Category Archives: managing outsourced services

Lessons from Birmingham Council’s joint venture with Capita

Posted on 04/12/2012 | 3 comments

By Tony Collins

A report on Service Birmingham – Capita’s joint venture with Birmingham City Council – shows that the deal has been largely successful so far but that trust and relationships may be breaking down in some areas.

The “High-Level” review of Service Birmingham by the Best Practice Group could be read in two ways: as a qualified endorsement of the deal so far, or as a warning that a deteriorating relationship in some areas could end up, in years to come, as a legal dispute.

The report’s authors suggest that the council and Capita have little choice but to make improvements given that the contract lasts another nine years. They say:

“Given the fact that the commercial partnership has a further nine years to operate, there is an inherent risk that unless a core focus for both parties is re-established, the commercial trust between BCC [Birmingham City Council and SB [Service Birmingham] will continue to deteriorate.

“Neither party will benefit from the relationship if this situation is permitted to manifest itself.”

In another part of its report the Best Practice Group says:

“BCC and SB 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.”

Below are verbatim extracts from the Best Practice Group’s report which highlight some of the lessons arising from of the joint venture so far. The sub-headings (in italics) are mine.

Extracts from Best Practice Group’s report:

Service Birmingham charges a fee even when the council implements services outside the joint venture – poor value and reputedly poor practice?

“SB has an on-going contractual duty to ensure it provides independently benchmarked best value in the services it delivers to BCC [Birmingham City Council]. As part of these arrangements, BCC can request specific third party services (outside SB’s own delivery capability) with SB applying a fee for ‘contract management’.

“However, these situations vary considerably, raising the question of how to maximise value. The contract management fee would be considered high value when BCC gives SB a service outcome it wants to achieve, and SB researches the market, provides options and recommendations to BCC, sources the best value vendor, and ensures the solution is implemented and the business outcomes achieved.

“In other situations, BCC already knows the outcome to be achieved, how to achieve it and who the best value vendor is, and can implement the solution itself. However, the same contract management percentage still applies to these cases. This causes resentment for the service area involved because they cannot see how SB has added to the process, and in real terms, is perceived by BCC as very poor value. Although the sums involved are minimal compared with the relationship’s overall cost, it is highly visible as an area of poor value and reputedly bad practice, and needs to be realigned.”

Service Birmingham needs to make a significant return for its shareholders

“Given the relationship challenges between BCC and SB, there are a couple of fundamental points to address, namely that: (a) certain individuals within the Council need to understand that SB is not a social enterprise, a public sector mutual, or a charity, and needs to make a significant return on its capital for its shareholders, and (b) SB needs to understand that the Council is in a significantly deteriorating financial position due to Government cutbacks.”

SB drops its prices 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.”

A hardened commercial stance in some circumstances?

“… these obvious and immediate savings are now being met with a hardened commercial stance for anything that falls outside of the core deliverables by SB.”

The cloud imposes hidden costs for SB

“Regardless of whether a scale of mark-up can be achieved, one issue that is clear from the interviews undertaken is that SB/BCC needs to educate the BCC service areas at all levels around what the contract management mark-up actually buys for the Council from SB. At present, for example, there is a lack of understanding within BCC service areas that having ‘cloud’ delivered solutions within the overall portfolio does still incur hidden costs for SB in supporting the overall infrastructure and managing the intermediate fault–reporting service.”

Staff survey on SB – mixed results

“With regards to the survey, 63% stated that they talk ‘positively’ about SB to their colleagues. Slightly less, 59%, believe SB understands the requirements and support needed to deliver the Council’s services. However, when asked if they would naturally think to contact SB for help and advice in situations where they were thinking about undertaking new ICT related work, only 33% of the Council respondents said that they would…

“When asked the direct question of how satisfied they were overall with the service delivered by SB, only 15% of the respondents felt that the service was less than satisfactory. However, only 10% believed that it was excellent with 39% rating it as satisfactory and 36% rating the service received as good.”

Project concerns

“There is a feeling which was voiced by several interviewees from the Council that project implementation often runs behind schedule and ultimately it is the ‘loudest project to shout’ which will then have the scarce resources allocated to it at the cost of other projects.”

Lack of commercial trust

“…there are elements of the KPI [key performance indicator] reporting received from SB that BCC need clarity on . This, coupled with the 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.”

Seeds of a possible legal dispute in future years between the two sides?

“One point that should be highlighted is that we believe there is a misalignment between both parties view of what partnership working actually entails. From the perspective of some service areas within BCC, they view certain individuals within SB as uncooperative. In a similar vein, there are certain individuals within SB who view specific BCC staff also as uncooperative. It should be noted that these individuals within both BCC and SB are in the minority.

“However, such un-cooperation is manifesting itself into a perception of a lack of commercial trust in both camps. Some BCC individuals are not really taking into account, or understanding, that SB is a commercial organisation that has a majority shareholding by a publically listed company. Its commercial shareholders need to see financial returns from SB that increase annually…

“In the early stages, the working relationship was put firmly on the rails by having a ‘great common cause’. The transformation requirements of BCC were so fundamental, it seems many differences of opinion were set aside and both parties worked very hard to overcome the obstacles in ensuring the transformation was successful. Largely, that was achieved. Now that the original transformation process has almost all been completed, the parties working relationship seems to have deteriorated in certain instances. This pattern of behaviour is normal in most strategic vendor relationships.”

SB more expensive than the average in certain areas?

“SB appear to be significantly more expensive than average in the areas of voice, data and converged service provision (KPI-17). The most significant of the three costs provided is the provision of Data services where SB are the worst value of all of the respondents in the SOCITM survey with a cost of £227 per data outlet (capital + support) compared to a median of £118. At the time of writing this report, no clarification had been provided as to the reasons for the significant difference between the SB provided cost and the survey median. When KPI-17 is reviewed as a cost per user, SB fairs much better across the service types. It has a cost of £321 per user compared to a median of £290 per user. However if you consider that this £31 per user per year, it actually represents over £600k per annum above average.”

Council concerns over SAP work going abroad

“Different parties within BCC perceived that in the interest of cost savings, SB was passing some work on SAP projects to an off-shore organisation, rather than using the UK workforce. It should be noted that the contract allows for the off-shoring of SAP work, but only where such work does not adversely impact jobs in the UK.

“A high level review of the SAP project work has identified that SAP work has only been off-shored when the UK workforce does not have the required expertise. In addition, we requested specific evidence from individuals to support their view that work was being off-shored that could have been undertaken by the UK workforce, but this could not be provided.”

The Council was paying for unused phone lines

“… Ultimately, the Council kept receiving invoices from the line provider for what were essentially unused telephone lines. The process ceased promptly after BCC and SB addressed the escalation of the issue.”

Stagnating innovation could widen the divide between the two sides

“It is clear that both parties will continue to feel significant frustration until they can resolve how to share the innovation process, provide resources to help the generation of sound business cases and provide formalised and comprehensive feedback to allow for the implementation of suggestions. These suggestions need to become acceptable to the Council as realistic deliverable solutions. If this does not happen, then innovation between the partners will continue to stagnate, driving a widening divide between the organisations.”

KPIs not always useful?

In the case of the BCC and SB agreement, despite an abundance of KPIs being in place, the Council perceives the contract could be better aligned in order to maximise the behaviours from SB that it needs.

