Is Francis Maude starting to spin – without realising it?

Posted on 16/03/2012 | 6 comments

By Tony Collins

Francis Maude is, perhaps, the most effective Cabinet Office minister in decades.

If the business world divides into two main types of character, black and white, and grey – neither being better or worse than the other –  Maude is black and white.

He wants clarity. He shuns subtlety and complexity. He has no time for civil service sophistry and equivocation, or the coded language of some supplier representatives. He wants cuts in the cost of contracts and doesn’t want to hear long arguments on why things are not that simple. He had deep reservations over doing a new deal with CSC over the NPfIT.

A strength of Maude and his colleagues at the Cabinet Office has been the absence, or at least scarcity, of exaggerated and unsubstantiated statements of efficiency savings, of the sort made repeatedly during Labour’s tenure.

Is that beginning to change?

In the past fortnight Maude has made two major claims that are not based on published evidence.

• Maude said spending on SMEs has risen from 6.5% to 13.7%.  It’s not clear how that figure is calculated. There’s a good analysis of the tenuousness of the claim by Peter Smith of Spend Matters. How much of the increase in SME work is down to unaudited claims by large companies that they are giving their SMEs more work?

• He said that £200m has been cut from Capgemini’s Aspire contract with HMRC. [Aspire also involves Fujitsu and Accenture.] He has received much good publicity for the claim. Said the Telegraph yesterday:

“He [Maude]  announced that ministers had successfully renegotiated one deal on computers and tax systems for HM Revenue and Customs.

He said the new contract, with Capgemini, would save £200 million on the deal previously agreed.”

Last year Mark Hall, deputy CIO at HMRC was reported as saying that the Aspire contract was on course to save more than £1bn. Is the £200m quoted by Maude in many news articles this week new?

And none of the articles mention the total cost of the Aspire contract – so from what is £200m being cut?

At one point, according to Mark Hall, the estimated cost of Aspire rose to £10bn from its original estimate of £2.83bn over 10 years. This means that cost increases on the Aspire contract are measured in billions – which puts the £200m savings figure mentioned by Maude into context.

And have Maude and his team offered Capgemini anything in return for a price cut, such as an improved profit margin? [The contract is on an open-book accounting basis]. This week’s Cabinet Office statement on the £200m cut gives no help here. An HMRC FOI response in 2010 and an NAO report in 2006 show that costs of Aspire are fluid. They change according to internal demand; and pricing arrangements are complex. HMRC has refused FOI requests to publish the contract so how can anyone put the claimed £200m savings into a contractual content?

In 2007 negotiations between HMRC and Capgemini extended the 10-year contract by three years, to June 2017; and there’s an option to extend Aspire  for a further five years to 2022. In return for the contract extension Capgemini has already guaranteed savings of £70m a year and a further £110m a year from 2012. Are these savings in addition to the £200m a year Maude has announced? Or the £1bn savings mentioned by Mark Hall?

The good news is that HMRC’s CIO is Phil Pavitt who is a natural sceptic of big outsourcing deals. If anyone is going to achieve genuine savings on Aspire it is Pavitt. Indeed he has given some details of his negotiations. But the contractual context remains abstruse.

Comment

Doubtless Maude believes the figures he has announced on SMEs and Aspire are correct but without substantiation they will mean little to anyone except the media. Maude, perhaps, needs to trust his own cautious instincts than listen too much to his advisers. Otherwise he’ll begin to sound more like Labour ministers who repeatedly made claims the NAO found difficult to substantiate.

The important and impressive work Maude is doing to cut the costs of running government should not be trivialised and debased by spin. Announcements on what he is doing to cut costs and make government more open are usually helpful. But Maude should the first to differentiate the real – in other words the factually corroborated – from aggrandising and flimsy political claims.

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Posted in Campaign4Change, compliance with spending review, cost avoidance, efficiency savings, Freedom of Information, Government IT, managing change, managing outsourced services, outsourcing, Politics, procurement, public sector, public services, reducing cost strategically, supplier relationships

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Change division helps Bendigo Bank transform IT project outlook

Posted on 14/03/2012 | Leave a comment

By David Bicknell

A report from Australia has suggested that scrapping the chief information officer’s (CIO) role and replacing it with a change division enabled Bendigo Bank in Australia to slash its IT project failure rate.

According to an article in ITNews, establishing the change division  prompted better project delivery priorities and outcomes over the past two years, and may have  improved the rate of successful projects by 50 percent.

