Category Archives: efficiency savings

Civil servant in charge of £9.3bn IT project is not shown internal review report on scheme’s failings.

By Tony Collins

“If people don’t know what you’re doing, they don’t know what you’re doing wrong” – Sir Arnold Robinson, Cabinet Secretary, Yes Minister, episode 1, Open Government.

Home Office officials kept secret from the man in charge of a £9.3bn project a report that showed the scheme in serious trouble.

The Emergency Services Network is being designed to give police, ambulance crew and firemen voice and data communications to replace existing “Airwave” radios.  The Home Office’s permanent secretary Philip Rutnam describes the network under development as a “mission-critical, safety-critical, safety-of-life service”.

But Home Office officials working on the programme did not show an internal review report on the scheme’s problems to either Rutnam or Stephen Webb, the senior responsible owner. They are the two civil servants accountable to Parliament for the project.

Their unawareness of the report made an early rescue of the Emergency Services Network IT programme less likely. The scheme is now several years behind its original schedule, at least £3.1bn over budget and may never work satisfactorily.

The report’s non circulation raises the question of whether Whitehall’s preoccupation with good news and its suppression of the other side of the story is killing off major government IT-based schemes.

With the Emergency Services Network delayed – it was due to start working in 2017 – police, ambulance and fire services are having to make do with the ageing Airwave system which is poor at handling data.

Meanwhile Motorola – which is Airwave’s monopoly supplier and also a main supplier of the Emergency Services Network – is picking up billions of pounds in extra payments to keep Airwave going.

Motorola may continue to receive large extra payments indefinitely if the Emergency Services Network is never implemented to the satisfaction of he emergency services.

EE is due to deliver the network component of the Emergency Services Network. Motorola is due to supply software and systems and Kellogg Brown & Root is the Home Office’s delivery partner in implementing the scheme.

Has Whitehall secrecy over IT reports become a self-parody?

The hidden report in the case of the Emergency Services Network was written in 2016, a year after the scheme started. It said that dialogue between suppliers, notably EE and Motorola, did not start until after the effective delivery dates. Integration is still the main programme risk.

MP SIr Geoffrey Clifton Brown has told the Public Accounts Committee that the report highlighted an absence of clarity regarding dependency on the interface providers, which caused something of an impasse.

He said the report “alluded to the fact that that [a lack of clarity around integration] remains one of the most serious issues and is not showing any signs of resolution”.

Stephen Webb has been in charge of the project since its start but he is the business owner, the so-called “senior responsible owner” rather than the programme’s IT head.

In the private sector, the IT team would be expected to report routinely to a scheme’s business owner.

But in central government, secrecy over internal assurance reports on the progress or otherwise of major IT-related projects is a Whitehall convention that dates back decades.

Such reports are not published or shared internally except on a “need-to-know” basis. It emerged during legal proceedings over the Universal Credit IT programme that IT project teams kept reports secret because they were “paranoid” and “suspicious” of colleagues who might leak documents that indicated the programme was in trouble.

As a result, IT programme papers were no longer sent electronically and were delivered by hand. Those that were sent were “double-enveloped” and any that needed to be retained were “signed back in”; and Universal Credit programme papers were watermarked.

The secrecy had no positive effect on the Universal Credit programme which is currently running 11 years behind its original schedule.

Webb has told MPs he was “surprised” not to have seen review report on the Emergency Services Network. He discovered the report’s existence almost by accident when he read about it in a different report written a year later by Simon Ricketts, former Rolls Royce CIO.

This month the Public Accounts Committee criticised the “unhealthy good news” culture at the Home Office. The Committee blamed this culture for the report’s not being shown to Webb.

The Home Office says it doesn’t know why Webb was not shown the “Peter Edwards” report. The following was an exchange at the Public Accounts Committee between MP Sir Geoffrey Clifton-Brown, Webb and Rutnam.

Clifton-Brown: When you did that due diligence, were you aware of the Peter Edwards report prepared in the fourth quarter of 2016?

Rutnam: No, I’m afraid I was not. The Peter Edwards report on what exactly, sorry?

Clifton-Brown: Into the problems with ESN [Emergency Services Network], in particular in relation to suppliers.

Rutnam: I do not recall it. It may have been drawn to my attention, but I’m afraid I do not recall it.

Webb: It was an internal report done on the programme. I have not seen it either.

Clifton-Brown: You have not seen it either, Mr Webb—the documents tell us that. Why have you not seen such an important report? As somebody who was in charge of the team—a senior responsible officer—why had you not seen that report?

Webb: I don’t know. I was surprised to read it in Simon’s report. [Simon Ricketts.]

Chair: Who commissioned it?

Webb: The programme leadership at the time.

Chair: That is the board?

Webb: The programme director. It was a report to him about how he should best improve the governance. I think he probably saw it as a bit of an external assurance. It probably would have been better to share it with me, but that was not done at the time.

Clifton-Brown: “Probably would have been better to share it”? That report said that dialogue between suppliers, notably EE and Motorola, only started after the effective delivery dates. The report highlighted that there was not clarity regarding dependency on the interface providers, and that caused something of an impasse. It also alluded to the fact that that remains one of the most serious issues and is not showing any signs of resolution. That was in 2016, in that report. Had that report been disseminated, would we still be in the position that we are today?

Webb: I think that we would have wanted to bring forward the sort of [independent] review that the Home Secretary commissioned, and we would have done it at an earlier date.

Clifton-Brown: Why did you need to? You would not have needed to commission another review. You could have started getting to the root of the problem there and then if you had seen that report.

Webb: Yes.

Comment:

Webb and Rutman seem highly competent civil servants to judge from the open way they answered the questions of MPs on the Public Accounts Committee.

But they did not design the Emergency Services Network scheme which, clearly, had flawed integration plans even before contracts were awarded.

With no effective challenge internally and everything decided in secret, officials involved in the design did what they thought best and nobody knew then whether they were right or wrong. With hindsight it’s easy to see they were wrong.

But doing everything in secret and with no effective challenge is Whitehall’s  systemically flawed way of working on nearly all major government IT contracts and it explains why they fail routinely.

Extraordinary?

It’s extraordinary – and not extraordinary at all – that the two people accountable to Parliament for the £9.3bn Emergency Services Network were not shown a review report that would have provided an early warning the project was in serious trouble.

Now it’s possible, perhaps even likely, the Emergency Services Network will end up being added to the long list of failures of government IT-based programmes over the last 30 years.

Every project on that list has two things in common: Whitehall’s obsession with good news and the simultaneous suppression of all review reports that could sully the good news picture.

But you cannot run a big IT-based project successfully unless you discuss problems openly. IT projects are about solving problems. If you cannot admit that problems exist you cannot solve them.

When officials keep the problems to themselves, they ensure that ministers can be told all is well. Hence, ministers kept telling Parliament all was well with the £10bn National Programme for IT in the NHS  – until the scheme was eventually dismantled in 2011.

Parliament, the media and the public usually discover the truth only when a project is cancelled, ends up in the High Court or is the subject of a National Audit Office report.

With creative flair, senior civil servants will give Parliament, the National Audit Office and information tribunals a host of reasons why review reports on major projects must be kept confidential.

But they know it’s nonsense. The truth is that civil servants want their good news stories to remain uncontradicted by the disclosure of any internal review reports.

Take the smart meters roll-out. Internal review reports are being kept secret while officials give ministers and the Department for Business, Energy and Industrial Strategy the good news only. Thus, the latest Whitehall report on smart meters says,

“Millions of households and small businesses have made the smart choice to get a smart meter with over 12.8 million1 operating in smart mode across Great Britain. This world leading roll out puts consumers firmly in control of their energy use and will bring an end to estimated bills.”

