Ministry of Defence Outsourcing Contract Challenges – 4 lessons to avoid your outsourced service coming under fire

By Allan Watton on August 23, 2019

Seven years ago, in 2012, the British Army turned to outsourcing giant Capita for help in recruiting more regulars and reserves into its ranks. The Recruiting Partnership Project (RPP) was launched – a ten-year collaboration costing £1.3bn in its term. However, it has not been without its rough patches for either side.

Not Achieving (all) Expectations – Outsourcing Contract Challenges

Reportedly, each year of the partnership so far, the programme has fallen significantly short of between 21% and 45% of its targets. In real terms, that means there were 7,000 fewer recruits than were required in 2017–18 alone.

The partnership was also expected to provide significant savings, but the true extent of these savings is now being brought into question. Of the £267m in savings the Army was forecast at the outset, it is now looking likely that savings of just £180m will be seen by 2022 when the original agreement is due to end.

In fairness, if the partnership is able to achieve the quality of candidates (if not the volume), these savings should still be applauded. However, more recent reports say that even the £180m is an optimistic estimate as it relies on the remaining four years of the agreement being delivered on budget.

Misaligned Requirements

It seems from reports that there were a number of reasons for this. Primary among these was the complexity of the Army’s recruitment policies and procedures (containing some 10,000 requirements across the board) which were simply not fully understood at the outset. Others included:

  • That the contract introduced untrialled recruitment methods.
  • The essential digital platform for the programme was delayed.
  • Contracting with a supplier without the required specialist knowledge.
  • And a client that chose a hands-off approach.

Scrutiny Comes to Those who Wait…

The Chair of the Public Accounts Committee (PAC), Meg Hillier, is reported as saying: “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.”

An earlier report from the National Audit Committee suggested that a significant factor that led to the failure of this partnership’s ability to deliver to targets was a lack of an online solution. The Army’s recruitment website was delivered four years late and three times over budget, which has led to delays.

Hillier went on to say: “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.”

To be fair, the PAC report also suggested that the issues were not all Capita’s fault, as the Army had insisted on their use of an ‘antiquated IT system’. For any supplier of complex client services which have a need to be transformed, using IT systems that are not fit for purpose will severely constrain the speed of progress.

Separately, the extent to which Capita had the opportunity to fully examine the IT systems and existing recruitment processes prior to submitting their final bid is not known. Also, whether Capita or the MoD made the performance contingent on having suitable systems and processes already in place, and in turn, whether the MoD accepted these contingencies is also not known.

An article on Parliament.co.uk stated: “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 PAC had previously asked the MoD to “simplify and streamline” its processes, but it’s reported that little has changed since the contract started. In fact, it takes so long for applications to be assessed that 47% of applicants voluntarily drop out of the process.

Are the Right Individuals Being Recruited?

The committee also suggests that as well as the Army not recruiting enough regulars and reserves, they may also be recruiting the wrong people as it’s believed that the Army may not be keeping pace with changes in the threat environment.

Recruitment into the Army requires certain levels of fitness and excludes recruits with particular medical conditions. There are views in the media that this approach may be short-sighted, as there could be many from within this group who possess skills that are currently in seriously short supply in the Army.

And, when it comes to skill shortages, the Army may not fully appreciate where these issues actually lie, as, for example, there is a pressing need for cyber capability which simply is not being addressed rapidly enough.

4 Lessons to Avoid your Outsourced Service Coming Under Fire

So, with the MoD’s £1.3bn contract with Capita failing to deliver to expectations, what can we learn from this relationship that might be of use to your own complex supplier relationships? We’ve summarised our thoughts into four lessons:

1. Outcome identification and articulation

Would you ever just jump into the car and drive, figuring that you’ll work out where you’re going sometime later in the day? It’s important to have more than a vague idea of where you are heading before you set off and that’s just as true in your outsourced relationships.

The process of involving all relevant stakeholders in the development of a thorough business case, of identifying and quantifying the outcomes for the destination of your service relationship once it is fully implemented and gaining the benefits from it are the only ways of determining with any clarity ‘what good looks like’. And, once you know where you are going, it’s incumbent on you to articulate this clearly to your supplier to allow them to embark on an appropriate pre-contractual due diligence process so that they are able to confirm a full understanding of your expectations.

With Capita so keen to win this project and what has been reported to be the Army’s lack of appreciation for the relative complexity of its own processes, there seems to have been serious misalignment of expectations from the start.

2. Client-side responsibilities

It’s all too easy to immediately blame the other side when things go wrong or start to veer off course. However, there will be occasions when the issues that have led to performance failings have originated with you, the client. Did you perform all prudent pre-contract client-side due diligence? Did you communicate a clear understanding of your expectations and leave it to the supplier to determine how to deliver on them?

If you interfered, took over, left ambiguity in expectations, requirements, contracts or conversations instead of offering clarity at all times, if you’ve not performed on your side of the contract, delaying deliverables and so forth, then you must take some responsibility for the issues that face you.

The PAC report suggests that the Army failed to articulate what they needed with enough clarity, that they have been slow to change with both societal and threat evolutions, they failed to identify issues in the relationship soon enough and have done too little to address them. In order for an improvement to be achieved over the final four years of the contract, the Army needs to first recognise what it now needs to do differently internally. Only then can it look to collaborate with Capita in an open and honest way, to work through practical changes that can be implemented.

3. Contractual and relationship adaptability

If you are not regularly reviewing (a minimum of every six months) a complex service relationship’s successes and challenges and reshaping your agreement in order to maximise the opportunities for change these afford you, then your relationship is unlikely to be being optimised as it could and should be.

Regular readers of our articles will have noticed from time to time, references to a six-monthly ‘review and reshaping’ process that should be built into all agreements.

The MoD-Capita relationship was to run for a decade and in that time politics, economics, society, technology and more can change. What was once a vital facet of the project could become unimportant and new issues can arise that were unpredictable at the outset. PAC criticised the Army for not identifying and reacting to performance issues quickly enough – if there had been a periodic review and reshaping process imbedded into the contract and governance this could have addressed this issue far more quickly.

4. Intelligent Client Function (ICF) team

An ICF team is a multi-skilled group of individuals from within your workforce – each an expert in their field – put together to develop, maintain and leverage the relationship you build with your supplier. The unique insights they will gain through the closeness of their relationship with their supplier-side counterparts will provide you with an early warning system to spot issues on the horizon, a greater appreciation for the motivations that could impact on productivity and where pressure can be exerted to achieve desired results.

In the case of the MoD-Capita relationship, an ICF team should have been able to identify productivity issues and what action might turn things around far more quickly. It may have also identified the slip in savings that could be expected and in turn, helped to determine more workable solutions to the Army’s complex recruitment processes.

Conclusion

There are four more years to run on this agreement and the PAC report has acknowledged that change is being implemented – the recruitment website is now live, more support is being provided for recruits going through the recruitment process, and a new management team say they’re committed to improving performance.

But many issues remain – the backlog of applications, the overly involved processes, and the lack of flexibility in the Army’s recruitment criteria that could be rejecting candidates with exactly the skills they need right now.

Savings are still possible as a result of this relationship, but the PAC report suggests that a significant shift in approach will be required first. As the partnership has failed to deliver the required number of recruits year on year, one of the key metrics for identifying whether such a shift has occurred will come from this year’s shortfall or otherwise in new boots on the ground of the appropriate quality.

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