Comment:

The report gives the impression that those running the joint venture must overcome the many problems because the contract still has nine years left to run. Both sides, it seems, are locked into the relationship. In some areas it works. In others it doesn’t.

Capita, clearly, has been trying hard to make the relationship work. Some within the council have too. Some are not so enthusiastic and have been “making noise” according to the report’s authors. Do those making a noise have a point, or are they simply making trouble against the joint venture? The report suggests removing those making a noise. But will that remove some of those who are providing an independent challenge?

So far the relationship has been largely successful; and the survey of staff is generally positive. But there are signs of serious trouble. Innovation is stagnating, the council’s finances are deteriorating and Capita needs to make a profit from the venture. Are these fundamental incompatibilities? Will the relationship really last another nine years, especially if there is more political change within the council?

High-Level Review of Service Birmingham

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Posted in Campaign4Change, Capita, Cloud, Cloud Computing, cost reduction, G-Cloud, innovation, IT projects, local government, managing change, managing outsourced services, operational issues, outsourcing, project management, public services, public-private partnerships, reducing cost strategically, SAP, shared services, supplier relationships

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Success in outsourcing needs political stability says councillors’ panel

Posted on 26/11/2012 | 4 comments

By Tony Collins

A group of councillors has found, after investigating several large local authority outsourcing contracts, that political stability may be a critical factor in successful deals.

Cornwall Council’s “Support Services Single Issue Panel” investigated outsourcing deals that involved Birmingham City Council (Capita), Liverpool City Council (BT),  Taunton Deane Borough Council (IBM), Suffolk County Council (BT) and South Tyneside Council (BT).

The panel is not,  in principle, against outsourcing. It found that,

“Information from other authorities has highlighted the importance of political stability for a project which will extend for many years. This has been the single most important lesson that they have learnt.”

In those councils that have an inherently stable majority of one particular
party, outsourcing has not necessarily been a problem. “Likewise it has not been an issue for those councils who have achieved a cross-party consensus, even where there has been a change of administration,” says Cornwall’s panel of councillors. But …

“For those councils who do not have a cross-party approach the process of going into a strategic partnership has caused significant problems; in some  cases a polarised membership which has also impacted on their staff…”

The finding indicates that the risks of a large-scale failure of outsourcing contracts at Cornwall and Barnet councils – where political dissent has been marked – could be greater than its officials realise.

Cornwall may outsource a range of services, including IT, to BT in a contract that is likely to be worth at least £200m, and possibly hundreds of millions of pounds more,  over 10 years.

Barnet has chosen Capita as its preferred outsourcing supplier as part of its “One Barnet” transformation programme. The plan includes outsourcing IT.

A need for cross-party support

The findings of Cornwall’s Single Issue Panel also suggest that the initial major decision to outsource may need a cross-party consensus to succeed..

“What has proved both corrosive and destructive is where a major decision has been made without the support of a substantial majority of members,” says Cornwall’s panel.

Cornwall Council is putting the major decision of its outsourcing deal with BT to the full council. A yes or no decision is expected in December.

But Barnet is going ahead with its major decision to award a large outsourcing contract to Capita without a vote of the full council, although dissent over the plans are widespread. An inner circle of councillors, the “Cabinet”, is expected to approve a deal with Capita 0n 6 December.

This is part of what Cornwall’s panel says on the importance of political stability to successful outsourcing deals:

“Throughout the investigatory work of the Panel the importance of political leadership has been consistently stressed.

“It has been regarded by most authorities as the single biggest activity to get right and failure of this function will at best lead to problems and at worst to failure of the partnership.

“The form of the leadership is in itself not important and both cross-party support and a stable base from one political party have both been effective…

Comment:

BT in Cornwall and Capita in Barnet have made promises of large savings which, understandably, makes some councillors and officers want to sign large, long-term outsourcing deals.

If suppliers provide money upfront for transformation projects this eases, or even releases, the burden on councillors and officers to make big cuts.

But how will BT at Cornwall and Capita at Barnet pay for savings, and for new investment in changes, if they fail to attract new business?

This was among the findings of Cornwall’s investigating panel of councillors:

“Members of the SIP [Single Issue Panel] have supported the investigation of ways in which jobs in Cornwall Council could be retained by trading shared services.

“All other authorities that have started with a similar ambition have failed to deliver that aspiration. In one case the business model was substantially reliant on trading and growth and has been in place since 2006.

“No significant trading has taken place and this is a similar story in all other authorities that the SIP has been in contact with.”

This finding shows how the promises of suppliers to attract new business can prove over-optimistic; but at least all of Cornwall’s councillors will have a chance to vote on a deal. Barnet is not giving its full council the same opportunity.

If Barnet’s officers and ruling members read Cornwall’s Single Issue Panel report they will be aware of evidence that it can be corrosive and destructive for a council to make a major decision without the support of a substantial majority of members.

If Barnet’s inner circle then goes ahead with making a major decision in the face of widespread and strong dissent among some staff and councillors, could its decision amount of maladministration if the subsequent deal turns sour?

One concern is that the suppliers may put up money in advance and charge for this – with interest – in the latter part of the contract, as in discredited PFI deals.

Today’s councillors and officers would have money for investment in the early stages of the contract. But they may leave future generations of councillors and officers with a legacy of large payments. The full facts should be known before any deal is signed.

Another concern is that the suppliers may rely on major legislative and organisational change – both of which are inevitable – to provide much of their profit.

If a future council does not want to pay the suppliers’ invoices for changes a dispute may arise, for which the suppliers will be much better prepared than the councils.

A further concern is that the savings promised by suppliers may be smaller than the savings the councils could make on their own,  with suppliers acting as consultants, for the costs of technology fall annually – as do some cloud services as competition increases. Again the facts should be known before any long-term deal with a single supplier signed.

It may also be important for officers at Cornwall and Barnet to be aware that Suffolk County Council has decided after its outsourcing deal with BT that it is better to outsource to multiple “expert” suppliers than a single one.

In Barnet the public needs to be able to hold those responsible for a major decision to account, if all goes wrong. The problem is that the individuals on any minority group that is responsible for a outsourcing decision today are unlikely to be in post when any dispute arises.

Links:

Councillor Andrew Wallis – The Single Issue Panel Releases its Third Report on the Support Services Proposals

Capita preferred bidder at Barnet

The Barnet Eye

Shared services disaster

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Posted in BT, Campaign4Change, Capita, change management, cost reduction, IT-related failures, local government, managing change, managing outsourced services, procurement, public sector, public services, public-private partnerships, shared services, supplier relationships

Outsourcing costs in Cornwall escalate – and no deal signed yet

Posted on 16/10/2012 | 3 comments

By Tony Collins

The estimated procurement costs of a mega-outsourcing project in Cornwall have risen sharply, not necessarily under the full control of the county council’s cabinet, and before any deal with BT or CSC is signed.

Meanwhile councillors are due to be told, in confidential briefings, that BT and CSC may claim back their costs so far, and are prepared to legally enforce that claim,  if no outsourcing deal is signed.

Such a legal claim, of potential suppliers suing a potential client, would be highly unusual perhaps unprecedented. 

Is Cornwall’s  cabinet using FUD – fear, uncertainty and doubt – to make councillors fearful of not  agreeing a deal with CSC or BT at a full council vote next week?

