Category Archives: outsourcing

Parts of report on Cornwall’s planned BT joint venture are missing

Posted on 06/12/2012 | Leave a comment

By Tony Collins

Cornwall Council’s officers have written a 134-page report on the options available to councillors for confronting budget cuts.

It will help councillors  decide at a full council meeting on 11 December whether to ask officers to conclude a joint venture with BT.

The report “Partnership for Support Services – Options Appraisal” is clearly a well-meant attempt to convince councillors that the best option is a deal with BT. The current plan is for BT to set up a subsidiary it would own completely, that would deliver ICT and other services back to the council and parts of the local NHS. BT has no plans for the council to be represented on the subsidiary’s board.

The new report is strong on the benefits of a joint venture with BT, such as guaranteed jobs and savings. Absent, though, are  important parts on costs, risks and local authority experiences on joint ventures and private sector partnerships. 

Secret risks

The report says that the “risks inherent in SP 1 [the joint venture with BT] has been submitted to the Council” by legal firm Eversheds.  A final version of the Eversheds report will be signed off by council officers before any invitation to tender is issued to BT. But there’s no indication that this report on risks will be shown to all councillors.

Secret appendix 

The council’s own procurement costs relating to the proposed joint venture, and further projected costs, are escalating.

In July 2011 the costs to Cornwall’s taxpayers of planning the joint venture  were estimated at £375,000. That figure rose to £650,000, then to £800,000, then £1.8m and now stands at  £2.1m.

“The current forecast estimate of the costs of the procurement process now stands at £2.1m. This is funded from the corporate improvement budget,” says the new report.

There are further costs arising from the partnership, says the report. One example is the pension fund for the transfer of staff which will cost about £10m over 10 years.  “There will also need to be additional budget to create a robust client team [to manage the BT contract],” says the report. This would cost between £400,000 and £700,000 a year.

“Both of these additional costs have been taken into account in the option analysis contained in appendix 2.”

But appendix 2 is missing in the public version of the report.

Also missing  

The report suggests that strategic partnerships are “nothing new”. It adds:

“BT – and other councils (sic) – have been involved in them for more than 10 years. Similarly the outsourcing market is mature and well understood. The UK local government IT and Business Process Outsourcing market is the biggest outsourcing market in the world and there are over 100 deals in operation. Risks are sometimes managed well and sometimes managed badly. The risks have been mitigated by using expert advisors and the Council has senior officers who understand this territory well.”

But the report does not mention that some councils in the mature local authority market have, after poor experiences, outcast joint ventures and one-size-fits-all outsourcing deals. Neither does it mention that the Cabinet Office disapproves of partnerships that lock public sector organisations into one major supplier.

These are some of the partnerships not mentioned in Cornwall’s report:

– Suffolk County Council signed a £330m joint venture deal with BT in 2004. By late 2010 the cost had risen 26% to £417m.  A BT spokesman told  the Guardian that the additional costs were due to “…additional services contracted by the council”.  Suffolk has decided not to renew the BT contract. It will instead outsource to separate specialist firms. Assistant director director strategic finance Aidan Dunn said in a council report that “efficiencies can be achieved by dealing with individual suppliers who are experts in specific areas of back office service provision, rather than contracting with back office generalists”.

He added: “Our analysis suggests that it is not necessary to have one large contract, but that our requirements would best be serviced via three separate contracts: finance and HR, ICT and services to schools.”

– Somerset County Council’s loss-making joint venture is in dispute with its main supplier IBM. Council leader Ken Maddock said the joint venture was “failing to be flexible enough in the changing financial landscape”.  He did not blame the workforce but the “contract, the complications, the failed technology, the missed opportunities, the lack of promised savings”.

– Birmingham City Council is, in effect, locked into a “Services Birmingham” contract with Capita that began in 2006 and lasts for another nine years. The contract has been largely successful but the relationship is deteriorating in some areas, according to a report which was published this week.  The two sides have many problems to overcome.

– Essex County Council has taken civil legal dispute advice over its deal with BT. The European Services Strategy Unit quotes the Financial Times as saying that a 10-year contract began 2002 but in January 2009 Essex Council served BT with a notice of material breach of contract. A spokeswoman for the council said: “We decided it wasn’t value for money and we weren’t getting the level of service we required, so we decided to terminate the contract.”