Nothing is said about millions of homes having had “smart” meters installed that are neither smart nor compatible for the second generation of smart meters which have a set of problems of their own.

The answer?

For more than 30 years the National Audit Office and the Public Accounts Committee have published seemingly unique reports that each highlight a different set of problems. But nobody joins the dots.

Sir Arnold, the Cabinet Secretary said in “Yes Minister“, that open government is a contradiction in terms. “You can be open, or you can have government.

This is more than a line in a TV satire.  It is applied thinking in every layer of the top echelons of civil service.

Collective responsibility means civil servants have little to fear from programme failures. But they care about departmental embarrassment. If reviews into the progress or otherwise of IT-enabled programmes are published, civil servants are likely to be motivated to avoid repeating obvious mistakes of the past. They may be motivated to join the dots.

But continue to keep the review reports secret and new sets of civil servants will, unknowingly each time, treat every project as unique. They will repeat the same mistakes of old and be surprised every time the project collapses.

That the civil service will never allow review reports of IT programmes to be published routinely is a given. If the reports were released, their disclosure of problems and risks could undermine the good news stories ministers, supported by the civil service, want to feel free to publish.

For it’s a Whitehall convention that the civil service will support ministerial statements whether they are accurate or not, balanced or not.

Therefore, with review reports being kept secret and the obsession with good news being wholly supported by the civil service, government’s reputation for delivering successful IT-based programmes is likely to remain tarnished.

And taxpayers, no doubt, will continue to lose billions of pounds on failed schemes.  All because governments and the civil service cannot bring themselves to give Parliament and the media – or even those in charge of multi-billion pound programmes –  the other side of the story.

Home Office’s “unhealthy good news culture” blamed for Emergency Services Network Delays – Civil Service World

Emergency Services Network is an emergency now – The Register

Home Office not on top of emergency services programme – Public Accounts Committee report, July 2019

Advertisements

Aspire: eight lessons from the UK’s biggest IT contract

By Tony Collins

How do you quit a £10bn IT contract in which suppliers have become limbs of your organisation?

Thanks to reports by the National Audit Office, the questioning of HMRC civil servants by the Public Accounts Committee, answers to FOI requests, and job adverts for senior HMRC posts, it’s possible to gain a rare insight into some of the sensitive commercial matters that are usually hidden when the end of a huge IT contract draws closer.

Partly because of the footnotes, the latest National Audit Office memorandum on Aspire (June 2016) has insights that make it one of the most incisive reports it has produced on the department’s IT in more than 30 years.

Soaring costs?

Aspire is the government’s biggest IT-related contract. Inland Revenue, as it was then, signed a 10-year outsourcing deal with HP (then EDS) in 1994, and transferred about 2,000 civil servants to the company. The deal was expected to cost £2bn over 10 years.

After Customs and Excise, with its Fujitsu VME-based IT estate, was merged with Inland Revenue’s in 2005, the cost of the total outsourcing deal with HP rose to about £3bn.

In 2004 most of the IT staff and HMRC’s assets transferred to Capgemini under a contract known as Aspire – Acquiring Strategic Partners for Inland Revenue. Aspire’s main subcontractors were Accenture and Fujitsu.

In subsequent years the cost of the 10-year Aspire contract shot up from about £3bn to about £8bn, yielding combined profits to Capgemini and Fujitsu of £1.2bn – more than double the £500m originally modelled. The profit margin was 15.8% compared to 12.3% originally modelled.

The National Audit Office said in a report on Aspire in 2014 that HMRC had not handled costs well. The NAO now estimates the cost of the extended (13-year) Aspire contract from 2004 to 2017 to be about £10bn.

Between April 2006 and March 2014, Aspire accounted for about 84% of HMRC’s total spending on technology.

Servers that typically cost £30,000 a year to run under Aspire – and there are about 4,000 servers at HMRC today – cost between £6,000 when run internally or as low as £4,000 a year in the commodity market.

How could the Aspire spend continue – and without a modernisation of the IT estate?

A good service

HMRC has been generally pleased with the quality of service from Aspire’s suppliers.  Major systems have run with reducing amounts of downtime, and Capgemini has helped to build many new systems.

Where things have gone wrong, HMRC appears to have been as much to blame as the suppliers, partly because development work was hit routinely by a plethora of changes to the agreed specifications.

Arguably the two biggest problems with Aspire have been cost and lack of control.  In the 10 years between 2004 and 2014 HMRC paid an average of £813m a year to Aspire’s suppliers.  And it paid above market rates, according to the National Audit Office.

By the time the Cabinet Office’s Efficiency and Reform Group announced in 2014 that it was seeking to outlaw “bloated and wasteful” contracts, especially ones over £100m, HMRC had already taken steps to end Aspire.

It decided to break up its IT systems into chunks it could manage, control and, to some extent, commoditise.

HMRC’s senior managers expected an end to Aspire by 2017. But unexpected events at the Department for Work and Pensions put paid to HMRC’s plan …

Eight lessons from Aspire

1. Your IT may not be transformed by outsourcing.  That may be the intention at the outset. But it didn’t happen when Somerset County Council outsourced IT to IBM in 2007 and it hasn’t happened in the 12 years of the Aspire contract.

 “The Aspire contract has provided stable but expensive IT systems. The contract has contributed to HMRC’s technology becoming out of date,” said the National Audit Office in its June 2016 memorandum.

Mark DearnleyAnd Mark Dearnley, HMRC’s Chief Digital Information Officer and main board member, told the Public Accounts Committee last week,

“Some of the technology we use is definitely past its best-before date.”

2. You won’t realise how little you understand your outsourced IT until you look at ending a long-term deal.

Confidently and openly answering a series of trenchant questions from MP Richard Bacon at last week’s Public Accounts Committee hearing, Dearnley said,

“It’s inevitable in any large black box outsourcing deal that there are details when you get right into it that you don’t know what’s going on. So yes, that’s what we’re learning.”

3. Suppliers may seem almost philanthropic in the run-up to a large outsourcing deal because they accept losses in the early part of a contract and make up for them in later years.

Dearnley said,

“What we are finding is that it [the break-up of Aspire] is forcing us to have much cleaner commercial conversations, not getting into some of the traditional arrangements.

” If I go away from Aspire and talk about the typical outsourcing industry of the last ten years most contracts lost money in their first few years for the supplier, and the supplier relied on making money in the later years of the contract.

“What that tended to mean was that as time moved on and you wanted to change the contract the supplier was not particularly incented to want to change it because they wanted to make their money at the end.

“What we’re focusing on is making sure the deals are clean, simple, really easy to understand, and don’t mortgage the future and that we can change as the environment evolves and the world changes.”

4. If you want deeper-than-expected costs in the later years of the contract, expect suppliers to make up the money in contract extensions.

Aspire was due originally to end in 2004. Then it went to 2017 after suppliers negotiated a three-year extension in 2007. Now completion of the exit is not planned until 2020, though some services have already been insourced and more will be over the next four years.

The National Audit Office’s June 2016 memorandum reveals how the contract extension from 2017 to 2020 came about.

HMRC had a non-binding agreement with Capgemini to exit from all Aspire services by June 2017. But HMRC had little choice but to soften this approach when Capgemini’s negotiating position was unexpectedly strengthened by IT deals being struck by other departments, particularly the Department for Work and Pensions.

Cabinet Office “red lines” said that government would not extend existing contracts without a compelling case. But the DWP found that instead of being able to exit a large hosting contract with HP in February 2015 it would have to consider a variation to the contract to enable a controlled disaggregation of services from February 2015 to February 2018.