Papers published by Cornwall County Council show that a mega-outsourcing deal proposed by the authority’s ruling cabinet will be worth between £210m and £800m.

The full  council will vote on whether to proceed with a contract with BT or CSC on 23 October.

Before that vote the cabinet is expected to give confidential briefings to individual councillors. The briefings will focus on the promised benefits of signing a deal,  and the disadvantages of not going ahead.

The cabinet may tell councillors approximately how much money BT and CSC will claim, and if necessary take legal action to recover, if a deal is not signed, according to an interview the council leader Alec Robertson gave to thisiscornwall.co.uk

“The two bidding companies have spent a lot of money over the past couple of years and they will have a legal claim against the council for changing direction,” Robertson is quoted as saying.

“Councillors need to know the consequences. There is a lot of commercial confidentiality, but we wouldn’t be talking about small amounts of money.”

The council’s own budget for the outsourcing project so far has escalated. An independent panel set up as a “critical friend” to scrutinise the council’s plans for outsourcing has learned that the costs to Cornwall’s taxpayers of planning for the scheme were £375,000 in July 2011.

In March this year the “Single Issue Panel” members were told that the costs for the project would need to be increased from £650,000 to £800,000.

“The current estimate of the cost of the procurement process at the time of writing this report is £1.8m,” says the panel in its July 2012 report.

The £1.8m will be met from existing budget, says the cabinet in council documents.

On top of this, potential NHS partners in the deal have their legal costs.

The cabinet says in its written reply to the panel that the increase in costs is due in part to a “significant  increase in external support drawn in to support the procurement”, including specialist legal support and costs for consultancy KPMG, which has advised on the finance and client side support.

There has also been an “extension of scope” due to the proposed inclusion of telehealth/telecare. In addition there have been “project delays”.

Comment:

With the outsourcing-related costs to Cornwall’s taxpayers escalating before any deal with CSC or BT is signed, what will happen after the council is contractually committed to a long-term deal with one of the companies?

One reason there is no clear answer to this question is that so much of the council’s plans are based on assumptions that BT or CSC will commit contractually to providing up to 500 new jobs, saving money and achieving an IT-led transformation of services (while making a profit from the deal and recovering bid costs).

Cornwall’s cabinet seems confident that BT or CSC will enshrine all its promises in a contract free of caveats and ambiguities, and that the sort of legal dispute that has broken out in Somerset over the IBM/Somerset County Council joint venture Southwest One is unlikely to happen in Cornwall.

But isn’t Cornwall repeating Somerset’s mistake of not seeing that, behind the promises, assumptions, hopes and so-called contractual commitments,  the reality of withheld payments for poor service and the subsequent threat of legal action by the supplier is always there.

If Cornwall’s cabinet is already concerned about possible legal action from the bidders to recover their costs,  will the council be more confident about avoiding a legal action once the chosen suppliers’ lawyers have agreed a long and very carefully-worded outsourcing contract – a contract that may be different from the council’s proposed draft contract?

The Cabinet Office’s Major Projects Authority, under the enlightened David Pitchford, has a guiding principle that sets the coalition apart from previous administrations when it comes to avoiding disasters. That principle is to stop a deeply-flawed project cheaply before much more is spent and at risk of being wasted.  Ian Watmore, when permanent secretary at the Cabinet Office, put it well: “Fail early, fail cheaply.”

Will council leader be asked to stand down?

Cornwall outsourcing/partnership debate.

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Posted in BT, Campaign4Change, CSC, IT-related failures, KPMG, legal disputes, local government, Major Projects Authority, managing outsourced services, procurement, project management, public sector

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Cornwall Council’s extraordinary attack on outsourcing critic

Posted on 10/10/2012 | 1 comment

By Tony Collins

A “Cabinet” councillor in Cornwall has launched an extraordinary attack on a former IT strategy analyst Dave Orr who emailed members of the county council with his analysis of its outsourcing plans.

Orr is concerned that the council may sign a deal similar to the Southwest One joint venture contract between IBM and Somerset County Council which has been branded a failure.

His email to Cornwall’s members included links to articles, board papers and a BBC regional TV item on Southwest One’s problems. The email provided evidence on the dangers of succumbing to over-optimistic promises.  He sent it as a Somerset resident and local taxpayer.

In response, a Cabinet councillor in Cornwall sent a lengthy email to all members which defended the outsourcing proposals but also attacked Orr’s credibility.

Said the Cabinet councillor: “I understand that David Orr was employed by Somerset County Council within ICT before being seconded into SouthWestOne.  I also understand that he was a Unison representative and that he no longer works for either company. He has submitted 92 FOI requests between 5 April 2011 and 24 September 2012 to Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police .

“Whilst he is clearly a ‘Somerset resident and local taxpayer’, we do feel he is potentially misrepresenting himself by not making his previous employment with Somerset County Council and SouthWestOne explicit.

“We do not dispute the information Mr Orr has provided about SouthWestOne, although it should be noted that he was not in the contract management team and much of his information appears to have been gleaned from FOI requests and media reporting. However, Mr Orr is clearly not well placed to comment on the proposed Cornwall deal …”

Comment:

The personalised attack on Orr suggests that Cornwall’s Cabinet councillors might have lost sight of the need for independence and objectivity, particularly when close to signing a deal with BT or CSC that could be worth £300m or more.

In the response to Orr’s legitimate concerns, Cornwall’s Cabinet – the councillor uses “we” in his email – appears to have played the man as well as the ball.

Orr has nothing to gain by criticising Cornwall’s outsourcing plans;  and his FOI requests about the Southwest One deal have helped to make Somerset County Council much more open than it was.

He is right to warn on the basis of experiences in Somerset that optimistic statements by Cornwall council and the bidders could come to little or nothing. Neither CSC nor BT is infallible. Both companies were notified by the Department of Health of a breach of contract over deals they had signed as part of the National Programme for IT [NPfIT], the UK government’s largest civil IT programme.

Cornwall has had a genuinely independent assessment of its outsourcing plans by a panel it set up. But the ruling councillors dismissed the panel’s biggest concerns.

Pro-outsourcing enthusiasts on the council negotiating with optimistic potential suppliers doesn’t sound like a recipe for a successful deal.

Three centuries ago Jonathan Swift warned of the dangers of over-optimism. “The most positive men are the most credulous,” he said.

Cornwall’s ruling councillors are entitled to defend their outsourcing proposals – and they have made it clear they will continue to argue their case vigorously. But objectivity is all-important especially as an outsourcing deal on the scale proposed could be the most momentous decision in the council’s history.

A meeting of the full council will vote on the outsourcing plan later this month.

At that meeting the council’s cabinet members will argue that, without a deal, council jobs will be at risk. But has the council looked seriously at other options for saving money?  By its own admission it hasn’t. So is it really ready to sign a mega-contract with CSC or BT?

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Posted in BT, Campaign4Change, CSC, decision-making, IBM, local government, managing outsourced services, npfit

A mega-outsourcing plan in Cornwall beset by naive fanaticism?

Posted on 01/10/2012 | 6 comments

By Tony Collins

Comment and analysis

An inner circle of councillors at Cornwall council is rushing plans to sign a big outsourcing deal despite a council vote against it.  The aims of the deal include an IT-based transformation of services,  the creation of “up to” 500 new jobs and tens of millions of pounds in savings – all too good to be true? 