ITNews reported that, “In early 2010, the bank’s CIO Andrew Watts became the executive of a new ‘change’ division, which included 140 technologists, such as business analysts and project managers.

“Those technologists joined some 60 staff from elsewhere in the business, with the division aimed at overseeing business architecture and project delivery across ‘people, process and technology’.

“Other technologists formed a rebranded ‘technology services’ team, led by general manager Gary Doig and charged with managing the bank’s IT operations.”

Bendigo Bank believes that high business ownership across its projects has become  one of the most important foundations to deliver project success.

Related Links

Reuters: Banks team up to cut tech spend burden

ITNews (Australia) site

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Posted in change, change management, CIO, IT projects

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Lessons from “stupid” NHS IT scheme – Logica boss

Posted on 13/03/2012 | 1 comment

Some wise words from Andy Green, CE of Logica, on lessons from the NPfIT and other failures

By Tony Collins

Andy Green, CE, Logica

Andy Green, chief executive of Logica, speaking to the BBC’s Evan Davis about the NHS National Programme for IT, NPfIT, said:

“It is a stupid thing for the supply chain to have answered, and it’s a stupid thing for the customer to have asked for.”

Green was speaking on Radio 4’s The Bottom Line about corporate “cock-ups and conspiracies”. Other guests were Phil Smith, chief executive of Cisco UK and Ireland, and entrepreneur Luke Johnson.

Green, who joined Logica as CEO in January 2008, said he was in one of the bidders for the NPfIT when he was at BT.

The plan, he said, had been to put the same system into every hospital but later foundation hospitals were able to opt out of the NPfIT.

“Half way through [the NHS IT programme] foundation hospitals were invented,  and suddenly foundation hospitals did not have to go with what the NHS said at all”.

He added: “There were fundamental errors in the whole procurement process, and then real difficulty in delivering what had been promised.”

Evan Davis said the NHS IT scheme had cost billions, achieved little and had been running for years. He asked Green: “What’s the story?”

Green said some things went well including the supply of a network that connects pharmacies and doctors. But …

“What  had been promised by the supply chain was fantastic software that had not been designed yet that was going to completely revolutionise hospitals and delivering that proved to be horrendous… in the end it is foolish to set out on a programme that is going to take seven years with a fixed procurement up front, which says we all know everything about it …”

Lessons

Green spoke of the need for the supplier to understand exactly what the customer wants and whether it is deliverable before the parties agree to draw up a project specification.

“I think the world is beginning to learn about incrementalism. Let’s do something that we can all see and understand.

“Some of our clients we now work with in common teams – we call it co-management – and only when we have worked out exactly what is going to work in the client, and we can deliver, do we specify it as a project.

“Those things tend to go a lot better. We have got used to the fact that we don’t know everything.”

Luke Johnson

Luke Johnson, who is a former chairman of Channel 4, criticised IT suppliers for not getting it right often enough.  “I have bought quite a lot of projects and been involved as a customer many times… As a customer it is a very scary thing because clearly you are not an expert. Your providers are experts and yet they do not seem to be able to get it right often enough it seems to me, given how much they charge.”

Green said there is a high failure rate in the IT industry. “The client sets out one view at the beginning and then they have to change. The sensible defence to this is the partitioning into smaller items and relationships.

“We bluntly always think of our clients over the long run. You need to know people so that you can sit down and have a decent conversation. Too often when these things start to go wrong everybody runs for the contract. Experienced buyers and sellers do not do that: they run for each other and they talk it through, and they work it out, and they put it back on track.

“It’s value that matters. It’s doing something that really changes Patisserie Valerie’s business. [Luke Johnson is chairman of Patisserie Valerie.] What can you do that would transform that. If you can get that done, then if it over-runs by 20% it probably does not matter.”

Luke Johnson: “It depends how much money you’ve got.”

Lowest-price bids

Phil Smith, Cisco

Phil Smith of Cisco said government often has the biggest problems because “they squeeze so much in procurement there is little good value and goodwill left”.He said that on good projects problems are tackled by cooperation but “if every piece of value has been squeezed out before you procure it, your only option is to get something back from it”.

Beware procurement experts

Johnson said if procurement experts take control, and their mantra is to save money, it can often lead to trouble. “I fear that in many aspects of business, it gets down exclusively to price rather than value.

“Quality is out the window. They [procurement experts] can show a saving so they have justified their bonus but the supplier may be rubbish.”

