Category Archives: managing outsourced services

Southwest One – a positive postscript

By Tony Collins

somerset county council2IBM-led Southwest One has had a mostly bad press since it was set up in 2007. But the story has a positive postscript.

Officials at Somerset County Council now understand what has long been obvious to ICT professionals: that the bulk of an organisation’s savings come from changing the way people work – and less from the ICT itself.

Now that Somerset County Council has the job of running its own IT again – its IT-based relationship with Southwest One ended prematurely in December 2016 – the council’s officials have realised that technology is not an end in itself but an “enabler” of headcount reductions and improvements in productivity.

A 2017 paper by the county council’s “Programme Management Office”  says the council has begun a “technology and people programme” to “contribute to savings via headcount reduction by improving organisational productivity and process efficiency using technology as the key enabler”.

Outsourcing IT a “bad mistake” 

It was in 2007 that Somerset County Council and IBM launched a joint venture, Southwest One. The new company took over the IT staff and some services from the council.

In the nine years since then the council has concluded that outsourcing ICT – thereby separating it from the council’s general operations – was not a good idea.

The same message – that IT is too integral and important to an organisation  to be outsourced – has also reached Whitehall’s biggest department, the Department for Work and Pensions.

Yesterday (8 February 2017) Lord Freud,  who was the Conservative minister in charge of Universal Credit at the Department for Work and Pensions, told MPs that outsourcing IT across government had proved to be a “bad idea”.  He said,

“What I didn’t know, and I don’t think anyone knew, was how bad a mistake it had been for all of government to have sent out their IT…

“You went to these big firms to build your IT. I think that was a most fundamental mistake, right across government  and probably across government in the western world …

” We talk about IT as something separate but it isn’t. It is part of your operating system. It’s a tool within a much better system. If you get rid of it, and lose control of it, you don’t know how to build these systems.

” So we had an IT department but it was actually an IT commissioning department. It didn’t know how to do the IT.

“What we actually discovered through the (Universal Credit) process was that you had to bring the IT back on board. The department has been rebuilding itself in order to do that. That is a massive job.”

Task facing Somerset officials

Somerset County Council says in its paper that the council now suffers from what it describes as:

  • Duplicated effort
  • Inefficient business processes
  • A reliance on traditional ways of working (paper-based and meeting-focused).
  • Technology that is not sufficient to meet business needs
  • Inadequate data extraction that does not support evidence based decision making.
  • “Significant under-investment in IT”.

To help tackle these problems the council says it needs a shift in culture. This would enable the workforce to change the way it works.  

From January 2017 to 2021, the council plans “organisation and people-led transformational change focused on opportunities arising from targeted systems review outcomes”.

The council’s officers hope this will lead to

  • Less unproductive time in travelling and  attending some statutory duties such as court proceedings.
  • Fewer meetings.
  • Reduced management time because of fewer people to manage e.g. supervision, appraisal, performance and sickness.
  • Reduced infrastructure spend because fewer people will mean cuts in building and office costs, and IT equipment. Also less training would be required.
  • Reduction in business support process and roles.
  • Reduction in hard copy file storage and retention.

 The council has discovered that it could, for instance, with changes in working practices supported by the right technology,  conduct the same number of social services assessments with fewer front- line social workers or increase the level of assessments with the same number of staff.

Southwest One continues to provide outsourced services to Avon and Somerset Police. The contract expires next year.

Comment

Somerset County Council is taking a bold, almost private sector approach to IT.

Its paper on “technology and people” says in essence that the council cannot  save much money by IT change alone.

Genuine savings are to be found in changing ways of working and thus reducing headcount. This will require very close working – and agreement – between IT and the business end-users within the council.

It is an innovative approach for a council.

The downside is that there are major financial risks, such as a big upfront spend with Microsoft that may or may not more than pay for itself.

Does outsourcing IT ever make sense?

Somerset County Council is not an international organisation like BP where outsourcing and standardising IT across many countries can make sense.

The wider implication of Somerset’s experience – and the experience of the Department for Work and Pensions – is that outsourcing IT in the public sector is rarely a good idea.

Thank you to Dave Orr, who worked for Somerset County Council as an IT analyst and who has, since the Southwest One contract was signed in 2007, campaigned for more openness over the implications of the deal.

He has been more effective than any Somerset councillor in holding to account the county council, Taunton Deane Borough Council and Avon and Somerset Police, over the Southwest One deal.  He alerted Campaign4Change to Somerset’s “Technology and People Programme” Somerset paper.

One of Orr’s recent discoveries is that the council’s IT assets at the start of the Southwest One contract were worth about £8m and at hand-back in December 2016 were worth just £0.32m, despite various technology refreshes.

Somerset County Council’s “Technology and People Programme” paper

Whitehall’s outsourcing IT a “bad mistake” – and other Universal Credit lessons, by a former DWP minister

Barnet Council claims £31m savings with Capita – and not an auditor in sight.

By Tony Collins

capita

It’s commendable that Barnet Council has published much material on its three-year review of a £322m 10-year outsourcing contract with Capita.

More than a dozen council reports and appendices cover every aspect of the contract.

The quantity of material seems, on the face of it, to answer critics of the outsourcing deal, among them local bloggers, who have pointed to the lack of reliable evidence of the savings achieved. The suspicion is that costs have increased and council services including ICT have deteriorated since Capita took over in 2013.

Now the council has ostensibly proved that the opposite is the case. Barnet’s press release says,

Barnet Council and Capita contract delivers £31m savings

“A review of a contract between Barnet Council and Capita has demonstrated it is delivering significant benefits to the borough with overall savings of £31 million achieved alongside increased resident satisfaction…

“In terms of satisfaction with services provided, the review, showed 76 per cent of residents were satisfied with the outward-facing customer services, up from 52 per cent before the contract was established.

“This increase was even more significant in respect of face to face services, as 96 per cent of residents who engaged with the council in this way said they were satisfied compared with a previous 35 per cent.

“The review also showed that the cost of delivering the bundle of services provided in the contract is now £6m a year less than before the contract was signed and that 90 per cent of the contract’s key performance indicators being met or exceeded.”

The press release quotes two leaders of the council saying how pleased they were with the contract. Capita calls it a “positive review”.

The review has various mentions of items of additional spending including £9m on ICT and it’s not clear whether the extra sums are taken into account in the savings figures.

