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.
“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.”
Conclusions and recommendations
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. The MoD should write to the Committee by September 2019 to share their updated recruitment plans.
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.
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.
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.
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.
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.
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 constituent parts, and how it will measure this success.
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 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.