Category Archives: public-private partnerships

Who polices police IT reports?

Posted on 24/10/2013 | 5 comments

By Tony Collins

The police, and civil and public servants in central government, the NHS and local authorities criticise journalists for biased reporting – taking selected facts out of context.

They’re sometimes right.  Journalists working for national newspapers can draft an article that is diligently balanced only to find, by the time it’s published, it leaves out facts which would have complicated, blunted, or contradicted the main points.

It’s one thing for this to happen in the world of journalism. You don’t expect public bodies to report on their own affairs with a partiality that rivals out-of-context reporting by some newspapers.

But it appears to be happening so regularly that one-sided self-reporting on organisational performance may be becoming the norm in the public sector.

In the NHS subjective, positive reporting in board papers – where managers tell directors what they think they want to hear – could help to explain why Cerner patient record implementations have, for years, gone badly wrong for the same reasons.

In recent months reports without balance have been published on the performance of Avon and Somerset Police’s IT outsourcing contract with IBM. 

Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police  are minority shareholders in a private company, Southwest One,  which is owned by IBM.

Confusingly, Taunton Deane Borough Council issued positive reports about its successful partnership with Southwest One – and then it decided to take some services back in-house.

Now it has emerged – only as a result of FOI requests by Somerset resident and campaigner Dave Orr – that two independent organisations, the National Audit Office, and HM Inspectorate of Constabulary, have commented positively on Avon and Somerset Constabulary’s partnership with Southwest One, based entirely on the unaudited opinions of the police force itself.

SAP

From his FOI requests Orr learned that the Avon and Somerset’s outsourcing deal with Southwest One has not gone entirely as expected. The National Audit Office’s FOI team has released notes of a joint visit by the NAO and HM Inspectorate of Constabulary to Avon and Somerset police in December 2012.  The visit was to find out about how well Southwest One was delivering services to the police force.  

The NAO’s notes are positive in parts. They say that performance has improved considerably since the implementation of the contract.

“Implementation of SAP improving the accounts close-down process, initial issues being resolved and a good quality of service being provided regularly.”

But there is another side to the story that is not reflected in the published accounts of Avon and Somerset’s relationship with Southwest One. The NAO’s [unpublished] field notes say:

“Fewer than expected benefits have been realised from IT due to the considerably different security requirements of the Police compared to the Councils.

“It also took a long time for SAP to be implemented. There has yet to be a duty management system implemented by SWOne which is part of the contract… SAP would have benefited from some pre-launch testing or piloting.”

A letter to Orr from the Home Office appears to confirm that Avon and Somerset Police’s participation in Southwest One is an unequivocal success.

“The private sector can help to deliver police support services better and at lower cost. Every pound saved means more money for the front line, putting officers on the streets…

“In its report “Policing in Austerity: rising to the challenge [2013] Her Majesty’s Inspectorate of Constabulary identified the Southwest One partnership as being a key element in achieving savings for Avon and Somerset Constabulary while ensuring better procurement, streamlining business support processes, and ensuring better use of police officer time.

“The report also noted that the Southwest One collaboration was the first of its kind for policing in England and Wales and that to date, no other force has delivered this level of partnership with local authorities.”

A little of the other side of the story comes in the last sentence of the Home Office letter to Orr which says: “We understand that Avon and Somerset Constabulary continues to work closely with IBM to resolve any technical difficulties and improve the services provided by Southwest One.”

Indeed a table on page 155 of HMIC ‘s 2013 report Policing in austerity: rising to the challenge indicates that Avon and Somerset Constabulary has one of the worst records of any police force when it comes to savings delivered between 2010/11 and 2012/13. [Table: Key indicators of the challenge – quartile analysis.]

Southwest One began a 10-year contract providing services to Avon and Somerset Police in 2008. The services included enquiry offices, district HR, estates, financial services, site administration, facilities, corporate human resources, information services, purchasing and supply, and reprographics. The contract involves 554 seconded staff.

Comment

Police forces, councils, the NHS and central government departments need  a few Richard Feymans to report on their organisation’s performance. Feynman was a gifted scientist, MIT graduate and noble prize winner who was chosen as a commissioner to report on the cause , or causes, of the Challenger Space Shuttle “O” rings accident on 28 January 1986.

He reported with such independence of mind and diligence that his hard-hitting findings were not considered acceptable to be included in the main report of the Presidential Commission of inquiry into the accident.  Feynman had to be content with having his findings published as an appendix to the Commission’s report – and an edited appendix at that.  

He suggested in his book “What do you care what other people think?” that his appendix was the only genuinely balanced part of the official inquiry report. 

“For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled,” said Feynman.

One of his questions was whether “organisation weaknesses that contributed to the [Shuttle] accident [was] confined to the solid rocket booster sector, or were they a more general characteristic of NASA.”

One of Feynman’s conclusions:

“It would appear that, for whatever purpose – be it for internal or external consumption – the management of NASA exaggerates the reliability of its product to the point of fantasy.”

If such exaggeration happens at NASA it can happen in UK police force IT reports, and in board papers on the performance of councils and NHS trusts.

When journalists get it wrong it’s usually to their eternal regret. In the public sector positive unbalanced reporting is so “normal” that hardly anyone involved realises it’s a deviant practice. The US author Diane Vaughan coined a phrase for such corporate behaviour.  She called it the normalisation of deviance.  

It’s surely time for public bodies to move away from the norm and start reporting on their performance, and the performance of their outsourcing other private sector contracts, with balance, objectivity and independence of mind.   

If managers knew that reports on the progress of their contracts would be audited for impartiality and competence over organisational self-interest, perhaps they would have a greater incentive to avoid badly thought through outsourcing deals and IT implementations.

Is this why some council and NHS scandals stay hidden for years?

NAO report “Private sector partnering in the police service”

Dave Orr’s HMIC FOI requests and answers

NAO’s FOI responses on Avon and Somerset Police

5 Comments

Posted in Campaign4Change, Government IT, IT-related failures, local government, NHS, openness and transparency, operational issues, outsourcing, oversight, private sector lessons for the public sector, project management, public sector, public services, public-private partnerships, SAP, supplier relationships

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Does outsourcing make corruption more likely?

Posted on 17/10/2013 | 7 comments

By Tony Collins

Few journalists want to write about corruption in local government unless they have specific evidence from a court case. Which helps to explain why a well-researched report on the subject last week attracted little mainstream publicity, although there was a piece in the Professional section of The Guardian .

