.14 The...
Concluded (the committee's words)
Capita has missed the Army’s targets for recruiting new soldiers each year since 2013.14 The Department suggested that the fundamental deficiencies in Capita’s performance did not become fully apparent for about three years.15 It told us that it was initially focussed on training in preparation for the war in Afghanistan and then on meeting the Prime Minister’s target to increase the size of its reserve force to 30,000. The Department could not, though, explain how senior management were monitoring performance during this period. Given the Parliamentary interest in recruitment figures, we are extremely surprised at the Army’s failure to recognise the scale of Capita’s performance problems and at the passive approach to managing the contract before 2016.16 This is particularly the case since this Committee published a report in September 2014 on Army 2020 which covered these issues. In that report, the Committee commented that the recruitment contract with Capita was not established on the basis of a clear understanding of the scale of the recruitment challenge, that shortfalls in Army recruitment were increasing the risk of capability gaps emerging in some parts of the Army’s structure and that a huge step up in performance was required if the Army was to hit its ambitious targets.17
15In April 2017, the Army agreed to revise its contract with Capita, lowering performance targets...
Concluded (the committee's words)
In April 2017, the Army agreed to revise its contract with Capita, lowering performance targets and resetting the contract’s penalties. It believed that continuing to apply the maximum service credit deductions would not give Capita an incentive to invest 8 Q 3 9 Qq 35, 37–38 10 C&AG’s Report, para 18 11 Q 10 12 Q 3 13 Qq 16, 17, 99 14 C&AG’s Report, para 5 15 Q 27 16 Qq 60, 63, 66 17 Committee of Public Accounts, Army 2020, 11th report of Session 2014–15, HC 104, 5 September 2014 Capita’s contracts with the Ministry of Defence 11 in improving its performance.18 We are concerned, however, that the Army gave away a lot at this point and that this was a good deal for Capita, with the potential for big wins in the future. In particular, the Army did not amend the contract to secure the intellectual property for the online recruitment system that it had co-developed and co-funded. The Army could not explain why – despite Capita’s poor performance - there had been no pushback on these issues and it did not use its leverage to secure additional benefits.19 The National Audit Office report shows that Capita has not even achieved the reduced targets for the number of new recruits since the contract was reset.20
16The Army and Capita have failed to simplify the recruitment process.
Concluded (the committee's words)
The Army and Capita have failed to simplify the recruitment process. In 2017–18, half of applicants took 321 days to complete the recruitment process – from application to starting basic training – and one third took over 400 days. The Army and Capita have not, however, made any substantive changes to the recruitment process and recruitment times have not reduced since 2014–15. While some applicants complete the process quicker and others like to pace themselves through the process, there are also applicants that are not fit enough to meet the Army’s requirements and need to spend time preparing to get through the physical assessments.21 Applicants have also had long waits for medical records to be obtained from their general practitioner. However, the Army and Capita have also introduced some changes - such as the use of primary health care records - without trialling them and subsequently found that these changes slowed recruitment times.22 17 The length of time to complete the recruitment process affects the conversion of applicants into new recruits. Capita estimated that just 14% of applicants actually join the Army and 47% voluntarily dropped out..23
18The Department accepted that the time it takes to recruit new soldiers is too high...
Concluded (the committee's words)
The Department accepted that the time it takes to recruit new soldiers is too high and that it needs to streamline the recruitment process across the three frontline services. It has begun to trial new initiatives, including taking more risks at the beginning of the process and running different stages in parallel. It is also reviewing its policy and approach to obtaining medical records, including working with NHS Digital to obtain documentation more quickly, and assessing the value of the online medical questionnaire. Overall, the Army aims to reduce recruitment times to three months – from application to the offer of a post.24 The Army and Capita’s response
19The Army and Capita have introduced a series of new initiatives to address the problems...
Concluded (the committee's words)
The Army and Capita have introduced a series of new initiatives to address the problems that they have encountered and to address Capita’s under-performance. They have introduced new arrangements for managing recruitment, bringing together the eight areas of the Army with a responsibility for aspects of recruitment, with meetings chaired by senior personnel from both bodies.25 The online system is now operational and provides 18 C&AG’s Report, paras 3.6 – 3.7 19 Qq 111–112, 114 20 C&AG’s Report, para 3.8 21 Qq 52, 53; C&AG’s Report, para 14 22 C&AG’s Report, paras 2.18 and 2.20 23 Qq 53, 54 24 Qq 67, 68 25 Q 45 12 Capita’s contracts with the Ministry of Defence better data to understand the progress of applications through the recruitment process.26 In January 2019, the Army and Capita also launched a new marketing campaign and told us that applications were three times higher than in January 2018.27
20Capita has performed poorly against the key performance indicators in the contract, meeting a target...