When the DWP announced it was planning to extend its IT contract with its prime supplier HP Enterprise, HMRC was already in the process of agreeing with Capgemini the contract changes necessary to formalise their agreement to exit the Aspire deal in 2017.

“Capgemini considered that this extension, combined with other public bodies planning to extend their IT contracts, meant that the government had changed its position on extensions…

“Capgemini therefore pushed for contract extensions for some Aspire services as a condition of agreeing to other services being transferred to HMRC before the end of the Aspire contract,” said the NAO’s June 2016 memo.

5. It’s naïve to expect a large IT contract to transfer risks to the supplier (s).

At last week’s Public Accounts Committee hearing, Richard Bacon wanted to know if HMRC was taking on more risk by replacing the Aspire contract with a mixture of insourced IT and smaller commoditised contracts of no more than three years. Asked by Bacon whether HMRC is taking on more risk Dearnley replied,

“Yes and no – the risk was always ours. We had some of it backed of it backed off in contract. You can debate just how valuable contract backing off is relative to £500bn (the annual amount of tax collected).  We will never back all of that off. We are much closer and much more on top of the service, the delivery, the projects and the ownership (in the gradual replacement of Aspire).”

6. Few organisations seeking to end monolithic outsourcing deals will have the transition overseen by someone as clear-sighted as Mark Dearnley.

His plain speaking appeared to impress even the chairman of the Public Accounts Committee Meg Hillier who asked him at the end of last week’s hearing,

Meg Hillier

Meg Hillier

“And what are your plans? One of the problems we often see in this Committee is people in very senior positions such as yours moving on very quickly. You have had a stellar career in the private sector…

“We hope that those negotiations move apace, because I suspect – and it is perhaps unfair to ask Mr Dearnley to comment – that to lose someone senior at this point would not be good news, given the challenges outlined in the [NAO] Report,” asked Hillier.

Dearnley then gave a slightly embarrassed look to Jon Thomson, HMRC’s chief executive and first permanent secretary. Dearnley replied,

“Jon and I are looking at each other because you are right. Technically my contract finishes at the end of September because I was here for three years. As Jon has just arrived, it is a conversation we have just begun.”

Hiller said,

“I would hope that you are going to have that conversation.”

Richard Bacon added,

“Get your skates on, Mr Thompson; we want to keep him.”

Thompson said,

“We all share the same aspiration. We are in negotiations.”

7. Be prepared to set aside millions of pounds – in addition to the normal costs of the outsourcing – on exiting.

HMRC is setting aside a gigantic sum – £700m. Around a quarter of this, said the National Audit Office, is accounted for by optimism bias. The estimates also include costs that HMRC will only incur if certain risks materialise.

In particular, HMRC has allowed around £100m for the costs of transferring data from servers currently managed by Aspire suppliers to providers that will make use of cloud computing technology. This cost will only be incurred if a second HMRC programme – which focuses on how HMRC exploits cloud technology – is unsuccessful.

Other costs of the so-called Columbus programme to replace Aspire include the cost of buying back assets, plus staff, consultancy and legal costs.

8. Projected savings from quitting a large contract could dwarf the exit costs.

HMRC has estimated the possible minimum and possible maximum savings from replacing Aspire. Even the minimum estimated savings would more than justify the organisational time involved and the challenge of building up new corporate cultures and skills in-house while keeping new and existing services running smoothly.

By replacing Aspire and improving the way IT services are organised and delivered, HMRC expects to save – each year – about £200m net, after taking into account the possible exit costs of £700m.

The National Audit Office said most of the savings are calculated on the basis of removing supplier profit margins and overheads on services being brought in-house, and reducing margins on other services from contract changes.

Even if the savings don’t materialise as expected and costs equal savings the benefits of exiting are clear. The alternative is allowing costs to continue to soar while you allow the future of your IT to be determined by what your major suppliers can or will do within reasonable cost limits.

Comment

HMRC is leading the way for other government departments, councils, the police and other public bodies.

Dearnley’s approach of breaking IT into smaller manageable chunks that can be managed, controlled, optimised and to some extent commoditised is impressive.  On the cloud alone he is setting up an internal team of 50.

In the past, IT empires were built and retained by senior officials arguing that their systems were unique – too bespoke and complex to be broken up and treated as a commodity to be put into the cloud.

Dearnley’s evidence to the Public Accounts Committee exposes pompous justifications for the status quo as Sir Humphrey-speak.

Both Richard Feynman and Einstein said something to the effect that the more you understand a subject, the simpler you can explain it.

What Dearnley doesn’t yet understand about the HMRC systems that are still run by Capgemini he will doubtless find out about – provided his contract is renewed before September this year.

No doubt HMRC will continue to have its Parliamentary and other critics who will say that the risks of breaking up HMRC’s proven IT systems are a step too far. But the risks to the public purse of keeping the IT largely as it is are, arguably, much greater.

The Department for Work and Pensions has proved that it’s possible to innovate with the so-called digital solution for Universal Credit, without risking payments to vulnerable people.

If the agile approach to Universal Credit fails, existing benefit systems will continue, or a much more expensive waterfall development by the DWP’s major suppliers will probably be used instead.

It is possible to innovate cheaply without endangering existing tax collection and benefit systems.

Imagine the billions that could be saved if every central government department had a Dearnley on the board. HMRC has had decades of largely negative National Audit Office reports on its IT.  Is that about to change?

Update:

This morning (22 June 2016) on LinkedIn, management troubleshooter and board adviser Colin Beveridge wrote,

“Good analysis of Aspire and outsourcing challenges. I have seen too many business cases in my career, be they a case for outsourcing, provider transition or insourcing.

“The common factor in all the proposals has been the absence of strategy end of life costs. In other words, the eventual transition costs that will be incurred when the sourcing strategy itself goes end of life. Such costs are never reflected in the original business case, even though their inevitability will have an important impact on the overall integrity of the sourcing strategy business case.

“My rule of thumb is to look for the end of strategy provision in the business case, prior to transition approval. If there is no provision for the eventual sourcing strategy change, then expect to pay dearly in the end.”

June 2016 memorandum on Aspire – National Audit Office

Dearney’s evidence to the Public Accounts Committee

Capita – an NAO insight.

By Tony Collins

Capita is a remarkable success story. Formed in 1984 with two people, as a division of the Chartered Institute of Public Finance and Accountancy, it grew rapidly to become a FTSE 100 member in 2006. In 2012 its turnover was £3.35bn, its pre-tax profits were £425.6m and it employed 52,500 people. It now has 62,000 staff across the UK, Europe, South Africa and India. It  acquired about 36,000 staff through TUPE.

In a survey, 71% of Capita staff agreed with the statement that “Overall I feel Capita is a good place to work” and 85% have an overall satisfaction with management.

The company’s  public sector turnover in the UK is about £1bn, divided roughly equally between local and central government. Two of its most recent UK contracts are at Barnet Council.

Yesterday the National Audit Office published an insight into four companies, Capita being one, after a request by the chair of the Public Accounts Committee, Margarget Hodge. She is not so impressed by Capita’s success.

“I asked the NAO to carry out this work after looking at case after case of contract failure- G4S and the Olympic security, Capita and court translation services, Atos and work capability assessments, Serco and out-of-hours GP services, to name a few.

“In each case we found poor service; poor value for money; and government departments completely out of their depth,” said Hodge.

Capita, however, comes out of the NAO investigation fairly well, better than the other three companies (G4S, Serco and Atos) but the NAO made some general points, unspecific to any of the four contractors, that indicate contracting arrangements between government and some of its major suppliers are far from ideal.