Journalists assume, perhaps like many people, that local government doesn’t have a problem with corruption. But by its nature a subtle exploitation of the opportunities provided by a lack of oversight and accountability – at worst indifference – will remain hidden.

Who would say anything to the police – and if the police were informed would they act? – if officers or councillors shaped policy or a decision in favour of a certain company, with a view to opening up a path to future employment? Could such subtle deviance be proven?

“The temptation might be exacerbated by the risk of redundancy, providing a greater incentive for officers to use their position to build a network with a view to future employment,” says last week’s report Corruption in UK local government – the mounting risks.

The report was not written by a marginal organisation. It was researched and drafted for Transparency International by Elizabeth David-Barrett, Research Fellow at Said Business School and Director, Corruption and Transparency Research Centre, Kellogg College, Oxford University. Funding was from the Joseph Rowntree Charitable Trust.

Transparency International defines corruption as the abuse of entrusted power for private gain. David-Barrett says a disturbing picture emerges of conditions in which corruption is likely to thrive, what she calls:

“low levels of transparency, poor external scrutiny, networks of cronyism, reluctance or lack of resource to investigate, outsourcing of public services, significant sums of money at play and perhaps a denial that corruption is an issue at all”.

High standards in public life are the norm but David-Barrett notes that a “feature of researching this report has been the lack of agreement among the many experts we consulted about the scale and prevalence of corruption in UK local government”.

Some argued that the cases that have come to light represent the tip of the iceberg. Others said the small number of obvious corruption cases, and their disclosure by existing oversight structures, indicated there was no iceberg.

The report makes no comment on current levels of corruption but points out that, by its nature, it will usually remain hidden. Corruption in local government does exist, says the report, and it gives a few examples that have been publicised.

Outsourcing

“If local authority employees abuse their access to insider information or their ability to shape policy or contracts whilst in office in order to create opportunities for themselves, their friends, or for private-sector companies for which they will later work, this is corrupt,” says the report.

Such corruption could manifest itself in poor services and value for money. It may shut out companies of unquestionable integrity that could offer better deals.

That said, some suppliers may be concerned about the risks to their reputation of hiring through the revolving door. One unnamed interviewee quoted in the report says:

“We’ve been approached by individuals who are retiring from local government but don’t want to stop working. They come to us and say they can help us, they have a lot of experience. We look at it very carefully and err on the side of caution if we are going to be working with that council.”

But another interviewee is quoted in the report as saying

“There are situations where local authority staff end up working for contractors and implicit agreements to scratch backs in return for contracts will arise.”

The report claims that a council officer who had written the specification for a tender for a particular contract resigned from the council and successfully bid for the contract as a private-sector supplier.

Undue influence

“Research conducted for this report suggested that revolving-door type corruption is difficult to prove, but may not be uncommon and is certainly creating suspicions which, in themselves, undermine public confidence.”

Change requests

An interviewee is quoted in the report as saying

“…the number of variations – that’s where people make money. The profit is often determined by the award of work under the framework contracts, particularly where the pricing basis is not clearly defined, so that you can end up with charging for extra work by hourly rates.”

Another interviewee said

“The sharp operator in terms of the outsourcing contractor company will have agreed a contract based on a lump sum, invariably based on a local authority which, at the time that the contract was let, was much larger.

“If you have a company which provides HR, IT and admin, where can it make its savings? If they are prepared to make the investment, they can usually make significant savings for themselves, that’s where they are legitimately making some of their profit, but if the local authority has downsized over the years, then there is less to provide.

“So if it’s a 20-year contract, every 5 years there is a review and renegotiation based around head count. But normally councils are not very good at negotiating soft-side deliverables.”

The report says that corruption can arise if favoured sub-contractors are not held accountable, or the use of sub-standard goods is overlooked, or if a corrupt company and corrupt supervising official collude to agree on price increases or changes in specifications.

“There is a key weakness in the governance of this area because the contract implementation phase is often managed by the local authority department which uses the procured goods or services, rather than by the central procurement function. This department may be unaware of the precise terms of the contract and may not notice if corners are cut.”

A procurement expert is quoted in the report as saying

“There might be a disconnect between a procurement department that does this first part [pre-tender and tender] and the ‘client’, for example, the council’s IT dept. It is the IT department that is supposed to monitor the contract, and see how it is performing, but the disconnect reduces accountability. The supplier might be able to provide sweeteners to the IT department to re-negotiate the contract without going back through the procurement department.”

Another procurement specialist said that relatively few resources are devoted to contract management.

“The central functions in local authorities often focus on contract letting and not contract management. Many of the same skills are involved, but less [sic] resources are devoted to contract management. And departments are often left to manage contracts – raising risks not just of corruption but also of inefficiency.”

Does outsourcing reduce accountability?

“When services are outsourced, local authorities retain a statutory obligation to ensure that all of the rules that would have applied to them are equally followed by the external providers. However, the extent to which that obligation is fulfilled varies… there are concerns that local government officers do not adequately monitor contract performance or respond to complaints. Councils sometimes seek to claim that decisions made by contractors on long-term contracts are beyond their control.

“Without the Audit Commission to exert pressure and with the decline of local investigative journalism, there is a risk that corruption in this area will become more common.

“The Institute for Government’s 2012 report, Commissioning for Success, argues that decisions about when to outsource need to be made on a more robust basis, that monitoring and stewardship of outsourced services needs to be strengthened, and that accountability arrangements need to be clarified.”

Auditors enfeebled?

The report says

“The system of checks and balances that previously existed to limit corruption has been eroded or deliberately removed.

“These changes include the removal of independent public audit of local authorities, the withdrawal of a universal national code of conduct, the reduced capacity of the local press and a reduced potential scope to apply for freedom of information requests. We have identified 16 areas in which we find a marked decline in the robustness of local government to resist corruption…”

The lack of independent audits is a particular concern. Audits are carried out by companies that can be sacked if they’re too critical.

“We believe that the new system – in which local authorities themselves are solely responsible for awarding their audit contracts and where there is no back-stop support for auditors who are challenging the local authority – will narrow the scope and effectiveness of local audits, while increasing potential conflicts of interest…”

External auditors risk being sued if they try to highlight suspected corruption in a report, even if they have the appetite to do it “which is less likely given their commercial priorities and the expected relative reduction in the scope of audits”.

The report goes further and says that external auditors “may face incentives to avoid undertaking investigations or raising concerns about suspicions of fraud or corruption”.

Audit professionals interviewed for this report saw these as serious concerns. One commented, “If you come down tough on a client, and it creates ruffles, you’ve got an eye to what will happen when it goes to open competition.”