Green said government is in a difficult position when a project starts to go wrong. “You are stuck in a procurement and the poor individual responsible is almost certainly facing a union or a consumer group or a doctor who doesn’t want the thing to happen anyway.”

Evan Davis made the valid point that the costs of projects in the public sector have to be underestimated to get approved. Realistic estimates would be rejected as too costly.

“… The person who is championing this project has to demonstrate to superiors that it is not too expensive. It is only by taking the cheapest bid and starting the thing off that you can sell the project higher up and of course down the line it costs a heck of a lot more.”

Luke Johnson: “We all know in many sectors there are providers that will take things at cost or even less with a view that they will somehow bulk it out and make a margin on the way. They know the client will need variations.

Innovation means taking risks

Luke Johnson: “If you want an innovative society, if you want one that is willing to take risks, to generate new technologies, new jobs, new businesses, then it involves failures and cock-ups.

“I think the British have got vastly better in recent years in accepting that as part of the journey and that is incredibly healthy.”

BBC R4’s The Bottom Line – Cock-ups and conspiracies.

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Posted in Campaign4Change, change management, Government IT, health records, IT projects, IT-related failures, managing change, managing outsourced services, NHS, npfit, operational issues, private sector lessons for the public sector, procurement, project management, supplier relationships

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US Government opens its books on IT projects

Posted on 12/03/2012 | Leave a comment

By David Bicknell

The Office of Management and Budget in the US has gone some way to opening up the books on IT investments to public scrutiny with the updating of the Agency’s IT Dashboard.

The move,  announced by Federal Chief Information Officer Steven VanRoekel, makes publicly available detailed IT investment information in support of the President Obama’s FY 2013 Budget.

The Obama Administration launched the IT Dashboard in 2009 to create  more transparent and open government.

As VanRoekel says in his blog,  “By publicly posting data on more than 700 IT investments across the Federal government, we armed agencies with the tools needed to reduce duplication in IT spending, strengthen the accountability of agency CIOs, and provide more accurate and detailed information on projects and activities. We also gave Americans an unprecedented window into how their tax dollars were being spent.”

VanRoekel says the latest dashboard will provide greater transparency of IT investment performance and empower CIOs to intervene in troubled projects sooner. Changes include:

Making the Dashboard more accessible: the Dashboard will now provide access to individual projects and activities associated with an investment, link investments to funding sources, and include visualisations to track investment performance from year-to-year.

Identifying duplication: New data on what kind of services each investment provides will help US agencies identify and address duplication in their IT portfolios.

Improving data quality: Improved validations and warnings will prevent erroneous data from coming into the system,  while new data quality reports will help agencies identify improvements they can make to their existing data

More data and tools: More datasets are now being made available, as well as additional tools to enable the public to participate by downloading and building their own applications.

According to VanRoekel, the  transparency enhancements will improve the way US taxpayers’ dollars are spent. He argues that by using the IT Dashboard and Techstat accountability developments to focus on the most challenged critical projects, agencies and the Office of Management and Budget have driven reforms that have saved taxpayers upwards of $4 billion since the initial launch.

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Posted in Campaign4Change, Gateway reviews, government, Government IT, IT projects, oversight, US Government

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London Borough of Hammersmith & Fulham mutual process ‘continuing’

Posted on 09/03/2012 | Leave a comment

By David Bicknell

The London Borough of Hammersmith & Fulham told Campaign4Change today that the council is continuing to work its way through tenders received in January in response to an invitation to tender (ITT) for  “an innovative independent sector partner (ISP) to participate and invest in the creation of a Mutual Joint Venture Company.”

The mutual, which is due to be up and running in September 2012, will cover services to schools across three London boroughs working together: Hammersmith & Fulham, Kensington & Chelsea, and Westminster City  Council.   

In response to a Campaign4Change call checking on progress, a spokesperson for the London Borough of Hammersmith & Fulham said the tender evaluation process was ‘continuing’, as normal.

The ITT which closed in January, had indicated that “the ISP will take responsibility for the creation of the joint venture company, whose shareholding will be shared between the ISP and the employees (held on the employees’ behalf in a trust). The Contracting Authority will have a contractual arrangement with the Mutual Joint Venture company to provide some of the services, supplies and works listed….. for a period of not less than 4 years.”