Concluded (the committee's words)
Capita has performed poorly against the key performance indicators in the contract, meeting a target just four times out of 228 since August 2015. It accepted that it was not pleased with this performance but was confident that the recent changes will lead to improvements.28 As a result of the contract penalty clauses, the Army has deducted £26 million from its payments to Capita (6% of contract payments since 2012) which, in most months, was the maximum amount possible. The Army was not, though, able to provide us with a convincing answer on how it would penalise Capita for under- performance in the future, and the conditions under which it would consider terminating the contract. The Secretary of State has previously said that the Department would remove the contract if it “lost confidence in Capita”.29 But the Department could not provide us with clarity on in what circumstances – other than the withdrawal of key staff - or what level of under-performance would lead to this and how long it would take to disentangle Capita from the process.30
21However, despite increased applications, Capita has not yet met the Army’s targets for recruiting new...
Concluded (the committee's words)
However, despite increased applications, Capita has not yet met the Army’s targets for recruiting new soldiers.31 The Army forecasts that Capita will recruit 60% of the soldiers that it needs in 2018–19. The Army also told us that it had a high degree of confidence that it would achieve 80% of its requirement by March 2020 and that Capita would be recruiting the full demand by end of contract. Capita also stated its confidence in meeting or exceeding these targets.32 26 Q 56 27 Q 35 28 Qq 32, 37, 79 29 Qq 24–26, 35 30 Qq 128–132 31 C&AG’s Report, para 20 32 Qq 5, 42, 44 Capita’s contracts with the Ministry of Defence 13 2 Achieving future benefits Recruiting the skills that are needed in the future
22The evolving threats to national security mean that nature of the Department’s work is changing...
Concluded (the committee's words)
The evolving threats to national security mean that nature of the Department’s work is changing rapidly. It is seeking to develop its future force to ensure that it has the skills and capabilities that are needed, particularly in areas such as digital technology and cyber security.33 Our September 2018 report on Skill Shortages in the Armed Forces highlighted the long-standing problem of skills shortages and the challenge of recruiting the specialist skilled personnel needed to meet future ambitions.34 The Department told us that it has a skills plan and considers options to address shortages, including the remuneration package for trades with shortages and lateral entry into these trades. The Army also considers its shape, size and skill requirements and, on this basis, sets targets for Capita to recruit into specific groups. However, Capita did not achieve the Army’s requirement in more than five of 17 target groups in any quarter in 2017–18.35
23We were concerned that the Department’s policies restricted its ability to recruit the specialist skills...
Concluded (the committee's words)
We were concerned that the Department’s policies restricted its ability to recruit the specialist skills that it will increasingly need in the future. The Department told us that it was not changing its entry standards but has widening its entry criteria. For example, it is revising its medical conditions, considering areas such as mental health standards and musculoskeletal requirements, to attract a wider range of people.36 The Department is also growing its cyber capabilities, essential in a changing world. It is engaging with other government agencies to consider the entry requirements of people with cyber skills, and the extent to which they need to meet military standards and criteria. The Department accepted that these developments will require a fundamental change to the culture of the Armed Forces which had to be managed carefully. We were not convinced, however, that the Department was thinking radically enough or re-assessing its policies at the necessary pace.37
24The Army has closed 68 local recruitment centres, more than half of the local offices...
Concluded (the committee's words)
The Army has closed 68 local recruitment centres, more than half of the local offices it had in 2013. It claimed that the closures were largely in rural areas and based on an analysis of the number of applicants coming from those offices.38 However, the Committee found that some of the closures were in areas with historicall high recruiting rates or had the effect of requiring applicants to travel long distances.39 The National Audit Office report shows that closures have increased journey times to local offices.40 Capita claimed that the location of offices is not fixed and also, using its analysis of the origin of applicants, it could use its mobile facilities to increase its representation in areas without a recruitment office. We were concerned, however, that the Army was limiting the pool of potential recruits, and consider it should not rely solely on data on applications to indicate potential 33 Qq 97, 99 34 Q 117; Committee of Public Accounts, Skill shortages in the Armed Forces, Session 2017–19, HC 1027, 12 September 2018 35 Q117, C&AG’s Report, para 2.23 36 Q 95 37 Qq 91, 96, 97 38 Q 81, C&AG’s Report, Figure 5 39 Qq 80, 83 40 C&AG’s Report, para 2.17 14 Capita’s contracts with the Ministry of Defence interest, nor should it underestimate the value of face-to-face recruitment drives.. The closure of offices has also reduced its ability to travel to schools and colleges to generate interest in careers in the Armed Forces.41 Achieving the intended savings
25In 2012, the Department forecast that it would save £267 million over 10 years from...
