How the Government plans to ensure IT projects have a lifetime cost of under £100m

By David Bicknell

The Government has issued a Procurement Policy Note that sets out its thinking behind the policy that individual ICT contracts or projects should have a lifetime cost of less than £100m.

It says the £100m limit will apply to all future ICT projects, “unless a strong case can be made that doing so increases the overall cost to the taxpayer, notably increases the risk of failure or increases the security threat to the public body or Government as a whole.”

It adds that in future, “government IT contracts will be more flexible, starting with two areas (application software and infrastructure IT). The Government is introducing set breakpoints in IT contracts so there is less money locked into large lengthy contracts. The Government will look to disaggregate future contracts and deliver more flexible, cheaper solutions. This opens up opportunities for SMEs and reduces the cost to taxpayers.”

Its guidance, which takes effect from 1st April, applies to all central government departments, their agencies and non departmental public bodies and is particularly intended for those with a purchasing role.

In background notes, the briefing says:

  • The £100m threshold relates to all ICT contracts or projects where the total value over the life of the contract exceeds £100m regardless of how the contract is funded. It includes frameworks as well as individual call offs from frameworks. A case may be made for exemption from this policy on the grounds of national security or continuity of a critical Government service.

Based on this, the policy aims are as follows:

  • To reduce the risk of single supplier failure within a large project;
  • To increase competition and innovation by enabling more suppliers to bid and take part in projects, thereby increasing value to the taxpayer;
  • To procure contracts in a way which ensures maximum possible benefit to the maximum number of parties – for example, ensuring that infrastructure/services which are procured can be used by more than one department.

In a foreword, Cabinet Office minister Francis Maude says:

“The Government believes that business is the driver of economic growth and innovation, and that we need to take urgent action to boost enterprise and build a new and more responsible economic model. We want to create a fairer and more balanced economy, where we are not so dependent on a narrow range of economic sectors, and where new businesses and economic opportunities are more evenly shared between regions and industries. This guidance is founded on a desire to minimise the risk around high value contracts and ensure that Government always seeks the best possible value for money when procuring large ICT contracts.

“In the Coalition Programme the Government made a commitment to promote small business procurement in particular by introducing an aspiration that 25% of government contracts should be awarded to small and medium sized businesses. To deliver this aspiration the Prime Minister and The Minister for the Cabinet Office announced, on the 11th February 2011, a far reaching package of measures to open up public procurement to small and medium sized enterprises. The Government ICT Strategy, published at the end of March 2011 outlined a new approach to ICT procurement that improves contract delivery timelines and reduces the risk of project failure, enables greater use of SMEs, a much shorter timescale and lower costs to all parties.

“We will end the practice of attempting to cover every requirement in great detail and cover every legal eventuality in every project and contract, thereby increasing the procurement cost and timescales to all parties to unacceptable levels. We will do this by focusing on the 80/20 rule, simplifying to the core components of the requirements at every level and at every stage of a project.

On SMEs, G-Cloud and Open Systems, the policy note says procurement will:

  • Ensure value for money, competition and innovation by ensuring that small and medium sized enterprises (SMEs) are freely able to bid. Ensuring that any procurement process we use does not unnecessarily exclude them due to price, risk or resource associated with bidding activity. This includes reviewing our criteria and evidence required as part of the contract award process for items that might be relevant to a large company only. However, SMEs will be treated no differently in evaluation of capability, financial stability, or their ability to provide ongoing support, etc.
  • Ensure visibility of innovation and encourage mass purchasing of solutions available from both within the public sector and the private sector by creating a quality assured Government Cloud based procurement vehicle for Government, which enables all sizes of organisations to showcase their products, services, solutions etc. This service would also enable government to market and sell any unwanted assets it might own.
  • Encourage and maximise the use of Open Source/Open Standards whenever possible and where it represents a value for money solution, allowing department to re-use code, designs, templates etc. ensuring that work is not duplicated.


The Government’s aspiration to have individual ICT contracts or projects with a lifetime cost of less than £100m is a worthy one. But the proof of the pudding, as always, is in the eating. And we haven’t seen the pudding yet.

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