The warning signs are there. The council’s remarkable naivety,  a hurried enthusiasm for signing a deal, and a confident waving aside of internal and external concerns,  may be early indications of a possible disaster.  An internal report warns of a potential “catastrophe” over service delivery.

 If all turns sour could accusations of maladministration follow? Is there still time for the full council to stop the inner circle from pressing ahead with a contract signing?

Major IT suppliers have some exceptional salespeople. They don’t merely sell hardware, software and services. They inspire. They rouse to action. Their promises are believable because they believe them with a conviction that can be contagious.

Joe Galloway might have been a one-off.  He was managing director of a part of one of the world’s largest IT companies EDS (now HP).  He helped to strike a CRM [Customer Relationship Management] deal with BSkyB in 2000. The contract ended in a £709m legal dispute in which Galloway was a main witness for HP. The judge in the case of BSkyB v HP found that some of Galloway’s evidence was untrue.

He demonstrated an “astounding ability to be dishonest, making up a whole story about being in St John [part of the Virgin Islands], working there and studying at Concordia College. EDS properly distance themselves from his evidence and realistically accept that his evidence should be treated with caution,” said the judge.

The judge also said

“I am driven to the conclusion that he proffered timescales (on the CRM project) which he thought were those which Sky desired, without having a reasonable basis for doing so and knowing that to be the position… I consider that he acted deliberately in putting forward the timescales knowing that he had no proper basis for those timescales. At the very least he was reckless, not caring whether what he said was right or wrong.”

During the High Court hearing, when HP discovered Galloway’s dishonesty, it sacked him.

He had held a senior position at EDS and the company’s customer BSkyB believed what he had said.  The case cost HP £318m plus tens of millions of pounds in legal fees – and the dispute lasted more than seven years. HP, it could be said, became a victim of some of the statements made by one of its executives.

The point about mentioning the case is that supplier promises, even if made with the best of intentions, may in the end come to nothing – or worse, a costly and prolonged legal dispute. Good intentions were behind the setting up of a joint venture between IBM and Somerset County Council – Southwest One – in 2007. The two sides are now immersed in a legal dispute that looks like going to court. Other councils have gone into joint ventures with major IT suppliers only to be disappointed.

So why do councils still want to sign mega outsourcing deals?

Councils keen to enter a large outsourcing deal become convinced that failures of such ventures elsewhere do not apply to them because their plans are unique. Indeed Cornwall council says on its website:

“Our strategic partnership is unlike any that has happened before, and as such, we cannot compare our programme accurately to others.”

But how do potential suppliers explain failing contracts?

In talks with potential customers IT companies correct or clarify reports in the media about outsourcing deals that have failed or are failing. It is customary during the bidding process for salespeople to take potential clients to reference sites where the representatives will agree that the media reports of a failing partnership were inaccurate or hyperbolic.

[Councils that have signed failing outsourcing deals will sometimes be reluctant to publicise the fact – and may put on a brave face in which they align themselves with the supplier; until a council changes hands, as at Somerset County Council, when a new administration is happy to publicise the mistakes of the last, and the full extent of the problems begins to emerge publicly.]

Cornwall council says on its website that it has received responses from its two shortlisted suppliers BT and CSC to specific negative press articles. The Council is now untroubled by any of the articles.

Says Cornwall

 “The feedback we received from the references contacted were balanced and gave us no significant causes for concern… We do need to reflect that these are press stories and we know only too well from our own experience that you can find negative reports on most major companies if you look for them.

“As global companies, it is to be expected that you will find a whole range of perspectives on each; it is important we take a balanced and independent view.  Please be assured that we will continue to work with both companies to deal with any issues that may arise throughout the procurement process and beyond…”

Articles BT and CSC were not asked to respond to included one in the Financial Times which said of NHS IT contracts:

“There are big doubts as to whether the government can fire BT and CSC, its two main suppliers, without paying huge sums in compensation.”

Cornwall says it continues to monitor press coverage, with the help of BT and CSC. It suggests that articles not yet written may be biased.

“… We actively monitor the press, and both companies [BT and CSC] make sure that they let us know if a negative or positive story is going to break, making sure that we understand the background. It is important to note that these articles do not always present an unbiased view,” says Cornwall.

Does setting up a “critical friend” group give a false assurance?

On the face of it Cornwall deserves praise for setting up an independent panel of “critical friends” to scrutinise the council’s outsourcing plans. It is called the “Support Services Single Issue Panel” which comprises mostly Cornwall councillors. It had help from, among others, council officers, and BT and CSC. The Panel also visited some customers of BT and CSC that the suppliers chose.

But when the Panel later expressed serious concerns about Cornwall’s outsourcing plans the council’s inner circle simply replied that it did not accept those concerns. This may strike some as a naive response to real risks.

This was part of the council’s response to the Panel:

“We do not accept the magnitude of some of the risks raised in the SIP [Single Issue Panel]. This includes the risk of service delivery failure and the risk of losing senior officers to the partner. Nor do we think there is a significant conflict between profitable trading and a public service commitment. We do not think our timescales are risking service delivery but will advocate delaying those timescales if this is judged necessary to protect the Council’s interests and/or to achieve greater contractual benefit…”

Is there a danger the council will use the setting up of the critical friend group to say that it has considered all the risks – even if it has considered then dismissed the most serious of them?

A poor supplier would be in breach of contract – but then what?

To the Panel’s concerns that the joint venture may fail to deliver, or costs escalate, Cornwall responds that if its suppliers do not deliver they will be in breach of contract.

But then what?

Said the council:

“The contract obliges the strategic partner to deliver. Any initial failure to deliver would be dealt with through a service credit arrangement. Persistent failures would represent a breach of contractual conditions which would lead to breach of contract where the Cornwall Partners would exit the contract.

“The cost for this would be picked up by the strategic partner. Financial difficulty is covered by a guarantee that the parent company would step in and continue delivery. Costs are largely within our control…”

Is it straightforward to exit a contract after an alleged breach of contract? The Department of Health was in dispute with CSC over alleged breaches of contract on the National Programme for IT, NPfIT. CSC made it clear in its statements to US regulators that the DH was unable to exit the NPfIT contracts without large payments. CSC and the Department ended up accusing each other of breaches of contract which made negotiations for a settlement long and costly.

Heading for claims of maladministration?

Is Cornwall being naive when it says simply that after any breach of contract the council “would exit the contract”? In the past this has been the legal cycle of events in some major legal disputes on IT contracts

– Customer alleges breach of contract

– Supplier makes counter-claim

– Customer withholds money

– Supplier instigates legal action

– Customer wishes to exit contract but cannot because of potential costs, counter-claims and need for supplier’s cooperation to maintain existing services.

– Long and costly settlement negotiations – which is good for lawyers – while service delivery remains in the “hold” position, unresponsive to changes that may need to be made or remedial action that may need to be taken.

International IT companies are experts in the legal side of contracts and dealing with disputes. Do Cornwall’s ruling councillors believe that the council’s expertise and legal advice would trump the supplier’s in the event of an alleged breach of contract?

When Cornwall says that in a breach of contract it would exit the contract and “the cost for this would be picked up by the strategic partner”, do the council’s ruling councillors trust that the supplier would say to the council in any dispute, “Let us know your costs of exiting the contract and we’ll settle up.”

There is another worrying sign of Cornwall’s apparent naivety. The council says “The costs would only escalate if the Cornwall Partners make changes to the services required.”

