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House of Lords Hansard
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Defence Fire and Rescue Project: Capita
21 June 2018
Volume 791

Statement

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My Lords, I shall now repeat an Answer to an Urgent Question asked earlier today in the other place:

“I am grateful for the opportunity to put on record the justification for the awarding of this contract. The defence fire and rescue project has been examining potential improvements in how fire and rescue services are provided to the Ministry of Defence, both here in the United Kingdom and overseas. The total value of defence fire and rescue operations is around £1.3 billion. We intend to award a 12-year contract worth around £400 million to Capita Business Services Ltd. However, this is open to possible challenges—the normal process ensues—following the issuing of the contract award decision notice and possible parliamentary challenges to the contingent liability.

The contract will deliver improvements in the safety of military and civilian firefighter personnel and improvements in the equipment and training available to them. It will deliver savings that will be reinvested in the defence budget while sustaining our ability to support operations around the world and to support local authority fire services, should that be required at times of heightened national need. In doing so, it will ensure that our personnel, airfields and strategic assets worldwide continue to be protected from the risk of fire.

I assure Parliament that the proposed contractual arrangements have been subject to the fullest range of testing and scrutiny across government to ensure that the services will be delivered in a sustainable and resilient manner. Safeguards are in place to ensure that there is no break in service provision. Capita is a strategic supplier to the Government, and the Cabinet Office maintains regular engagement with the company, as with all strategic suppliers.

Fire risk management will remain a defence responsibility after the award of the contract. In no circumstances will there be any compromise to our personnel’s safety. Over the course of the bidding for the contract, Capita’s financial status has been analysed by the Ministry of Defence’s cost-assurance and analysis service, and we have in place the necessary contingency plans to ensure that the contract is managed accordingly. We will actively manage the contract to provide early warning of any performance concerns so that they can be addressed thoroughly.

Following a competitive bidding process, Capita’s bid was deemed to deliver the best technical solution and the best value for money for defence. Robust evaluation and modelling processes were undertaken to test the deliverability of the proposed contracts to ensure that all risks were identified. As well as the full assessment of the proposal, we have a contract that clearly defines the obligations for the contractor. A performance mechanism has been developed to make sure that Capita is reincentivised to ensure that delivery targets are clearly defined.

I should be clear that this is not the first time that contractors have been used in this way. Several sites, including Porton Down, are already using contractor fire service capability. In addition to offering significant financial savings that can be reinvested in defence, the project aims for the delivery of sustainable and agile defence fire and rescue services that meet the requirement without compromise”.

Before we go into questions, I should make the point that my right honourable friend Tobias Ellwood mistakenly quoted a figure of around £400 million for the value of the contract. He should have said £550 million.

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My Lords, I thank the Minister for repeating the Answer. I have to admit to being little short of amazed by this award. Yesterday’s Daily Telegraph said:

“An assessment by financial analytics experts from Company Watch, which is used by the MOD, gave Capita a risk score of 10 out of 10. The higher the figure, the greater the perceived level of financial distress. Published on June 6, the report also measured Capita on a separate metric, a so-called health score, which plunged to just three out of 100”.

All in defence know the appalling mess Capita made of the Armed Forces recruitment programme, which has been saved only by the Armed Forces duplicating the work Capita should have done. Surely Her Majesty’s Government—of the party that is supposed to understand business—understand that the Capita business model is bid low, exploit the contract to its limit and cut costs remorselessly. How will Her Majesty’s Government ensure that the inevitable cost-cutting will not result in the death of members of the Armed Forces?

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My Lords, I thank the noble Lord for his questions. I obviously do not agree with him. I think this is basically a good thing for the Ministry of Defence, its budget and the taxpayer. The noble Lord mentioned a document that has been doing the rounds of the newspapers. The document in question was produced by the strategic supplier management team. The ratings on the SIB are taken from the Company Watch report and are provided for information purposes only. The SIB is not used in the formal assessment of the company’s financial health and is purely for background.