Among the review’s suggestions is that the council pay Capita’s annual management fee of £25m up front – a year in advance – instead of every quarter in return for extra savings.

The review also raises the possibility of extending the contract beyond the 10 years in return for additional savings. Capita is “keen” to explore this suggestion (though it could tie the hands of a future council administration).

The review reports were compiled by council officers who reported to a working group of Tory and Labour councillors, under a much-respected Tory chairman. By a small margin, Conservatives run the council.

Lack of independent challenge?

It’s unclear why the council did not commission its audit committee, or auditors, to review the contract. In the past the audit committee has been critical of some aspects of the contract.

For this reason the reports are unlikely to silence critics of Barnet’s outsourcing deal. Council officers compiled the review’s findings, not auditors.

As a result, despite the volume of published written material, there is no evidence that the figures for savings have been independently verified as accurate.

Neither is there independent verification of the methods used by officers for obtaining the figures.

Further, some observers may question the positive tone of the review findings. The “good news” tone may be said to be at odds with the factual neutrality of, say, reports of the National Audit Office.

There are also questions about whether the council is providing enough effective challenge to Capita’s decisions and figures.

At a council committee meeting in November 2016 to discuss the review reports, the most informed challenges to the findings appear to have come not from Barnet councillors but two local bloggers, Mrs Angry and Mr Reasonable, who questioned whether the claimed savings could be more than wiped out by additional spending – including an extra £9m on ICT. They appear to have received no clear answers.

Concerns of some officials

The body of the review reports outline some of the concerns of staff and directors. Mrs Angry quotes some of the concerns from the review reports:

“Transparency of costs, additional charges and project spend were raised as key concerns. It was felt that CSG [Barnet’s Customer and Support Group, for which Capita is responsible] are often reluctant to go above and beyond the requirements of the contract without additional charges.

“Directors reported that the council needs to be more confident that solutions suggested by CSG, particularly for projects and capital spend are best value.

“Concerns were raised that CSG has a disproportionate focus on the delivery of process and KPIs over outcomes, creating a more contractual rather than partnership relationship between CSG and the council. Directors noted that many KPIs are not relevant and their reporting does not reflect actual service performance.”

The Capita contract began in September 2013, under which it provides finance, ICT, HR, Customer Services, Revenues and Benefits, Procurement, Estates and Corporate Programmes.

Comment

On the face of it, Barnet Council’s review of the Capita contract looks comprehensive and impressively detailed.

Looked at closely it’s disappointing – a wasted opportunity.

Had the council wanted the review’s findings to be widely believed, it would have made it uncompromisingly independent, in line with reports by the National Audit Office.

As it is, the review was carried out by council officers who reported to a working group of councillors. The working group comprised Labour as well as Tory councillors but the facts and figures were compiled by officers.

Nearly every page of every Barnet review report has a “good news” feel. There’s an impression that negative findings are played down.

Example:

“It should be noted that the failure to meet the target for KPI 30 related to one quarter only [my italics] and discussions are continuing regarding the application of the above service credit.”

Some negative findings are immediately countered by positive statements:

“CIPFA benchmarking data shows that the cost of the ICT service is slightly above the median, but below upper quartile in terms of the cost of the service as a percentage of organisational running costs.”

Another example of a negative finding immediately countered by a positive one, which may be said to be one hallmark of a non-independent report:

“One key area of concern in terms of overall performance is internal customer satisfaction… Survey results in respect of the financial year 2015/16 were universally poor, with all services failing to meet the target of upper quartile customer satisfaction. As a result, service credits to a total value of £116k have been applied in respect of these KPIs.

“To some extent, a degree of dissatisfaction amongst internal service users is to be expected, given the fact that cost reductions have been achieved to a large extent through increased self-service for both managers and staff, along with more restrictive processes and controls over things like the payment of invoices and the appointment of staff.

“Despite the survey outcomes indicating a low level of satisfaction, the interviews conducted with staff and managers as part of this Review suggest that services are generally considered to be improving.”

Integra ERP financial system a “success” – ?

The review report describes Capita’s introduction of the Integra financial system as “successful”. Elsewhere, however, it says,

“Many users raised issues with the Integra finance system, describing it as clunky and not user-friendly or intuitive.”

Double counting?

There’s no evidence that savings figures have been checked for possible inadvertent double counting on overlapping services. Double counting of savings is regularly found in National Audit Office reports.

“There are no standardised way for departments to evidence the reductions in ongoing expenditure,” said the National Audit Office in a report on Cabinet Office savings in July 2014. “Departments provided poor evidence, and double counting was highly likely as projects reduced staff or estates requirements.”

In a separate report on claimed savings in central government, the National Audit Office quoted the findings of an internal audit …

“A number of errors (instances where the evidence did not support the assertion) were found during our review and total adjusted accordingly … In addition, a number of savings were double counted with other savings categories and these have now been removed…

“We assessed some £200m of other savings as Red because they were double counted due to the same savings having been claimed by different units or, for example, because savings on staff were also claimed through reductions in average case costs.”

Omitted costs?

The omission of relevant costs could skew savings figures. It’s unclear from Barnet’s review reports whether extra spending of millions of pounds on, for example, ICT have been taken into account. Barnet blogger Mr Reasonable, who has a business background, raises the question of whether £65m of additional spending has been taken into account in the savings figures.

Reverse Sir Humphrey phenomenon?

The biggest single flaw in the review reports is that they appear worded to please the councillors who made the decision to outsource – the reverse of the “Sir Humphrey” caricature. The positive tone of Barnet’s reports implies that officers are – naturally – deferring to their political leaders.

In a BBC Radio 4 documentary on Whitehall, former minister Peter Lilley talked about how some officials spend part of their working lives trying to please their political leaders.

“Officials are trying to work out how to interpret and apply policy in line with what the minister’s views on the policy is …. They can only take their minister’s written or spoken word for it and that has a ripple effect on the department far greater than you imagine… Making speeches is the official policy of the department and that creates action.”

Another former minister Francis Maude told the BBC he found that too few officials were willing to say anything the minister did not want to hear.

“The way it should work is for civil servants give very candid well informed advice to ministers about what it is ministers want to do – the risks and difficulties,” said Maude. “My experience this time round in government, 20 years on from when I was previously government, is that the civil service was much less ready to do that.

