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Capita given £500m MoD job despite highest risk rating

The Ministry of Defence has handed Capita a £500m contract despite the firm having been given a maximum risk rating by an independent assessment.

The rating was reported by the Financial Times, which also revealed the company was given a “health score” of 3 out of 100.

A score of 25 or less means a company is “vulnerable and should be viewed with care”.

The ratings were supplied to the MoD by independent analyst Company Watch, which gave Capita 10/10 for risk – the most high-risk rating its assessments can give.

Despite the ratings, Capita beat Serco to the £500m 10-year contract to run fire and rescue services for the MoD.

Serco was reportedly rated 8/10 for risk.

An MoD spokesman said: “Robust assessments have been made to ensure the financial health of suppliers ahead of any contract placement.

“We will monitor the performance of the supplier throughout the contract’s duration.”

In addition to the analysis by Company Watch, Capita’s financial health was also investigated by the MoD’s cost assurance and analysis service.

The deal comes as scrutiny of the government’s largest suppliers and the awarding of contracts has intensified in the wake of Carillion’s collapse.

Transport minister Chris Grayling has been under pressure to reveal details of why a Carillion / Kier / Eiffage joint venture was handed £1.34bn of HS2 contracts shortly after Carillion revealed an £845m writedown.

A report from the National Audit Office into the government’s handling of Carillion’s collapse revealed that the JV’s appointment was approved before the profit warning, though the contract was actually signed after.

In addition, the public accounts committee is currently looking into the monitoring of the government’s strategic suppliers.

Interserve chief executive Debbie White revealed to MPs last week that the firm had been given a ‘red’ rating by their crown representative – the Whitehall officials that monitor government suppliers.

Ms White said Interserve was now working to get its rating changed to amber, but had contingency plans in place for “the most serious eventualities”.

Capita is currently trying to sell off around £300m of non-core assets as part of a turnaround plan after it revealed a £513m pre-tax loss for 2017 and net debt of £1.1bn.

On Monday the firm announced it had sold supplier database Constructionline and its other supplier assessment services for £160m.

A Capita spokeswoman said: “We are executing our strategy announced in April, including action to address the balance sheet.

”Our successful £701m rights issue and the £160m disposal of Supplier Assessment Services demonstrates the progress we are making to simplify and strengthen the business to deliver future success.” 

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