The £1.3 billion recruiting partnership project between the Ministry of Defence and Capita has been marred by extra costs and technical difficulties.
In March 2012 Capita signed the landmark deal pledging to overhaul and improve recruitment across the armed forces.
As well as taking over recruitment for the Army, Capita was contracted to design the defence recruitment system, an IT system intended to handle Army, Royal Navy, Royal Air Force and Royal Fleet Auxiliary recruitment.
Ministers have confirmed the project went live on November 13, five years after the original contract was signed, but this was immediately followed by reports of technical issues.
Defence minister Mark Lancaster told MPs this week there were "minor glitches in the new computer system", adding that they were being ironed out.
The shortfall in savings has been partly blamed on extra funding needed to set up the defence recruitment system.
It comes amid wider issues with recruitment to the armed forces.
A report last year by Conservative former defence minister Mark Francois found that the Army is missing its annual recruitment target by as much as 30%, with the Royal Navy and RAF around 10% short.
At the time he said the recruitment problem "is exacerbated by an outsourcing contract with Capita which is performing badly".
Separate figures released to Parliament show that in the 12 months to October, 6,060 new recruits joined key posts in the Army against a target of 7,970, including a shortfall of more than 1,000 new recruits for the infantry.