Unforeseen change is endemic in the public sector: governments change, policies change, legislation changes, organisations change, particularly the NHS which is a potential party to Cornwall’s outsourcing plans.

Is any public authority that signs up to a large and complex outsourcing deal on the basis of ‘no unforeseen change’ leaving itself open to accusations of maladministration?

Has Cornwall’s democratic process broken down?

The most extraordinary single thing about Cornwall’s outsourcing plans is that, at a full council meeting on 4 September, a majority of councillors voted against a deal but the inner circle is going ahead anyway.

Says the council’s website: “A motion calling on Cornwall Council to change its decision to enter into a partnership with the private sector to deliver a range of support services was supported by a majority of 17 Members following a three hour debate at County Hall on 04 September.”

[The motion was put and seconded by two councillors, Andrew Wallis and Andrew Long, who are not members of the major political parties.]

In dismissing the vote of the council, a spokesman for Cornwall’s pro-outsourcing group said

“All the concerns which have been raised today have already been considered by the Cabinet… This is a very complex proposal and unfortunately the decision by Members not to move into private session meant that we were unable to share the detailed confidential information they needed to make an informed decision”.

Should the Council rush to sign a deal?

Somerset County Council’s joint venture was characterised by a rush to sign, which culminated in the signing at 2am at the weekend. The failed NHS IT plan was also notable among potential suppliers for the haste before the signing of contracts, as was the failed Firecontrol contract. Is Cornwall’s deal being rushed? Cornwall’s Support Services Single Issue Panel said

“The timetable restrictions placed on the SIP [Single Issue Panel] has condensed the available time such that this report has had to be compiled within one working day. Had the timetable slipped by just that one day it is certain that no report would have been submitted.”

The Panel also said

“The risk is that this timescale is far too short for detailed evaluation and due diligence to be carried out. This is a significant value contract. The estimated value of the contract in the Prospectus for Cornwall …was £210m to £800m. The current estimated value is not known to the Panel…”

The council’s inner circle concedes that its timescales are “tight but achievable”.

Conclusion

When outsourcing plans have taken up much time and money there is always a danger a contract will have to be signed to justify the effort.  But would the signing of a mega deal at Cornwall be a triumph of ideology over objective reasoning?

One has to wonder how a mega outsourcing deal can improve services, provide a good profit margin for an international IT company, save the council money and create hundreds of jobs. Doesn’t something have to give? Is there so much inefficiency, and so much money floating around the council and its potential NHS partners, that a major supplier can cut tens of millions of pounds, spend to transform services, and make money?

In evidence to MPs last year SOCITM, which represents ICT professionals in councils, said of outsourcing ICT that it “carries many risks for local authorities and can come at a heavy price”.

Some praise for Cornwall’s approach

Cornwall’s ruling councillors should be applauded for two things:

– There is every sign that the inner circle’s plans are motivated are by the best of intentions: to save money, improve services, protect existing jobs and create more.

– Although some criticise the council’s lack of openness, the inner circle is not hiding all of its papers and discussions in a blanket of secrecy. It has published the report of the “critical friend” Panel and the council’s responses. There is much information – and links – on the planned deal on the council’s website. This doesn’t always happen in the run-up to a large public sector outsourcing contract.

But good intentions do not make up for naivety and a wish for outsourcing that may border on fanaticism – the pursuit of a Cause whatever the dangers.

If a majority of councillors at a full council meeting cannot stop the signing of a mega-deal can anyone?

It appears that a tiny group within the council will make the final decision – although it is arguably the most momentous decision in the council’s history.

Says the council: “The final approval of, and the date for, the issuing of the said invitations to submit final tenders be determined by the Chief Executive in consultation with the Leader of the Council and the Portfolio Holders for Environment, Waste Management Policy and Shared Services, Health and Wellbeing and Human Resources and Corporate Resources.”

The final decision is due next month. If Cornwall enters a deal in which it relies on the contract to protect services and the council’s reputation is it being naive? Could it end up facing accusations of maladministration, particularly after side-lining a council vote against the deal?

**

Thank you to Dave Orr and a journalist in Cornwall for your emails on Cornwall’s outsourcing plans.

Council says its joint venture is failing – BBC

Some papers on Cornwall’s outsourcing plans

Local MP’s website on Southwest One.

An ill-judged outsourcing?

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Posted in BT, BT Health, Campaign4Change, CSC, legal disputes, local government, managing outsourced services, outsourcing, oversight, Politics, private sector lessons for the public sector, public sector, public-private partnerships, risk, supplier relationships

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DWP starts media campaign on Universal Credit IT tomorrow

Posted on 19/09/2012 | Leave a comment

By Tony Collins

The Work and Pensions Secretary Iain Duncan Smith has told MPs his department is launching a “major exercise” tomorrow to inform the media about Universal Credit, including progress with the IT project.

The public relations push will include a demonstration to journalists of the Univeral Credit front-end, and an explanation of the ability of “agile” to rectify problems as you go along. Duncan Smith said there is a lot of ignorance in the media, and suppositions, that need tackling head on.

His full statement on the PR campaign is at the foot of this article.

Comment

Iain Duncan Smith’s remarks to MPs sound remarkably like the statements that were made in the early part of the National Programme for IT in the NHS, when DH ministers and senior officials were anxious to correct ignorance and suppositions in the media – and to show journalists the front end of new electronic patient record systems.

Several times journalists were invited to Richmond house in Whitehall, the HQ of the DH, to hear how well the NPfIT was going. So anxious were the minister and leading officials to give a good impression of the programme that, on one occasion, trade journalists who had an insight into the NPfIT’s progress and could ask some awkward questions in front of the general media were barred from attending.

I would like Universal Credit to succeed. In concept it simplifies the excessively complex and costly benefit system. The worrying thing about the scheme, apart from the DWP’s overly sensitive reactions to scepticism in the media, is the way UC seems to be following the path which led to NPfIT’s downfall.

The Secretary of State attacks the media while trying to show UC in a glowing light and at the same time keeps secret all the DWP’s interview reviews and reports on actual progress. Duncan Smith says that the DWP wants to be open on UC but his department is turning down FOI requests.

There is no doubt that Duncan Smith has a conviction that the programme is on course, on budget, and will deliver successfully. But there still a morass of uncertainty for the DWP to contend with, and lessons to be learnt from pilots, some of which could be important enough to require a fundamental re-think. That’s to say nothing of HMRC’s Real-Time Information project which is part of UC.

Duncan Smith says the UC project is not due to be complete until 2017 which gives the DWP ample time to get it right. But ministers and officials in the last administration gave the NPfIT 10 years to complete; and today, nine years later, the scheme is being officially dismantled.

Did NPfIT ministers really know or understand the extent of the project’s true complexities and uncertainties?  Did they fully grasp the limited ability of suppliers to deliver, or the willingness of the NHS to change?  But they were impressed with the patient record front-end system and they organised several Parliamentary events to demonstrate it to MPs.

The NPfIT public relations exercises – which included DH-sponsored DVDs and a board game to market the NPfIT – were all in the end pointless.

Should Duncan Smith be running Universal Credit?

This is another concern. Duncan Smith is much respected and admired in Parliament but he appears too close to UC to be an objective leader. At a hearing of the Work and Pensions this week Duncan Smith took mild criticism of UC as if it were a verbal attack on his child.

