UK government buys off Serco lawsuit with £10m bung. Whew. Now Capita can start running fire and rescue

The Ministry of Defence has slipped £10m of British taxpayers' money into Serco's back pocket to settle a legal challenge over the award of a £525m Fire and Rescue services contract to rival outsourcer Capita.

Capita won the MoD tender in June last year but the project – which includes running 53 fire stations in the UK and on MoD sites in Cyrpus and the Falklands Islands for a 12-year period – was suspended for a whole year after Serco stepped in and launched a protracted legal battle over the tender, the details of which are not public.

"We have now mutually agreed an out-of-court settlement £10m which provides better value for money for the taxpayer than an uncertain and costly court case," said MoD Minister of State Tobias Ellwood.

He said the MoD's Accounting Officer has commissioned an independent review to learn from the "complex procurement", led by Tony Pulter, a non-executive director at the Department for Transport.

So that's OK then.

The contract was first published in the Official Journal of the European Union back in 2014. As part of its award, 560 MoD civil servants, mostly firefighting personnel, will be TUPEd across to Capita.

The outsourcer will also provide "digital technology solutions" - a broad, nebulous term – and it will build and run a new centralised training facility for Defence firefighters.

Ellwood said Capita's bid for the business – mission-creep for the privatisation of the public sector – was "deemed to deliver the best technical solution and the best value for money".

Clearly the MoD's recent chequered history with Capita over the botched Army recruitment project hasn't deterred the department from awarding the company additional service contracts.

"We expect the contract to deliver significant financial savings over the course of its lifespan: money which can be reinvested in other areas of the Defence budget," Ellwood claimed.

The Royal Air Force and Royal Navy will still employ firefighters, though numbers in the Air Force will reduce "over time… due to the introduction of new technology," the minister added.

Capita CEO John Lewis, the man chosen to lead the corporate turnaround at the company, told staff in a memo seen by The Register that winning the contract is "tangible demonstration of the confidence government has in us to deliver a critical public service".

"We now have a wonderful opportunity to surpass the expectations of our partners at the Ministry of Defence, and to demonstrate the many ways in which Capita can drive value through the application of digital technology solutions," added Lewis. "As we enter the growth stage of our multi-year corporate transformation strategy, winning new business becomes imperative."

Capita, which has a reputation for low-balling contracts to win them, has faced its own fair share of contract challenges in recent years, including with the Co Op and the Department for Transport.

The past three years have been the least prosperous in its near 35-year history, with a string of profit warnings leading to redundancies and a major restructure. Lewis sold off a number of business unit to concentrate on a smaller numbers of areas.

Serco said – without any hint of irony – that the £10m "commercial settlement" with the MoD "under which Serco will withdraw its legal challenge" will "allow the MoD to move forward with modernising the UK Armed Forces' safety-critical fire and rescue service and avoid further delays" to the programme "while also minimising legal costs to both parties".

Good old Serco, makes you proud to British. ®