Capita has landed a new £500million contract from the Military of Defence (MoD) to run its UK military fire and rescue services – despite a report finding the outsourcer has the highest possible risk rating.
A financial assessment by Company Watch found that Capita scored 10 out of 10 for risk – the highest on the scale for financial distress – The Financial Times reports.
As part of the risk assessment, which was used by the MoD, Capita was awarded a ‘health score’ of just three out of 100. A score of 25 or less means a company is in a ‘warning area’ of vulnerability.
The contract will affect around 2,000 staff at 78 defence fire stations worldwide.
Unions have condemned the deal, with Unite describing the decision as “deeply alarming”. They expressed concern that the contract could affect civilian and military workers,
“Unite will now be ensuring that jobs are not cut and that the pay and conditions of our members are not squeezed in order to boost Capita’s profits,” it said.
“There is no way that such essential roles can be provided on the cheap.”
Jim Kennedy, Unite’s national officer for MoD workers added that it was “absolutely scandalous” that Capita was awarded the contract when it was deemed “extremely risky” in the financial check. “The Government has clearly learnt nothing from the Carillion fiasco. There needs to be an urgent investigation into how and why this contract was let to Capita,” he said.
However, an MoD spokesman defended the decision, saying all suppliers they use are “subject to robust assessments” before being handed contracts and are “closely monitored.”
Public sector use of outsourcing has come under scrutiny following Carillion’s collapse.
A parliamentary public accounts committee report in May found that the Government was too slow to spot the problems at the outsourcing company and concluded that too many public work contracts are concentrated in few private firms.
The PAC report added that a lack of transparency in outsourcing to such firms risked creating “poor practice.”
Furthermore, in January this year, Capita was on the brink following its decision to suspend its dividend and seek equity, which sent shares down by 39.5%.
At the time, it was reported that Capita’s recruitment contract with the Ministry of Defence (MoD) failed to deliver more than £100million in planned savings.
Following this, Capita’s Chief Executive, Jonathan Lewis, who joined the firm in October 2017, said he would review Capita’s structure and implement a “multi-year transformation programme” to reduce complexity at the firm.
The FTSE 250 company raised £701million from shareholders in May as investors backed Lewis’s turnaround plan.