Defence Fire and Rescue Project: Capita

Thursday 21st June 2018 Commons Chamber

10:35

[Fabian Hamilton (Leeds North East) (Lab)]

(Urgent Question): To ask the Secretary of State for Defence if he will make a statement on the awarding of the defence fire and rescue contract to Capita.

[The Parliamentary Under-Secretary of State for Defence (Mr Tobias Ellwood)]

I am grateful for the opportunity to put on record the justification for the awarding of the 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.[Official Report, 25 June 2018, Vol. 643, c. 4MC.]

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 into 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 MOD’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 incentivised 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.

[Fabian Hamilton]

I am extremely grateful to you, Mr Speaker, for granting this urgent question. I was very eager to hear the Minister’s justification for awarding such a crucial contract for the defence fire and rescue service to Capita.

I think that we would all agree that it would be extremely worrying if a situation were to arise whereby this contract could not be delivered or was not delivered to the standard required. The risks, I am sure the Minister agrees, are simply too great for that to be allowed to happen.

The Minister’s Department received advice as recently as 7 June that Capita represents a 10-out-of-10 risk, so how was the decision made to give the contract to Capita? The Minister has already touched on that. His Department has said that all its suppliers are

“subject to robust assessments ahead of any contract placement.”

What consideration, if any, was given to the advice that the Ministry of Defence has received on the financial health of the company?

We know that Capita has a record of poor performance for delivering Ministry of Defence contracts. It was stripped of the defence estate contract, and the less said about its Army recruitment contract the better. In spite of that, the Government have knowingly chosen to give Capita another contract. What specific measures has the Department put in place to monitor the delivery of the contract and to take penalty action for poor performance, if necessary?

The Government’s written statement told us that

“the contract duration is 12 years”,

which is a considerable amount of time for a company associated with extremely high risk. The fire service is vital to the safety of our armed forces, to their families and to key defence assets. Will the Minister tell us what arrangements will be in place if Capita is unable to deliver the contract for its full duration?

A number of defence fire workers will be very worried indeed about this news. The significance of the workforce, and their role in protecting MOD staff and families, and the Department’s infrastructure—both overseas and at home—cannot be overstated. What assurances can the Minister give us about the future of these workers and their pensions? What help will be provided for them if redundancies do occur?

Is it not time to accept that this Government’s ideologically driven approach to outsourcing public services at any cost has simply failed? We must end the racket of outsourcing and deliver solutions that benefit taxpayers and service users alike.

[Mr Ellwood]

I am grateful to the hon. Gentleman for his questions. I appreciate his interest in, and concern about, these important matters. If I may, I will probably write to him in more detail, because he set out a series of questions, but I will give him an overview now to reassure him that the bidding process was absolutely robust.

I did go to some length in my opening remarks to reassure the hon. Gentleman that we were looking at a number of companies—Serco, Babcock and QinetiQ, as well as an in-house offering—to ensure that we have a robust system that meets our responsibility to eliminate any problem related to fire. The actual bid process itself was competitive. There was robust evaluation modelling—it involved not just the MOD, but the Treasury, the Cabinet Office and indeed the three services—to make sure that we have the necessary processes in place to manage what will be an umbrella organisation.

As the hon. Gentleman knows, the way in which our fire service is conducted means that we have responsibility inside the wire. There is also civil capability, and RAF and naval personnel are cap badged to provide fire capability, too. We also lean occasionally, when required, on local authorities, and that relationship will continue, but overall control will come from Capita itself. Having said that, the actual responsibility will be managed by the Defence Fire Risk Management Organisation, which, as I have said, will continue to scrutinise the performance of Capita itself.

The hon. Gentleman is right to raise concerns about the workers themselves. Just under 600 civilian workers will be transferred across. I absolutely hope that this will not lead to any changes. If there are any, I hope that they will be done through redundancies. We are looking for investment in new machines, new technology, new capability and new safety measures, which will hopefully be welcomed by Members on both sides of the House.

[Sir Desmond Swayne (New Forest West) (Con)]

The Minister said that personnel would be safer; will he explain how?

[Mr Ellwood]

Short and to the point, as ever. As I just mentioned, there will be investment in new technology—we need investment in new fire service vehicles—as well as training methods, collaboration and response times so that we can respond to any fire at any time. These changes will make the work of the fire service personnel safer.