Hammersmith & Fulham Pathfinder tender hints at September start

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Posted in Campaign4Change, mutualisation, mutuals, public sector, public services

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Lean Procurement – an early bird analysis

Posted on 08/03/2012 | Leave a comment

 In this guest blog, John Pendlebury-Green and John Jones from strategic sales architects Landseer Partners discuss the Government’s plans to introduce lean procurements, an approach which should shorten procurement times, reduce bidders’ costs and encourage greater SME participation

Lean procurement is being piloted by the Government with six pilots underway across various departments. We at Landseer Partners have been extensively involved with one of these pilots. Also, we have discussed the emerging characteristics with service providers participating in other lean procurements.

Although it is early days, there are some emerging trends that the Government and bidders would do well to take on board for lean procurements to become successful and ubiquitous across government.

So, what are these emerging trends? Our “early bird” experience of being on a lean procurement pilot suggests that:

·         Lean procurements, by their very nature in attempting to reduce the overall procurement timeline significantly, have the potential benefit of reducing bidders’ costs. They also have the potential to reduce the opportunity to discuss in sufficient detail important commercials such as contract schedules and contractual terms and conditions.

·         Both the client and potential suppliers need to plan and resource better a lean, competitive dialogue. That means supplier submissions need to be submitted much sooner than in previous procurements. It also means that client bid reviews and quality assurance need to be undertaken much quicker and more efficiently.

·         There is an even greater need for strong leadership and decision-making on both the client and supplier side i.e. the need for empowered individuals is greater in lean procurements than in a traditional competitive dialogue. Decisions need to be taken swiftly in order to maintain pace in the procurement.

·         Stress levels for all parties can be high. All parties will be “doing more” in “less time” – so outcomes need to be kept in perspective with a view to the quality of deliverables/schedules not being compromised and

·         Bid teams need to be better resourced at the outset, especially in terms of having the right subject matter experts being available at the appropriate time. This seems to be especially so in the case of lean dialogue.

Finally, our experience, short though it is, suggests that incumbent suppliers, by virtue of their incumbent status, have a slight advantage over other short-listed competitors. They have greater knowledge of the existing services supplied. They need less time in the “data room” and are often able to provide a greater level of detail in their dialogue responses, simply by virtue of knowing the service in greater detail.

In summary, it is still very early days in the lean procurement world.  The obvious benefits of shorter procurement times (and hence reduced costs on all sides) though welcome, might actually mask additional costs that could subsequently emerge.  

Landseer Partners     http://www.landseerpartners.com/

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Posted in government, Government IT, procurement, public sector

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Why prompt decision-making is critical to the success of IT projects

Posted on 07/03/2012 | Leave a comment

By David Bicknell

Research from the US-based IT projects specialist Standish Group suggests latency between decisions is a major contributor to project delays and failures.

“Projects get behind a day at a time. My observation is they get behind because people cannot make decisions. Therefore, it is important to establish a process that enables you to quickly gain the decision information you need,” says Mike Sledge, chief executive of corporate performance company Robbins-Gioia.

There are literally thousands of decisions that have to be made during the life of a project. Standish Group research shows that for every $1,000 in project cost, the organisation will need to make 1.5 decisions. A $1 million project will produce 1,500 decisions, while a $5 million project will have 7,500 decisions. During a typical medium-size ERP system implementation the organisation will have to make more than 10,000 decisions.

“The key reason for making fast decisions has nothing to do with always making right decisions. It has everything to do with being open to mistakes,” says Richard Mark Soley, chairman and CEO of the Object Management Group (OMG). 

Standish Group took the case of two US companies in the same sector that were both implementing customer relationship management (CRM) systems. Both companies were similar in size, number of accounts, and salespeople. They even used the same software package.

Both started to implement a CRM system about four years ago. One finished in six months and the other has still not finished. The key difference was the one that finished in six months had a hard stop and had set up a rapid decision process to reduce decision latency.

Standish Group goes on to say that while the volume of decisions comprising a project can be a problem, it is actually the time that lapses from when an issue first arises until a decision is made that causes most difficulties.

For example, if the average decision latency is only one-hour, then the added decision time to a $1 million project is six months (1,500 decisions = 1,500 hours). On the other hand, if the project team can cut the latency time in half, it adds only three months to the project time (1,500 decisions = 750 hours).

With this insight into the corrosive effect of slow decision-making on project success, and after years of research in project management performance, the Standish Group decided to develop The Dezider, a real-time information decision support solution to help organisations cut decision-making time in half through greater stakeholder participation and more information.