One of the NAO’s findings is that some suppliers may be “too big to fail” – and “difficult to live with, or without”.

The NAO memo provides information on Capita that would not otherwise be in the public domain. The audit office based its information on interviews with suppliers and civil servants, surveys, company reports, data from “open book” accounting and Cabinet Office files.

The four suppliers co-operated with the NAO but not completely. Where the contract did not have “open book” clauses Capita did not provide information on its costs or profit margins.

Below are some of the NAO’s findings in its “Memorandum on the role of major contractors in the delivery of public services”.

Capita has contracts with most major central government departments. In 2012/13 these contracts by value included:

Department for Work and Pensions: £146m.

Home Office: £99m

NHS: £71m

MoD: £40m

Department for Transport: £28m

Ministry of Justice: £23m

Cabinet Office: £19m

Department for Education: £17m

Department for Business Innovation and Skills: £11m

Department for Culture Media and Sports: £5m

DEFRA: £5m

Department for Energy and Climate Change: £3m

Department for International Development: £2m

HM Treasury: £2m

HMRC: £1m

Department for Health: £1m

Capita’s profits

The NAO says:

“Capita has been profitable for many years. Its accounts allocate its activities to 11 operating segments according to the nature of the services provided. All of these operate globally and contain at least one public sector contract as well as UK private sector and overseas work.

“The information that we saw at Capita indicates the following

• Public sector work generally has a margin, before both divisional and global overheads, of 6 to 18 per cent, falling to between 1 to 10 per cent once overheads are included. Capita told us that its other public sector contracts would be similar, but that they were ‘doing better’ in the private sector.

• Two contracts reported a loss. Capita said this was because costs such as investment were being incurred at the start of the contract. Capita told us they expected these contracts to achieve a whole-life gross margin of at least 15 per cent.

• Some contracts had higher margins. Capita told us these were older contracts, some of which had made losses early on.

“Capita only showed us information on contracts that had open-book clauses. They believed that most of their clients regularly use open-book access rights. It  [Capita] said: ‘We do not distinguish between public and private sector contracts in our internal management information systems and it would be additional work for us to make available the information in a comparable format.’”

Capita’s UK taxes

The NAO estimate Capita’s UK tax paid in 2012 was £50m-£56m.

Below are some of the NAO’s general points that are not specific to any one of the four companies.

Making money through contract changes

NAO: “Changing a contract and adding requirements allows a contract to evolve, but can be less competitive than fully tendering the new requirement.

“Because of such changes, the total revenue through contract tends to grow, as reflected in the four contractors’ portfolios. In our experience the contractors tend to make higher profit margins on these changes. Good practice aims to build flexibility to the contract and relies on transparent costs and profits…

“Generally contractors manage their profit across a portfolio, targeting an overall level of profit. Low margins are often established during the bidding process, but can increase during the contract lifetime.”

Easier to stick with existing suppliers?

“Incumbents can be seen by procurement and policy officials as the easier and safer option. Across the 15 applicable services we looked at as case studies for this memorandum, seven had been re-tendered at least once, with four of the most recent competitions for each service being won by existing providers and three by new providers.”

Open book accounting not always open

“The government only has access to information on the profits contractors make where ‘open-book arrangements’ are written into contracts. Open-book arrangements either require the contractor to update the client department regularly on their costs and profit, or allow the client to audit those costs and profit on an ad hoc basis.

“We found that use of open-book access rights varies. Some public bodies do not try to see data on contract profits. Comparing profit levels from the open-book arrangements we reviewed also posed challenges as contractors vary in how and when they allocate central overhead costs against profits from contracts…

“We do not have direct audit rights over government contractors. It is normal, however, for government contracts to require the contractor to give us information and help when we audit that public service and government entity. Where there are open‑book accounting arrangements with the government then this includes making those available to us.”

Suppliers pass risk back once contract start?

The original allocation of risk in the contract often changes once the contract starts. For instance:

• Contractors will often pass risk back to clients who do not fully enforce or carry out their part of the contract. The government department therefore needs the appropriate skills to manage the type of contract it is using.

• The original understanding of the risks in the contract may prove to be wrong. This can lead to the contract being terminated (Figure 18) and risks that the government thought the contractor would manage returning to the public sector.

• The government sometimes ignores the commercial terms and risk allocation in the contract when trying to settle a dispute or vary the requirement. Instead, it can put political pressure on the contractor and threaten their reputation

You can’t rely on contracts

The standards expected of all public services are honesty, impartiality, openness, accountability, accuracy, fairness, integrity, transparency, objectivity, and reliability, says the NAO. They should be carried out:

• in the spirit of, as well as to the letter of, the law;

• in the public interest;

• to high ethical standards; and

• achieving value for money.

In these respects public contracts are limited in what they can achieve. Says the NAO:

“Many of the standards expected of all public services do not easily translate into a contract specification. It is not possible, for instance, to contract for ‘integrity’ or the ‘spirit of the law’.

“Achieving the standards expected for public service depends largely on the corporate culture, control environment and ethics of the contractor. It is not easy, however, to use contract negotiations to meaningfully assess and set standards for the contractor overall.

“Government therefore needs to supplement traditional contractual mechanisms with other means of ensuring the expected standards are met. In particular, they need to ensure that the companies’ own corporate governance, management and control environment are aligned with taxpayers’ interests.

“This requires both transparency over performance and incentives to implement the rigorous control environment required including credible threat to profits and future business if problems are found.”

The NAO says officials need to better understand the general control environment that contractors use to manage government contracts, and how far senior executives in those companies should understand what is happening within their companies.

US is more open than UK

The NAO says that companies’ own public reporting and transparency to the public is important to facilitate public scrutiny and trust. Although the government publishes new public contracts on its website www.contractfinder this contains only recently awarded contracts and “very few of the four contractors’ contracts are on it”, says the NAO which adds:

“By contrast, the US government website www.USAspending.gov sets out the full contracts and spending on all government suppliers.”

On Freedom of information, contractors compile information to answer freedom of information requests when asked by their government clients, where they hold the information for the government, but the department answers the actual request.

Says the NAO: “Freedom of information does not apply to the contractor’s business and commercially sensitive information can be exempt.”

On the openness of suppliers in reporting profits the NAO says:

“Even where transparency exists, it is inevitably difficult to interpret profit information. It can be unclear what a reasonable margin looks like. In theory, the margin is meant to reflect risk, innovation and investment. But these are difficult to measure. Furthermore, profit is rarely presented consistently. It can be unclear how overheads are allocated. The profit margin changes, depending on the stage of the project. And different companies may target different rates depending on their business model.”

KPIs of limited value

The NAO says KPIs give a limited overview of performance and are normally focused on things that are easily measurable.

“The main way the government can gain quality assurance is through the contractual reporting. This normally includes a set of KPIs that track performance and that are often linked to financial incentives. Together these make up the service level agreement (SLA). These can be used effectively to manage performance. However, there are three major risks that mean that contractual reporting is not sufficient on its own to monitor performance.”

The NAO says there are risks of misreporting. “There have been instances of contractors misreporting performance, including the case of Serco’s Cornwall out-of-hours healthcare contract …”

Poorly calibrated KPIs.  

“All the contractors told us about instances where poor calibration has resulted in green SLA traffic lights where the client is unhappy or red traffic lights where the client is content with the service. This reduces the SLA’s relevance and can indicate that incentives are not working.”

Are some suppliers too big to fail?

“The current government, like the one before it, sees contracting out as a way to reform public services and improve value for money. Contracting out can significantly reduce costs and help to improve public services. However, there are several indications that better public scrutiny is needed across government contracting:

• There have been several high-profile allegations of poor performance, irregularities and misreporting over the past few months. These raise concerns about whether all contractors know what is going on in their business and are behaving appropriately; and how well the government manages contracts.