Analysis of other parts of latest Cornwall report

The options appraisal report says it was produced in a tight timeframe which has limited its usefulness to councillors. But who has imposed a tight timeframe? Councillors have not imposed any specific time limit. It could be that some council officers have. But aren’t artificial time limits usually the prerogative of double-glazing salesmen who offer 60% off if you sign straight away? Cornwall’s report says:

“… it is recognised that the necessity for the Chief Executive to fulfil the mandate of Council in such a tight timeframe means that it has been difficult in terms of ensuring full Member engagement…

” … As stated, the timeframe has been particularly challenging and the report would have benefited from more discussions with and input from Members but it is hoped that the Council has sufficient analysis and background information to make a decision on the best way forward.”

Health partners

The report says of the council’s three proposed health partners that “all are keen to promote closer integration, improve services and deliver savings through the SP 1 [BT joint venture] proposal”.

This isn’t quite what “all” the health partners said.

Kevin Baber, chief executive of Peninsula Community Health in St Austell said the only realistic option was a BT joint venture (though the authority has begun telehealth talks outside the partnership). The other two health authorities were not so definite in their support for a BT joint venture – and one of them  wished expressly not to influence Cornwall Council’s debate.

Lezli Boswell, Chief Executive of Royal Cornwall Hospitals NHS Trust, said:

“It would not be appropriate for me to comment on the Options Appraisal as [the trust] has not been involved in the preparations process and also would not want to appear to be influencing the Council’s debate…”

Phil Confue, chief executive of Cornwall Partnership NHS Foundation Trust, said that the option for a BT joint venture appeared to offer to a real opportunity  to deliver value for money. But he made no commitment to the partnership even if Cornwall votes in favour of a deal with BT.  He said the trust did not want, as an NHS body, to lobby the council over its decision.

“The decision whether to pursue the Strategic Partnership will be made by
our Trust Board of Directors, once the Council has made its decision on the 11 December 2012.”

As the Cornwall options appraisal report concedes, health trusts have the option of outsourcing services to Shared Business Services, a successful shared services organisation run by Steria.

Comment:

Most of the councils that went into joint ventures with high hopes amid promises of large savings have become disillusioned. Such deals are characterised by an anxiety for a deal to be signed as soon as possible, followed by rising costs, lack of flexibility, high prices when there is a need for major legislative and organisational change, and the discovery that ending a contract early carries risks of disruption to services, high re-transitional expenses, legal action and sunk costs.

Some may wonder if the unforeseen rising costs of procurement – they have increased five-fold – may be a sign of what could happen with costs after a contract is in place.

Given the lessons from the growing number of joint venture failures, one would have thought that council officers would be suspicious of supplier promises.  Not at Cornwall. The officer-enthusiasts for the BT deal don’t mention any of the joint venture contracts that have failed. Indeed those officers prefer the claims of suppliers that failures are in the eyes of trouble-makers, media scaremongers and union activists.

Why does so much enthusiasm at the start of contracts dissipate once realities set in? Could it be that the best marketing people are the easiest to sell to? Do the officials that want success so much overlook or minimise the risks and past poor experiences of others?

Links to Cornwall Council’s options appraisal and agenda for 11 December council meeting on the blog of campaigner Cornwall councillor Andrew Wallis.

Cornwall’s joint venture procurement costs escalate

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Posted in BT, Campaign4Change, IT-related failures, local democracy, local government, managing outsourced services, outsourcing, Politics, public sector, public services, public-private partnerships, shared services, supplier relationships

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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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Are HMRC’s IT costs under firm control?

Posted on 20/11/2012 | 1 comment

By Tony Collins

 The costs of IT outsourcing at HMRC have soared despite a well-written contract that promised large savings. When, as Inland Revenue, the department first outsourced IT in 1994, annual IT costs were around £100m.  Now it has emerged that HMRC’s  annual IT spending was running at more than  £1bn between April 2011 and March 2012.  Only some of the 10-fold increase is explained by new work.

