The Ministry of Defence is not doing enough to ensure contractors get comparable employment terms and conditions to staff it directly employs, MPs have said.
Contractors “drop standards and squeeze employees to raise their profit margin”, the Defence Committee said in a report into the treatment of outsourced staff in the MoD.
The committee has called on the department to do more to stop this.
The report, which focused on the Defence Fire and Rescue Service as a case study to examine MoD outsourcing, raised concern over Capita’s involvement in the DFRS.
Capita won a £525m 12-year contract in 2019 to manage a large chunk of DFRS. 58% of DFRS is outsourced, 47% to Capita and 11% to other companies, with contractors working alongside firefighters still centrally employed by the MoD.
The MoD granted Capita the contract despite rating the supplier “10/10 for risk”, the FT reported at the time.
Staff employed by Capita include a significant number of former MoD staff, whose working conditions the committee said have worsened as a result.
Since April 2020, more than 600 MoD firefighters have transferred to Capita Fire and Rescue. The company has also taken over functional control from the Royal Air Force of 500 Air Command firefighters and 100 Cypriot civilian firefighters, and a number of trainers and other staff.
The outsourcing firm has been repeatedly criticised by the Defence Committee for its performance on MoD contracts, including failing to meet recruitment targets.
MPs said the MoD should ensure contracted staff and employees receive comparable contracts as a standard part of the process when considering bids.
The MoD is “not always willing to step in and enforce expected standards”, the committee said.
Key functions of the MoD, including the DFRS, were outsourced to the private sector after a department review in 2015 pledged to reform defence to make it “leaner and more efficient”.
But terms and conditions of outsourced employees are generally worse than those of their directly employed counterparts, with reduced wages and benefits, the committee said.
This is largely because the subcontracted company seeks to maximise its profit margin, and one of the ways to do this is to reduce employee’s wages, MPs added.
The report included comments from Andrew Forzani, director general for commercial at the MoD, who told the committee that the department had put “huge” time, effort and expertise into protecting employment terms and conditions when staff transferred over to Capita.
But the committee said: “Whilst it is positive to hear that efforts are being made to preserve terms and conditions, they do not appear to have been entirely successful.”
The MPs said Capita told them that its DFR terms and conditions were “comparable” to those of MoD employees, but that there was a difference in the leave entitlement. Capita employees get 27 days’ annual leave, while MoD staff get 30 days.
“Capita did highlight that its financial remuneration increased if employees were promoted,” the committee added.
MPs also raised concern about the drop in firefighter numbers since Capita took over. At a Trident nuclear submarine base in Scotland, 38 out of 524 firefighters had left on a voluntary basis as of last December, and further 150 had asked to be allowed to quit.
The committee said the cuts to staffing levels posed “a risk to fire safety”.
“We find these figures surprising,” MPs said. “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.”
The report also called for the MoD to give more consideration to providing services in-house, if it would provide better value for money.
And MPs criticised the fact that departments cannot take bidders’ previous performance into account when procuring contracts, which committee member Mark Francois called “absurd”.
Forzani told the committee that this was due to EU regulations. The government has said it will amend the rules as part of its procurement bill, announced earlier this month in the Queen’s Speech.
The amendments would mean bidders could be excluded for reasons including:
- A previous public contract has been terminated due to breach of contract
- The supplier has failed to remedy poor performance.
A Capita spokesperson said the company has a “strong” record on the DFRS contract and has achieved all of its performance targets since it was awarded.
They said this has delivered an £85m investment in new firefighting vehicles, digital technology, PPE and enhanced training facilities “which are improving firefighting capabilities, reducing risk to our firefighters, MoD personnel and critical military assets”.
Responding to MPs’ concern about staffing levels, the spokesperson said: “Our joint recommendations over resourcing levels at any MoD site have to be endorsed by the MoD, and ultimately approved by the individual site’s military leadership team. Any such decision would follow on from a thorough review of fire risks.”
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.