“There were brilliant civil servants who were perfectly ready to tell you things that they thought you might not want to hear but there were too few of them.”

Barnet’s reviewing officers might have been dispassionately independent in reporting their findings and double checking the supplied figures – but who can tell without any expert independent assessment of the review?

The US Sabanes-Oxley Act, which the Bush administration introduced after a series of financial scandals, defines what is meant by an “independent” audit. The Act prohibits auditing by anyone who has been involved in a management function or provided expert services for the organisation being audited.

That would disqualify every Barnet officer from being involved in an independent audit of their own council’s contract with Capita.

The Act also says that the auditor must not have been an employee of the organisation being audited. Again that would disqualify every Barnet officer from an independent audit of their own council’s contract.

Review a waste of time and money?

It would be wrong to imply that the review is a pointless exercise. It identifies what works well and what doesn’t. It will help officers negotiate changes to the contract and to key performance indicators. For example it’s of little value having a KPI to answer phone calls within 60 seconds if the operator is unable to help the caller.

What the review does not provide is proof of the claimed savings. Barnet’s press release announcing savings of £31m is just that – a press release. It does not pretend to be politically neutral.

But without independent evidence of the claimed savings, it’s impossible for the disinterested observer to say that the Capita contract so far has been a success. Neither does evidence exist it has failed.

Capita share price at 10-year low

What is clear is that fixing some of the more serious problems identified in the report, such as obsolescent IT, will not be easy given the conflict between the continuing need for savings and Capita’s pressing need to improve the value of its business for shareholders, against a backdrop of difficulties on a number of its major contracts [Transport for London, Co-op Bank, NHS] and a share price that was yesterday [30 November 2016] at a ten-year low.

The review also raises a wider question: are most of a council’s busy councillors who come to council meetings in their free time equipped to read through and digest a succession of detailed reports on the three-year interim results of a complex outsourcing contract?

If they do glance through them, will they have enough of a close interest in the subject, and a good understanding of it,  to provide effective challenge to council officers and their political leaders?

If nothing else, the Barnet review shows that councillors in general cannot provide proper accountability on an outsourcing contract as complex as Capita’s deal with Barnet.

Either council tax payers have to put their faith in officers, irrespective of the obvious pressure for officialdom to tell its political leaders what they want to hear, or council taxpayers can put their faith in an independent audit.

Barnet Council has not given its residents any choice.

It’s a pity that when it comes to claimed savings of £31m there’s not an auditor in sight.

Barnet declares its contract a success – Barnet and Whetstone Press

Mr Reasonable – important questions on the Capita review

Mrs Angry – who writes compellingly on the council meeting where the review reports were discussed.

Capita to lose part of £1bn+ Service Birmingham contract?

By Tony Collins

Birmingham City Council is set to take back the “Revenues” – council tax – element of its Service Birmingham contract with Capita.

A report which went before a cabinet meeting on Tuesday said that decisions on the “proposed termination of the revenues element of the Service Birmingham contract” with Capita would be taken in the “private” – secret – part of the meeting.

One reason the discussions are in private is that even though the contract allows the council to take back services “at will”, this may still involve paying compensation to Capita,

In the open part of the meeting, the deputy leader said that bringing the revenues service back in-house will allow the council “greater flexibility” – which appears to mean lower costs.

It will require a change to the wider Service Birmingham contract under which Capita delivers Birmingham’s ICT services.

In particular, said the deputy leader, taking back the revenues service will avoid any need to invoke a formal “change control” within the contract. He didn’t say why the council was keen to avoid invoking the change control clause.

Taking back revenue services could mean up to 150 Capita staff returning to the direct employment of the council, according to theBusinessDesk.com.

Service Birmingham is a joint venture company run by Capita since 2006 in which the council owns a minority of shares. The contract, which mainly covers ICT services, ends in 2021.

In the first few years Capita received about £120m a year from the joint venture but the figure has come down to about £90m-£100m a year after much criticism of the cost of the contract.

Between 2006 and 2012, Service Birmingham paid Capita £994m. It’s unclear whether the payments have represented value for money for Birmingham’s residents.

The report for this week’s cabinet meeting said that since Capita took over revenue collection the government has introduced a number of local welfare reforms [related to Universal Credit] “which have resulted in the council wishing to deal with Revenues matters differently”.

Keen to retain the revenues work, Capita had suggested a revised service to the council but the report said, “These were considered and it was concluded that they did not meet the current requirements of the council.”

Taking back revenue collection could result in “savings” worth £10.5m between next year and 2020, according to theBusinessDesk.com.

The gradual introduction of Universal Credit means that the Department for Work and Pensions, rather than the council, will eventually handle housing benefit payments.

This would mean less work for the council and Service Birmingham.

Councillors were expected at yesterday’s meeting to confirm officer recommendations on terminating the revenues collection part of the Service Birmingham contract. The new arrangements are likely to come into effect from February 1, 2017

Capita says on the Service Birmingham website that it has transformed services and “realised savings of approximately £1bn”. Capita had introduced SMS texting to prompt council tax payments and reduce the need to issue paper reminders.

Overspend

Birmingham council has a serious overspend for 2016/17, estimated to be around £49m.

The Birmingham Independent Improvement Panel says, “The Council faces a mammoth task to prepare a balanced budget for 2017/18.  With very limited general reserves available, this potentially places at risk its future success.”

Lessons

In 2012 a “high-level” review of Service Birmingham by the Best Practice Group suggested that the deal had its successes but that trust and relationships might have been breaking down in some areas.

It said,

“BCC [Birmingham City Council] and SB [Service Birmingham] seemed to overcome early challenges in their relationship by having a ‘great common cause’. The Council entered into this relationship in 2006 because it had the foresight to realise it had to fundamentally transform how it operated in order to improve social outcomes for its population…

“Now the transformation has largely been successful and the initiatives are almost complete, the level of innovation seems to have stalled and the relationship has deteriorated. Somewhere in the fire-fighting, both BCC and SB have lost sight of the next ‘great common cause’ – the fact that the Council needs to further reduce the cost of ICT service delivery by £20m per annum. This will require some significant ‘outside the box’ thinking about how to achieve from both BCC and SB.”