Another said “external auditors now have nominal independence but they will probably feel pressure to keep their clients happy so as to avoid losing this contract, future contracts, or non-audit contracts with the local authority.”

Risks

Particular risks of corruption include:

1. public procurement at needs assessment stage;

2. public procurement at bid design stage;

3. public procurement at award stage;

4. public procurement at contract implementation stage;

5. control and accountability over outsourced services;

6. the revolving door of personnel between local authorities and private companies bidding to provide services;

7. planning discretion and influence regarding ‘permissions to build’ decisions;

8. planning discretion and influence regarding ‘changes of use’ decisions;

The report says:

“We feel it is important to emphasise, as has been noted in a number of public consultations and inquiries, that the majority of local councillors and council officers observe high standards of conduct and very few misuse their positions to further their own ends.

“There is no substitute for a commitment to ethics and integrity in public service. However, when accountability is absent, public officials may exercise their power for private ends unchecked by scrutiny, complaint, or the threat of punishment.

“Clear opportunities exist for unethical officers and members to exploit public trust for private gain. In any sector, corruption tends to increase as oversight and enforcement are weakened…

“Irrespective of how much corruption currently occurs, we believe that under the new and proposed arrangements for local government, corruption is likely to increase and there will be less reporting of that corruption.”

Media enfeebled?

The report says there is little scrutiny of local authority work by a “largely emasculated local media”; and the ballot box “provides only feeble discipline given that turnout is low and in many areas one party dominates or seats go uncontested”.

Corruption scandals over the years have revealed that individuals are sometimes able to capture local politics, exercising informal power over the local party and their political group as well as council officers, “so that they can shape policy to serve their own interests unchallenged by their peers”.

Countering corruption

The report highlights a need for:

–  Effective assessment of corruption risks;

–  Independence of the units or authorities whose duty is to prevent or investigate corruption;

–  Visible and effective whistleblowing mechanisms.  “Whistleblowing has been more effective than audit, internal monitoring, or police investigations in revealing corruption in local government … Suitable mechanisms should be established to provide an easy-to-use and confidential channel for reporting corruption suspicions or incidents.”

– The institutional will to mount effective investigation and prosecution of corruption;

– A nominated individual in every local authority who is responsible for counter-corruption and who conducts a regular corruption risk assessment and liaises closely with law enforcement authorities.

– Strong sanctions implemented against those who are caught – both legal and other;

– A commitment to transparency.

– Firms providing an audit function for local authorities not being allowed to provide other commercial and consultancy services to the same local authority.

–  Internal investigations being adequately resourced and sufficiently independent. “Internal audit teams are vulnerable to manipulation by the corrupt, and this vulnerability increases if they are under-resourced, unsupported by the leadership or have their terms of reference and freedom to investigate curtailed.”

– Strict procedures requiring officers always to report (i) major price discrepancies among procurement bids and (ii) details of contract variations to the council’s Audit Committee and senior management.

– Greater monitoring of elected officials’ interests

–  Private companies, when operating services in the public interest, to be required to comply with the Freedom of Information Act with regards to those services. Specifically audit reports from local authorities should be covered under the Freedom of Information Act or published directly as public documents.

Thank you to openness campaigner Dave Orr for drawing my attention to the Transparency International report.

Comment

Lack of firm oversight, and a tolerance of bad practice contributed to the financial crisis of 2007/8. It was normal to give mortgages to people who had no means of paying them back. Only when the crisis became manifest did people realise that what had been regarded as normal behaviour was in fact deviant.

Is there a danger of tolerance in local government to aberrant behaviour such as the shaping of policy to favour outsourcing which could later benefit some individuals?

Those who claim corruption hardly exists can point to the strong ethos of public service in many councils – and indeed countless councillors do important public work for very little money – but that doesn’t remove concerns about what may remain hidden.

Transparency International’s report rings alarm bells. It points out that auditors, the media and whistleblowers are unlikely to expose deviant practices, and are even less likely to in the future. The report suggests that local government provides unprecedented opportunities for corruption.

“The accomplice to the crime of corruption is frequently our own indifference.”  – Bess Myerson, columnist. 1974.

Corruption in UK local government – the mounting risks.

7 Comments

Posted in Campaign4Change, excessive secrecy, Freedom of Information, local government, managing outsourced services, oversight, public services, public-private partnerships

Capita has duty to promote success of Barnet contract

Posted on 03/10/2013 | 3 comments

By Tony Collins

Capita has a contractual duty to promote the success of the “One Barnet” outsourcing deal with Barnet Council – apparently without taking into account facts that may count against success.

Within the 2,400 pages that make up contracts between Capita and Barnet Council, Unison has discovered clauses that appear to put the onus on the service provider to talk up the success of Barnet’s outsourcing deal.

These are excerpts from the contracts:

“The Service Provider shall use its relationships to create advocates of the success of the One Barnet programme by informing the Department of Communities and Local Government and the Local Government Association of key milestones and achievements within the programme thereby supporting increased political awareness of the Authority and the Service Provider shall utilise its corporate and personal networks to support the communication of the success of the Partnership via appropriate case studies.”

The contract points out that the service provider has “frequent meetings across central government at official level and occasional meetings at ministerial level”. It also sits on the Public Services Strategy Board, the Whitehall & Industry Group, Reform, Policy Exchange and Localis.

“The Service Provider shall use its relationships to create opportunities for the successes of the Partnership to be promoted enhancing the profile of the Authority at strategic level across the public sector,” says one of the contractual clauses.

Thank you to Dave Orr, a campaigner for openness over local government outsourcing deals, for drawing my attention to the Barnet Council clauses.

Comment

It now seems to be official – that outsourcing deals in local government have to be perceived as successful. Perhaps these sorts of clauses in local government outsourcing contracts help to explain why the public don’t learn of failing “partnerships” and joint ventures until what has gone wrong can be hidden no longer.

This is not open government. This is a contractual expectation that the supplier’s representatives should smile, and smile broadly, whenever the subject of an outsourcing deal with Barnet is discussed, or there is an opportunity to discuss it.

Which rather undermines the credibility of the Public Services Strategy Board, the Whitehall & Industry Group, Reform, Policy Exchange and Localis if supplier’s representatives are there to pass on PR messages about their outsourcing deals, whatever the truth.

“Smile and others will smile back. Smile to show how transparent, how candid you are. Smile if you have nothing to say. Most of all, do not hide the fact you have nothing to say nor your total indifference to others. Let this emptiness, this profound indifference, shine out spontaneously in your smile.” Jean Baudrillard.