Concluded (the committee's words)
In 2012, the Department forecast that it would save £267 million over 10 years from its partnership with Capita, mainly by withdrawing personnel from the recruitment process and redoplying them to frontline operations.42 In January 2019, the Department forecast that it would now save £180 million, a reduction of 33%. At our evidence session the Department could not, though, provide us with clarity on the number of soldiers that were still involved in recruitment, or would be needed in the future.43 The Department has since written and stated that there are currently 417 military recruiting posts, which includes 374 Regular personnel and 43 Full Time Reserves.44 The National Audit Office found that the Army had employed additional military personnel to improve awareness of recruitment campaigns.45
26The Army has achieved savings of just £25 million in the first six years of...
Concluded (the committee's words)
The Army has achieved savings of just £25 million in the first six years of the contract, which means it expects to save £155 million in the remaining four years.46 Achieving this is dependent on delivering the remainder of the Programme within the budget of £1.36 billion. In October 2018, the Army was within budget, but the increased cost of the Capita contract – which had risen from £495 million to £677 million – was a significant factor in the Army using all of the Programme contingency of £199 million. This, and the lack of certainty over the need to use Army personnel to boost recruitment in the future, meant that the Army was not confident of achieving these savings.47
27The Army and Capita jointly developed the online recruitment system.
Concluded (the committee's words)
The Army and Capita jointly developed the online recruitment system. The Army incurred costs of £113 million and Capita invested £60 million to bespoke the system to meet the services’ recruitment processes and criteria,48 Capita told us that the Army will have an in-perpetuity right to use the system for an industry-standard maintenance fee.49 We were concerned, however, at the risk of commercial exploitation and the potential future cost to the Army, given that it had co-created and co-funded the system. The Army is exploring its future options, including its ability to adapt the system in the future, the potential costs and possible alternatives.50
28The Army aimed to transform recruitment by bringing in Capita’s expertise in recruiting and marketing.51...
Concluded (the committee's words)
The Army aimed to transform recruitment by bringing in Capita’s expertise in recruiting and marketing.51 It removed 900 of its military and civilian personnel as Capita introduced its own professional recruiters. Given this, we were not convinced that the Army was doing enough to build up its capability so that it would have the option of reverting to an in-house approach in 2022, rather than be reliant on Capita.52 The Army 41 Qq 80, 83–86 42 Qq 121, 124 43 Qq 122, 123 44 Letter from Stephen Lovegrove to Chair of the Public Accounts Committee, 25 January 2019 45 C&AG’s Report, para 3.12 46 C&AG’s Report, para 3.12 47 Qq 122, 123 48 Q 35, C&AG’s Report, para 9 49 Qq 103, 109 50 Qq 107, 110, 111, C&AG’s Report, para 12 51 Q 10, C&AG’s Report, para 1,5 52 Qq 18, 35 Capita’s contracts with the Ministry of Defence 15 has recently introduced a new Programme to explore its options for recruiting across the three frontline services and the Department’s civilian workforce. It plans to trial new ideas to build its understanding of the options before 2022, and inform its thinking on whether to continue with its partnership with Capita.53 The Department plans to consider its options in early 2020.54 The Department’s wider relationship with Capita
29The Department has 81 current contracts with Capita, as well as 49 more where the...
Concluded (the committee's words)
The Department has 81 current contracts with Capita, as well as 49 more where the final payments have not yet been made or which have yet to be closed. Together these arrangements are worth £1.28 billion.55 The Department told us that of the contracts it had with Capita, two - for army recruitment and for managing the defence estate for the Defence Infrastructure Organisation - account for around 90% of payments made last year to the company. In addition, in June 2018, Capita won a further important contract for Defence Fire and Rescue Services but this is currently subject to a judicial review.56 Most of the remainder are small contracts, where the Department told us that it is not dependent on Capita as it could use alternative suppliers. Capita secures around 46% of its revenue from the public sector as a whole, but just 4% from the Department.57
30As we noted last year, poor performance by Capita on the defence estate contract has...