The report said that some individuals within the council needed to understand better that Service Birmingham was not a social enterprise, a public sector mutual, or a charity, and needed “to make a significant return on its capital for its shareholders” amid a “significantly deteriorating financial position due to Government cutbacks.”

Best Practice Group also said that Capita reduced its charges when challenged

“There have been statements made by a number of the officers in the Council that SB drops its prices when challenged, especially when the Council has investigated alternative industry offerings. SB have suggested that it is only when the challenge arises that initial data is clarified and therefore, more focused pricing can be provided.”

Trust

There was – at that time – a “general lack of commercial trust between the parties and the fact that BCC have shown that SB have reported some data incorrectly (after discussion around interpretation), means that the KPIs are not fully aligned to the business outcomes BCC now needs to achieve in the current financial climate”.

The report reached no firm conclusions on value for money but questioned whether Service Birmingham was “significantly more expensive” in some technology areas.

Comment

Birmingham City Council expects to make “savings” by bringing the revenues collection service back in-house.

If the new savings are added to the claimed £1bn savings originally predicted for the Service Birmingham joint venture, are the actual savings more or less what the council could have saved if it carried on supplying ICT in-house, without helping to keep Caita’s shareholders happy?

In fact the word “savings” has been largely discredited when used in connection with large council outsourcing deals and joint ventures.

In the absence of published and audited savings figures, council reports can interpret the word “savings” to mean almost anything.

The unfortunate truth, as observers of Barnet Council’s deal with Capita have discovered, is that local residents who fund joint ventures and outsourcing deals, have no idea whether their councillors end up paying far too much for IT and other services.

Hide

Birmingham Council this week discussed a major revision to the Service Birmingham contract in secret, which raises a wider point.

Commercial confidentiality means that councils and suppliers can hide behind the contract when things go wrong. Indeed all parties to the contract have an interest in not telling the public about anything that goes wrong.

Exactly what is going on with Service Birmingham nobody knows – outside the council’s inner circle of officers and ruling councillors.  Could the contract be costing too much but the cancellation fees are too high to make cancellation worthwhile?

How many of the councillors who were involved in the signing of the original deal will care if it ends up costing a fortune?

The ruling councillors in 2006 are highly unlikely to be the ruling councillors in 2016.

Councils have the power to make the wrong decisions in private and local residents have no options but to pay for those decisions; and when, many years later, councillors want to discuss a major revision to the contract, which could involve paying compensation on the basis of further promised savings, they have the power to go into private session again.

Those who have no right to know what’s going wrong are the captive council tax payers – those who fund the council’s decisions on the basis of never-ending promises of “savings” – savings that are rarely if ever independently verified as having been achieved.

The system could work well if big decisions were taken in public view.

ICT suppliers are not always obsessed with secrecy. They tend to want only very specific details kept secret. Ian Watmore, former head of Accenture, later government chief information officer and the first Civil Service Commissioner, has been a notable advocate of public sector openness.

But council officers and ruling councillors usually want to have all discussions about outsourcing deals in private – largely because life is simpler without accountability.

It’s not a political matter. Birmingham council is staunchly labour but it was a coalition of Conservatives and Lib-dems that set up Service Birmingham in 2006.

In the same way as the government imposed openness on local councils, so new laws or government guidelines could force councils to be open on big decision and major revisions to contracts.

There again, if council tax payers knew in advance the whole truth about the likely full-term costs and speculative benefits of a major IT-based outsourcing deal or joint venture, would such a public-private partnership deal ever be signed?

Update 11.05 17 November 2016

Barnet Council has this week published a report on “£31” savings from its contract with Capita, alongside “increased resident satisfaction”. Barnet outsourced IT,  HR, a call centre and other services in 2013 in a 10-year contract. The Barnet report will be the subject of a separate post on Campaign4Change.

Birmingham set to pull out of [part of] Capita joint venture in revenues collection overhaul.

 

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

Has 8 years of IT-based outsourcing really come to this?

By Tony Collins

In public, in the past, Taunton Deane Borough Council’s IT-based outsourcing deal has always been a success. Two years ago council officers and an executive at IBM were particularly upbeat about the success of their partnership.

“Service delivery … viewed in the round, is broadly on track. The majority of services perform well or extremely well…”

Now that the 10-year contract is 2 years away from expiry, which encourages officers to consider what happens then,  more of the truth is emerging.

A council report this month reveals that:

Savings are less than half those first envisaged – £3m against £10m projected. The £3m is an “identified” rather than actual saving.  The projected savings are “now out of alignment with our new financial circumstances and savings requirements”.

– Costs of exiting the contract with the IBM-run Southwest One partnership will be “significant”.

– Unravelling a shared services contract and reallocating work to the 50 council staff seconded to Southwest One will be “complex”. Says the report: “Any disaggregation from the shared service model will be complex and resource intensive and will also be challenging for SWO [Southwest One] as it attempts to satisfy the requirements of three partners whilst protecting and maximising its own financial position”.

– Use of lawyers will be intensive and already consultants have been engaged to advise on the implications of the contract’s ending. Funding this work will mean dipping into the council’s financial reserves.

– the joint venture with IBM has “not attracted new partner authorities” as first envisaged.

– IBM’s global strategy has changed, as has the council’s. Says Taunton Deane’s report of 10 March 2015: “Whilst central government once heralded large scale, multi agency and multi service partnerships with the private sector as the future, their advice now appears to be changing (in favour of) sustained competition, disaggregated services, small short contracts, transparency and diverse supply.”

– Technology strategies have changed. “Computer data centres are being replaced by cloud solutions and mobile technologies have become the norm in many business environments”.

It also emerges that the council is deeply unhappy with its SAP-based transformation, which was directed and implemented by IBM.  The SAP system is “costly”, “complex”, “not responsive to TDBC requirements”, and “resource intensive”.

The SAP system is also a “barrier to sharing services with other district councils”, and “does not support the customer access agenda in respect of channel shift as the SAP Citizen Portal (website) is inadequate”.

The “system is overly complex and users find the processes inefficient”.