The intention behind The Dezider is to connect individuals with their co-workers, stakeholders, peers, superiors, friends, and family as an aid to decision-making.

One way to increase decision velocity, decrease latency, and increase people’s participation is to simplify large issues by breaking them into smaller issues and decisions. (You may recognise something of an Agile-like approach to decision-making here)

The Dezider enables the ability to create a series of minor or micro issues and to construct a stream of responses to achieve quicker, easier, and more comprehensive answers. Each of these micro issues can then be directed to the proper level, role, and/or responsible person(s).

What usually happens in organisations is that people are busy doing their main jobs and often put off project tasks such as participating in project decisions. The Dezider offers a feature that gently reminds project participants that they have an outstanding issue and the team is waiting for their response.

Another feature within Dezider provides the ability to match the type of decision with the roles of the people making the decisions. For example, a technical decision should have a technical person making the decision. On the other hand, a business decision should have a business person making the decision.

There are more details about the impact of decision-making on projects, and about The Dezider on the Standish Group blog. Standish Group is probably best known for its Chaos research into project management leadership and best practices.

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Posted in Campaign4Change, decision-making, IT projects, managing change, project management

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SMEs – when to choose them and when not

Posted on 07/03/2012 | 1 comment

By Ian Makgill

The key to giving business to SMEs is to understand when SME suppliers can meet the needs of government and when it is best not to try and resist the gravitational pull of a large supplier.  

Some of this is obvious.  You wouldn’t expect the government to award banking services or insurance contracts to an SME. On the other hand, there is no real reason why legal services or consulting contracts can’t be provided almost entirely by SMEs, with only a couple of larger providers required for national programmes with multiple sites. In fact, it is a great shame that Government Procurement Service’s (GPS) new tender for consulting services does not utilise the regional model that they’ve previously used for temporary medical staff.

GPS has scored a couple of hits with SMEs, firstly with the appointment of Redfern Travel as the preferred travel management provider and secondly, with the choice to let the G-Cloud IT framework. It may be that Redfern ceases to meet the exact criteria of being an SME once the contract is fully embedded in Central Government, but that’s the whole point, to drive growth through smaller businesses. The G-Cloud framework provides a meaningful opportunity for SME suppliers to sell complex services to government, and may also help government to break their addiction to monolithic, large scale IT projects (as typified by the CSA’s latest IT tender with 90,000 specified requirements.)

Cloud services offer a remarkable opportunity for small teams to serve millions of people. A good example is 37signals, a Chicago web design company that created a project management tool called Basecamp. Its team of 32 staff currently service three million customers.

It is equally important to know when not to try and counter market forces.

Take agency staff.

We’ve been doing some very detailed work in this area, and there is an inexorable move towards using large, national suppliers. These suppliers can provide much more competitive margins and better services and data to public bodies. The market is healthy in terms of competition and there is room for smaller suppliers to become second tier suppliers to some of the national companies. Clearly the option to become a second tier supplier, or to lose their existing business is not good news for smaller suppliers, but with such strong benefits available to public bodies it would make no sense to try and resist developments that are affecting the whole market.

There needs to be a much deeper understanding of the characteristics of contracts that can be fulfilled by SME suppliers and a comprehensive strategy to follow up on that work, and to prevent government issuing restrictive tenders that see SMEs unnecessarily barred from doing business with Government, or spin-out mutuals facing procurement hurdles that are inappropriate to them. Until that strategic work is done, then there is a risk that the appointment of SMEs to government contracts will be haphazard, with a few notable successes and far too many failures.

Ian Makgill is the Managing Director of Govmark, researchers who specialise in government contracting.

Download Govmark’s report into agency staff in local government

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Posted in Campaign4Change, change management, G-Cloud, government, mutuals, procurement, public sector, SME

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Shared services disaster: a gain for some officials and ERP suppliers?

Posted on 07/03/2012 | 3 comments

By Tony Collins

Today an impressive report by the National Audit Office shows in detail how various shared services ventures in central government have, over time, cost rather than saved money.

Five shared services centres studied by the NAO have cost £1.4bn so far; they were supposed to have saved £159m by 2010-11 but the net cost has been £255m. Setting up the centres since 2004 has been good, though, for some suppliers (and officials who wanted to gain new skills in Oracle and SAP enterprise resource planning systems).

The Cabinet Office has now intervened and plans a new shared services strategy, based on the DWP [Oracle v11i ERP) and Department for Transport [SAP ERP] offering independent major shared service centres to departments and agencies.

