Conclusions and recommendations
1.Service families have been badly let down for many years and are not getting the accommodation service that they have a right to expect. Satisfaction with the accommodation the Ministry of Defence (the Department) provides, and the quality of maintenance services, has fallen significantly in the last year. Some families have been left for many months without heating, hot water or cooking facilities, and others have been dissatisfied with the quality and cleanliness of properties when they have moved in. Despite this, often they have been unable to refuse to take the accommodation they have been offered. CarillionAmey acknowledges that it was not organised to deliver the required level of service from the beginning of the National Housing Prime maintenance contract. It was only after the Secretary of State’s intervention in February 2016 that CarillionAmey hired more members of staff, invested more in training, delivered a new IT system and put in place plans to improve the quality of its sub-contractors’ work. CarillionAmey told us that it is not yet making a profit from the contract, but anticipates that it will do so in the future.
Recommendation: The Department must ensure that CarillionAmey, or any replacement contractor, meets or exceeds its contractual obligations as regards estate maintenance, and that the contractor is organised to sustain this level of performance for the remainder of the contract.
2.The performance of CarillionAmey has been totally unacceptable and it is right that the Department is considering terminating the contract. Carillion admits that it has failed to deliver the service for which it was contracted and which service families expect. From the start of the contract in November 2014 up until April 2016, CarillionAmey failed to meet many of the Key Performance Indicators in the National Housing Prime maintenance contract. The Department and CarillionAmey agreed a plan to ensure that the indicators are met by June 2016, but assertions that the plan was effective and that CarillionAmey’s performance has improved, are still based on unaudited figures and therefore not yet proven. The Department will make a decision in summer 2016 about whether to terminate CarillionAmey’s contract, once independent auditors have validated the reported performance improvements
Recommendation: The Department should write to us promptly on conclusion of its deliberations about whether to continue the contract with CarillionAmey and set out the evidence on performance supporting its decision.
3.The Department has repeated failings that this Committee has seen only too often in other government contracts. In particular, it too easily assumed CarillionAmey had the capacity to deliver, did not do enough to make sure the contract would meet user needs, and agreed a penalty regime that is ineffective in incentivising performance. CarillionAmey won all of five of the Next Generation Estates maintenance contracts for which it bid because it was the lowest bidder. The Department agreed a contract of £626 million for one of these contracts, the National Housing Prime, which saved £192 million in comparison to the previous contract. The Department claims that it did look into the contractor’s ability and capacity to deliver at this price, but acknowledges that in the future it may need to obtain stronger assurance about contractors’ operations and their ability to deliver. The three family federations, which represent the views of service families, were not consulted when the contract was being agreed. The Department acknowledges that the contract only enabled it to retain a maximum of £10 million of the £115 million paid to CarillionAmey to date, and it is looking at options for penalising CarillionAmey further.
Recommendation: When letting future contracts, the Department must ensure it has done enough to test contractors’ ability and capacity to deliver the services at the price agreed, that it has captured and taken account of the views of service users, and that the proposed Key Performance Indicators in the contract are clearly backed up with robust financial penalties and incentives.
4.The Department’s current model for providing accommodation for families is not flexible enough to meet the reasonable needs of service families in the 21st century. The Department is developing a ‘Future Accommodation Model’—considering different options for how to bring housing and accommodation policy into the 21st century and allowing families to have more freedom over where they live. Different families have different housing needs: for example, living on a military base is important to many, but to others living in proximity to their extended family is of greater importance. The current model also bases entitlement on marital status and rank and does not reflect the diversity of today’s service families. Many service families own a home, but the proportion varies across the services, and the Department is looking to encourage greater levels of home ownership across all services to help with the transition to civilian life. The Department committed to considering different approaches for providing Service Family Accommodation, including those used successfully elsewhere, such as Arm’s Length Management Organisations, housing trusts, or using new legal powers to enable service families to build their own homes on land owned by the Department.
Recommendations: As part of its considerations about the Future Accommodation Model, the Department should think imaginatively about different approaches for providing housing, including setting up Arm’s Length Management Organisations and using new legal powers to support families collectively buying MOD land and building their own homes.
Many families may eventually want to own a home close to their extended family. As personnel move frequently it may be that some will own a home but still need to rent close to, or on the base of, the service personnel member of their family, and home ownership will therefore not necessarily reduce the demand on services accommodation as much as the Department expects. It should consider this in its full analysis of the needs of modern families.
5.The Department does not have effective arrangements in place for capturing and acting on the views of service families. The service families federations were not consulted during the specification of the National Housing Prime maintenance contract. There were differences between service families and the families federations about CarillionAmey’s performance in maintaining Service Family Accommodation in recent months and we are unconvinced that the federations fully reflected families’ views of CarillionAmey’s performance. The Department does not have a complete view of the impact of poor accommodation on recruitment and retention. The Department confirmed that service personnel are able to voice their concerns regarding accommodation to their constituency MPs outside of their chain of commands without fear of being disciplined.
Recommendation: The Department should set out for us what it will do to improve the way it engages with service families when setting policies and agreeing contracts that will impact upon their lives.
6.Whatever the stated benefits of the new Combined Accommodation Assessment System, there is a widespread perception that many properties have not been assessed fairly under the process. The Department introduced the Combined Accommodation Assessment System to improve fairness and transparency over the calculation of rent that service families pay for their accommodation. Many families accept that they will need to pay more rent than in the past, and the new system has led to rents increasing for 81% of families. The Department assessed the appropriate rent banding for individual properties using a combination of surveys and the extrapolation of survey results. The Department began surveying properties in January 2015 but only 80% of properties have been surveyed to date and the Department committed to surveying all properties. Representatives of service families also raised some concerns about how the surveys were undertaken and the perceived fairness of some banding decisions. Between February 2016 and mid-April 2016, the Department received 1,675 appeals to banding decisions, but, as at 25 April 2016, had only processed 377, with just 24 resulting in a change.
Recommendation: Once it has cleared the backlog of appeals to new rent bandings, the Department should write to us and set out the results of the appeals process, as well as the lessons it has learned about how it communicated and managed the process of surveying properties.
7.We are concerned that the Department is underestimating the effect of poor and unsuitable accommodation on morale and on attitudes to remaining in the armed services. Service Family Accommodation is highly valued by service families. The Department sought to deliver significant savings from how it maintains such accommodation. As a result, families are facing an increase in their rent at the same time as a deterioration in the maintenance services that they receive, all against a backdrop of pension contribution increases and pay restraint. The impact on family life is the most cited reason why people leave the services and accommodation is a contributory factor. When making short term decisions on cost savings, there appears to be insufficient attention paid to the possible impact on expensively trained service personnel and the consequences for their retention, which represents very poor value for money.
Recommendation: In its Treasury Minute response to this report, and then more fully in the articulation of its Future Accommodation Model, the Department should explain how it is assessing the impact on recruitment and retention levels of any changes to its accommodation provision for service personnel.
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8 July 2016