PAC: recruitment problems still undermining defence estate plan

MPs warn that contract with Capita-led consortium has "failed to transform" Defence Infrastructure Organisation, and continued uncertainty will exacerbate ongoing recruitment challenges at the body set up to manage £31bn defence estate 

By Suzannah.Brecknell

22 Mar 2017

Above: A soldier on a training exercise at the Army Training centre in Pirbright

The Public Accounts Committee has warned that continued recruitment and retention problems at the Defence Infrastructure Organisation will undermine plans to reduce the size and cost of the defence estate.

In a report published on Wednesday, the committee said that nearly one in five posts at the DIO – set up in 2011 to centrally manage the £31bn defence estate – are vacant, and key skills shortages remain despite a 2014 contract with a Capita-led business partner to bring in new management and staff.

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In 2015 the Ministry of Defence spent 12% of its overall budget – nearly £5bn – on its estate, according to the latest assessment by the National Audit Office, and ministers have asked it to reduce its built estate by 30% by 2040.

PAC notes that the department has only carried out essential maintenance on its estate since 2009, and this has lead to “a steady decline in the overall condition of the estate which now represents a risk to defence capability.”

The MoD has developed a 25-year strategy for managing the estate and reducing costs, but even if this plan is realised the MoD will have an estates funding gap of £8.5bn over the next 30 years. MPs also believe this plan is undermined because the MoD “still does not have a fit for purpose model for managing the estate and faces continued uncertainty”.

The committee said continued instability in the department’s estate management plans “is likely to be bad for staff morale and retention in DIO, an organisation which is already carrying around 500 vacant posts, and which has had three different permanent chief executives in two years.”

The committee urged the MoD to set out how it intends to address recruitment and retention issues and fill skills gaps in DIO when it writes to the committee before the end of May 2017 to share the results of its infrastructure model review.

PAC chair Meg Hillier said: “It is dismaying that there continues to be such instability in the department’s estate management model and we will expect it to set out the findings of its current review as a matter of urgency.

“The department intends the DIO to serve as an expert estate manager but it can only do so if fundamental weaknesses in its operation are addressed swiftly.”

MPs also criticised the department for “fundamental weaknesses” in its approach to securing savings through a contract with the Capita-led strategic business partner.

The deal, which left DIO owned by the ministry but run by the business partner, “failed to transform the performance of DIO,” the report said. This was partly because the department had not completed its own programme of change – such as modernising IT –  before entering into the contract.

The MoD believes the contract has had mixed success, with some programmes working well but uncertainty over whether savings achieved were sustainable or thanks to one-off cost-cutting work. Despite this, the committee found that the MoD paid the consortium £90m between June 2016 and 2016. The department estimates that around 50% of this figure was profit, though the business partner disputes that estimate.

The committee recommends that the MoD must use an ongoing review of the strategic business partner’s role, the department must ensure that it incentivises sustainable savings and “avoids enabling private sector providers to earn excessive profits.”

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