• The government believes that contractors generally have often not provided sufficient value, and can contribute more to the overall austerity programme.But the general level of transparency over contractors’ costs and profits is limited. The government needs a better understanding of what is a fair return for good performance for it to maintain the appropriate balance between risk and reward.

• Third, underlying both these issues is the concern that government is, to a certain degree, dependent upon its major providers. There is a sense that some may be ‘too big to fail’ – and difficult to live with or without.

Can we see whether contractors’ profits reflect a fair return?

The NAO’s answer to its own question appears to be “no”.

It says there is a need to explore further:

• Whether there is sufficient transparency over costs, profit and tax.

• Whether the balance of risk and reward is providing the right incentives

for contractors.

• Whether profits represent a fair return.

Shareholder v taxpayers’ interests

The NAO suggests that suppliers are likely to put their own interests before taxpayers’.

“Companies’ own control environments will likely concentrate on maintaining shareholder value. Government needs to ensure that it is in the contractors’ financial interests to focus their control environment more widely on meeting the standards expected of public service.

“This involves using contractual entitlements to information, audit and inspection to ensure standards are being met. And it is likely to involve financial penalties, banning from competitions and political fallout when problems are found.”

The NAO says that, to be a well-informed customer, the government needs to satisfy itself that contractors’ corporate governance structures work in taxpayers’ interests, and that the companies are not paying ‘lip service’ at the centre with little group-wide control to back it up.

“Companies that are large and have sprawling structures, involving a vast number of subsidiaries, may have to make particularly strenuous effort to demonstrate this.”

The NAO suggests further areas to explore:

• Whether contractors are meeting the standards of performance the public expects.

• What contractors consider themselves accountable for.

• Whether transparency is sufficient to ensure contractors work in the taxpayers’ interests.

• Whether contractors’ control environments focus on ensuring standards of public services are met.

Supplier information unverified

The NAO says: “We are grateful for the help and cooperation provided by Atos, Capita, G4S and Serco in the preparation of this memorandum. Most of the information in this report is based on information the companies provided.

“Much of this would not otherwise be in the public domain. The contractors also helped us to understand their business and talked frankly about the risks, challenges and incentives they face.

“However, we do not directly audit these companies and have not been able to verify all the information provided against underlying evidence. We have therefore presented the information in good faith, and attempted to compare different evidence sources wherever possible.”

NAO memorandum on the role of major contractors in the delivery of public services

Comment

Capita is not a bad government contractor.  Perhaps it is one of the best. But is that a ringing endorsement?

The NAO has carried out a thorough investigation but its inquiry suggests that much about public sector contracting remains hidden. On suppliers in general, it is not difficult, if both sides tacitly agree, to hide problems from Parliament, the media and even the Cabinet Office which asks the right questions of departmental officials but does not always get answers, let alone accurate answers.

The NAO did not always get answers to its questions. Indeed Amyas Morse, head of the NAO, said there is an impression that some officials are not in control of their suppliers.

“Contracting with private sector providers is a fast-growing and important part of delivering public services.  But there is a crisis of confidence at present, caused by some worrying examples of contractors not appearing to treat the public sector fairly, and of departments themselves not being on top of things.

“While some government departments have been admirably quick off the mark and transparent in investigating problems, there is a clear need to reset the ground rules for both contractors and their departmental customers,” said Morse.

My thanks to campaigner Dave Orr for drawing my attention to Morse’s comment.

Firecontrol disaster and NPfIT – two of a kind?

By Tony Collins

Today’s report of the Public Account Committee on the Firecontrol project could, in many ways, be a report on the consequences of the failure of the National Programme for IT in the NHS in a few years time.

The Firecontrol project was built along similar lines to the NPfIT but on a smaller scale.

With Firecontrol, Whitehall officials wanted to persuade England’s semi-autonomous 46 local fire authorities to take a centrally-bought  IT system while simplifying and unifying their local working practices to adapt to the new technology.

NPfIT followed the same principle on a bigger scale: Whitehall officials wanted to persuade thousands of semi-autonomous NHS organisations to adopt centrally-bought technologies. But persuasion didn’t work, in either the fire services or the NHS.

More similarities

The Department for Communities and Local Government told
the PAC that the Firecontrol control was “over-specified” – that it was unnecessary to have back-up to an incident from a fire authority from the other side of the country.

Many in the NHS said that NPfIT was over-specified. The gold-plated trimmings, and elaborate attempts at standardisation,  made the patient record systems unnecessarily complicated and costly – and too difficult to deliver in practice.

As with the NPfIT, the Firecontrol system was delayed and local staff  had little or no confidence it would ever work, just as the NHS had little or no faith that NPfIT systems would ever work.

Both projects failed. Firecontrol wasted at least £482m. The Department of Communities and Local Government cancelled it in 2010. The Department of Health announced in 2011 that the NPfIT was being dismantled but the contracts with CSC and BT could not be cancelled and the programme is dragging on.

Now the NHS is buying its own local systems that may or may not be interoperable. [Particularly for the long-term sick, especially those who have to go to different specialist centres, it’s important that full and up-to-date medical records go wherever the patients are treated and don’t at the moment, which increases the risks of mistakes.]

Today’s Firecontrol report expresses concern about a new – local – approach to fire services IT. Will the local fire authorities now end up with a multitude of risky local systems, some of which don’t work properly, and are all incompatible, in other words don’t talk to each other?

This may be exactly the concern of a post-2015 government about NHS IT. With the NPfIT slowly dying NHS trusts are buying their own systems. The coalition wants them to interoperate, but will they?  

Could a post-2015 government introduce a new (and probably disastrous) national NHS IT project – son of NPfIT – and justify it by drawing attention to how very different it is to the original NPfIT eg that this time the programme has the buy-in of clinicians?

The warning signs are there, in the PAC’s report on Firecontrol. The report says there are delays on some local IT projects being implemented in fire authorities, and the systems may not be interoperable. The PAC has 

” serious concerns that there are insufficient skills across all fire authorities to ensure that 22 separate local projects can be procured and delivered efficiently in so far as they involve new IT systems”.

National to local – but one extreme to the other?

The PAC report continues

“There are risks to value for money from multiple local projects. Each of the 22 local projects is now procuring the services and systems they need separately.

“Local teams need to have the right skills to get good deals from suppliers and to monitor contracts effectively. We were sceptical that all the teams had the appropriate procurement and IT skills to secure good value for money.

“National support and coordination can help ensure systems are compatible and fire and rescue authorities learn from each other, but the Department has largely devolved these roles to the individual fire and rescue authorities.

“There is a risk that the Department has swung from an overly prescriptive national approach to one that provides insufficient national oversight and coordination and fails to meet national needs or achieve economies of scale. 

Comment

PAC reports are meant to be critical but perhaps the report on Firecontrol could have been a little more positive about the new local approach that has the overwhelming support of the individual fire and rescue authorities.  

Indeed the PAC quotes fire service officials as saying that the local approach is “producing more capability than was expected from the original FiReControl project”. And at a fraction of the cost of Firecontrol.

But the PAC’s Firecontrol Update Report expresses concern that

– projected savings from the local approach are now less than originally predicted

– seven of the 22 projects are running late and two of these projects have slipped by 12 months

– “We have repeatedly seen failures in project management and are concerned that the skills needed for IT procurement may not be present within the individual fire and rescue authorities, some of which have small management teams,” says the PAC.

On the other hand …

The shortfall in projected savings is small – £124m against £126m and all the local programmes are expected to be delivered by March 2015, only three months later than originally planned.