3 Comments

Posted in Campaign4Change, Capita, Freedom of Information, local democracy, local government, outsourcing, Politics, public sector, public services, public-private partnerships, supplier relationships

Taunton council to bring some outsourced services back in-house?

Posted on 27/09/2013 | 5 comments

By Tony Collins

A week after praising the Southwest One joint venture with IBM, officers at Taunton Deane Borough Council are recommending bringing some services back in-house.

Last week a report to councillors said:

 “Service delivery for TDBC, viewed in the round, is broadly on track. The majority of services perform well or extremely well (eg Customer Services). We do have concerns in some areas and we are working closely with the services in question to remedy the issues.”

Now Penny James, Chief Executive of the council, has written to staff about bringing services back in-house.

“Dear All

The Corporate & Client Services Team has over the past few months with the assistance of Southwest One (SWO) reviewed the services being provided to TDBC under our contract with SWO.

“The review has considered whether, in the light of the decisions taken by Somerset County Council to remove a number of their services from SWO and by Avon and Somerset Police to remove Property Services, TDBC [Taunton Deane Borough Council] should also consider whether services should be removed…

“The review concludes that it would be prudent for TDBC to bring back in-house the following service areas: Corporate Administration, Design & Print, Facilities Management, Finance Advisory, HR Advisory (including Learning and Development) and Property Services.  These are all services where TDBC has largely lost the benefit of shared service delivery.”

James says a formal decision will require the agreement of councillors after consultation with staff directly affected by the potential changes. The consultation will end on 31 October and a decision will be taken by the full council on 12 November 2013.

“Should the members agree to the return of these services the necessary changes are likely to be implemented early in 2014,” says James.

In a statement to Taunton’s Corporate Scrutiny Committee last week, local resident Dave Orr, who has campaigned for the full truth over the Southwest One venture to be made public, told Taunton’s councillors that the council had borrowed £3.65m in 2008 to buy SAP from IBM and Southwest One.

“That debt was to be paid out of procurement savings and should have been paid off 18 months ago. Instead, almost £1m of the debt for SAP is left, incurring interest charges that are reducing funding for our Council services.”

Orr said in the statement that Southwest One has continued to make losses and IBM has disposed of its global customer service business which adds to uncertainty over the future of the joint venture.

“Will Southwest One survive to the end of contract in 2017 or will parent company actions by IBM from the USA bring about an earlier demise? What is Taunton Deane’s response to this added uncertainty and risk?

He concluded: “Don’t throw any more money away in South West One – we can’t afford it.”

5 Comments

Posted in Campaign4Change, IBM, local government, openness and transparency, operational issues, outsourcing, public-private partnerships, SAP, supplier relationships

Is this a reason some council and NHS scandals stay hidden for years?

Posted on 19/09/2013 | 5 comments

By Tony Collins

Six years into Southwest One’s joint venture between IBM and three public authorities, the outsourced service is not a big success.  

Somerset County Council, one of the joint venture’s partners, has been in dispute with IBM, the major shareholder in Southwest One. It cost the county council £5.9m to settle, including £800,000 in costs when bringing back staff who had been outsourced.

The joint venture’s SAP-based “transformation” led to complaints of poor quality of service by some of Somerset’s finance users; the venture has consistently made losses and on the matter of savings, Somerset Cabinet member for resources, David Huxtable, said there have been some but added:

“It was a very complex contract and lots of the savings were predicated on an ever-increasing amount of money being put into public services and we know in the last four years that has gone into reverse.”

Now IBM has sold its low-margin customer care outsourcing unit which could affect the future of Southwest One.

Yet a smaller partner in Southwest One, Taunton Deane Borough Council, describes the relationship as a “success”. Reports to Taunton Deane’s councillors on Southwest One are remarkably positive.

Dave Orr an IT specialist who used to be work for Somerset County Council and has kept a close eye on Southwest One since it was formed in 2007 has drawn my attention to Taunton’s latest reports on the joint venture. When read quickly Taunton’s reports are upbeat, almost breathless with praise for the joint venture.

Below are excerpts from two reports that have been written for today’s meeting of Taunton Deane’s Corporate Scrutiny Committee.  The first is a “Procurement Transformation Update”, report to the council by Southwest One’s Chief Procurement Officer.

There are no hints of any difficulties on the contract except a comment that cutting spending will make it harder to achieve procurement savings. From Southwest One’s report to Taunton:

“Executive Summary

“As at 31/07/13, in excess of £1.8m [report’s emphasis] savings have been delivered to the Council through signed-off procurement-related initiatives brought about by Southwest One’s Strategic Procurement Service. This is up from £1.59m when last reported in January 2013.

“A further £1.364m of savings are scheduled to be delivered from these signed-off initiatives during the life of the current Southwest One contract, which expires in 2017.

“Multiple projects continue to be progressed by Southwest One Strategic Procurement Service which are expected to significantly add to the pipeline of savings. These Include initiatives for a new pool & spa at Blackbrook; Waste; Insurance; various small scale initiatives within the DLO/HPS areas .”

A second report for Taunton’s Corporate Scrutiny Committee “SouthwestOne Partnership Update report” is written jointly by a team at Taunton council and the CEO of Southwest One. Again it’s upbeat and summarises Southwest One’s performance over the last six months.

“Service delivery for TDBC, viewed in the round, is broadly on track. The majority of services perform well or extremely well (eg Customer Services). We do have concerns in some areas and we are working closely with the services in question to remedy the issues. “

The report says that the shared service model in conjunction with larger authorities provides Taunton with “much needed resilience” (report’s underlining) in service delivery, although “this has been impacted to a certain extent by changes made recently to the contract by the other partners”.

Additionally, “our secondee staff to SWO benefit from ‘assured employment’, which was offered by IBM”.

A survey of staff in June 2013 “saw marked improvements in staff morale and communication”.

Sickness absence for the financial year to the end of March 2013 was slightly down to about 9 days per full-time employee though up a little more recently.

Appendices – now for the problems

It’s only when councillors come to the report’s appendices that they will see some detail of the problems. But how many councillors will scrutinise a report’s appendices? From the Taunton report’s appendices:

“There are service and capacity issues. The helpdesk move caused significant problems, leading to an increased number of issues being raised with the Client Team from TDBC [Taunton Deane Borough Council] staff. We are closely monitoring the plan SWO [Southwest One] have put in place to fix these issues.

“Project delivery capacity and project scheduling continues to cause concern, with improved governance within TDBC highlighting this problem more acutely. Our issue tracker is currently tracking 11 escalated issues with SWOne, 6 of them with a Red RAG status.