Ending the contract means considering in depth:
– staffing implications
– premises and accommodation
– asset & third-party contract transfers
– communications
– logistics, technical infrastructure and system security and access
– intellectual property and authority data
– work in progress transfer
– service transition and knowledge transfer
– company dissolution

The council will also need to consider its service delivery options, which will involve:
– costed business case and recommendations
– understanding risks
– contractual implications and legal advice
– financial implications
– exploratory negotiations with SWO and discussions with the public
partners
– a detailed review to identify the options and costs for potential
replacement systems for the SAP system

Says the council report:

“Preparing for and implementing contract end and potentially exit from SWO [Southwest One] will require a significant amount of time and effort from the authorities due to the volume of work required, some of which is contractual and cannot be avoided.

“Contract end will require robust project governance and the appointment of an authority exit management team including work-streams around: exit management, HR, legal/contract representation, commercial, project management, communications, finance, technology and procurement.

“The resource requirement will be similar whichever future delivery option is selected.”

Comment

Councils that are considering large IT-based outsourcing deals could learn much from Taunton Deane’s experiences. At the start of such deals clients and suppliers find it easy to talk about what they’ll deliver – they need prove nothing by actions at this stage.

Taunton Deane and Somerset County Council, its lead partner in Southwest One, blew the trumpet in advance of their deal with IBM. Big savings were promised, and a transformation programme that would be led by a world-class supplier.

Barnet Council’s leading councillors  and officers also published numerous upbeat reports and gave zestful speeches in praise their forthcoming outsourcing deal with Capita.

At Taunton Deane, over time, expensive actions replaced cheap words. Partners did not join the partnership so economies of scale did not materialise. The transformation proved more complex than first envisaged. Reality overwhelmed aspirations.

Nobody could escape from the fact that the council was passing across to IBM a host of conflicting realities and expectations. Beyond the rosy Disney world of pre-contract euphoria was a harsh landscape.

Officers and councillors were actually passing across costs that were unlikely to decrease, and savings requirements that were likely to become more demanding. On top of this the supplier had to make a profit.

How can big savings and costly IT-led transformations not be in conflict with the inbuilt demands of suppliers whose share price is sensitive to the exacting expectations of investors who require ever increasing returns?

Councils will continue to outsource because their officers and lead councillors are unlikely to be in place in the later stages of a contract when they could otherwise be accountable for an administrative, financial and technological mess. In the early stages nobody need be held accountable for anything.  Words are sufficient. Promises cannot be tested yet.  Guarantees sound impressive.

It’s only actions that are hard to achieve.

Perhaps the answer is for auditors to become more proactive. The National Audit Office has this week published well considered guidelines for local authority auditors which calls for “professional scepticism”.  Auditors can stop councils making mistakes. They can see through promises and so-called guarantees.  It’s actions that matter.

At the start of a contract when the supplier’s executives, council officers and lead councillors are all in love they’ll say anything to reassure to each other. But everyone knows that when expectations are at their peak there is only one way to go – Taunton Deane has discovered to its cost.

Thank you to openness campaigner Dave Orr for providing the information on which this blog is based. 

TDBC SW1 contract exit planning Item 10 March 2015 (2)

Real time information – the good and bad

By Tony Collins

Widespread publicity over the past week has drawn attention to inaccuracies in Real Time Information, HMRC’s system for handling PAYE submissions from employers every time they pay an employee rather that at the year-end. The Daily Telegraph broke the story with the headline

“Five million UK workers face uncertainty after tax bills wrongly calculated twice in HMRC blunder”

The BBC said tax  statement errors affect thousands of people.  Accountancy Live reported that tax experts were urging HMRC to review RTI to see if it’s fit for purpose. The FT reported HMRC as admitting that an “unknown number of inaccurate P800 statements and payment orders for the 2013/14 tax year had been sent to taxpayers since September 15”.

But HMRC says that RTI is a success for more than 98% of those employers who have to use it.

Tens of millions of PAYE employees are now on RTI – and if the system were a disaster HMRC and MPs would be deluged with complaints. That hasn’t happened.

Indeed the National Audit Office was complimentary in its audit of HMRC’s 2013/14 accounts of the ability of RTI to give employees the correct tax code when their jobs change – thereby reducing the levels of under and overpayments.

“Data quality has improved and HMRC’s own evaluation suggests that RTI is helping to change employer behaviour by encouraging them to tell HMRC of changes in employee circumstances earlier,” said the NAO.

RTI – the good and bad

The good news for HMRC and the government’s welfare reformers is that Universal Credit, which relies on RTI to calculate benefits, is running well behind its original schedule.

UC is rolling out to a small number of people – fewer than 12,000 by 14 August 2014 –  rather than the expected 184,000 by April 2014, according to the DWP’s revised December 2012 business case.  This means that inaccuracies in RTI will have little effect on UC for the foreseeable future.

The bad

If RTI cannot be relied on to provide accurate information on whether Universal Credit claimants are paying the right amount of tax, UC cannot be relied on to provide correct payments to claimants – which would undermine the welfare reform programme.

Another problem is that tax experts are weary of HMRC’s repeated blaming of employers for RTI’s problems. One of the reasons RTI contains inaccuracies is that HMRC uses employers’ changing internal “works” numbers as individual identifiers, as well as the National Insurance Number.

Employers change their payroll works numbers for a variety of reasons, say when an employee is promoted to management, when the company wants to distinguish various groups for the employer’s own purpose, or when an employee moves location.

The works number is for the internal use of the employer but is included in information submitted to HMRC. The number is “owned” by employers and is for them to use and administer as they see fit. It should have no relevance to HMRC.  But when the works number changes, it can trigger a false assumption in HMRC’s systems that the employee has two employments, with the same employer.  This would generate an incorrect tax code – and would be HMRC’s fault, not the employer’s.

Steve Wade, tax director at KPMG, puts it well.  He says of the latest publicity about RTI errors:

“These systems issues are causing so called ‘employer errors’, which is where the data supplied by the employer is not processed by HMRC systems as expected.

“Sometimes this can be due to bad data being supplied but equally it can be due to errors in HMRC systems which were not designed to deal with all the complexities of PAYE.

“The upshot for employers and employees is that they find that the PAYE tax and National Insurance Contributions that have been paid do not match those calculated by HMRC, despite their providing the information as requested.  As a result, they now face uncertainty over whether they have paid the right amount of tax.

“There needs to be some significant and urgent investment in the processing and back end software systems at HMRC which collect and process this data to generate the operational efficiencies envisaged when the whole RTI initiative was conceived.”