It is doubtful anyone working for Duncan Smith would dare give him bad news on UC , though he attends lots of departmental meetings. Doubtless he listens to all those who agree with him, those who are walking press releases on the progress of the UC programme. He’d be a good marketing/PR man on UC. But surely not its leader. Not the one making the most important decisions. For that you would need somebody who’s free from the politics, who is independently minded, and who welcomes informed criticism.

Is there any point in a demo of front-end systems?

Seeing a front-end system means little or nothing. The question is will it work in practice when it is scaled up, when exceptions come to light, and when large numbers of people try to contact the helpdesks because they cannot get to grips with the technology and the interfaces,  or have particular difficulties with their claim.

What will a media campaign achieve?

If the NPfIT experiences are anything to go by, journalists who criticise the UC project will be made to feel stupid or uninformed.

In a totalitarian regime the media could be forced to publish what the government wants people to believe. Will the DWP’s PR campaign be designed to achieve the same end without the slightest attempt at coercion?

Duncan Smith’s comments to MPs

Below is some of what Iain Duncan Smith told Work and Pensions Committee MPs this week. He had been asked by a Committee MP to have a dialogue with the media to ensure that people believe that Universal Credit is a good thing.

Duncan Smith:

“On Thursday we are carrying out a major exercise in informing the median about what we are doing, looking at the system front-end, about budgets and all the elements the committee has been inquiring into.

“We will take them through that, show them that. We are going to open up much more. It is such an important system that I want people to learn what it is all about.  There is a lot of ignorance in the media and suppositions made; things that are important to tackle head on. Everyone says you mustn’t have a big bang; you are not going to be ready in time. The time we deliver this is 2017 when it is complete.  That is over four years…”

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Posted in Agile, Campaign4Change, change, change management, culture, DWP, e-health, excessive secrecy, FOI, Government IT, IT projects, managing change, managing outsourced services, NHS, npfit, Politics, procurement, project management, public sector, public services, Real-Time Information, Universal Credit

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Is Universal Credit really on track? The DWP hides the facts.

Posted on 11/09/2012 | 6 comments

By Tony Collins

The Department for Work and Pensions has told Campaign4Change that consultancy reports it commissioned on Universal Credit would, if disclosed under FOI, cause “inappropriate concern”.

Who’s to say the concern would be inappropriate?

At the weekend a spokesman for the Department for Work and Pensions told the BBC: “Liam Byrne (Shadow Work and Pensions Secretary) is quite simply wrong. Universal Credit is on track and on budget. To suggest anything else is incorrect.”

But the DWP has decided not to disclose reports by consultants IBM and McKinsey that could throw light on whether the department is telling the truth. Though the reports cost taxpayers nearly £400,000, the public has no right to see them.

The DWP told us: “Disclosure [under FOI] would … give the general public an unbalanced understanding of the [Universal Credit] Programme and potentially undermine policy outcomes, cause inappropriate concern (which in turn would need to be managed) and damage progress to the detriment of the Government’s key welfare reform and the wider UK economy.”

Comment

In refusing to publish the costly reports from IBM and McKinsey the Department for Work and Pensions makes the  assumption that the Universal Credit IT programme will be better off without disclosure. But does the  DWP know what is best for the Universal Credit project?  Is the DWP’s own record on project delivery exemplary? Some possible answers:

–  The DWP has a history of big IT project failures, some of which pre-date the “Operational Strategy” project in the 1980s to computerise benefit systems. MPs were told the Operational Strategy, as it was called, would cost about £70om; it cost at least £2.6bn.  Today, decades later, the DWP still has separate benefit systems and relies on “VME” mainframe software that dates back decades.

– NAO reports regularly criticise the DWP’s management of projects, programmes or  suppliers. One of the latest NAO reports on the DWP was about its poor management of a contract with Atos , which does fit-to-work medical assessments.

– The DWP hasn’t broken with tradition on the awarding of megadeals to the same familiar names. Though Universal Credit is said to be based, in part, on agile principles, Accenture and IBM are largely in control of the scheme and the department continues to award big contracts to a small number of large companies. HP, Accenture, IBM and Capgemini are safe in the DWP’s hands.

–  The NAO has qualified the accounts of the DWP for 23 years in a row because of “material” levels of fraud and error.

So is the DWP in an authoritative position to say that the taxpayer and the Universal Credit IT project are better off without disclosure of consultancy reports when the DWP has never done it differently; in other words it has never disclosed its consultancy reports?

Can we trust what DWP says?

Without those reports being put in the public domain can we trust what the DWP says on the success so far of the Universal Credit programme?

Unfortunately departments cannot always be trusted to tell the truth to the media, or Parliament, on the state of major projects.

In 2006 the then health minister Liam Byrne praised the progress of the NHS National Programme for IT, NPfIT. He told the House of Commons that the NPfIT had delivered new systems to thousands of locations in the NHS. “Progress is within budget, ahead of schedule in some areas and, in the context of a 10-year programme, broadly on track in others.”

That was incorrect. But it was what the Department of Health wanted to tell Parliament.

Now it is the DWP that is praising Universal Credit and it is Liam Byrne criticising the programme. This time Byrne may have a point. The problem is we don’t know; the DWP may or may not be telling the truth – even to its Work and Pensions Secretary Iain Duncan Smith.

It would not be the first time ministers were kept in the dark about the real state of big IT projects: ministers were among the last to know when the Rural Payment Agency’s Single Payment Scheme went awry.

And while the NPfIT was going disastrously wrong, progress on the programme was being praised by ministers who included Caroline Flint, Lord Hunt, Lord Warner, John Reid, Andy Burnham, Ivan Lewis and several others. Even a current minister, Simon Burns, gave Parliament a positive story on the NPfIT while the programme was dying.

So while DWP spokespeople and Iain Duncan Smith praise the Universal Credit IT programme can anyone trust what they say? Though Duncan Smith sits on an important DWP steering group on Universal Credit, does he know enough to know whether he is telling the truth when he says the programme is on track and on budget?

At arm’s length to ministers, officialdom owns and controls the facts on the state of all of the government’s biggest projects – and the facts on Universal Credit’s IT programme will continue to stay in locked cupboards unless the Information Commissioner rules otherwise, and even then the DWP will doubtless put up a fight against disclosure.

The IBM and McKinsey reports were so well hidden by the DWP that, for a time, it didn’t know it had them.

The DWP gave the reasons below for rejecting our appeal against the decision not to publish. The DWP’s arguments against publishing the reports on Universal Credit are the same ones that, hundreds of years ago, were used to ban the publication of Parliamentary proceedings: that reporting would affect the candour of what needed to be said. That proved to be nonsense.

By hiding the reports the DWP gives the impression it doesn’t want the truth about Universal Credit to come out – leaving the department and Iain Duncan Smith free to continue saying that the scheme is on track. Indeed Duncan Smith said yesterday that he “has nothing to hide here”. That is evidently not true.

The reports we’d requested were:

– Universal Credit end-to-end technical review” (IBM – cost £49240).
– Universal Credit delivery model assessment phases one and two. ( McKinsey and Partners – cost £350,000).

DWP’s letter to us:

7 September 2012
Dear Mr Collins,

…You asked for a copy of the Universal Credit Delivery Model Assessment Phase 1 and 2, and the Universal Credit End to End Technical Review.