“ SRM (Supplier Relationship Management) performance in SAP continues to be well below the required level despite the amount of focus it is receiving from SWOne. Work on a revised governance process for the SAP system is underway and looks likely to deliver a more controlled SAP Change process.”

The most serious problem – and it is not mentioned until the penultimate page of the report’s appendices – is that savings will be nowhere near the original target of £10m.

“This is red, tracked against the original [savings] £10m target. To date £2.8m has been signed-off and it is not yet clear how the lower target of £5.7m will be achieved as there are fewer savings opportunities and initiatives emanating from SWO…”

From the small print of Taunton Deane’s report it is possible to work out that the cost of the council’s SAP implementation was supposed to have been paid off by savings but hasn’t. Indeed a debt of nearly £1m is still incurring interest.

Comment

Perhaps it’s unfair to pick on Taunton Deane’s reports to councillors. The positive tone is little different to dozens, perhaps hundreds, of NHS, council and central government board reports I have read over two decades.

If you’re a director of a public authority your job is probably made harder if you’re getting self-vindicating internal reports on the organisation’s progress. It would be more helpful if management reports were neutral and objective, framed by unvarnished facts.

When you hire a roofing company and it reports back on the finished job, you want to know about the tiles that leave a gap or are loose, not the ones that fit nicely.

NHS trust reports can often be particularly one-sided, often of the type that say:

“We had 3 fatalities on the main staircase last month because of a ruptured floor lining but the overall accident rate in that part of the building is down over the last 3 years and our falls rate overall is 3% below the average for the NHS as a whole.

“Our contractor confirms that the floor lining is within KPI requirements and a repair will be effected shortly.”

It appears that those who write board reports for public authorities feel an obligation to motivate and inspire, to leave the reader feeling good, to clothe bad news in layers of good news, omit it altogether or put it in the appendix hardly anyone reads.

Is this one reason so many outsourcing and NHS scandals stay hidden for years? 

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Posted in Campaign4Change, cost reduction, decision-making, excessive secrecy, IBM, legal disputes, local democracy, local government, NHS, openness and transparency, outsourcing, public sector, public services, public-private partnerships

IT suppliers out of control of DWP on Universal Credit?

Posted on 13/09/2013 | 7 comments

By Tony Collins

The Department for Work and Pensions is investigating with consultants PwC whether poor financial controls on payments to IT suppliers have “materialised into cash that should not have been spent”.

If there is evidence the DWP’s permanent secretary Robert Devereux says the DWP will raise the matter with suppliers.

It’s rare for details of central government’s relationship with specific suppliers to come into the public domain but this has happened to some extent on the Universal Credit IT project, thanks mainly to the National Audit Office.

Last week the NAO published a summary of a PwC report into the financial management of UC’s IT suppliers. PwC’s report was circulated to MPs on the Public Accounts Committee who read out some of its contents at a hearing this week.

The Committee’s MPs questioned Devereux, his Finance Director Mike Driver, and Dr Norma Wood, Interim Director General at the Cabinet Office’s Major Projects Authority.

Wood said the Major Projects Authority noticed that suppliers, in doing user acceptance testing, were increasing their average daily rates from £500 to about £800.

Said Wood:

“We came back down to about £500, in round figures. That could mean that you have much greater quality, so one has to be careful. We didn’t have an evidence base really to be able to probe this, which is why we recommended to the accounting officer that he undertake this [PwC] investigation.”

Wood agreed with Margaret Hodge, chair of the Public Accounts Committee, that financial control of the IT companies was a “shambles”.

Hodge said: “The PwC report reads more shockingly than the NAO report in terms of the lack of financial control.” She said that the DWP had sat on the PwC report for six months [before releasing it internally], a point the department has not denied.

Hodge said the PwC report referred to:
– incomplete contracts
– incomplete evidence to support contracts
– inappropriate authorisations
– insufficient information supporting contract management
– delegated authority given to a personal assistant to authorise purchase orders on the behalf of the chair of the strategic design authority

“This is a shambles,” said Hodge. “The fear that one has is that money was clearly paid out to the four big ones—Accenture, IBM, HP and BT—which they claimed on a time basis. It was not a tight contract; it was on a time-and-materials basis, which could well have paid out for no work being done.”

Wood: “I agree with you…it is quite clear that suppliers were out of control and that financial controls were not in place. As we did the reset, we ensured that everything was properly negotiated and contracted for, so that is very tight in terms of the reset going forward, but there are definitely questions about how it was handled… As with any payments you should have a proper audit trail and they should be properly governed. They should have been properly contracted for…”

Wood said that she would use the same suppliers again. “Under proper control why not?”

Hodge said the DWP appeared to have given suppliers a blank cheque. “Last night Mr Driver [DWP Finance Director] kindly sent me a copy of the PwC report, which is even more damning in my view [than the NAO report Universal Credit: early progress], particularly on the blank cheque that you appear to have given to suppliers and the failure to keep Ministers properly informed.”

Conservative MP Richard Bacon said the findings in the PwC report were “extraordinary”. Reading from the report he said there was:
– Limited cost control
– Ineffective end-to-end accounts payable processing
– Limited control over receipting against purchase orders
– Accenture and IBM accounted for almost 65% of total IT supplier spend, as at February 2013.
– Purchase orders for Accenture and IBM do not allow for granular verification of expenditure as they are raised and approved by value only. Thus, they cannot
be linked to individual delivery and grades of staff use. Receipting is completed by reference to time sheets. However, this confirmation is not complete and/or accurate as the majority of those individuals receipting do not have the capability and capacity to verify all time recording. This constraint has resulted in expenditure being approved with a nil return in many cases. As a result, payments may be made with no verification.

Bacon added:

“After all the history that we have had of IT projects going wrong, how can this
extraordinarily loose control—it is probably wrong to use the word “control”—how can this extraordinarily loose arrangement exist?”

Devereux, who was criticised by Hodge on several occasions for not answering questions directly, replied: “I will try at least to explain what was going on. Let me take you back to the process that we were operating. The process we were operating was seeking to work through, in the space of a four-week period -”

Hodge: “You are doing it again, Mr Devereux.”

Devereux: “I am afraid that I cannot answer the question without giving some facts.”

Hodge: “So is PwC wrong?”