[Brendan O'Hara (Argyll and Bute) (SNP)]

Scottish National party Members have always been very concerned that these vital services were ever thought appropriate for privatisation. Our added concern is that the protection of national and defence strategic assets has been given to a company with such a chequered past. Indeed, on the day of the announcement, Capita’s chief executive was appearing before the Public Accounts Committee to answer questions about the company’s poor delivery of services to the NHS. Will the Minister therefore explain why the Government felt the need to privatise these services, when not even the US Department of Defence does, and how a company with such obvious shortcomings could be considered the best option for delivering this contract?

[Mr Ellwood]

I can only repeat what I said earlier: there was a robust bidding process and it was deemed that Capita offered the greatest contract we could have. Concerns have been raised about Capita in other areas—recruitment, for example, has been mentioned—but I am convinced that the necessary scrutiny is in place to provide the best deal and the necessary support for our fire service.

[Rachel Maclean (Redditch) (Con)]

Will the Minister say a bit more about the savings he talked about being reinvested in defence, which I am sure most of us in the House would be very glad to see?

[Mr Ellwood]

I am grateful for that question, although it almost tempts me down a rabbit hole that I have occasionally gone down before. While I support the increase in the budget for the health service, I must reiterate that the UK’s defence posture is such that we must invest in our armed forces as well. Having said that, there is an obligation—a requirement; a duty—on the armed forces and the MOD to make efficiencies and savings, without affecting risk, and this is one area where we can do that and reinvest the savings in defence.

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

We have had 12 years of debate about what should happen to the contract—12 years of uncertainty for the workforce—and now we have a 12-year contract. It seems to me and the unions that key parts of the work currently delivered by the defence fire and rescue service, such as the checking of fire extinguishers on site, are not included in the contract. Capita does nothing for nothing, so this will not save money. What is the Minister doing to ensure this provides value for money?

[Mr Ellwood]

The hon. Lady follows these issues very closely, and I pay tribute to her for her interest and expertise in this matter, which the House greatly appreciates. I agree that, for various reasons, this has taken too long. The contract process was run in accordance with the Defence and Security Public Contracts Regulations 2011, but it has taken too long for various reasons, some of which I have covered, including the number of stakeholders that had to scrutinise and agree the bidding process, and confirm the successful bidder. I take her point on board, however, and we will make sure as we do the evaluation that her concerns are met.

[Jeremy Quin (Horsham) (Con)]

I welcome the fact that safeguards are in place and that the delivery of the contract will be monitored. Will the Minister reconfirm that the contract represents value for money and will also result in improvements and savings to the Department?

[Mr Ellwood]

My hon. Friend makes an important point. This is not just about savings; it is about the responsibilities of our defence fire service, which not only has the duty of looking after our airfields, ports, ships and bases, but has the responsibility of being on standby to help its civilian counterparts in extreme cases. It is important that we can invest in the necessary high-tech machinery and fire service capability. That is what will lead to savings in the long term.

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

Prospect, the union that represents staff in the MOD fire and rescue service, including in Devonport in my constituency, has said that any projected savings cannot be delivered without increasing the risk to defence. Will the Minister respond to that concern?

[Mr Ellwood]

I would need more detail even to respond to that very broad statement. The analysis done in the MOD, and the analysis that has been done by the Treasury and the Cabinet, says exactly the opposite. As always, I am happy to discuss the hon. Gentleman’s concerns for Devonport; he did not mention Plymouth this time.

[Alex Chalk (Cheltenham) (Con)]

Can the Minister provide some assurances about fair terms towards subcontractors? BST Electrical in my constituency fell victim to the Carillion scandal because of Carillion’s obscene 120-day payment terms. Will the Minister assure me that that sort of invidious practice will not continue under Capita?

[Mr Ellwood]

My hon. Friend’s question gives me licence to confirm that the shadow of Carillion hangs heavy over all Government Departments, if we are fair. Any new contract—with Capita or anyone else—needs to be sufficiently robust that we do not fall foul of some of the problems that Carillion experienced, including through its relationship with small and medium-sized enterprises, which my hon. Friend mentions.

[Tom Brake (Carshalton and Wallington) (LD)]

There is a case for outsourcing when the company has specialist expertise. What specialist expertise does Capita have in military fire services? Does the Minister think that it is now time for freedom of information legislation to apply to companies that are, in effect, doing public sector work, so that we can know, for instance, what contingency plans there might be in case Capita goes belly up?