Are there lessons for Barnet, Cornwall and other public authorities as they ponder large-scale outsourcing, given that HMRC did almost everything right and still faces a costly contractual lock-in to major IT suppliers until 2017 – a 13-year outsourcing contract?

HMRC has made some extraordinary payments to its outsourcing suppliers since 2011  – more than mid-way through a 13-year contract.

HMRC figures collated by former Inland Revenue IT employee and now payroll specialist Matt Boyle of Research4paye show that HMRC paid its “Aspire” IT partners £964.2m in a single year, between April 2011 and March 2012.

HMRC paid a further £42.6m of invoices from Serco for one year of website development and support. These figures do not include all of HMRC’s IT costs between April 2011 and March 2012, such as invoices from Accenture for maintenance fees and for work relating to Customs.

IT costs soar

1994. £100 annual IT costs. Inland Revenue first outsources its 2,000-strong IT department to EDS. The annual cost of the 10-year contract is about £100m a year according to the National Audit Office.

2004.  £250m annual IT costs. The end of the EDS contract. HMRC’s annual IT costs have risen to about £250m a year (National Audit Office figure).

2004. £280m annual IT costs. Capgemini wins from EDS a new 10-year HMRC outsourcing deal called Aspire (Acquiring Strategic Partners for the Inland Revenue). Capgemini’s main subcontractors are Fujitsu and Accenture. Capgemini’s bid is for £2.8bn, an average of £280m a year.

2005. £539m annual IT cost.  Inland Revenue merges with Customs and Excise to form HMRC which takes on £1bn Fujitsu IT contract from Customs. The first year of the Aspire contract costs £539m, nearly double the expected amount. The NAO blames most of the increase on new work.

2007. In return for promised savings of £70m a year from 2010/11, HMRC extends Capgemini’s contract by three years to 2017. There’s an option to extend for a further five years.

2010. £700m annual IT costs. Under FOI, HMRC releases a statement saying that the Aspire annual contract costs are running at about £700m.

2011/12. £964.2m annual IT cost. HMRC’s list of invoices from its Aspire suppliers for one year between April 2011 and March 2012 add up to £964.2m. A further £42.6m is invoiced by Serco for website development and support.  This puts HMRC’s IT annual outsourcing costs at 10 times higher than they were when Inland Revenue let its first outsourcing deal in 1994. Some of today’s HMRC systems pre-date 1994 [BROCS/CODA].

Aspire – a good contract?

It appears that HMRC did everything right in its Aspire contract. Indeed the National Audit Office has found little to criticise. Aspire is committed to “open book”, so Capgemini, Fujitsu and Accenture must account for their costs and profit margins.

The contract has some innovations. The suppliers’ margin is retained by HMRC until trials are successfully passed. Even then 50% of the margin is retained until the final Post Implementation Trial about six months after implementation.

Charges under Aspire are split into two categories: “S” and “P”.  The former is mainly a commodity pricing arrangement with unit prices being charged for all service elements at a commodity level (e.g. per Workstation, volumes of printed output etc). The charge to HMRC will vary by volume of demand for each service line.

The ‘’P’’ series charge lines are charged on a man-day basis. Application development and delivery is charged mainly on what HMRC calls an “output basis utilising function points“.

Where IT spending goes

There are more than 800 invoices from Aspire covering the year from April 2011 to March 2012. Some of the invoices are, individually, for tens of millions of pounds and cover a single month’s work.

The invoices cover services such as data centre output, data centre operations, systems software maintenance, software coding changes, licences, IT hardware and data storage.

For some of the Aspire invoices HMRC gives a brief explanation such as £57.6m – “June monthly payment for development and support”. But some of the biggest invoices have little explanation:

May 2011:  invoice for £24.7m – IT Software. A further invoice of £61.7m – “data output prod”.

June 2011: invoice for £55.8m – “data output prod”. A further invoice £56.8m – “data output prod”.

On top of these payments HMRC paid about 24 invoices of management fees in the year. Typical monthly invoice amounts for Aspire management fees ranged from about £390,000 to £2.9m.