And, as the PAC says, the Department for Communities and Local Government has told MPs that a central peer review team is in place to help share good practice – mainly made up of members of fire and rescue authorities themselves.

In addition, part of the £82m of grant funding to local fire services has been used by some authorities to buy in procurement expertise.

Whether it is absolutely necessary – and worth the expense – for IT in fire services to link up is open to question, perhaps only necessary in a national emergency.

In the NHS it is absolutely necessary for the medical records of the chronically sick to link up – but that does not justify a son-of-NPfIT programme. Linking can be done cheaply by using existing records and having, say, regional servers pull together records from individual hospitals and other sites.

Perhaps the key lesson from the Firecontrol and the NPfIT projects is that large private companies can force their staff to use unified IT systems whereas Whitehall cannot force semi-autonomous public sector organisations to use whatever IT is bought centrally.

It’s right that the fire services are buying local IT and it’s right that the NHS is now too. If the will is there to do it cheaply, linking up the IT in the NHS can be done without huge central administrative edifices.

Lessons from FireControl (and NPfIT?) 

The National Audit Office identifies these main lessons from the failure of Firecontrol:

– Imposing a single national approach on locally accountable fire and rescue authorities that were reluctant to change how they operated

–  Launching the programme too quickly without applying basic project approval checks and balances

– Over optimism on the deliverability of the IT solution.

– Issues with project management including consultants who made up half of the management team and were not effectively managed

MP Margaret Hodge, chair of the Public Accounts Committee, today sums up the state of Firecontrol

“The original FiReControl project was one of the worst cases of project failure we have seen and wasted at least £482 million of taxpayers’ money.

“Three years after the project was cancelled, the DCLG still hasn’t decided what it is going to do with many of the specially designed, high-specification facilities and buildings which had been built. Four of the nine regional control centres are still empty and look likely to remain so.

“The Department has now provided fire and rescue authorities with an additional £82 million to implement a new approach based on 22 separate and locally-led projects.

“The new programme has already slipped by three months and projected savings are now less than originally predicted. Seven of the 22 projects are reportedly running late and two have been delayed by 12 months. We are therefore sceptical that projected savings, benefits and timescales will be achieved.

“Relying on multiple local projects risks value for money. We are not confident that local teams have the right IT and procurement skills to get good deals from suppliers and to monitor contracts effectively.

“There is a risk that the DCLG has swung from an overly prescriptive national approach to one that does not provide enough national oversight and coordination and fails to meet national needs or achieve economies of scale.

 “We want the Department to explain to us how individual fire and rescue authorities with varied degrees of local engagement and collaboration can provide the needed level of interoperability and resilience.

“Devolving decision-making and delivery to local bodies does not remove the duty on the Department to account for value for money. It needs to ensure that national objectives, such as the collaboration needed between fire authorities to deal with national disasters and challenges, are achieved.”

Why weren’t NPfIT projects cancelled?

 NPfIT contracts included commitments that the Department of Health and the NHS allegedly did not keep, which weakened their legal position; and some DH officials did not really want to cancel the NPfIT contracts (indeed senior officials at NHS England seem to be trying to keep NPfIT projects alive through the Health and Social Care Information Centre which is responsible for the local service provider contracts with BT and CSC).

PAC report on Firecontrol

What Firecontrol and the NPfIT have in common (2011)

BT gets termination notice on £300m outsourcing contract

By Tony Collins

Sandwell Council has issued BT with a 30-day termination notice on a 15-year £300m outsourcing contract that has yet to reach its half-way point.

The metropolitan borough council says there are various defaults BT needs to resolve. Based at Oldbury, West Midlands, about five miles from Birmingham, Sandwell has been an outsourcing reference site for BT.

The company quoted Sandwell Council in its presentations that formed part of the bidding for Cornwall Council’s planned outsourcing work.

The “guaranteed” savings in Sandwell’s contract with BT appear to be based on a level of spending the council is not maintaining. One point of contention appears to be the council’s wish for BT to reduce its charges to the council in line with the authority’s lower levels of activity.

In June 2012 Sandwell submitted a change request that asked BT to recalculate the annual service charge because the service volumes delivered through the contract had reduced significantly.

The council wanted the recalculation to be based on a reduction in the workforce from around 7,400 in 2007 when the contract with BT was signed to 4,688 in mid 2012.

Government Computing quotes a council document on the dispute as saying

“A reduction in the workforce should have a corresponding reduction in volumes such as the size of the ICT estate, the payroll, HR support and budget holders. There have been volume reductions in invoices, the number of contracts administered and calls to the contact centre for some services.”

Sandwell’s 30-day termination notice to BT was issued on 16 July so it will expire around that time next month. The council says it is prepared to take back staff.

Sandwell council leader, Councillor Darren Cooper, told Government Computing: “Cabinet has approved a recommendation to start the process of ending our contract with BT. That termination will take effect in 30 days’ time unless BT puts right various defaults we have asked them to resolve.

“If we have to, I am confident we will be able to bring the services BT currently supplies to us back to the council and run them in the most effective way in future.”

Guaranteed

In 2007 BT and its joint bidder, outsourcing provider Liberata, had set out to run the council’s back-office functions at what was announced as a “guaranteed” reduced cost over the lifetime of the contract.

The deal was aimed at cutting costs and improving Sandwell’s IT infrastructure, HR, finance, payroll and customer services functions.

There was some success. The BT-led ‘Transform Sandwell’ team won the UK’s Best Customer Services Management Team at the National Customer Services Awards in December 2010.

BT built a 75,000 square foot office block for Transform Sandwell. It accommodated 400 employees of Transform Sandwell and a 300-strong customer service team working for BT.

Massive mistake?

Independent socialist councillor Mick Davies said “Someone somewhere has obviously made a massive mistake and the taxpayers of Sandwell will have to foot the bill… The writing seemed to be on the wall when BT’s partner in the project, Liberata, was dumped unceremoniously a couple of years ago.”

Sandwell Council’s deputy leader and cabinet member for strategic resources Councillor Steve Eling said: “In view of the current climate and public expenditure reductions, the council is engaging with its partner to determine services that are needed over the medium term and to reduce the overall costs in light of public spending reductions.”

Technologies used in the Transform Sandwell contact centre have included Verint Impact 360, Siebel CRM and Nortel Contact Centre 6.0.

A BT spokesman told the Halesowen News

“BT continually looks at ways to improve the service it provides to its customers. The original contract was signed in 2007 and as is normal with long-term partnerships BT constantly looks at ways to service the changing needs of both the council and citizens of Sandwell.”

BT told Government Computing it “has throughout – and remains – fully committed to delivering the commitments it made through the Transform Sandwell Partnership.”

The European Services Strategy Unit which has carried out detailed research on outsourcing contracts lists some of the terminated and reduced local authority strategic partnership contracts.

Sandwell has 72 councillors, 67 of which represent Labour.

Comment

At some point in a 10 or 15-year outsourcing contract a major dispute seems almost inevitable because a supplier’s business objectives will rarely change when the council’s priorities change.

BT’s deal with Sandwell was signed in 2007 – as was Southwest One’s deal with IBM – at a pre-austerity period.

Now that councils have been making, and continue to make, radical savings, they want the flexibility to cut their outsourcing costs too. But it may not be in the supplier’s interests to take profits that are much lower than expected.

No such thing as a free lunch

How can the business interests of outsourcing providers and their council clients ever completely align and move in time like synchronised swimmers?

The growing number of disputes in local authority outsourcing deals suggests that councils are not properly weighing up the risks when they sign deals.