One of the urgent drivers for the Cabinet Office’s publishing a new strategy in July 2011 was that three shared service centres face an investment of £47m to upgrade their Oracle ERP systems before November 2013, says the NAO.

“The current version of Oracle will not be supported by the manufacturer past this date,” says the NAO. “This means that if their core system fails, there is a high risk that they would not be able to re-instate it quickly. This gave the Cabinet Office an opportunity to see if it could derive better value-for-money options for shared services.”

Saving £32m on Oracle upgrade costs?

The Cabinet Office expects its new plans to save £32m on Oracle upgrade costs, says the NAO. Indeed the Cabinet Office has questioned whether departments need to use large ERP systems. It acknowledges that smaller, simpler software solutions may be appropriate, says the NAO.

Civil servants in search of new ERP skills rather than saving money?

The NAO report hints that civil servants at the five service centres might have wanted to implement new Oracle or SAP ERP software more than to save money.

Says the NAO: “The [shared service] Centres have prioritised increasing the number of customers or implementing new software, rather than working with existing customers to drive efficiency… There are other options to reduce costs in addition to increasing the number of customers or implementing a new ERP system.”

Indeed the NAO questions why the service centres bought big and expensive ERP systems that are now under-used, without looking at smaller and simpler accounting packages.

“These ERP systems [installed at five shared service centres studied by the NAO] are complex and it is not easy to modify them when needs change, such as when an organisation is restructured or processes are redesigned.

“We found the Centres are only using a small part of the capability their ERP systems provide. The systems are capable of handling larger volumes of transactions and more services and it is not clear why such expensive solutions were bought. Other smaller and simpler accounting packages were not looked at to see if they may have provided the required functionality.”

Concludes the NAO:

“The shared services initiative has not so far delivered value for money for the taxpayer. Since the Gershon Review recommended the creation of shared services in 2004, the Government has spent £1.4 billion against a planned £0.9 billion on the five Centres we examined.

“By creating complex services that are overly tailored to individual departments, government has increased costs and reduced flexibility. In addition, it has failed to develop the necessary benchmarks against which it could measure performance. The Cabinet Office has issued an ambitious new shared services strategy to address these issues.”

Failing to standardise ways of working

Shared services are about standardising ways of working, not running separate services for every client but the NAO found that the five centres replicated old ways of working.

“The services provided are overly customised. We found shared services to be more complex than we expected. They are overly tailored to meet customer needs. This limits the ability for the Centres to make efficiencies as they have an overhead of running multiple systems and processes.”

Big cheques to big ERP suppliers?

The NAO said departments have wasted money on ERP systems – and now plan to spend more on DRP systems.:

“The software systems used in the Centres have added complexity and cost. All the Centres we visited use Enterprise Resource Planning (ERP) software systems. These are complex and have proven to be expensive. They are designed to manage all the information generated by an organisation by using standard processes. These systems work most effectively with large volumes of heavily automated transactions.

“With a lack of scale and usage in some Centres, limited standardisation and low levels of automation, the cost to establish, maintain and upgrade these systems is high. As a result two Centres intend to totally re-implement their existing systems with simpler, standard ERP software, despite the significant investment already made.

“All the Centres acknowledge they need to simplify and standardise their systems and reduce customisation.”

Cabinet Office took a back seat instead of driving sensible change

Says the NAO: “The Cabinet Office and Civil Service Steering Board could have done more to ensure shared services were implemented appropriately. While the Cabinet Office led by example in initiating their own shared service arrangements, more could have been done to challenge the performance achieved by customers and providers.

“They could have established reliable cost and performance benchmarks and done more to document best practice and lessons learned for customers. Also, they could have done more to remove the barriers to departments and agencies joining shared services.

“The Cabinet Office relied on a collaborative model of governance, which was consistent with the role of central government at the time. Under this model it was left to individual departments to implement shared services and eight shared services have been established. There has been little actual sharing of services between departments…”

Should officials have been forced to take part in shared services?

“Departments have struggled to fully roll-out shared services across all their business units and arm’s-length bodies,” says the NAO. “This is because participation has largely been voluntary. Of the five Centres we examined, three had not attracted the customers they had expected and two had potential spare capacity of 50 per cent.”

Cabinet Office is trying to repair the damage

Using DWP and DfT centres the Cabinet Office plans to have two independent shared service centres and a host of sub centres. But the NAO suggests the strategy may fail unless the Cabinet Office mandates the use of the centres. [But there’s no point in mandating change unless working practices are standardised.  If they cannot be standardised shared services may end up – again – costing more.]