There are dozens of Aspire invoices in the year for IT software changes to support day-to-day HMRC’s business. Quite a few of those invoices for software changes are each for tens of thousands of pounds but more than 30 invoices for IT changes in the year 2011/12 each bill more than £100,000. The biggest single invoice in the same year for software changes to support day-to-day HMRC business is  £469, 964 in December 2011.

Transparency

Matt Boyle collated the figures on HMRC’s IT spending from spreadsheets published by HMRC . All credit to Francis Maude, the Cabinet Office minister, for making government departments publish details of their invoices over £25,000.

And credit is due to Matt Boyle for collating and totalling HMRC’s IT-related invoices. Boyle says he is surprised at the high costs of Aspire. He is also surprised that the contract excludes web development and support.

Comment:

HMRC appears to have done nearly everything right and still its IT outsourcing costs are soaring, apparently uncontrollably.

It is hard to avoid the conclusion that the department and taxpayers would have been much better off if Inland Revenue had not outsourced and instead spent the millions it pays annually on, say,  management fees, to building up an in-house IT force and expertise.

Central government seems now to shun big outsourcing deals but local authorities including Barnet and Cornwall are at the stage Inland Revenue was in 1994: they are considering saving money by outsourcing major IT and other services to one main supplier.

If they learn from HMRC’s experiences – and the sums it has had to pay to outsourcing partners – it may take a little of the sting out of HMRC’s enforced prodigality.

[It may also be worth mentioning that some including Boyle ask how it is possible to credibly justify a spend of £46m in one year on a website.]

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Posted in Campaign4Change, Fujitsu, governance, Government IT, HMRC, managing change, outsourcing, Real-Time Information, Universal Credit

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Barnet’s undemocratic BT/Capita outsourcing plan?

Posted on 05/11/2012 | 1 comment

By Tony Collins

Barnet Council is remarkably defensive about its plan to outsource IT, customer services, finance, payroll, HR, corporate procurement and other services to BT or Capita, by the end of December 2012.

After the controversy in Cornwall about whether the full council or an inner circle of councillors – the “Cabinet” – should make momentous decisions affecting the council’s future, Campaign4Change asked Barnet whether it was putting its decision to outsource to BT or Capita to the full council.

Cornwall’s decision on whether to outsource to BT or CSC was going to be taken by the Cabinet alone but Cornwall’s leader Alec Robertson changed course and decided to put the idea of a mega-outsourcing deal to the full council.

Straightforward question

So would Barnet council’s decision to award a mega-outsourcing contract to BT or Capita go to full council for a vote? It was a straightforward question for Nick Griffin, Media Officer, Chief Executive’s Service, Barnet Council. He did not answer the question directly.

His reply:

“There is quite a bit of information available on our website. Please see the links (at the bottom of this post)  …

But was the information on the council’s website out of date? We wanted to be clear on the facts. We asked Griffin again. His reply was polite but insistent: he would not say whether the council was putting its outsourcing decision on BT or Capita to the full council.

Neither would he answer directly another straightforward question on local democracy: Has the decision to approve/reject One Barnet [transformation programme] gone to full council for a vote?

From the council’s website it appears that all key decisions on the outsourcing plans have been made by Barnet’s Cabinet’s alone. This is from the council’s website:

“A decision will be made by Cabinet in late 2012 as to which bidder [BT or Capita] will win the contract. The new provider will start to run the NSCSO [New support and Customer Services Organisation] in spring of 2013.”

Barnet’s website lists as the relevant previous decisions those taken by the council’s Cabinet alone.

– Cabinet, 29 November 2010 – approved the One Barnet Framework and the funding strategy for its implementation.

– Cabinet …2 March 2011 – Customer Services Organisation and New Support Organisation Options Appraisal

– Cabinet … 29 June 2011 – approved the New Support and Customer Services Organisation business case and the start of the competitive dialogue process…

So one of the most momentous decisions affecting the council, its staff and council services is not being made by the full council.

Undemocratic?

Barnet Council comprises 38 Conservatives, 22 Labour, and three Lib-Dem councillors. Most of them will not have a say on the outsourcing of:

  • Customer Services
  • Estates
  • Finance and Payroll
  • Human Resources
  • IT Infrastructure and Support
  • Corporate Procurement
  • Revenues and Benefits
  • Commercial Services.

