The Ministry of Defence’s decision to hand a 12-year contract for fire and rescue services to outsourcing giant Capita is underpinned by “robust evaluation and modelling processes” to “ensure all risks were identified” a junior minister has insisted.
Capita confirmed earlier this week that it had won the £400m contract to provide fire services on military bases, airfields and munitions sites in a move dubbed “risky” by major civil service union Prospect in light of the firm's recent profit warning.
In an urgent debate called yesterday by shadow defence secretary Fabian Hamilton, undersecretary of state for defence Tobias Elwood was asked why the government had picked a company with a risk rating of “10 out of 10” to run the service. Elwood said Capita’s bid had been “the best”.
He said the outsourcing giant was picked ahead of rival bids from Serco, Babcock and QinetiQ for the deal, which will see 600 staff transfer and require a range of service and hardware improvements, including new fire-service vehicles and new training methods.
But in the wake of January’s collapse of construction firm and major outsourcer Carillion – and a profit warning subsequently issued by Capita that month – MPs yesterday demanded assurances from Elwood that the new MoD deal was secure.
They also noted that the MoD had last year chosen to terminate a strategic business partnership under which Capita managed the Defence Infrastructure Organisation after five years rather than the originally-planned 10.
Elwood acknowledged that the demise of Carillion had changed Whitehall’s attitude to outsourcing, but insisted that the fire and rescue deal had been scrutinised and risk-assessed in fine detail.
“The shadow of Carillion hangs heavy over all government departments, if we are fair,” he said.
“Any new contract – with Capita or anyone else – needs to be sufficiently robust that we do not fall foul of some of the problems that Carillion experienced, including through its relationship with small and medium-sized enterprises.”
However Elwood said the bid process in relation to the defence fire and rescue deal had been extensive, and featured pan-Whitehall input.
“There was robust evaluation modelling – it involved not just the MoD, but the Treasury, the Cabinet Office and indeed the three services – to make sure that we have the necessary processes in place to manage what will be an umbrella organisation,” he said.
Earlier in the week, Prospect deputy general secretary Garry Graham said the union was “deeply disappointed” that the government had chosen to proceed with letting the fire-and-rescue contract when lessons from Carillion were still being learned.
“There is a very real risk that the MoD will end up paying over the odds for a much worse service than they would have had if they had just invested properly in the in-house service and the dedicated staff who work there,” he said.
“The constant drive to outsource services is not working for the MoD, the taxpayer or the workforce. It is time for ministers step back and make the right decision to protect this service for the future.
“We will now be working with our members to ensure jobs, quality and services are protected.”
Civil Service World asked Capita for its response to Prospect’s concerns about its stability.
A spokeswoman said: “We are executing our strategy announced in April, including action to address the balance sheet. Our successful £701m rights issue and the £160m disposal of Supplier Assessment Services demonstrates the progress we are making to simplify and strengthen the business to deliver future success.”