Wade told Accountancy Live: “At the moment, RTI just does not seem to be delivering information that is real. What we need is a thorough investigation of what has happened by a team which includes not just HMRC personnel but external specialists. Only that will give the necessary degree of confidence in the system that is vital for everyone who depends upon it.”

Natalie Miller, President of the Association of Taxation Technicians, says of RTI’s inaccuracies:

“This is an alarming revelation and further underscores the need for collaboration with external stakeholders, all of whom have a vested interest in the success of RTI.

“We have been drawing HMRC’s attention to the quirks and complexities of RTI in meetings and correspondence from its inception. We have also highlighted the significant burdens it places on employers and agents. What we are seeing now are real and serious practical problems for possibly many thousands of employees at a time when building confidence in the system is crucial.

“Some of those difficulties might have been avoided if HMRC had heeded advice from ATT and similar bodies at an early stage.

“In light of this latest revelation, we are calling for an urgent review of the RTI system to ensure that it is fit for purpose. This is essential because every employer and employee is entitled to know that PAYE is being dealt with properly. It is doubly important because the RTI system underpins the Universal Credit system that is being rolled out by the Department for Work and Pensions to replace certain state benefits.

“If, as HMRC’s reported comments suggest, the particular problem arose because employers had failed to send in final payment statements for the full 2013/2014 tax year, that suggests two things.

“Firstly, that the process is simply too complex for employers to understand. Secondly, that either HMRC know the information to be incomplete and are failing to address this before placing reliance on the information, or HMRC do not know the information is incomplete, which raises the equally worrying prospect that the system cannot identify when important information is missing.

“It is in nobody’s interest that RTI stumbles from problem to problem; that threatens its credibility. We all need a system that does what it says on the tin. At the moment, Real Time Information just does not seem to be delivering information that is real. What we need is a thorough investigation of what has happened by a team which includes not just HMRC personnel but external specialists.

“Only that will give the necessary degree of confidence in the system that is vital for everyone who depends upon it (employees, pensioners, employers, payroll bureaux, tax advisers, other parts of government and HMRC itself). The review’s remit should extend to other areas of RTI where systemic problems have been identified. The ATT and many other professional bodies stand ready to assist HMRC in that review.”

George Bull, senior tax partner at Baker Tilly, said that the RTI system had so far failed to demonstrate that it can put an end to the annual problem of incorrect tax demands and refunds. “It seems to me that in 2014, this is a pretty sorry state to be in.”

HMRC note to employers, professional bodies and business groups in full (published by Accountingweb)

“We are today emailing our stakeholders to explain that we are aware that a number of employees recently received a form 2013-14 P800 which was issued during our bulk 2013-14 End of Year reconciliation exercise.

“The 2013-14 P800 shows an incorrect overpayment or underpayment where the pay and tax shown on the P800 is incorrect and does not match that shown on their 2013-14 P60.

“The most common scenarios are where:

  • An incorrect overpayment is created as the 2013-14 reconciliation is based upon the Full Payment Submission (FPS) up to month 11 although the employment continued all year.
  • Where the year to date figures supplied are incorrect, for example where an employer reference changed in-year and the previous pay and tax is incorrectly included in the “year to date” (YTD) totals.
  • We have received an “Earlier Year Update” (EYU) and this is yet to be processed to the account.
  • There is a duplicate employment (often caused by differences in works numbers and other changes throughout the year)

“We are urgently investigating these cases and will look to resolve the matter in the next 6-8 weeks.

“We currently do not know the scale of the issue, but some large employers are involved, so several thousands of employees may be affected.

“Next Steps

“We are very sorry that some customers will receive an incorrect 2013-14 P800 tax calculation.

“We are urgently investigating these cases and will look to resolve the matter and issue a revised P800 to the employee in the next 6-8 weeks.

“Employers and their agents should not send any 2013-14 EYUs unless requested by us. We are aware that there are still some 2013-14 EYUs which we have yet to process to the relevant account.

“If an employee asks about a 2013-14 P800 which they think is incorrect, they should advise them:

  • Not to repay any underpayment shown on the P800
  • Not to cash any payable order they may have received
  • Employees will not be affected by the incorrect tax code as we will issue a revised P800 before Annual Coding.”

Comment

RTI is not a disaster but it’s clearly not in a fit state to support Universal Credit – another uncertainty for UC. When the National Audit Office reports on UC, as it is due to do in the next few weeks, it would be useful if it also reports on the state of RTI.

If it does so report, the NAO should not take at face value HMRC’s claims that the fault with RTI lies mainly with employers.

[The NAO will find that, even after the modernisation of PAYE processes, the systems still incorporate COP/CODA/BROCS software that dates back more than 30 years.]

Labour asks good questions on Universal Credit programme

By Tony Collins

Labour has a “Universal Credit Rescue Committee” whose membership includes a former Rolls Royce CIO Jonathan Mitchell.

Mitchell is quoted in Government Computing as saying that it would be irresponsible for a Labour government to continue spending large amounts of money on Universal Credit without getting answers to important questions such as:

  • Is there a comprehensive business case – one that clearly outlines the expected benefits, demonstrating that the Universal Credit project is viable?
  • Is the business case agreed by all stakeholders?
  • Is there clarity about what needs to be achieved?
  • Is there a stable specification explaining exactly how the new processes will work and how they will be automated?
  • Is the project being managed and staffed by people and organisations with appropriate levels of experience, track-record and expertise, all of whom are capable of delivering the benefits of the project and ensuring safe roll-out in a timely manner?
  • Is the project fully under control?
  • Can it absorb the changes demanded by a new incoming Government? If not, can the project be brought under control at an acceptable cost with respect to the business case, through a re-planning exercise?
  • Once such a re-planning exercise is completed, are we convinced that it was successful and that the project will now proceed to a satisfactory completion in a controlled fashion?
  • Are there appropriate “control gates” in place to ensure that all aspects of each phase of the plan are fully completed (and that projected costs to completion preserve the business case) before allowing the project to move safely onto each next stage?

Mitchell said, “Universal Credit is one of those applications that might look straightforward when you first look at it, but this is most definitely not the case. I believe there are significant process and technical challenges to overcome.”

Comment

Good questions, most of which the Department for Work and Pensions is unlikely to be able to answer satisfactorily today.