I am writing to advise you that the Department has decided not to disclose the information you requested.

The department has conducted an internal review and the information you requested is being withheld as it falls under the exemptions at section 35(1)(a) and (formulation of Government policy) and Section 36 (2) (b) and (c) (prejudice to the effective conduct of public affairs) of the Freedom of Information Act. These exemptions require the public interest for and against disclosure to be balanced.

These reports from external consultants discuss the merits or drawbacks of the UC delivery model and an assessment of whether the IT architecture is fit for purpose. This must be candid otherwise; the Department and the taxpayer will not secure value for money. Such reports can therefore be negative by nature in their outlook.

The Department considers that premature disclosure of these reports could lead to future consultants’ reports being less frank. In addition, there is a risk that this may lead to an absence of a recorded audit trail of the more candid elements. This is not in the public interest. Similarly, key staff selected to be interviewed by consultants are likely to be inhibited if they think their candour is likely to be recorded and released.

It is vital that the Department’s ability effectively to identify, assess and manage its key risks to delivery is not compromised. The willingness of senior managers to fully engage in a timely manner and support consultants assessment and assurance of key IT projects in an unrestrained, frank and candid way is vital to the effectiveness of the process.

Disclosure would also give the general public an unbalanced understanding of the Programme and potentially undermine policy outcomes, cause inappropriate concern (which in turn would need to be managed) and damage progress to the detriment of the Government’s key welfare reform and the wider UK economy.

While we recognise that the publication of the information requested could provide an independent assessment of the key issues and risks, we have to balance this against the fact that these reports includes details of ongoing policy formulation and sensitive information the publication of which would be likely to prejudice the effective conduct of public affairs.

The Department periodically publishes information about the introduction of Universal Credit, and this can be found on the Departments website here http://www.dwp.gov.uk/policy/welfare-reform/universal-credit/

Yours sincerely
Ethna Harnett

We have appealed the DWP’s refusal so the matter is now before the Information Commissioner’s Office.

Universal  Credit programme on course for disaster – Frank Field

Has the DWP lost £400,000 of reports it commissioned on Universal Credit?

Millions of pounds of secret DWP reports

NAO criticises Atos benefits contract

DWP scraps £141m IT project three months after assurance to MPs

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Posted in Agile, Campaign4Change, change, change management, DWP, excessive secrecy, Freedom of Information, Government IT, HMRC, IBM, IT projects, managing outsourced services, npfit, outsourcing, Universal Credit

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IBM sues its council “partner”

Posted on 06/09/2012 | 3 comments

By Tony Collins

Earlier this week we reported IBM’s disclosure that it is in dispute with Somerset County Council, its lead partner on a joint venture Southwest One.

In  its annual statement on Southwest One, a joint venture owned by IBM in which Somerset County Council is the lead partner, the company said that a dispute with its partners had gone to mediation which had failed.

Now it turns out that the dispute has escalated: IBM, in the form of Southwest One, is suing Somerset County Council according to BBC online.

On its website Southwest One says how “collaboration and cooperation can help to deliver procurement savings”.  But it is largely over the level of procurement savings that Southwest One is going to court.

Southwest One’s statement

Southwest One said it had taken court action because an agreement could not be made with Somerset Country Council.

“Southwest One complies with its contractual obligations, providing a robust service to all partners which includes the identification of substantial procurement savings.

“Throughout the course of the contract, Southwest One has secured procurement savings that amount to £22 million which have been approved by all partners, with contracts in place to deliver a further £71 million of savings.

“Southwest One has also successfully achieved external recognition from the Cabinet Office for Customer Service Excellence and operates an award-winning Customer Contact Centre.”

Somerset’s statement

Somerset County Council said

“We are in disagreement with Southwest One about the quality of the procurement service and what payments Southwest One is entitled to as a result of savings made by getting better deals through the joint venture.

“As set out in the terms of the contract, we had hoped we would be able to settle this issue through mediation and negotiation.

“It is now apparent that this will not be possible and it is disappointing that we are in the position of going to court.

“It is paramount that we look after the best interests of tax payers and take action when standards of performance and quality are not being met.

“We will therefore robustly defend our position and make counter-claims where we believe we have suffered losses.

“Somerset County Council will not be commenting any further on this issue at this stage.”

Thank you to Dave Orr for drawing my attention to IBM’s legal action.

Comment

As procurement expert Peter Smith asks: what is a procurement saving? Amid a complexity of transactions the phrase “procurement saving” can mean almost anything.

Southwest One was supposed to be a partnership between IBM and three public authorities: Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police.

Now the primary beneficiaries will be lawyers … And so we plough along, as the fly said to the ox.

Links

Southwest One sues Somerset County Council

Procurement savings disputes are not unusual

IBM in dispute with partners on £585m contract

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Posted in IBM, IT-related failures, legal disputes, local government, managing change, managing outsourced services, procurement, public-private partnerships, SAP, shared services

IBM in dispute with its joint venture partners on £585m contract

Posted on 31/08/2012 | 1 comment

By Tony Collins

IBM says it is currently in dispute with the joint venture partners on a number of contractual matters relating to South West One, a joint venture between IBM and three public authorities. IBM owns the joint venture company.

South West One’s annual report says that a mediation was held on 4 and 5 July 2012 between IBM and Somerset County Council, which is the main public authority partner, on a confidential basis.

“No settlement has been reached and accordingly the board [of South West One] will be reviewing which of the remaining options in the contractual procedure should now be pursued,” says SW1’s annual report.

South West One’s report doesn’t give any detail on the “contractual matters” in dispute.

Possible matters under discussion might have included a withholding of money (the councils are expected to pay IBM about £585m over 10 years, from 2007),  contention over KPIs (IBM did not meet all of its key performance indicators and indeed met fewer of Somerset’s KPIs in 2011 than in 2010), changes to the contract which is being re-negotiated, a lack of remedial action over accounting problems in Somerset’s finance department following a major SAP implementation , a shortfall in expected savings, and the council’s extra costs of working around SAP-related problems .

It is known that a contract renegotiation has been underway for some time.

The contract was subjected to review after the Conservatives took control of Somerset County Council from the Liberal Democrats in May 2009.

The review in June 2010 found that some aspects of the contract had been successful but “figures provided do, however, tend to indicate that the anticipated procurement savings are currently falling short of projections”.

On service delivery the review said there had been “major and minor system problems and difficulties in implementation have been experienced which have often involved Somerset County Council staff in additional time and effort in working around these issues”.

It said that a “significant area of difficulty has been in relation to financial and processing components of SAP which have also had a serious effect on others outside Somerset County Council.

“As a result, there appears to have been substantial but unquantified additional direct and indirect costs incurred by the County Council and others in resolving the various difficulties encountered.

“Southwest One has also provided intensive additional resources at its own expense, notably in addressing the issues that arose in relation to the SAP phase one roll out where lessons have clearly been learned and applied to the more successful phase two implementation. More work is, however, still required as a priority in some key areas where concerns remain around the efficiency and effectiveness of service delivery and financial systems.”

South West One is dependent on the financial support of IBM to continue trading, says  company’s annual report. It adds that the “difficult political and economic environments in which the company has been operating have not shown any signs of easing”. Somerset has taken back from South West One finance, an HR advisory service, design and print.

