MoD and Army 'made mistakes and errors' in awarding Capita recruitment contract
MoD permanent secretary admits the contract has not been "anywhere near as successful as we’d like".
The Ministry of Defence and the Army made “bad mistakes” in their handling of an underperforming contract with the outsourcing company Capita to recruit armed forces personnel, MPs have heard.
Speaking to the Public Accounts Committee yesterday, Lt Gen Tyrone Urch, commander of the Army home command group, set out several areas that were handled “not too cleverly” when the two bodies handed the ten-year contract to Capita in 2012.
Urch was called before committee to answer questions about a National Audit Office investigation pushlished last month that found Capita had consistently fallen short of its recruitment targets. He appeared alongside MoD chief commercial officer Andrew Forzani, chief of defence people Lt Gen Richard Nugee, MoD permanent secretary Stephen Lovegrove and Capita’s chief executive, Jonathan Lewis.
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The Recruiting Partnering Project contract was intended to significantly increase numbers of soldiers and reservists by transforming the Army’s approach to recruitment. Issues uncovered by the NAO included an army recruitment website being launched four years late and at four times the planned cost.
Urch said the Army had “made some bad mistakes and some errors” in its handling of the contract, including insisting on a contract that was “way too complicated”, with too many compliance lines.
He said it was “naïve” to think the job of an army recruiting sergeant could be subcontracted out to a non-military organisation. “I think that was a failing.”
And he said the Army was wrong to insist Capita used an “antiquated IT system” to handle recruitment, and that it should not have allowed the outsourcer to use what he called a “centralised call system way of doing business”.
“In hindsight we lost our ability to nurture our candidates, to look after them, and to pay them the attention that they really deserved,” he said.
Despite the contract's failings, Urch contended that the contract had not been a failure, because it was still on track to save around £200m and had allowed the Army to return around 900 soldiers who had previously worked in recruitment to the front line.
The contract was initially forecasted to save the Army £267m. Lovegrove said the £200m figure represented a “very significant saving”, but conceded: “Has the contract been anywhere near as successful as we’d like? Clearly not.”
He said the MoD was working to adopt an “increasingly mature and sophisticated” approach to outsourcing.
When the committee questioned why Capita had been given such specific instructions on how to run the recruitment – such as specifying the IT system it should use – Lovegrove said he “wouldn’t put this particular contract into the category of a mature and sophisticated one when it was assigned”.
Despite Capita’s failings to date, those giving evidence were insistent that its performance was improving.
Urch predicted that Capita would be recruiting around 60% of the personnel demanded by the contract by the end of this recruitment year in March. He said this should to 80% by the end of the next year and that he had a “high degree of confidence that by end of contract we will be recruiting everybody that we need”.
By end next year, expect to have close to 80% and by end contract, “I am sincerely hoping that Capita will be recruiting the full demand”.
And Nugee said the contract had delivered benefits beyond the cost savings discussed during the committee hearing. “They have brought a commercialisation to it that we would not have done ourselves. What they have brought is an expertise that we didn’t have,” he said.
Lines of accountability
Lewis, who was appointed to lead Capita in 2017, said the company should have pushed back against some of the contract’s requirements but admitted that it didn’t because “we were chasing revenue” when it signed on. As a result it was unable to meet its obligations and has had £26m deducted from its remuneration for the programme.
Forzoni told the committee the MoD had used the "full force of the performance regime" to make the deduction. “We actually think we’ve been pretty tough on Capita under the mechanism of the contract."
Lewis said this sum was “very close to 100% of the margin of the contract” and that combined with additional investment Capita has made in developing its recruitment platform, means that it will lose “a very considerable sum of money” over the course of the contract.
The company has spent £60m more than planned on developing the platform, which Lewis said it needed to do to allow it to fulfil its contractual obligations.
Capita will retain the intellectual property rights for the platform. The army will continue to use the platform after the contract ends, paying an “industry standard fee”, Lewis said.
On the other side of the contract, MPs on the committee struggled to ascertain who had been held accountable for its failings.
Lovegrove said none of those responsible for signing it off in 2012 were still at the department by the time the problems became apparent three years later. Nugee said the generals involved on the Army side had all since left without being promoted.
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