The Treasury still hasn’t approved the full business case, which is odd for a project that started in earnest more than three years ago.

It’s hard to see, given the rate of progress, the amount of work being completed manually, the lack of integration with legacy systems, the complexity of changes of behaviour required, the reliance on other parties such as local authorities, the inflexibility of some supplier contracts, regularly changing project leadership, the variable performance of HMRC’s RTI systems, and the DWP’s poor history of success on big IT-related projects, how the UC programme will be completed before 2020 whoever wins the next election.

Labour committee outlines Universal Credit “rescue” strategy – Government Computing

Stop filming! That’s the IBM exit strategy we’re discussing

By Tony Collins

Dave Orr, a former IT employee at Somerset County Council, is now a local taxpayer trying to see if public statements made aboutthe authority’s joint venture with IBM match up to the facts.

Some councillors don’t seem to welcome his scrutiny, or his campaigning which can attract the attention of the local press.

Somerset claims it is saving millions of pounds through the Southwest One joint venture – which is majority owned by IBM. But Orr has learned through FOI requests and council reports that once extra costs are taken into account the council has had a net loss of £53m on the contract. He points to:

– £52m of SAP and “transformation” costs the council paid upfront to IBM

– £4m of council bid costs

–  £2m for a written-off loan to Avon and Somerset Police for SAP

–  £3m interest on a £30m loan over 10 years

–  £3m in contract management costs

–  £5m in legal costs over a dispute with IBM

This totals £69m. Procurement savings to December 2013 were £16m – which gives a net loss of £53m. The contract is supposed to save £150m over its 10-year life. The deal was signed in 2007 by IBM, Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police. The authorities are considering what they will do at the end of the contract.

Stop filming

At a meeting of the council’s audit committee last month, the chairman of the audit committee asked Orr to stop filming. He was using a Panasonic compact camera. A vote was proposed and seconded that the meeting not be recorded.

Five councillors voted in favour and 3 Lib-dems abstained. Those supporting the motion to stop filming included Tory, Labour and UKIP members.  Somerset is Conservative controlled.

Orr says the discussion shortly before the vote was taken was on Southwest One and the council’s exit strategy from the contract.  Councillors also agreed that they may at a later date go into a secret “Part 2” session to discuss a “lessons learnt” report about the collaboration with Southwest One.

A blow to local democracy?  

The government has issued guidance that states explicitly that councils should allow the public to film council meetings. Under the heading “Lights, camera, democracy in action” an announcement by local government secretary Eric Pickles  says on the gov.uk website:

“I want to stand up for the rights of journalists and taxpayers to scrutinise and challenge decisions of the state. Data protection rules or health and safety should not be used to suppress reporting or a healthy dose of criticism.

“Modern technology has created a new cadre of bloggers and hyper-local journalists, and councils should open their digital doors and not cling to analogue interpretations of council rules.

“Councillors shouldn’t be shy about the public seeing the good work they do in championing local communities and local interests.”

Before the meeting of the audit committee Orr had obtained informal consent from the council to filming.

Comment

Open government is not a party political issue – none of the parties seem to want it. Indeed councillors at Somerset seem at their most comfortable  when voting for secrecy.  Is this because it gives them a feeling of privilege – having access to information the ordinary citizens don’t have?

In central government one of the first things the civil service does after a general election is give new ministers access to state secrets. It distances the ministers from ordinary people. Ministers feel privileged – “one of us”.  Is this the main unspoken reason some Somerset councillors  love to have secret meetings?

Councillors may feel weighed down by Orr’s questions and campaigning. But his questions are arguably more important than those raised internally by deferential party politicians who don’t ask the most difficult questions.

If anything they should be asking themselves whether they should ask the questions he is asking.

It’s too easy on big outsourcing contracts for supplier and client to put a gloss on the relationship. It’s easier talking about unsubstantiated savings than explaining why the contract isn’t making the savings originally intended. And it’s even easier when you shun scrutiny from members of the public.

HP’s tacit threat to government not to bid for contracts?

By Tony Collins

HP has written to the Treasury  questioning whether it is worthwhile competing for contracts if the Government is no longer interested in doing business with multinationals, says The Independent.

Cabinet Office minister Francis Maude is encouraging departments to spend more with SMEs and be less reliant on a small number of major IT suppliers. He wants departments to avoid signing long-term contracts which lock-in ministers to one major supplier.

The Independent says:

“In a striking case of Goliath accusing David of bullying, the American giants Microsoft and Hewlett Packard have complained that they are being unfairly picked on by the Cabinet Office minister Francis Maude.

“…the Government’s largest IT supplier Hewlett Packard has written to the Treasury to express its concern at plans by Mr Maude to award more Government contracts to smaller suppliers.

“At the same time Microsoft is fighting a rearguard action against the Cabinet Office to protect the million pounds it gets each year from Whitehall by selling popular Office programmes such as Word and Excel.

“Both companies are concerned that they are being singled out by ministers as unpopular and easy targets in their rhetoric about cutting public sector waste…

“Microsoft is attempting to prevent the Government from migrating its own computer systems from those that rely on the multinational to open-source documents that are free to use…

“Both companies look set to be disappointed – at least unless there is a change in Government. Mr Maude is understood to be looking to next year – when a significant number of big IT contracts are up for renewal – to push ahead with the new policy that could significantly denude the profits of IT multinationals.”

A Cabinet Office spokesman said it was unaware of HP’s letter to the Treasury and added: “We value the contribution companies of all sizes make to the UK economy, driving innovation, growth and jobs.”

A spokeswoman for HP told The Independent:  “HP is a proud and long-standing supplier of IT products and services to Her Majesty’s Government and provides vital public services to UK citizens.  We maintain an ongoing dialogue with government about our programme of work.”

A report by the Institute for Government Government Contracting:  Public data, private providers says that HP is the largest supplier to government with earnings in excess of 1.7bn in both 2012 and 2013.

In 2013, 86% (£1.49bn) of HP’s revenue from central government came from a DWP contract to supply infrastructure and systems for DWP and its job centres. “This contract is likely to be the largest single non-defence contract in central government,” says the Institute.

Capgemini, BT and Capita were the next largest suppliers to central government. Capgemini’s work is mainly from HMRC through the “Aspire” contract which is worth about £850m a year.

