Military to review £30 billion estate operations amid criticism of Capita tie-up

Military chiefs are reviewing how they run their £30 billion estate, which includes a key outsourcing contract with Capita, in the wake of a damning report from the audit office.

Capita, which also collects the London congestion charge, signed a 10-year deal with the Ministry of Defence to run its giant UK estate in 2014.

However the Ministry is reviewing how it wants to run its estate just 18 months after it signed Capita to help it with the mammoth project.

It comes in the wake of a report which found "shortcomings" in the tie-up with Capita.

The National Audit Office this week claimed the outsourcing giant pocketed as profits nearly 50% of the £90 million paid in fees, although that was before costs. Capita declined to say how much it made, but analysts said it normally has a profit margin of 12% to 15%.

Concern has also grown after the MoD said it considered Capita’s performance “mixed” despite some positive benefits.

The Ministry and Capita tie-up has faced an uphill struggle to whip the estate into shape and NAO report says the deal has scored a number of improvements despite the problems.

Top brass are due to conclude their review on December 21. The defence board will decide early next year whether to keep the contract, which can be terminated at any time.

“This is an important report and we are determined to deliver a better defence estate,” the MoD said.

Capita said there was “no indication” the Ministry would “remove its ability to benefit from private sector expertise and support”.

“The contract is focused on delivering huge benefits to the department by securing the best property outcomes to release maximum funds for the Department and delivering sustainable savings through the efficient future maintenance of the estate," a Capita spokesperson said.

Capita shares crashed in September after a profit warning blamed on Brexit-induced jitters delaying investment decisions from clients.