The decision will be taken by the Cabinet’s 10 councillors, and perhaps not all of them. Is this local democracy in action?

Accusations of Maladministration?

Given that the decision to outsource to BT or Capita could have a major effect on the council’s future for good or ill, and is controversial –councils including Suffolk and Cornwall are rethinking large outsourcing plans – could Barnet’s decision not to put its outsourcing plans to a vote of the full council leave the Cabinet open to accusations of maladministration if things turn sour?

Links provided by Nick Griffin (1)  (2)

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Posted in BT, Campaign4Change, decision-making, local democracy, local government, openness and transparency, outsourcing, oversight, Politics, procurement, public sector, public services, public-private partnerships

Somerset’s dispute with IBM is “escalating”.

Posted on 22/10/2012 | 3 comments

By Tony Collins

Somerset County Council says in a paper due to be discussed next week that its dispute with the IBM-led Southwest One joint venture is “escalating” and that there is a need to “restore a deteriorating relationship with a supplier”.

The poor relationship is in contrast to the mutually content position in 2008, one year after Somerset signed its unique, ground-breaking deal with IBM. At that time Somerset refused a request by Unison for a copy of the business case for Southwest One saying, “We can record, however, that all our cost and performance criteria within the business case were met or exceeded”.

Now Southwest One and the council are in a legal dispute on several fronts. The council’s paper for its cabinet meeting next week says:

“The history of Southwest One [SWo] poor performance is continuing; during 2012 the Client Team have been holding SWo to account; resulting in the serving of 8 contractual notices to SWo.

“Over the past 3 weeks SWo have commenced disputes on several other matters, issuing further financial claims and disputing Somerset County Council’s warning notices.

“With a number of escalating disputes, we need to take action to:

• Conduct proceedings

• Respond to these disputes and restore a deteriorating relationship with a strategic supplier.

• Seek to improve value for money and service performance and ensure it is fit for purpose.

• Continue to assertively manage Southwest One to ensure it meets its contractual obligations.

• Maintain Partner relationships

Somerset’s officers recommend to the cabinet that:

“The Leader of the Council authorises the Chief Executive, Deputy County Solicitor, Director of Finance & Performance and other relevant SCC officers to serve and proceed with the defence and any counterclaim, to carry out all subsequent steps in the litigation process and any engagement in connection with the disputes.”

The paper  adds:

“It is also recommended that the Leader of the Council and the Chairman of Scrutiny Committee agree urgency in respect of the above recommendation…

“The Deputy County Solicitor is authorised to institute defend or settle any legal proceedings and to lodge an appeal. This report seeks authorisation to be given to SCC officers to serve and proceed with the Defence and any Counterclaim, to carry out all subsequent steps in the litigation process and any engagement and commit to financial considerations (such as legal costs) in connection with the disputes…

“Due to the contractually binding timetable for resolving disputes SCC officers need a mandate. Risks will be reported and managed through SCC’s governance arrangements.”

A budget exists to support the council’s approach.

The report says that the council is in disagreement with Southwest One over the quality of the procurement service and what payments it is entitled to as a result of savings made by getting better deals through the joint venture. “We had hoped we would be able to settle this through negotiations, but unfortunately that has not been the case.”

Comment:

In mid-2007, about two months before Somerset signed its deal to set up Southwest One with IBM, an external consultancy report on the proposals by consultants “Maana” praised the “immense amount of research and thinking” that went into the IBM bid.

It said that the “whole of the procurement process, from market investigation to preferred bidder selection has been well planned and executed”. Maana added:

“The evaluation process has been more extensive, well thought through and executed than any we have seen before.”

And look what happened to the best laid plans. Many saw at the time that the joint venture was too complicated and put too much responsibility IBM’s way, but the council pushed aside their concerns.

Who now is responsible for the failure of Southwest One? Nobody.

Thank you to Dave Orr whose information made this article possible.

