The Ministry of Justice has come under fire from public spending watchdogs for awarding a £90m contract for court interpreters to a company that lacked the ability to deliver it.

In a damning report on the outsourcing of language services in the justice system to Applied Language Solutions, the National Audit Office (NAO) declares that the MoJ ’s due diligence on the successful bid 'was not thorough enough'.

ALS was a small company and the volume of work the ministry wanted to give to it was large, the report notes. Yet a report the ministry itself commissioned from a financial data company indicated that Applied should only be given contracts worth up to £1m.

The contract with Applied for the provision of court interpreters is worth an estimated £90m over five years.

The NAO says: ‘The ministry considered the financial report but did not see it as a barrier to the award of the contract. It told us that this was because it considered [Applied] to be only a managing agent for interpreters, who themselves remained freelance sole traders.’

On the rationale for the new contract, the public spending watchdog says that the MoJ had strong reasons for changing the old system, which it said was ‘inadequate in several respects’.

However, in accepting Applied’s assertion that it would be able to increase the number of interpreters working in the justice system, the MoJ ‘did not give sufficient weight to the concerns and dissatisfaction that many interpreters expressed’ with Applied.

The report criticises the department for both failing to analyse the number of interpreters likely to be available and willing to work with Applied, and for not modelling the cut in income that public sector interpreters could expect.

On implementation, the NAO says the MoJ ‘underestimated the project risks’ when it decided to switch from a regional to a national rollout and ‘allowed the contract to become fully operational before it was ready’.

It also points out there were ‘other important contractual obligations’ with which Applied did not comply and to which Applied failed to alert the MoJ. The contract started on 30 January and ‘immediately faced operational difficulties’.

The report adds: ‘Initially [Applied’s] performance was wholly inadequate, leading to missed performance targets and around a fifth of the interpretation work in courts and tribunals being done under old arrangements.’

Trials and legal procedures were disrupted. Some 182 magistrates’ court trials were recorded as ineffective because of interpreter availability issues – almost double the number recorded for the same period last year (95 were recorded in the first quarter of 2011).

The NAO found that Applied’s systems were not ‘sufficiently mature’ to cope with demand and that it did not have enough staff to deal with bookings and complaints. Some calls from court services were routed to the company’s Indian call centre, contrary to the terms of the contract. On the control environment, the NAO points out that the MoJ has rights to inspect Applied, but ‘has been slow to do so’.

The MoJ also had the right to penalise Applied for its poor performance, by withholding a proportion of payments according to a formula. Yet it elected not to do so between January and April, foregoing an estimated £11,000.

The MoJ has subsequently applied penalty payments and told the NAO that its decision not to do so previously was ‘a commercial one, taken in light of the investment in making the contract work by Capita, which acquired Applied a few weeks after it won the MoJ contract’.

Under the new arrangements, the MoJ estimated that its organisations and police forces could together save £18m a year in payments to interpreters, but the NAO says it is too soon to determine whether the contract will provide value for money.

Among other things, the watchdog calls on the MoJ, with Capita, to complete checks to ensure all interpreters working on the contract have appropriate qualifications and criminal records clearance. Today’s report followed an investigation into the new contract after it had received correspondence from ‘a number of individuals, including MPs, whistleblowers and the public’, asking it to look into what had happened.

The Gazette was the first to expose teething problems with the contract back in February. The Justice Committee is also scrutinising the Applied contract; its call for written evidence ended last week.

Commenting on the NAO’s findings, chair of the Commons public accounts committee Margaret Hodge MP said: ‘It is appalling that the ministry awarded [Applied] a £90m contract to provide a service essential to ensuring the proper administration of justice that was clearly beyond this company’s ability to deliver.’

She said Applied’s ‘unacceptably poor performance’, which saw it supply an interpreter in only 58% of hearings in February, and at times interpreters who were ‘inexcusably bad’, led to ‘courtroom chaos’.

‘It forced court staff to interrupt their core duties to find interpreters at short notice and triggered a steep rise in the number of abandoned trials,’ she added.

‘My concern is that the resulting delays and hearing cancellations caused distress for victims, defendants and witnesses, additional costs to the taxpayer and damage to the reputation of the justice system.’

An MoJ spokeswoman said: ‘The National Audit Office is clear that the MoJ had strong reasons for changing the old interpreter booking system, which was inadequate in several respects.

‘We accept that there were problems at the start of the new contract in January but we have now seen a very significant improvement in performance and are confident that this trend is continuing.’

She added that figures in the NAO report show that 95% of bookings are now being filled and the number of complaints has fallen dramatically. She said the MoJ if continuing to push for further improvements and is confident that the contract will save £15m a year.

An Applied spokeswoman said: ‘What [the report] clearly demonstrates is that [Applied] has been able to draw upon the resources, skills and track record of Capita following its acquisition. This has helped [Applied] to enhance and strengthen the delivery of its service, with over 96% of booking requests now fulfilled, compared to 65% in the first month of the contract.’

She acknowledged that there had been ‘challenges’ but said Applied is ‘determined to get the service running at full efficiency’.

The full report is on the NAO website.