MoD cans DBS contract with Serco - bringing payroll and HR in-house

Serco brushes off MoD contract loss

The Ministry of Defence (MoD) has opted not to renew its Defence Business Services (DBS) contract, which ends in April this year, with IT services firm Serco - opting instead to host the DBS operations in-house.

The MoD confirmed that the contract, which included the provision of services such as HR, payroll, finance services and security vetting, would be carried out by its own employees.

"The MoD's contract with Serco for Defence Business Services (DBS) ends in April 2016. DBS operations will be hosted within MoD as we consider our future requirements".

The MoD suggested that as the partnership will reach its natural end in April 2016, it needed to consider options for the "next phase" of DBS. It said that the contract has delivered nearly £64m of savings and is "well on track" to deliver the full anticipated savings over the final year.

Interestingly, a Serco spokesperson suggested that the contract had "exceeded expectations", and claimed that the company would "hand back the senior management of this high-performing service to MoD in April as planned".

However, TechMarketView's Georgina O'Toole stated that there was an option to extend for another year, and that the MoD had clearly decided not to take this up.

When pressed by Computing on the whether this actually had been "planned", a Serco spokesperson said: "It is the decision of the MoD at the end of the contract", which suggests that the firm was hoping for an extension of the contract.

Despite the ending of the contract, O'Toole suggested that it may not be all doom and gloom for Serco. In the short term it could have a negative impact, she said, but the move may indicate bigger opportunities for Serco in the medium term. Although it was outsourced, much of the operational side of DBS has always been done in-house, and there may be room for Serco to return to the fold as part of the the Future DBS programme (FDBS).

The MoD is yet to decide what it wants to do with FDBS, but it could decide to outsource the delivery of all or some of the current DBS services. If it does go down the outsourcing route, O'Toole believes that Serco and Accenture - which partnered Serco for the DBS contract - will be well-placed to make a pitch to the MoD to provide the services.