[Mr Ellwood]

May I welcome the fact that the right hon. Gentleman’s party—if he is speaking on its behalf—recognises the importance of the private sector in such cases? However, as the hon. Member for Leeds North East (Fabian Hamilton) said, this should not apply at any cost or under any circumstances. A series of Governments—not just Conservative or coalition, but also Labour—have outsourced responsibility for firefighting from the armed forces over the past few decades, so it is very important that the necessary robust processes are in place to ensure that these contracts are met. We have around 60 contracts with Capita. Its responsibility is not to run the day-to-day things. Many people providing the fire service capability will continue on. This is about the management and organisation that Capita brings.

[Mr Philip Hollobone (Kettering) (Con)]

How many alternative bids were there, and was Capita’s bid the cheapest?

[Mr Ellwood]

Capita’s bid was the best. Three other organisations also bid.

[Jim Shannon (Strangford) (DUP)]

Given the fact that this company has earned the highest risk rating of 10 out of 10 and, worryingly, a health score of three out of 100, how will the Minister convince the House that this is not a case of penny wise and pound foolish at the expense of our defence fire and rescue service?

[Mr Ellwood]

As I said in my opening remarks, there was a very robust bidding process, which was scrutinised by a number of Departments. It does not just stop there. We do not simply slide the contract across and call it a day. We will continue to scrutinise the process, and any issues will be raised. I hope that the hon. Gentleman’s concerns will be met.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

It is said that the definition of insanity is doing the same thing multiple times but expecting different results. I think that this may be the case given the absolute failure in Army recruitment, whereby Capita has not met the already woeful threshold of 82,000. What is the Minister doing to grip that issue before rewarding failure again with this fire service contract?

[Mr Ellwood]

We are wandering into a very different subject, which is related to this matter only because of the company involved. The challenge that we have with recruitment is that the gene pool of people from which we are recruiting is of a particular age group and a particular level of fitness. In this day and age, that is a very competitive environment; it is not just Capita that is going out and doing recruitment. Capita works very closely with all three services. But, yes, it is a tough environment—I do not doubt that—and we need to do more to attract the brightest and best to be in the most professional armed force in the world.

[Nick Smith (Blaenau Gwent) (Lab)]

Given Capita’s highest risk rating, will the Minister please give us a full list of the MOD’s Capita contracts?

[Mr Ellwood]

I will write to the hon. Gentleman with more information on that matter.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

A constituent of mine, Mr Rob Rigby, is the national secretary of the Unite branch representing these workers, and I can assure the Minister that the workers are not particularly happy about this announcement. If the contract is going to be such a success, why is the Minister excluding all the bases in Cyprus?

[Mr Ellwood]

I did not quite hear the end the hon. Gentleman’s question. I think it was to do with the agreement in Cyprus; is that correct?

[Gareth Snell]

I asked the Minister why he was excluding the bases in Cyprus.

[Mr Ellwood]

Particular terms and conditions will apply to our overseas bases, and there will be contracts in place. I think that nine airfields are already running under privatised contracts, so the question mark over a particular airfield may be subject to existing arrangements.

[Diana Johnson (Kingston upon Hull North) (Lab)]

May I try again with the Minister? I do not understand how a company that scores 10 out of 10 for risk in an internal document produced by the MOD can be awarded a contract.

[Mr Ellwood]

In the bid that was put forward, the expectation that is made here is for managing our fire risk capability, and it is in those circumstances that Capita is being judged. We do not step back and take a look at the numbers and the bits and pieces in other areas; it is particularly for this aspect of it. The concern that the hon. Lady raises must be taken into account by ensuring that there is robust scrutiny of the effectiveness of the contract as it ensues, and I will be happy to come back to the House to report on the success or otherwise of the contract with Capita. I give her that guarantee.

[Dr David Drew (Stroud) (Lab/Co-op)]

The workforce undertake a complicated pattern of working through their shift arrangements. Will the Minister guarantee that that will not fundamentally change? Many of the workforce travel long distances to work and are on site for days on end. Will he guarantee that that will continue?

[Mr Ellwood]

I hope that I speak on behalf of the whole House in paying tribute to the incredible bravery, commitment and determination of all our emergency services. There are specific harmony guidelines in place to ensure that they are able to meet their requirements, see their families and do their duties, and I am sure that they will be continued under this new contract.