Concluded (the committee's words)
As we noted last year, poor performance by Capita on the defence estate contract has led the Department to end it five years early and take responsibility for managing the estate back in-house in 2019.58A number of aspects of the inadequate set-up and management of that contract were similar to that for army recruitment, including the delay to the necessary IT system and misaligned objectives.59 Both Capita and the Department state that their relationship is now stronger, with new people in post on both sides. Capita was supportive of the reforms that are being pushed forward by the Cabinet Office and stated that it is committed to the ‘living will’ concept, in case of contractor failure.60 The company told us that the calibre of dialogue with government is much higher than it was, and that closer working relationships was important in avoiding problematic outsourcing contracts. The Department also considered that Capita had been constructive in their approach to transferring key personnel over.61 53 Qq 98, 99, 105 54 Q 125 55 Q 133 56 Qq 157–162 57 Qq 134, 141–142 58 Committee of Public Accounts, Ministry of Defence’s contract with Annington Property Limited, Fifty-third Report of Session 2017–19, HC 974, 13 July 2018 59 Q 154 60 Qq 144–150, 156 61 Qq 153,155–156 16 Capita’s contracts with the Ministry of Defence 3 Management of defence housing
31This Committee has a long running interest in military housing which is essential for the...
Concluded (the committee's words)
This Committee has a long running interest in military housing which is essential for the well-being of many in the armed forces. We remain very concerned at the slow progress in improving military housing and at the lack of transparency around the major developments currently under way. We have reported on military housing and Annington Property Limited twice in the last two years and continue to keep the matter under review. Arrangement with Annington Property Limited
32The Ministry of Defence has committed to providing service personnel with subsidised accommodation.
Concluded (the committee's words)
The Ministry of Defence has committed to providing service personnel with subsidised accommodation. In July 2018, this Committee reported on the arrangement with Annington Property Limited, under which the married quarters estate was sold off and rented back for up to 200 years. We expressed concern at the ‘disastrous’ deal and noted that the situation could get worse because the rent levels are to be reviewed from
33In November 2018, the Department provided an update on the Annington arrangement.63 It told us...
Concluded (the committee's words)
In November 2018, the Department provided an update on the Annington arrangement.63 It told us that it was working with Annington Property Limited on an accelerated site review process. It is hopeful that agreeing this approach will avoid the need to review every site, which was due to start in 2021, and that the accelerated programme would be completed before that date.64 The Department said that Annington was also not keen on an extended site review. It also stated it was making good progress resetting some of the terms of the agreement with Annington to allow better management of the estate, particularly around voids and dilapedations, and would provide further information when it was available. In its November 2018 update, the Department also set out a plan to reduce empty properties to around 12% by 2022, rather than the 10% target that the Committee had recommended. Because negotiations are still on-going, the Department was reluctant to go into much detail but stated that since the Committee’ evidence session in January 2018 it felt that there had been a noticeable change in relations.65 Future Accommodation Model and housing quality
34Another initiative on which we have commented before is the Future Accommodation Model, which is...
Concluded (the committee's words)
Another initiative on which we have commented before is the Future Accommodation Model, which is designed to give service personnel greater choice and flexibility over their accommodation and allow access to the wider housing market. The Department’s Future Accommodation Model pilots to trial alternative ways of offering suitable accommodation for service personnel were due to start in 2018, but have slipped, and the Department now hopes that once it has ministerial and Treasury approval they will start later in 2019. The Department has previously told us that the pilots will take three years so we are now looking at almost 2023 before the pilots will have concluded. The Department told us that there would be three pilots, one for each of the Services.66 62 Committee of Public Accounts, Fifty-third Report of Session 2017–19, Ministry of Defence’s contract with Annington Property Limited, HC 974, 13 July 2018 63 Letter from Stephen Lovegrove to Chair of the Public Accounts Committee, 30 November 2018 64 Q 167 65 Qq 169–170 66 Qq 163–166 Capita’s contracts with the Ministry of Defence 17
35The Department assured us that it would not put service personnel and their families in...
Concluded (the committee's words)
The Department assured us that it would not put service personnel and their families in homes which are not of ‘decent homes standard’, and was attempting to bring all homes to a higher standard. It thought that over 80% were of ‘decent home plus’ standard already.67 67 Q 172 18 Capita’s contracts with the Ministry of Defence
Evidence
Oral evidence sessions 1
- 14 Jan 2019No witnesses recordedparliament.uk ↗
Correspondence 4 letters
- 10 Sep 2019Letter from Sir Stephen Lovegrove to Chair, regarding Committee report on Capita's contracts with the Ministry of Defence - dated 25 July 2019To committee
- 27 Feb 2019Correspondence from Ministry of Defence to Chair, Meg Hillier regarding Ministry of Defence's arrangement with Annington Property Limited - dated 30.11.2018
- 12 Feb 2019Letter from Jon Lewis CEO of Capita to Chair regarding Capita's Army Recruitment contract with the MoD - dated 31.12.19To committee
- 5 Feb 2019Letter from Permanent Secretary for Ministry of Defence to Chair regarding Capita's contracts with the Ministry of Defence - dated 25.01.19To committee