Says the NAO  “The Cabinet Office did not have the powers to mandate shared services. Without a mandate, we do not think that coherent shared services are likely to be achieved. If there is an overall value-for-money case for the taxpayer, the Cabinet Office should seek appropriate authority to mandate the shared services strategy and its implementation.

“The Cabinet Office should also make sure that there is clear accountability for implementing its new shared services strategy.”

MPs ignored

“…the Committee of Public Accounts set out recommendations (on shared services) for the Cabinet Office in 2008,” says the NAO. “None of the recommendations have been fully implemented. All are relevant to shared services today.”

The five shared service centres under NAO scrutiny – and their ERP

• The Department for Environment, Food and Rural Affairs (Defra) Centre provides services to 16,000 customer users (full-time equivalents)7 from the Department and 13 of its agencies. Enterprise Resource Planning System: Oracle 11i, upgrade to Oracle v12 in 2012-13.

• The Department for Transport (DfT) Centre provides services for 14,000 customer users from the Department and four of its agencies. SAP ERP.

• The DWP Centre provides services for 130,000 customer users from the Department, the Cabinet Office and the Department for Education. Main site Norcross. ERP system: Oracle 11i, upgrade to Oracle v12 planned in 2012-13.

• The Ministry of Justice Centre manages two separate systems – serving 47,000 customer users for its National Offender Management Service and 27,000 for the Home Office. Enterprise Resource Planning System: Oracle 11i, upgrade to Oracle v12 in 2012-13 and plans to completely re-implement its system to remove all customisation.

• Research Councils UK Centre provides services to 11,000 customer users from seven Research Councils. ERP is Oracle 12.

Three major shared service centres not under NAO scrutiny

• The Ministry of Defence’s Defence Business Services, which was established in July 2011. ERP is Oracle 11i. An upgrade to Oracle v12 in planned for 2012-13.

• The Department of Health NHS Shared Business Services Ltd (joint venture with Steria) which does not provide services to central government. (ERP is Oracle v12)

• HMRC which set up a shared service centre – but no other departments used it. ERP is SAP.

Comment:

Anyone reading the NAO report could be forgiven for thinking that civil servants setting up shared service centres have aimed to fail, perhaps to prove to ministers that major change within central government is a bad idea. We doubt this.

What is more likely is that civil servants, encouraged by some suppliers, thought it a good idea to buy big ERP systems from which they thought savings would naturally flow. But big has not proved to be better. When will this message get through? Isn’t it time for civil servants to stop throwing money at big suppliers?

[And there may be some substance in the NAO’s hint that some civil servants have preferred to work on big ERP systems rather than save money. Having strong ERP skills is an insurance against job loss.]

NAO report  

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Posted in capacity building, change management, collaboration, ERP, Government IT, IT projects, Oracle ERP, public services, reducing cost strategically, reforms, SAP, shared services, supplier relationships

Is new CSC accord good for the NHS and taxpayers?

Posted on 06/03/2012 | 1 comment

By Tony Collins

An editorial in The Times yesterday was full of praise for itself and Margaret Hodge, chair of the Public Accounts Committee.

“Thanks to The Times and to the forthright intervention of Margaret Hodge, Chairman of the Public Accounts Committee, CSC has now reached an agreement with the Department of Health to give up at least half of that money.”

The Times referred to CSC’s contracts under the National Programme for IT in the NHS, saying that the supplier had failed to deliver fully functional software to NHS trusts  but had “demanded a further £2 billion, and a time extension”.

CSC has now reached a deal with the Department of Health to forego at least half of the £2bn, said The Times.

There is in fact no binding agreement as yet between CSC and the DH, and CSC’s contracts with the Department of Health have for many years been worth about £3bn.

If negotiations that are continuing with the DH lead to CSC’s giving up about £1bn worth of NHS business under the NPfIT, the company may still be paid a total of about £2bn under the national programme – and it’s not clear for what.

It is likely that in any new deal that the DH will still be contractually bound to commit the NHS to placing a minimum amount of business with CSC. This was always the case in the original NPfIT contracts between the DH and CSC.

Indeed CSC in its filing to the US Securities and Exchange Commission says that its discussions with a the Treasury, the Cabinet Office and the Department of Health could lead to CSC’s being paid some of the $1.5bn it has already written off.