Perhaps small groups of ruling councillors – such as those at Barnet – are too easily persuaded by the “guaranteed” savings on offer at the start of a contract.

There is no such thing as a free lunch. But try telling that to council Cabinet councillors who have cartoon-character pound signs in their eyes in the Disney period before a big outsourcing contract is well underway.

Let’s hope BT and Sandwell kiss and make up. It looks like the lawyers are already in the middle of them, though; and at whose expense?

Sandwell and BT consider end of strategic partnership – Government Computing

Frustrated with the system – Govt CIOs, executive directors, change agents

By Tony Collins

Today The Times reports, in a series of articles, of tensions in Whitehall between ministers and an “unwilling civil service” over the pace of change.

It says a “permanent cold war” is being conducted with the utmost courtesy. It refers to Downing Street’s lack of control.

In one of the Times articles, Sir Antony Jay, co-creator of the “Yes Minister” TV series, writes that the civil service is more prepared to cut corners than in the 1970s  but hasn’t really changed. “If a civil servant from the 1970s came back today they would probably slot in pretty easily,” says Jay.

Politicians want “eye-catching” change while civil servants “don’t want to be blamed for cock-ups”, he says.

Separately, Mike Bracken, Executive Director of Digital in the Cabinet Office, has suggested that a frustration with the system extends to CIOs, executive directors to corporate change agents.

Bracken created the Government Digital Service which is an exemplar of digital services.  His philosophy is it’s cheaper and better to build, rent or pull together a new product, or at least a minimum feasible product, than go through the “twin horrors of an elongated policy process followed by a long procurement”.

Bracken has the eye of an outsider looking in. Before joining the Cabinet Office in July 2011 he was Director of Digital Development at the Guardian.

Bracken’s blog gives an account of his 18 months in office and why it is so hard to effect change within departments. I’ve summarised his blog in the following bullet points, at the risk of oversimplifying his messages:

Collective frustration

–  After joining the Cabinet Office in 2011 Bracken made a point of meeting senior officials who’d had exalted job titles, from CIOs and executive directors to corporate change agents. “While many of them banked some high-profile achievements, the collective reflection was frustration with and at the system,” says Bracken.

Civil service versus citizen’s needs

–  “I’ve lost count of the times when, in attempting to explain a poorly performing transaction or service, an explanation comes back along the lines of ‘Well, the department needs are different…’ How the needs of a department or an agency can so often trump the needs of the users of public services is beyond me,” says Bracken.

– Policy-making takes priority over delivery, which makes the civil service proficient at making policy and poor at delivery. “Delivery is too often the poor relation to policy,” says Bracken. Nearly 20,000 civil servants were employed in ‘policy delivery’ in 2009. Each government department produces around 171 policy or strategy documents on average each year. Bracken quotes one civil servant as saying: “The strategy was flawless but I couldn’t get anything done.”

Are citizen needs poisonous to existing suppliers?

– Departmental needs take priority over what the public wants. Bracken suggests that user needs – the needs of the citizen – are poison to the interests of policymakers and existing suppliers. “Delivery based on user need is like kryptonite to policy makers and existing suppliers, as it creates rapid feedback loops and mitigates against vendor lock-in,” says Bracken.

– “When it comes to digital, the voices of security and the voices of procurement dominate policy recommendations. The voice of the user [citizen] barely gets a look-in. ( Which also explains much of the poor internal IT, but that really is another story.)”

A vicious circle

Bracken says that new IT often mirrors clunky paper-based processes. [It should usually reflect new, simplified and standardised processes.] “For digital services, we usually start with a detailed policy. Often far too detailed, based not just on Ministerial input, but on substantial input from our existing suppliers of non-digital services. We then look to embed that in current process, or put simply, look for a digital version of how services are delivered in different channels. This is why so many of our digital services look like clunky, hard-to-use versions of our paper forms: because the process behind the paper version dictates the digital thinking.”

Then things take a turn for the worse, says Bracken. “The policy and process are put out to tender, and the search for the elusive ‘system’ starts. Due to a combination of European procurement law and a reliance on existing large IT contracts, a ‘system’ is usually procured, at great time and expense.

“After a long number of months, sometimes years, the service is unveiled. Years after ‘requirements’ were gathered, and paying little attention to the lightning-quick changes in user expectation and the digital marketplace, the service is unveiled to all users as the finished product.

“We then get the user feedback we should have had at the start. Sadly it’s too late to react. Because these services have been hard-wired, like the IT contract which supplied them, our services simply can’t react to the most valuable input: what users think and how they behave.

“As we have found in extreme examples, to change six words the web site of one of these services can take months and cost a huge amount, as, like IT contracts, they are seen as examples of ‘change control’ rather than a response to user need.

“If this 5-step process looks all too familiar that’s because you will have seen it with much of how Government approaches IT. It’s a process which is defined by having most delivery outsourced, and re-inforced by having a small number of large suppliers adept at long-term procurement cycles.

“It is, in short, the opposite of how leading digital services are created, from Amazon to British Airways, from Apple to Zipcar, there is a relentless focus on, and reaction to, user need…”

GOV.UK the civil service exemplar?

Bracken says: “In the first 10 days after we released the full version of GOV.UK in October 2012, we made over 100 changes to the service based on user feedback, at negligible cost. And the final result of this of this approach is a living system, which is reactive to all user needs, including that of policy colleagues with whom we work closely to design each release.”

Bracken says long procurements can be avoided.  “When we created GOV.UK, we created an alpha of the service in 12 weeks … We made it quickly, based on the user needs we knew about… As we move towards a Beta version, where the service is becoming more comprehensive, we capture thousands of pieces of feedback, from user surveys, A/B testing and summative tests and social media input.

“This goes a long way to inform our systems thinking, allowing us to use the appropriate tools for the job, and then replace them as the market provides better products or as our needs change. This of course precludes lengthy procurements and accelerates the time taken for feedback to result in changes to live services.”

Comment:

More big government projects could follow GOV.UK’s example, though some officials in their change-resistant departments would say their systems are too complex for easy-to-reach solutions. But a love of complexity is the hiding place of the dull-minded.

The Times describes the conflicts between the civil servants and ministers as a “crisis”. But conflicts between civil servants and ministers are a good thing. The best outcomes flow from a state of noble tension.

It’s natural for some senior civil servants to oppose change because it can disrupt the smooth running of government, leading potentially to the wrong, or no payments, to the most vulnerable.  It’s up to ministers like Francis Maude to oppose this argument on the basis that the existing systems of administration are inefficient, partly broken and much too costly.

A lazy dependence on the way things are will continue to enfeeble the civil service. Ministers who push for simplicity will always come into conflict with civil servants who quietly believe that simplicity demeans the important work they do. To effect change some sensible risks are worth taking.

The reports of a covert and courteous war between parts of the civil service and ministers are good news. They are signs that change is afoot. Consensus is far too expensive.

Cornwall Council votes for more time to consider outsourcing plans

By Tony Collins

Councillors in Cornwall voted unanimously today (23 October 2012) for a joint venture with BT to be considered more carefully, and for other options to be investigated, without any pressure to finalise a deal by the end of next month, which was the original intention.

The motion passed by the council was that the “current proposals for shared services shall not progress to the ‘invitation to submit final tenders’ stage until they have been debated and unless approved by a meeting of full council”.

The motion called on the Chief Executive [Kevin Lavery] to “investigate fully and as a matter of urgency all reasonable methods of delivering council services covered by the proposals for the strategic partnership which addresses the need to make efficiency savings and generate income”.

Councillors expect Lavery to investigate a “thin” joint venture in which the council and a partner share ownership of a new company.  There would be no early, large scale transfer of Cornwall Council staff into the company.  Cornwall Council would continue to receive its shared services internally. As the joint venture company won new work  – if it did – staff would transfer into it.