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Posted in Campaign4Change, IBM, IT projects, IT-related failures, legal disputes, local government, managing change, outsourcing, oversight, Politics, procurement, public services, risk, shared services

Cornwall council’s deputy leader resigns over “inevitable” outsourcing plans

Posted on 10/10/2012 | 2 comments

By Tony Collins

Jim Currie, the Conservative deputy leader of Conservative-controlled Cornwall County Council, has resigned in objection to the authority’s outsourcing plans.

“It’s an inevitability at this stage. I have done everything I can to try to influence the process and exhausted that,” he said in an email to the County Council’s leader Alec Robertson.

“The sensible thing is to step back if you’re out of step with the rest of the Cabinet.”

Parts of Currie’s email were published by Thisiscornwall.co.uk.

Some in the media suggest that Cornwall may make a u-turn over its plan to outsource support services to either BT or CSC. But Currie’s email suggests the opposite. He told Robertson “I know you will never let go.”

A small group of Cabinet councillors had expected to take the final decision to sign a deal with BT or CSC in November – a deal worth hundreds of millions of pounds – but they must now put the decision to a vote of the full council, which is expected to happen later this month.

The full council will be able to vote on the deal because independent councillor Andrew Wallis organised a petition which has collected 5,800 signatures. Any petition that collects a minimum of 5,000 signatures must go to the full council for debate and a vote.

The petition said: “We the undersigned call on Cornwall Council to reverse its decision to proceed with a Strategic Partnership for Shared Services until such time the majority of the elected members of Cornwall Council have voted to support the proposals.”

The petition is expected to be debated at a full council meeting on 23 October. Robertson has said he will abide by the decision of the full vote.

Extracts from Currie’s email to Robertson:

“I feel I have pushed the cause of retaining council control over the joint ventures as far as I can with the Cabinet.

“The financial risks involved with the rush into the new joint venture proposals are unacceptable. The JV [joint venture] is basically too large to control.

“We have wasted £42m+ on the unitary [authority], £42m+ on the incinerator and we are now proposing to risk a great deal more on the joint venture.

“I welcome your somewhat ambiguous offer to respect full council decisions on the 23rd October but I know you will never let go.

“I could not leave local government with billions of pounds of Cornish taxpayers’ money at risk and on my conscience… Alec, this matter has never been personal.”

Currie told Thisiscornwall  “Honestly, I have done everything I can do. I have been out on a limb for a very long time and will just have to let the thing take its course and it’s down to the membership and that’s what the council is supposed to be about.

“It’s absolutely the courage of my convictions and nothing else. The amazing thing is how many other people on the council think the same way across all parties. It’s tremendously non-political.”

Jeremy Rowe, leader of Cornwall’s Liberal Democrat group, told the BBC,

“We’re in a situation where Cornwall Council is becoming a laughing stock. There’s an administration there now which has this bunker mentality. It’s completely out of touch.”

Comment:

Will the inner circle of pro-outsourcing Cabinet members win a vote of the full council on 23 October, which would enable them to go ahead and sign a deal with BT or CSC?

The pro-outsourcing group may hope that most Conservative councillors and a few from the other groups will vote for a deal, perhaps knowing or caring little about it.

When the outsourcing was last debated by the full council, in September, many of Cornwall’s 123 councillors were either away or abstained. A majority of those who were there voted against the deal – but the Cabinet has ignored that vote.

The next time the deal is debated the pro-outsourcing Cabinet councillors may win the vote if most councillors turn up and vote to support the Cabinet whether or not they know much of the proposals.

The council comprises 47 Conservative councillors, 37 liberal democrats, 31 independents, six Mebyon Kernow, one Labour and one vacant seat.

Campaign4Change has argued that the pro-outsourcing Cabinet has, in defending the deal, quoted the arguments of the bidders, which shows signs of naivity.

Currie is right to say that the deal, as  proposed, is extraordinarily risky – and he is right to resign, if only to make a point to those councillors who are undecided on whether the council should outsource.

A mega-outsourcing plan beset by naive fanaticism?

Council deputy leader resigns over £300m outsourcing deal

Cornwall Council – our [shared services] journey

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Posted in BT, Campaign4Change, CSC, local government, outsourcing, public services, public-private partnerships, shared services

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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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 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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