The Ministry of Defence (MoD) has wasted at least £70 million on an Army recruitment system due to poor management of ICT suppliers, according to the Public Accounts Committee (PAC).
The online recruitment portal, once eventually up and running, is a crucial part of plans to reduce the size of the regular Army and recruit at least 11,000 reserve soldiers to help meet some of the shortfall.
The £70 million loss is mainly down to a failure by the MoD to provide the IT infrastructure required for the Army’s and Capita’s recruitment contract, the PAC report said.
MoD paying out £1 million a month
The figure includes extra costs of £1 million a month that the MoD will have to pay Capita for hosting until the necessary IT to support the system is ready.
The payments, which will add up to £25 million if the system is ready next summer as expected, are being paid to Capita as initial plans for the Army’s existing supplier ATLAS to provide hosting fell through.
ATLAS was originally supposed to provide hosting while Capita supplied software, however the MoD failed to manage the two contracts properly.
Delays to ATLAS providing a suitable hosting environment meant Capita could not run the recruitment process as originally planned, according to a National Audit Office (NAO) report published in June.
Single supplier model
Instead of using multiple providers as originally planned, the MoD decided to use Capita to set up and run the entire recruitment process, saying that this will ‘mitigate the risk of further delays’, the NAO said.
In January this year, the Army estimated that reverting to this fallback solution - of Capita providing the hosting for the scheme - would cost an extra £48 million.
Having had to use this contingency plan, this figure has now increased to £70 million, which includes £25 million (equivalent to £1.02 million a month, assuming the scheme launches in summer 2015) to Capita for developing the hosting environment and £34 million, again to Capita, for replanning provision of its recruitment software applications.
It also comprises £5 million paid to ATLAS for handover work and a write-off of £6 million worth of previous development work.
The NAO explained that the £1.02 million per month which will be spent until the new recruitment software launches comprises the Army having to use legacy systems for longer (£430,000), funding for extra civilian staff to help Capita with recruitment activities (£470,000) and payments to Capita for extra interim operational costs (£120,000).
The department originally expected the 'Recruiting Partnering Project' contract with Capita, signed in March 2012, to deliver savings of £267 million.
Costs could rise
Instead, although the MoD was unable to confirm the total cost incurred as a result of the IT issues, it acknowledged it would be “at least £70 million.”
PAC chair Margaret Hodge MP said: “The MoD’s bungling around the recruitment contract with Capita has meant at least £70 million of the planned £267 million savings from the contract have already been lost.
“There was no clear understanding of the scale of the recruitment challenge, poor information about potential recruits and the MoD did not provide Capita with the IT infrastructure it needed.”
An MoD spokesperson said: "It is unfortunate that there have been problems over the ICT but these have been addressed and are in the process of being resolved. We have absolute confidence in Capita to deliver the support to the Army that we expect.
"The MoD’s contract with Capita is being managed through a robust governance process which involves high level engagement with the Capita Chief Operating Officer down to weekly meetings at the operational level."
Responding to the NAO report published earlier this summer, a Capita spokesperson said:
“Capita has been working closely with the Army to overcome initial setbacks caused by the ICT infrastructure, which prevented the Army recruiting partnership from reaching its full operational capability.
“A comprehensive Capita ICT solution, rather than the planned solution involving a third party supplier, has been agreed, and will result in single ownership of the end-end-to-end recruiting process, a simplified integration of systems and more certainty of delivery dates.
“Capita is working with the Army to ensure the IT recruitment systems meet the needs of this complex project, and the partnership is on a clear upward trajectory. We are confident that, working together with the Army, we will meet the Army 2020 recruitment goals.”