Ministry of Defence contractors ‘drop standards’ to boost profits, MPs warn

Outsourcing companies working for the Ministry of Defence “drop standards and squeeze employees” to boost profits during the lifetime of their contracts, a committee of MPs has warned in a highly critical report.

The MoD should instead consider retaining firefighting and other ancillary services in house, the committee said – and take into account the previous behaviour of companies chasing lucrative contracts.

“The MoD’s outsourcing practice is not exemplary,” the committee concludes. “Contractors drop standards and squeeze employees to raise their profit margin, but the MoD is not always willing to step in,” the cross party committee concludes.

Particular criticism is reserved for Capita, a major outsourcing firm, whose handling of the Defence Fire and Rescue Service (DFRS) is analysed. The company took over responsibility for nearly half of the specialist firefighters in July 2019, after winning a 12 year contract priced at £525m.

The number of firefighters based at Faslane, the Trident nuclear submarine base in Scotland, had fallen significantly since privatisation, the MPs added. A total of 38 out of 524 had left on a voluntary basis as of last December, and further 150 had asked to be allowed to quit.

“We find these figures surprising,” the committee concluded. “Whilst Capita argue that its job retention rate is ‘good’, the number of voluntary exits suggests that there may be more than meets the eye.”

Mark Francois, a Conservative MP, added that the government should change the law in the forthcoming procurement bill to allow ministers to consider “a bidder’s past performance” when awarding contracts in future.

The former junior defence minister has been a persistent critic of Capita, and has called for the company to be stripped of its contract to supply army recruitment. “The performance of certain sub-contractors is well known both within industry and the defence community,” Francois added.

Army recruitment has been handled jointly by Capita and the British army since 2012. But performance has been mixed: targets were missed in six years out of eight, the army remained below its 82,050 official requirement and the website was offline for weeks in the spring after an apparent leak of data belonging to 120 recruits.

The committee also complained that staff terms and conditions were sometimes eroded once a service had been privatised. Defence firefighters employed by Capita had 27 days’ holiday compared to 30 in the MoD.

Capita said its record of delivery on the DFRS contract was strong, and the company had met all of its targets. Recommendations over staffing levels “at any MoD site have to be endorsed by the MoD, and ultimately approved by the individual site’s military leadership team,” a spokesperson added.

A MoD spokesperson said outsourcing was used to deliver “maximum value” for taxpayers. “Our contracts ensure that staff are paid fairly and contracted ancillary staff often have training and career prospects superior to an in-house service,” they added.

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