Devereux: No, no. PwC is correct, but I am about to explain what else was going on. I have just had a long set of sessions with PwC, who as we speak, are doing further work for me to establish one particular, critical thing that you will want to know, which is that other things were being checked in the background here that enabled PwC to go back and do some ex post calculations about exactly how much was being paid for each of the outputs we had. It is absolutely right to say-”

Bacon “… Is it not utterly elementary that when you are paying a supplier for having given you something, you know what it is you are paying and what you are getting for it? This is basic!”

Devereux said his department had a resource plan agreed with Accenture (the main UC IT supplier) which was based on a computer model on what a piece of work would involve.

“The contract …in any one month was being based on that calculation of how much work we were likely to put into it in advance. Then the signing off of invoices was indeed based on looking at monthly time sheets. I agree with you that that is not a satisfactory position.”

Bacon: “What is amazing is that you said you did not know any of this until the supplier-led review brought it to you in the summer of 2012. This had been going on for quite a while. There was apparently nothing going on in the Department that was flagging this up. Internal assurance, internal audit—where was it?”

Devereux: “… I conclude this, and it is my responsibility—that more than one line of defence has gone wrong. We have talked so far about whether the programme was properly managing itself.”

Bacon: “This is extraordinary, and it is horribly familiar…it is absolutely central to your job as accounting officer to be sure that you have got lines of defence that are operating effectively. That is part of your job, isn’t it?”

Devereux: “It is part of my job.”

Bacon: “So to be surprised by this is an extraordinary admission, is it not?”

Devereux: “I can only be surprised by this if I am not getting signals from my second line of defence—my financial controllers—that they are worried about what is going on.”

Bacon: “You do sound as though you are blaming everybody underneath you, I am afraid.”

Devereux: “I do not intend to do that, but you are asking me what I knew and what I didn’t know. I am trying to take you through the process by which I am aware of things, and the action I have taken on them.”

Bacon: “But my point is that it was your job to know. It is your job to manage this. You are effectively the chief executive of the DWP.”

Devereux: “I am the chief executive of the DWP, I am the accounting officer, and I am accountable for it. Correct.”

Bacon: “But you didn’t know, did you?

Devereux: “I didn’t know on this, no.”

Hodge revealed that one of the conclusions of the PwC report was that there was a lack of evidence of ministerial sign-off of some contracts. PwC tested 25 contracts over £25,000, and only 11 could be traced with approval; and evidence of value for money provided to the Minister was limited in some cases.

Hodge said: “Basically it [PwC] found that you failed to consult properly with Ministers in signing off the IT contracts.”

Driver: “I think we had a weakness in the process that was operating…It has not always been possible to find all of the paper evidence to confirm a decision. We hold our hands up; we need to improve that. We have now significantly improved the control arrangements that operate within the Department ahead of ministerial sign-off.

“We have also significantly improved the arrangements that apply to any sign-off with the Cabinet Office. I personally chair what is called a star chamber group, which looks at all contracts before we seek authority from the Cabinet Office to go forward…”

Devereux: The work that I was trying to describe to the Chair earlier, which PwC is doing now, is to establish whether the risks we have been running, given this lack of control, have actually materialised into cash that should not have been spent…

“In the event that there is evidence of that, we will go back to the suppliers, obviously. I do not want to run this argument too hard, but there is a set of control weaknesses here which gives rise to a risk of loss of value for money. I accept that.”

MPs dig hard for truth on Universal Credit IT

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Posted in Accenture, Agile, BT, Campaign4Change, DWP, Government IT, HP, IBM, IT-related failures, Major Projects Authority, outsourcing, oversight, procurement, project management, public sector, public services, public-private partnerships, PWC, Universal Credit

Sandwell Council and BT to agree “exit plan” on outsourcing contract

Posted on 28/08/2013 | 2 comments

By Tony Collins

Sandwell council and BT have agreed to work out an exit plan to their “partnership”, in which services will transfer back to the council in March 2014.

The 15-year £300m deal, which was signed in 2007, is being cut short by seven years. The outsourcing deal includes ICT, HR, project management, finance, procurement, and customer service.

The Express and Star reports a memo to council staff saying

“Discussions between the council and BT have been taking place to determine the way in which the current contractual arrangements will be brought to a close to both parties’ mutual satisfaction.

“As the 30-day notice period ends [Sandwell served a termination notice on BT on 16 July 2013], we will be entering into a transitional period.

“During this time, BT will continue to manage Transform Sandwell and deliver services. Also during this period, BT and the council will work on an agreed exit plan which will prepare all relevant services for handover in March 2014.”

The memo said that it would be at that point that any arrangements for staff working for Transform Sandwell to legally transfer their contracts would take effect.

The council’s ruling cabinet decided to begin the process to end the BT contract because it now has fewer workers, due to redundancies prompted by government cuts.

The authority wanted to pay BT less to reflect the reduced volume of work. It has also been unhappy with BT’s service and began dispute proceedings last September.

Forward-looking

On its website BT describes Sandwell as a “forward-looking” council. BT has used its “Transform Sandwell” partnership as a reference site for prospective outsourcing customers.

 BT’s website publicity about Transform Sandwell reads much like the statements made by other councils and their outsourcing supplier in the early years of a partnership.  

BT says the  council saw “leading edge CRM technology as crucial in enacting all elements of the Sandwell formula”. 

BT’s website continues:

“A thriving, sustainable, optimistic and forward-looking community – that’s where Sandwell Council aims to be in 2020.

“Powering that journey is one of the UK’s most exciting regeneration programmes, with well over £1 billion of inward investment. It’s a significant undertaking. Nearly 300,000 citizens give Sandwell the fourth highest population density of 34 districts in the West Midlands.

“Against that backdrop, Transform Sandwell is a 15-year strategic partnership between BT and Sandwell Council. It seeks to revolutionise how Sandwell does business and delivers public services – with a remit that includes ICT, HR, project management, finance, procurement, and customer service.

“The Transform Sandwell partnership has delivered a £45 million investment in technology, a new regional business centre, and the creation of hundreds of new jobs.

“Not only having to meet the needs of Sandwell and its citizens, Transform Sandwell also needs to fulfil government demands. One example of the latter is for councils to meet citizens’ needs as far as possible the first time they call, in pursuit of cost savings and better use of resources.

“Meanwhile the move from comprehensive performance assessment (CPA) to comprehensive area assessment (CAA) requires councils to gather more customer feedback on their performance. In both cases, the contact centre holds the key.

“The key is to ensure that more of people’s needs are met in a single interaction, while making better use of self-service and electronic channels. Similarly, gathering customer feedback means making the most of day-to-day interactions rather than labour-intensively creating new ones.”

