Capita shares fall after £495m British Army recruitment contract fails to meet targets

Outsourcing firm Capita has suffered another blow today, after a government report found it has failed to meet targets in a £495m recruitment contract for the British Army every year since it began.

Awarded the contract in 2012, an investigation by the National Audit Office (NAO) said Capita and the Army "underestimated the complexity of the project, which has been beset by problems".

The firm's share price has fallen more than six per cent this morning on the news.

A core part of the project was the creation of an online recruitment system, which due to mishandling by the Ministry of Defence (MoD) and the complexity of the requirements on Capita, was launched more than four years later than originally planned, and at triple its original budget to the tune of £113m.

The total recruitment shortfall by Capita as a result has ranged from 21 per cent to 45 per cent of the Army's requirement each year, the NAO said.

The Army later penalised Capita for missing recruitment targets with a credit deduction of £26m, or a six per cent pay cut. In April last year it lowered Capita's performance targets, as it considered "there was little prospect of performance improving".

Despite the targets for new recruits being lowered and some "significant changes" being made in the last year, however, the NAO said Capita is continuing to miss these requirements.

It concluded that the project as a whole will not achieve its planned savings target of £267m for the MoD. Additionally, as of July 2018, the Army was seven per cent below its required strength in terms of regular solider numbers due to the lack of successful recruitment. 

The news follows an earlier blunder by Capita revealed last month, in which more than 47,000 women did not receive letters of invitation or reminders regarding NHS cervical cancer screenings from Capita between January and June this year.

An investigation into the matter by NHS England found this week that the failure was more extensive than initially thought, adding another 3,591 women to the list. NHS England said last month it has placed its contract with Capita for cervical cancer screening communications under review.

A Capita spokesperson said today: "As the NAO report states, both Capita and the Army underestimated the complexity of this project. Our focus is now on working with the Army to deliver a recruitment process fit for the 21st century.

"We have overhauled governance on the contract and are already seeing improvements, with applications at a five-year high and a reduction in the amount of time it takes candidates to join the Army. We are absolutely committed to getting this partnership right."