Councillors also want Lavery to investigate an in-house option and forming a mutual, which would win the support of central government.

BT, meanwhile, has said it will keep its offer to the council open until the end of its financial year in March.  Jim Currie, Cornwall’s leader, has taken over responsibility for leading the shared services discussions. He says he wants more and better information on the proposals. Most of the information has so far come from BT which has “guaranteed” to save the council money, increase investment, transform services and add at least 500 jobs. In BT’s small print it points out that its commitments to the council are “draft” or, at this stage, “non-binding”.

At the full council meeting this morning one councillor called for an investigation into whether proceeding with one supplier BT – CSC having withdrawn from the bidding in part because of a “confused” political situation in Cornwall – would meet EC tendering rules.

Councillors have set no deadline on when they will come to a decision on the BT proposals or on other options.

Government Digital Service sets an example on cloud

By Tony Collins

The Government Digital Service is putting its money where its mouth is. A leading public sector advocate of the cloud, GDS says that the first cloud hosting provider it is working with is Skyscape.

Mark O’Neill, Head of Service Delivery and Innovation at GDS, which is a team of innovators based at the Cabinet Office, writes that GDS is building GOV.UK, currently in beta at http://www.gov.uk.

“In the past, we might have looked at dedicated servers or possibly even our own rack in a datacentre somewhere. We would then have had to decide if we wanted to own the servers or if we should rent them some time to break out amortisation tables and spreadsheets.

“We would have to make sure that we were not locked in if we needed to move servers, so it would be necessary to negotiate break clauses in contracts; we would need to arrange access to server rooms for security accreditation; we would need to… well, the list goes on and on.

“The cloud has transformed all of this. Through the G-Cloud framework we are able to simply and rapidly buy highly reliable, highly cost-effective hosting services.

“Colleagues in GDS put together a statement of our requirements based on the experience we had gained during the alpha and the ongoing beta releases of GOV.UK and experience from the delivery of other major online services, both public and private sector.

“We then tested that statement of requirements against the list of suppliers on the G-Cloud framework. This allowed us to sift the number of potential providers down to four who met the statement of requirements.

“We then invited each of the suppliers in and used a consistent set of questions to explore their ability to meet our needs, their approach to operational service delivery and how they could provide flexible, scalable services through the cloud.

“To meet the needs of GOV.UK, we are planning to work with a number of different Infrastructure as a Service providers. We are happy to announce that the first cloud hosting provider we are working with is Skyscape.

“We have used G-Cloud previously for a number of small projects covering services like hosting and operations. We were very happy to discover that letting a major service contract for our flagship platform, GOV.UK, was equally straightforward and quick.

“Whilst the GOV.UK contract is the largest we have let so far, it is one of an increasing number we are letting through G-Cloud, which is now our standard way of procuring infrastructure services… If you have not used G-Cloud before then take a look, you will be pleasantly surprised. In the words of a song of my youth, ‘It was easy. It was cheap. Go and do it!'”

Introducing a new supplier – Skyscape

NAO hopes Universal Credit will cut fraud and error

By Tony Collins

Amyas Morse, the head of the National Audit Office, has again qualified the accounts of the Department for Work and Pensions because of the high level of fraud and error in benefit spending.

The DWP’s accounts have been qualified every year since 1988-89. Morse hopes that Universal Credit will make a positive difference. In a report published today he says that new procedures and systems to verify identity and check entitlement  before payments are made, should mark an opportunity to eliminate some  of the key factors contributing to fraud and error.

But Margaret Hodge MP, Chair of the Committee of Public Accounts, said today the introduction of Universal Credit is full of risks which are compounded by the DWP’s secrecy over the scheme’s progress.

She said:

“The Department has the biggest budget in Whitehall and its inability, 24 years in a row, to administer its spending properly is just unacceptable.

“With fraud and error of £4.5bn in 2011-12, roughly the same as in previous years, huge sums of money are being lost to the public purse that could have been spent on our schools and hospitals. Government spending is at its tightest for over 50 years and it simply can’t afford to carry on like this.

“The Department is relying on the introduction of Universal Credit to get its house in order but the transition to Universal Credit is full of risks and the Department won’t even tell us if it is on schedule.

“The Department has got to get a grip on fraud and error now. Despite its assurances to my Committee, it has not done so and it must do better.”

 Complex benefit system

Morse says it is difficult for the DWP to administer a complex benefits system to a high degree of accuracy in a cost effective way.

“Some benefits, mainly those with means-tested entitlement, are more inherently susceptible to fraud and error due to their complexity, the difficulties in obtaining reliable information to support the claim and the problem of capturing changes in a customer’s circumstances.”

Claimants have to notify the DWP of changes in their personal circumstances.  “The Department has adopted this approach because it does not have routine access to verifiable third party sources of information, or the information may not exist that would allow them to track such changes…

” The complex administration of benefits also allows potential fraudsters the opportunity to present themselves differently to different administering agencies, which are not always sufficiently integrated to identify those instances.

“Because the Department does not have a readily available source of external information against which to verify some aspects of claims, such misrepresentations can result in fraud occurring.”

Errors commonly arise from poor or non-timely exchange of information between the Department and councils over whether a customer is in receipt of, or entitled to, a benefit.

“In practice, given the lack of direct integration between the Department’s systems and those of all local authorities, such errors will be difficult to eliminate.”

That said, the DWP has continued implementing Automated Transfers to Local Authority Systems (ATLAS), an IT development that automatically informs local authorities of new awards or changes in benefits.

From February 2012 councils have received details of changes in benefits administered by the DWP on a daily basis.

Poor IT suppliers to face ban from contracts?

By Tony Collins

The Cabinet Office minister Francis Maude is due to meet representatives of suppliers today, including  Accenture BT,Capgemini, Capita, HP, IBM, Interserve, Logica, Serco, and Steria.

They will be warned that suppliers with poor performance may find it more difficult to secure new work with the Government. The Cabinet Office says that formal information on a supplier’s performance will be available and will be taken into consideration at the start of and during the procurement process (pre-contract).

Maude will tell them that the Government is strengthening its supplier management by monitoring suppliers’ performance for the Crown as a whole.

“I want Whitehall procurement to become as sharp as the best businesses”, says Maude. “Today I will tell companies that we won’t tolerate poor performance and that to work with us you will have to offer the best value for money.”

The suppliers at today’s meeting represent around £15bn worth of central government contract spend.

The representatives will also be:

– asked their reactions on the government’s approach to business over the past two years

– briefed on the expanded Cabinet Office team of negotiators (Crown Representatives) from the private and public sectors. Maude says these negotiators aim to maximise the Government’s bulk buying power to obtain strategic discounts for taxpayers and end the days of lengthy and inflexible contracts.

Spending controls made permanent

Maude is announcing today that cross-Whitehall spending controls will be a permanent way of life. The Government introduced in 2010 temporary controls on spending in areas such as ICT  and consultancy. It claims £3.75bn of cash savings in 2010/11, and efficiency savings for 2011/12, which it says are being audited.

The Cabinet Office says: “By creating an overall picture of where the money is going, the controls allow government to act strategically in a way it never could before. For example, strict controls on ICT expenditure do not just reduce costs but also reveal the software, hardware and services that departments are buying and whether there is a competitive mix of suppliers and software standards across government.”

Maude said: “Our cross-Whitehall controls on spending have made billions of cash savings for the taxpayer – something that has never been done before. That’s why I’m pleased to confirm that our controls will be a permanent feature, helping to change fundamentally the way government operates.”