Local government has moved on

Council leader Darren Cooper said it was in both organisations’ interests to end the Transform Sandwell partnership. He said

“The world of local government has moved on significantly since 2007. We now need a different plan.”

TechMarketView’s John O’Brien said BT will now be doing all it can to salvage the situation and the potential reputational harm.

“This case shows the complexities of managing long-term IT/BPO deals, where client requirements can change so dramatically during the course of the programme. Local government will be particularly challenging right now because of the ongoing cutbacks to public spending.

“Such large, long-term deals are increasingly out of favour in local government today. Instead councils are moving  towards smaller more select sourcing of services from a variety of suppliers, particularly as their first generation deals come up for renewal.”

Comment

Clearly Sandwell has done its sums and decided it will be better off without BT. 

Could any 15-year outsourcing deal cope with all major changes over that period? HMRC’s outsourcing deals with HP and then Capgemini have coped well over 19 years so far – with no catastrophic lapses in service and the suppliers’ being able to help handle much policy-based change. But HMRC has had the money to spend vastly more than it originally intended.  

Sandwell needs to spend as a little as it can and BT is not a charity. At the start of  big local authority outsourcing deals it is usual for both sides to gush publicly about savings,  investment in transformation, and new jobs. But at some point the supplier needs to make money.

However the contract is configured, perhaps with council staff working more efficiently on the supplier’s other contracts, the outsourcing deal needs to turn in a profit – even if the pre-contract PowerPoint graph shows costs reducing over the whole term of the deal. 

The danger with single-supplier long-term outsourcing deals is that the council, in essence, receives a loan from the supplier to enable, almost from the start, a simultaneous service transformation, cost cutting and new jobs. But the supplier must recoup the money at some point.      

A single-supplier outsourcing deal can seem to get a council out of a hole. It offers savings and transformation at a time the council most needs them. Who cares about the latter period of an outsourcing deal when none of the original participants are likely to be around to be answerable for a poor deal?

It would take an extraordinarily strong public service ethos for councillors and officers to reject a supplier’s promises that look so attractive in the early years.

It is unclear what costs Sandwell will have to pay to end the deal. Will it have to pay BT compensation for its investments in the contract, as well as exit costs? 

 

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Posted in BT, Campaign4Change, CRM, legal disputes, local government, managing outsourced services, operational issues, outsourcing, public-private partnerships

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Has 2 decades of outsourcing cut costs at HMRC?

Posted on 12/08/2013 | 2 comments

By Tony Collins

If HMRC’s experience is anything to go by, outsourcing can, in the long-term, at least triple an organisation’s IT costs.

When Inland Revenue contracted out its 2,000-strong IT department to EDS, now HP, in 1994 it was the first major outsourcing deal in central government.

Costing a projected £1.03bn over 10 years the outsourcing was a success, according to the National Audit Office in a report in March 2000. The deal  enabled Inland Revenue to bring about changes in tax policy to a tight timetable, said the NAO’s Inland Revenue/EDS Strategic Partnership – Award of New Work.

But costs soared for vague reasons. Something called “post-contract verification” added £203m to the £1.03bn projected cost over 10 years. A further increase of £533m was because of “workload increases including new work”. Another increase of £248m was put down to inflation.

By now the deal with HP had risen from £1.03bn to about £2bn.

When the contract expired in 2004, HM Revenue and Customs and HP successfully transferred the IT staff to Capgemini. The new 10-year contract from 2004 to 2014 (which was later extended 2017) had a winning bid price of £2.83bn over 10 years.

So by 2004 the costs of outsourcing had risen from £1.03bn to £2.83bn.

The new contract in 2004 was called ASPIRE – Acquiring Strategic Partners for Inland Revenue. HMRC then added £900m to the ASPIRE contract for Fujitsu’s running of Customs & Excise systems. By now there were about 3,800 staff working on the contract.

The NAO said in its report in July 2006  – ASPIRE, the re-competition of outsourced IT services – that Gateway reviews had identified the need for a range of improvements in the management of the contract and projects.

Now costing £7.7bn over 10 years

The latest outsourcing costs have been obtained by Computing. It found that annual fees paid to Capgemini under ASPIRE were:

  • 2008/09:  £777.1m
  • 2009/10:  £728.9m
  • 2010/11:  £757.8m
  • 2011/12:  £735.5m
  • 2012/13:  £773.5m

So IT outsourcing costs have soared again. The original 10-year costs of outsourcing in 1994 were put at £1.03bn. Then the figure became about £2bn, then £2.83bn, then £3.7bn when Fujitsu’s contract was added to ASPIRE. Now annual IT outsourcing costs are running at about £770m a year – £7.7bn over 10 years.

So the original IT running costs of Inland Revenue and Customs & Excise have, under outsourcing contracts, more than tripled in about two decades.

Comment:

What happened to the prevailing notion that IT costs fall over the long-term, and that outsourcing brings down costs even further?

Shouldn’t HMRC’s IT costs be falling anyway because of reduced reliance on costly Fujitsu VME mainframes, reductions in data centres, modernisation of PAYE, and the clearance of time-consuming unreconciled items on more than 10 million tax files?

HMRC knows how much profit Capgemini makes under “open book” accounting. It’s a margin of about 10-15% says the NAO. Lower margins are for value-added service lines and higher margins for riskier projects. If the overall target profit margin of 12.3% is exceeded, HMRC can obtain an equal share of the extra profits.

There were 10 failures costing £3.25m in the first 15 months. Capgemini refunded £2.67m in service credits in the first year of the contract.

It’s also worth mentioning that Capgemini doesn’t get all the ASPIRE fees. It is the lead supplier in which there are around 300 subcontractors – including Fujitsu and BT.  Capgemini pays 65% of its fees to its subcontractors.

The outsourcing has helped to enable HMRC to bring in self-assessment online and other changes in tax policy. But HMRC’s quality of service generally (and not exclusively IT) is mixed, to put it politely.

The adjudicator for HMRC who intervenes in particularly difficult complaints identifies as particular problems the giving out of inaccurate information and recording information incorrectly.

She says in her 2013 annual report:

“I am disappointed at the number of complaints HMRC customers feel they need to refer to me in order to get resolution. My role should be to consider the difficult exceptions, not handle routine matters that are well within the capability of departmental staff to resolve successfully. At a time of austerity it is also important to note that the cost of dealing with customer dissatisfaction increases exponentially with every additional level of handling.”

RTI

There are complaints among payroll companies and specialists that real-time information  is not working as well as HMRC has claimed. There seems to be growing irritation with, for example, HMRC’s saying that companies owe much more than they do actually owe. And HMRC has been sending out thousands of tax codes that are wrong or change frequently – or both.