“The difficult environment for business, both public and private, will continue to place strains upon opportunities for South West One,” said the annual report.

“There will be specific challenges in the forthcoming year due to the implementation of Universal Credit, the requirements of the Winsor report and changes in regard to the move from Police Authorities to Police Crime Commissioners.”

South West One made a loss in 2011 of £6.8m (a loss of £22.7m in 2010) and has accumulated net liabilities of £43.2m. The company can continue trading, in part because it has the support of IBM UK’s parent:  International Business Machines Corporation based at Armonk New York.

IBM owns 75% of the shares in South West One. Somerset owns 11.75%, Avon and Somerset Police Authority 8.25%, and Taunton Deane Borough Council 5%.

This article owes much to Dave Orr who has campaigned tenaciously for the facts of the South West One deal to be made known.  

Comment

The unsettled dispute suggests that the “partnership” aspect of the contract between IBM and the three public authorities – Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police Authority –  is at an end. A partnership normally implies a harmonious relationship between the parties.

Is it any surprise that things have come to this?

The South West One contract was signed in 2007, in the early hours, at a weekend, amid great haste and secrecy.  The deal was driven by a senior official at Somerset who wanted to take the council “beyond excellence”. But the joint venture had little support from many of the council staff who were seconded to South West One. Most councillors took little interest in the setting up of South West One.

IBM has found to its cost that signing a major contract with just an inner circle of enthusiasts is not enough to make such a deal work. Though some have changed many of Somerset’s councillors remain. It could be said that they deserve the deal they have got, given that so few of them took any interest in the negotiations in 2007.

Besides, it is unlikely that any joint venture which doesn’t have the support of most staff will work, which makes mutuals a potentially better shared-services option.

IBM struggles with SAP two years on – a shared services warning?

IBM-led model partnership based on SAP makes loss

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Posted in Campaign4Change, change, change management, cost reduction, culture, IBM, IT-related failures, legal disputes, local government, managing outsourced services, mutuals, openness and transparency, operational issues, outsourcing, Politics, procurement, public-private partnerships, SAP, shared services, Universal Credit

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Well done Eric Pickles – more open government to engulf councils

Posted on 29/08/2012 | 2 comments

By Tony Collins

Few people have noticed but changes to the law next month could force councils to be much more open about big spending decisions including those that involve contracting out IT and other services.

It is a pity though that similar changes will not apply to the NHS.

The Local Government Association says that councils are already more open than Whitehall which is true.

Even so some councils are innately secretive about IT-related spending decisions, and discussions about projects that go wrong. Somerset County Council was notoriously secretive about its Southwest One joint venture with IBM in 2007. The deal has not made the expected savings and has consistently made losses. IBM claims the deal is a success.

Haringey Council’s “Tech refresh” project which went way over budget is another example. Evasive answers to opposition questions and meetings in secret were the norm.

Liverpool City Council was extraordinarily defensive and secretive about progress or otherwise on its Liverpool Direct Ltd joint venture with BT. The deal included giving BT control of IT.

Better public scrutiny

Now Local Government Secretary Eric Pickles has announced that changes to the law will mean that all decisions including those affecting budgets and local services will have to be taken in an open and public forum.

Ministers have put new regulations before Parliament that would come into force next month to extend the rights of people to attend all meetings of a council’s executive, its committees and subcommittees.

Pickles says the changes will result in greater public scrutiny. “The existing media definition will be broadened to cover organisations that provide internet news thereby opening up councils to local online news outlets. Individual councillors will also have stronger rights to scrutinise the actions of their council.

“Any executive decision that would result in the council incurring new spending or savings significantly affecting its budget or where it would affect the communities of two or more council wards will have to be taken in a more transparent way as a result.”

Councils will no longer be able to cite political advice as justification for closing a meeting to the public and press. Any intentional obstruction or refusal to supply certain documents could result in a fine for the individual concerned.

The changes clarify the limited circumstances where meetings can be closed, for example, where it is likely that a public meeting would result in the disclosure of confidential information. Where a meeting is due to be closed to the public, the council must now justify why that meeting is to be closed and give 28 days notice of such decision.

Chris Taggart, of OpenlyLocal.com, which has long championed the need to open council business up to public scrutiny, said

“In a world where hi-definition video cameras are under £100 and hyperlocal bloggers are doing some of the best council reporting in the country, it is crazy that councils are prohibiting members of the public from videoing, tweeting and live-blogging their meetings.”

These are the changes to be made by the  The Local Authorities (Executive Arrangements) (Meetings and Access to Information) (England) Regulations 2012 (the 2012 Regulations) which will come into force on 10 September 2012.

– Local authorities will have to provide reasonable facilities for members of the public to report council proceedings (regulation 4). This will make it easier for new ‘social media’ reporting of council executive meetings, opening proceedings to blogging, tweeting and hyper-local news/forum reporting.

– In the past council executives could hold meetings in private without giving public notice. From 10 September 2010 councils must give 28 days notice where a meeting is to be held in private, during which time people may make representations on why the meeting should be held in public. When the council wants to over-ride the notice period, it must publish a notice as soon as reasonably practicable explaining why the meeting is urgent and cannot be deferred (regulation 5).

– A document explaining the key decision to be made, the matter in respect of which a decision would be made, the documents to be considered before the decision is made, and the procedures for requesting details of those documents, has to be published (regulations 9).

– The new regulations create a presumption that all meetings of the executive, its committees and subcommittees are to be held in public (regulation 3) unless a narrowly-defined legal exception applies.

– Where the council has a document that contains materials relating to a business to be discussed at a public meeting, members of the local authority have additional rights to inspect such a document at least five days before the meeting (regulation 16). Previously no timescale existed.

– Where the council decides not to release the whole or part of a document to a member of an overview and scrutiny committee as requested by a councillor, it must provide a written statement to explain the reasons for not releasing such document (regulation 17).

– Documents relating to a key decision including background papers must be on the relevant local authority’s website (regulations 5, 6, 7, 9, 10, 14, 15, and 21).

Comment

Well done to Eric Pickles and the coalition. These are important and welcome changes. If council decision-makers know their discussions will be open to scrutiny they may give proper consideration to risks as well as the potential benefits of big IT-related investments. With inadequate scrutiny the potential benefits often drive decisions, which was the case with the flawed setting up of Southwest One. The press office at Liverpool City Council was so used to controlling information that its spokesman was outraged at questions we asked about its outsourcing venture with BT.

But what about the NHS?

It’s a pity the NHS is not subject to the new legal changes. Few trusts are open about their big IT-related investments; and when things go wrong, as has happened with some Cerner implementations, NHS trusts tend to lock all the doors, talk in whispers and instruct their press offices to issue statements that claim “teething troubles” have been largely addressed. The trust and everyone reading the statement know it is disingenuous but the facts to prove it are kept under wraps.

Organisations such as Imperial College Healthcare NHS Trust are taking decisions about major IT upgrades that could affect the safety, health and lives of patients without proper scrutiny. Pickles may want to mention his legal innovations to Andrew Lansley.

Eric Pickles announcement on opening up council discussions and decisions 

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Posted in BT Health, Campaign4Change, Cerner, decision-making, e-health, excessive secrecy, health, health records, improving communications, IT-related failures, local government, managing outsourced services, NHS, npfit, openness and transparency, operational issues, outsourcing, Politics, public sector, public services, public-private partnerships, shared services

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