Departments are more open than they used to be but the Institute found big gaps in the information provided.

These gaps include:

– Contractual transparency –  contracts and contractual terms, including who will bear financial liabilities in the event of failures

– Information about how well contractors perform, allowing a vital assessment of value for money

– Supply chain transparency – information including the proportion of work subcontracted to others, terms of subcontracting (particularly levels of risk transfer), and details on the types of organisation (for example, voluntary and community sector organisations) in the supply chain.

Comment

What concerns Maude and his team is not the existence of major suppliers in central government contracts but the reliance by central departments on long-term contracts that lock-in ministers and lead to costly minor changes.

Nobody wants the major suppliers to stop bidding for contracts. What’s needed is for departments to have the in-house expertise to manage suppliers adroitly, and not to be adroitly managed by their suppliers which seems to be the position at present.

Thank you to openness campaigner Dave Orr for the information he sent me which helped with this article.

The IT giants who fear losing the government’s favour

Opening the door to data transparency

 

 

 

Judge refuses DWP leave to appeal ruling on Universal Credit reports

By Tony Collins

An information tribunal judge has unexpectedly refused consent for the Department of Work and Pensions to appeal his ruling that four reports on the Universal Credit programme be published.

The ruling undermines the DWP’s claim that there would be “chilling effect” if the reports were published.

The judge’s decision, which is dated 25 April 2014, means the DWP will have to publish the reports under the FOI Act  – or it has 28 days to appeal the judge’s refusal to grant consent for an appeal.  The DWP is certain to appeal again. It has shown that money is no object when it comes to funding appeals to keep the four reports secret.

In 2012 John Slater, who has 25 years experience working in IT and programme and project management, had requested the UC Issues Register, Milestone Schedule and Risk Register. Also in 2012 I requested a UC project assessment review by the Cabinet Office’s Major Projects Authority.

Last month the “first-tier” information tribunal ruled that all four reports should be published. It rejected the DWP’s claim that disclosure would inhibit the candour and boldness of civil servants who contributed to the reports – the so-called chilling effect.

The DWP sought the tribunal’s leave to appeal the ruling, describing it as “perverse”. It said the tribunal had wholly misunderstood what is meant by a “chilling effect”, how it is manifested and how its existence can be proved.

It claimed the misunderstanding and the perverse decision were “errors of law”.  For the first-tier tribunal’s finding to go to appeal to the “Upper Tribunal”, the DWP would have needed to prove “errors in law” in the findings of the first-tier tribunal.

Now Judge David Farrer QC says his tribunal has understood the chilling effect but found no evidence that it was relevant to the four reports in question. Indeed the judge implies that if the chilling effect existed there would be evidence of it.

“The so-called chilling effect implies Government departments and other public authorities have by now extensive experience of decisions requiring them to disclose information which they sought to withhold for the reasons advanced by DWP here,” says the judge in dismissing the DWP’s request for permission to appeal.

“If the chilling effect is a widespread and damaging result of the fear of disclosure, there is every reason for central government to investigate the matter, enabling a government department to present a case based on its research.

“Quite apart from that, those receiving reports, conducting discussions and reading advice might be expected to observe, over a period, any trend in changing style and content of their colleagues` written work, so as to be able to present examples and relate them to the perceived threat of disclosure.

“Obviously the form of document will remain the same but it is hard to believe that the experienced observer could not spot and demonstrate a general loss of trenchancy, of innovation or of boldness in the content over a period if that were indeed the effect of possible public exposure.

“Such changes would constitute ‘concrete and specific effects’, adopting DWP`s wording.”

Although the reports requested under the FOI Act are now old – they date back to 2011 – their publication could throw light on how much DWP ministers and civil servants knew about the many problems with Universal Credit IT at a time when the department was issuing unswervingly positive press releases about the UC programme.

Judge Farrer hinted that DWP ministers and civil servants could have misled the public about the real state of UC programme.

Having read the four reports in question, the judge said in his ruling that the Tribunal was “struck by the sharp contrast with the unfailing confidence and optimism of a series of press releases by the DWP or ministerial statements as to the progress of the Universal Credit Programme during the relevant period”.

At the information tribunal in January 2014 a senior civil servant Sarah Cox, on behalf of the DWP, spoke on the supposed effects of disclosure on the candour and boldness of reviewers.

But the Tribunal noted that a Starting Gate review of Universal Credit was published [in 2011] which the DWP had refused to release under FOI. The Information Tribunal noted that Ms Cox did not suggest that the revelation of this document had inhibited frank discussion within the Universal Credit programme.

The Tribunal said reports such as the risk register and project assessment review are important indicators of the state of a project. Their disclosure can give the public a chance to test whether ministers and civil servants are giving out correct information on the state of a project.

This week the judge says that the Tribunal “read and heard the evidence of Ms. Cox, considered the subject matter and the withheld material, took account of her experience, applied its own experience of these cases and its commonsense and, on this issue, found her testimony unpersuasive, as it was entitled to do.”

In conclusion the judge says the Tribunal “rejects the claim that its handling of the ‘chilling effect’ issue involved an error of law.”

Comment:

The DWP was claiming in 2012 that all was well with the UC programme when in reality they knew there wasn’t even an agreed project plan.

That is a good reason for the DWP to want to keep the reports secret – but the main reason its senior civil servants want to stop publication is tradition. The DWP does not publish any of its reports on the state of big IT-enabled projects and programmes.

It’s perhaps because the DWP has always buried itself under the covers of secrecy that it is so imperious – to the point of arrogance – in its handling of FOI requests and appeals. It acts like an institution that is not used to having outsiders, including the information tribunal and National Audit Office – peep into its affairs.

Perhaps this is why the NAO found that the UC programme was being managed so badly. When complex institutions operate in secrecy and without effective day to day scrutiny standards can continue to fall to a point when even the best leaders are powerless to intervene.

There may come a time – if that time hasn’t been reached already – when the DWP will be held together, and only remain credible in the eyes of the public and Parliament, because of the solid work of its major IT suppliers that have been there for decades, bolstered by a plethora of media announcements and ministerial assurances.

We are certainly getting the media announcements and ministerial statements, but without the publication of reports on UC’s progress, do the official pronouncements mean anything at all?

FOI ruling judge refuses DWP leave to appeal