HMRC says it has made improvements but the helpline is appalling. It’s not unusual for callers to wait 30 minutes or more for an answer – or to hang on through multifarious automated messages only to be cut off.

That said there are signs HMRC is, in general, improving slowly. Chief executive of HMRC since 2012 Lin Homer is more down-to-earth and slightly more willing to own up to HMRC’s mistakes than her predecessors, and the fact that RTI and the modernisation of PAYE has got as far as it has is creditable.

But is HMRC a shining example of outsourcing at its best, of outsourcing that cuts costs in the long term? No. A decade of HP and a decade of Capgemini has shown that with outsourcing HMRC can cope, just about, with major changes in tax policy to demanding timetables. But the costs of the outsourcing contracts in the two decades since 1994 have more than tripled.

What about G-Cloud? We look forward to a change in direction from the incoming head of IT Mark Dearnley (if he has much say).

**

A Deloitte survey “The trend of bringing IT back in-house” dated February 2013, said that 48% of respondents in its Global Outsourcing and Insourcing survey 2012 reported that they had terminated an outsourcing agreement early, or for cause, or convenience. Those that took IT services back in-house mentioned cost reduction as a factor. Deloitte said factors included:

– the need for additional internal quality control due to poor quality from the outsourcer

– an increase in the price of service delivery through scope creep and excessive change orders.

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Posted in Accenture, BT, Campaign4Change, change management, CIO, Fujitsu, G-Cloud, Gateway reviews, Government IT, HMRC, IT projects, IT-related failures, managing outsourced services, operational issues, outsourcing, oversight, procurement, project management, public sector, public services, public-private partnerships, supplier relationships

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BT gets termination notice on £300m outsourcing contract

Posted on 22/07/2013 | 4 comments

By Tony Collins

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

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

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

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

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

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

Government Computing quotes a council document on the dispute as saying

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

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

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

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

Guaranteed

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

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

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

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

Massive mistake?

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

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

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

A BT spokesman told the Halesowen News

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

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

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

Sandwell has 72 councillors, 67 of which represent Labour.

Comment

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

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

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

No such thing as a free lunch

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

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

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

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

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

Sandwell and BT consider end of strategic partnership – Government Computing

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Posted in BT, change management, efficiency savings, ERP, IT projects, IT-related failures, law, legal disputes, local government, managing outsourced services, outsourcing, private sector lessons for the public sector, public sector, public services, public-private partnerships, risk, shared services, supplier relationships

The story of Southwest One

Posted on 16/07/2013 | 2 comments

By Tony Collins

Dave Orr worked in a variety of IT and project management roles for Somerset County Council and retired in 2010. For years he has campaigned with extraordinary tenacity to bring to the surface the truth over an unusual joint venture between IBM, Somerset County Council, a local borough council and the local police force.

Now he has written an account of the joint venture and the lessons. It is published on the website of procurement expert Peter Smith.

Orr questions whether Southwest One was ever a good idea, since it was formed in 2007.

The deal has not made the savings intended, a SAP implementation went awry, the contract has been mired in political controversy and criticism, Southwest One has repeatedly lost money, and many of the transferred staff and services have returned to the county council, and some services returned to the borough council. IBM and the county council have ended up in a legal dispute that cost the county council £5.5m to settle. Southwest One was not exactly the partnership it set out to be.

The contract may show how an outsourcing deal that doesn’t have the support of the staff being transferred is flawed fundamentally from the start (which is one reason few people will be surprised if a 10-year £320m deal for Capita to run Barnet Council’s new customer service organisation [NSCSO]  ends in tears).

These are some of Orr’s points:

–  Like other light-touch regulators, the Audit Commission repeatedly gave Southwest One positive reports, without ever qualifying the accounts, even as problems with SAP implementation mounted in 2009 and procurement savings were not being made in line with forecasts.

 – The contract called for transformation based upon ‘world-class technologies’, yet all of the IT Service was placed into Southwest One with no IT expertise back in the Somerset County client (until after a poor SAP implementation in 2009). Was the lack of retained IT skills in the Somerset County client behind the formal acceptance of a badly configured SAP implementation?

– Large scale outsourcing over a long contract of 10 years or more requires an ability to foresee the future that is simply not possible to capture in a fixed contract. In a 10-year contract, there will be three changes of national government and three changes of local government. That is a great deal of unpredictable change to cope with via a fixed, long-term contract.

– Local Government will always be at a disadvantage in resources and skills, to a large multi-national contractor like IBM, when it comes to negotiating, letting and managing a complex multi-service contract.

– What was the culture of Southwest One (75% owned by IBM)? Was it private, public or a hybrid? The management culture remained firmly IBM, yet the councils and police workforces were seconded and remained equally firmly public sector rooted. There is such a thing as a public service ethos. In fact, Southwest One was run like a mini-IBM based upon global divisions, complete with IBM standard structures and processes. Southwest One seconded employees were not allowed anything like a full access to IBM internal systems, thus creating additional complexity, as “real” IBM employees relied entirely upon on-line systems.

–  Mixed teams in a single shared service were hard to amalgamate. This meant the IBM managers of Southwest One never really gained the sort of command & control of the multi-tier workforces that their bonus-oriented model needs to function. “I doubt that IBM would ever again contemplate the seconded staff model over the TUPE transfer model,” says Orr.

– Somerset County Council ran with a “thin” client management team that, in Orr’s view, did not have sufficient expertise or enough staff resources to effectively manage this complex contract with IBM. The councils relied upon definitions of “partnership” that meant one thing to the councils’ side and quite another thing to IBM, says Orr.

– In Southwest One, Somerset County Council handed their entire IT Service over lock, stock and barrel. “Can you really consider IT as wholly a ‘back office’ service? Many successful private Companies see IT as a strategic service to be kept under their own control.”

– The real savings might have been found in optimising processes in big departments (like Social Care, Education, Highways) that lay outside of Southwest One’s reach. “The focus on IT rather than service processes was another flaw in the model.”

Orr  concludes that nobody who played a major part in the Southwest deal has in any way been held to account for what has gone wrong.

Southwest One – the complete story from Dave Orr

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Posted in Campaign4Change, change management, excessive secrecy, FOI, Freedom of Information, governance, IBM, IT-related failures, legal disputes, local government, managing change, managing outsourced services, openness and transparency, Politics, private sector lessons for the public sector, procurement, project management, public-private partnerships, SAP, shared services, supplier relationships