All competitive proposals were thoroughly analysed by subject-matter experts from within the defence and wider fire and rescue sectors. The recommendations were also subject to detailed scrutiny by the Ministry of Defence, Her Majesty’s Treasury and the Cabinet Office. The scrutiny extended for more than six weeks longer than it needed, to ensure that due diligence had been carried out.

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My Lords, what experience does Capita have of running fire and rescue services? What does the Minister think we should be taking from the fact that, as the noble Lord, Lord Tunnicliffe, pointed out, Capita doing recruitment for the Army has not been a notable success? Is value for money—meaning cost-cutting—the only thing that matters to the Government in letting this contract?

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My Lords, the noble Baroness asked a number of questions. She asked about value for money. This is a good thing. The fire and rescue service will be modernised. It will have far better training and equipment. This will all be put in place far quicker than if it had been left in the MoD budget. The noble Baroness also mentioned the matter relating to—will she remind me of the matter also mentioned by the noble Lord, Lord Tunnicliffe?

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It was the fact that Capita doing recruitment for the Army has not been terribly successful.

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My Lords, I think the noble Baroness is trying to compare apples and pears. The recruitment process has all sorts of population issues. Capita has experience in this field. It has extensive experience in training and firefighting and is a respected professional in that matter.

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I have certain experience of outsourcing in different areas. In my experience, it is linked—as we have sadly seen in the past—to the experience of the top team. It is crucial that the top team lives only this contract and nothing else. If there is a top team—I should have tried to find out beforehand—is it a group which has huge experience? If the suggestion is that, somehow or other, outsourcing is going to make it safer, I would be interested in making certain that Capita has people who really understand this and do not have to learn on the job.

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I thank my noble friend for his question. On the question of the management and oversight of this contract, it will be managed within the Defence Fire Risk Management Organisation, which is part of the Ministry of Defence. It will be responsible for monitoring the contract operations, including performance.

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My Lords, previous outsourced contracts have very often relied for their lower costs on the fact that the companies making the bid are able to rely on trained personnel who were once in the military conducting these duties. However, that source of trained and experienced personnel inevitably dries up after a few years, resulting in enormous increased cost pressures on the company. Can the Minister reassure the House that in this case the full training costs over the years of the contract have been taken into account by Capita?

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My Lords, I cannot actually comment on the contract itself because the exact details will not be made public until the contract is formally awarded. However, there is going to be strict governance over this contract, as I mentioned before, by the Defence Fire Risk Management Organisation, and of course this tender was highly examined in the Cabinet Office, the Treasury and the Ministry of Defence to ensure that it was a feasible and worth-while contract to go with.

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My Lords, my party leader and I met David Lidington recently to discuss public procurement. In that discussion, he expressed the Government’s desire to get the strategic providers to focus in on particular areas rather than simply being centres of excellence for getting money out of government. It seems to me that, while there are a small number of fire and service rescue contracts under Capita’s name, this is the Government doubling down on a strategic provider that needs their help. Can the Minister assure us overall what operational risk has been reviewed and how it is going to be managed?

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My Lords, as I said earlier to the noble and gallant Lord, the operational risk was considered heavily during the tender process and the management of the contract will be carried out by a Ministry of Defence team in the Defence Fire Risk Management Organisation. One also has to look at the benefits of this contract: investment in modern firefighting vehicles; improved safety for firefighters; better training—Capita has a great track record in training fire professionals; and centralised management information to monitor trends and reduce risk. This is a good deal, and I think we should congratulate the Government on it.

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My Lords, the Minister will undoubtedly be aware of the comments of the chief executive of Serco regarding government procurement to the effect that the Government have proved to be the worst procurer and the worst client, driving many large companies into difficulty. In that regard, what assurance can he give the House about the quality of the actual contracting process in this case so that that is not the end outcome here?

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My Lords, as the noble Viscount will be aware, Serco was the underbidder in this contract so it had an interest in this issue. As I have now repeated three times, the monitoring of the contract will be carried out by the DFRMO in the Ministry of Defence. These are Ministry of Defence civil servants who have great experience in this field.