So has much really changed?

It appears that Department of Health officials have convinced their colleagues in the Treasury and the Cabinet Office that CSC is much needed for two main reasons:

–         The DH legal case to withhold money from CSC under NPfIT contracts is weak. There is said to be a lack of paperwork and audit trails on all decisions made.

–         NHS Trusts that have installed Lorenzo systems from CSC will need support and upgrades.

But at what price will CSC forego £1bn? The concern of the Cabinet Office has been that CSC will cut the overall price of the contract but will charge a great deal more for the much-reduced number of deployments it does make.

A Cabinet Office memo leaked to me last year said that although additional“guaranteed” savings of £264m from CSC were appealing – possibly on top of savings already promised of about £400m – the “offer is unattractive”.

It added: “This is because the unit price of deployment per Trust under offer roughly doubles the cost of each deployment from the original contract”.

New DH commitment to CSC on behalf of trusts?

Now that CSC has indicated it is willing to forego £1bn of its £3bn NHS business, does this make its planned deployments to individual trusts any cheaper? Indeed each remaining deployment may still cost double – and CSC in its SEC statement makes it clear that any new deal with the DH will probably involve a DH commitment to Lorenzo deployments.

Said CSC in its SEC filing:

“… NHS will provide a commitment of a certain number of trusts, some to be named in the interim agreement and the remainder within six months, to receive the Lorenzo software product, which has been redefined into deployment units categorized as “base product” and “additional product” for pricing purposes. “

Will DH end up paying CSC for non-deployments?

If the intended Lorenzo deployment don’t occur, the DH may be obliged by the original NPfIT contracts to pay CSC anyway – in effect for nothing, that is for non-deployments. CSC refers in its SEC statement to “amounts committed by NHS for the base product…” which appears to refer to Lorenzo.

Said CSC’s statement:

“In addition to the amounts committed by NHS for the base product, additional amounts will be available from centrally available funds for additional products, supplemental trust activity and local configuration. The letter of intent also contemplates that the interim agreement will provide for a structured set of payments following certain product deliveries, as well as additional payments to CSC, which would cover, among other items, various deployments for the named trusts and payments for work already performed.

“Any payments would be made only if the binding interim agreement is entered into by the parties.”

So will DH officials quietly twist the arm of some trusts to make them deploy Lorenzo, to avoid taxpayers paying CSC for deployments that don’t happen?

No firm commitment yet by CSC or DH

CSC told the SEC:

“Under the letter of intent now agreed, the NHS and CSC have agreed to a set of high-level principles, which are intended to be reflected in a binding interim agreement to be entered into by both sides by March 31, 2012.”

CSC added:

“There can be no assurance that CSC and the NHS will enter into the interim agreement or the amendment or, if the interim agreement and amendment are negotiated and entered into, that such documents as finally negotiated will be on terms favorable to CSC or as provided in the letter of intent.”

CSC enthusiastic

In its press release on the letter of intent CSC was enthusiastic:

“As a part of this agreement, it is intended that CSC will contract to deliver additional Lorenzo implementations, adding to the 10 deployed successfully to date, with options for more where demand materializes.

“CSC is confident that Lorenzo’s modern technology base and the fact that it has been specifically designed in collaboration with the NHS, should result in further demand in the future.”

So is the new accord with CSC good for the NHS and taxpayers?

The Times in its editorial yesterday concluded that many people were at fault in the NHS IT debacle.

“Ministers too readily bought a vision of an all-singing all-dancing new service, when they should have settled for tried and tested systems.

“Officials were not honest enough about the risks involved. But companies which demand payments for failure on this scale need to understand another time-honoured phrase: ‘the party’s over’.

But is it over? The Times suggests that at last officialdom and ministers have set a precedent by materially changing a contract signed by Labour. But it’s not clear yet whether anything has changed materially for the better.

CSC may end up putting back onto its balance sheet money it has written off on its NPfIT contracts, and the Department of Health may end up paying for deployments that don’t happen. Is this real progress?

Parliament should be given details of any binding new deal. Margaret Hodge and the Public Accounts Committee – and particularly its campaigning MP Richard Bacon – will then be able to make an informed judgment on whether the new accord with CSC is value for money.

**

Thank you to David Moss for drawing my attention to articles in The Times.

CSC signs non-binding letter of intent with UK Department of Health

DH secures £1bn savings from CSC

Redemption for CSC? [Its share price is up] 

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