Opinion: Suppliers have had their beating, now it’s the government’s turn

The tide is turning in Whitehall. For months now Computerworld UK has tirelessly reported on the Cabinet Office’s procurement reforms, but with the focus more often than not falling on the inability of the government’s largest suppliers to deliver valuable IT services to the public sector.

Those still reeling from the hundreds of millions of pounds wasted on the NHS’ National Procurement for IT (which we are still paying for) will be more than aware of the route that DWP’s welfare reform project, Universal Credit, is headed – where IT assets are already being written off in failing pilots.

However, the rhetoric has largely circled around where the ‘oligopoly’ of suppliers and consultants are messing up and wasting our hard earned pennies. Now, don’t get me wrong, I think they are making mistakes left, right and centre - but I think it is now time to turn the attention on to those that are supposedly in charge of the projects. We need to cast our critical eye on to those ministers and civil servants that promise that they can not only deliver these projects, but also manage the contracts for their lifetime.

Let’s be honest, if these projects and contracts were being managed by experienced individuals who had the commercial savvy to keep suppliers on a tight leash from beginning to end, would we be in this continuous cycle of IT disasters?

A tale of woes

Let’s take the NHS’ NPfIT contract with CSC, where the government is still due to pay some £600 million for its Lorenzo systems (despite CSC failing to deliver on many of the terms of the deal). Astonishingly, the NHS had to pay £100 million to renegotiate that contract and has also agreed to effectively give CSC an additional £100 million bonus if the company now achieves some of its new ‘key milestones’.

Cue looks of bewilderment from Public Accounts Committee (PAC) chair Margaret Hodge…

Why didn’t the NHS pull out of the contract altogether given that CSC had broken many of the terms? Well, that is because CSC would have likely hit the NHS with a lawsuit claiming that it had not managed the contract effectively. Chief executive of the NHS, David Nicholson, told the PAC that CSC could have made claims about how the NHS conducted itself and he didn’t believe it was worth the risk of getting into “further legal disputes”. Instead, let’s open up the public purse.

Now let’s take a look at Universal Credit, where history appears to be repeating itself, after MPs found some remarkable examples of poor governance and financial control. The PAC recently heard evidence that there were instances where purchase orders worth nearly £30 million were approved by a personal assistant to the programme director.

Further to this, DWP was found to be making individual payments to suppliers that could not be linked to particular pieces of work that had to be delivered. “How much do you need? Sign where? Oh there, okay will do.”

Elsewhere in Whitehall, the Ministry of Justice has unleashed war on G4S and Serco, claiming that the companies were over-charging on a valuable electronic tagging contract. Although there is a Serious Fraud Office investigation underway, a recent audit found that there were a number of disputed billing practices that let to overcharging – including charging for services after they had finished and duplicate charges being issued.

The penny begins to drop…

All of these examples point to a systemic failure within Whitehall to effectively manage accounts and contracts, which was highlighted by the government’s chief procurement officer, Stephen Kelly, this week during an evidence hearing to the PAC.

Kelly noted that he had applied “blunt instruments early on” when initiating reforms, but he said it is now time to be more “sophisticated” and that the challenge for government was that it needed to raise its in-house capability “significantly”. He rightly noted that the civil service needs to quickly bolster its financial accounting experience and contract management experience, because otherwise the suppliers will run rings around junior officials who don’t understand some of the basics.

To support this, the recently formed Crown Commercial Service, which is going to be responsible for common departmental spend, is on a recruitment drive and aims to hire nearly 100 commercial experts.

Interestingly, during the session, Margaret Hodge also brought up the possibility of introducing freedom of information requests for private companies working on public sector projects. She said that she had asked a number of companies whether they would mind this being introduced and had received little resistance.

Kelly and chief procurement officer Bill Crothers seemed to welcome the idea, but members of the committee suggested that it had previously fallen flat because the FOIs could expose civil servant incompetence, where the term “commercially sensitive” is often used to block the data being released.

The weight of this skills challenge in government shouldn’t be underestimated. From talking to suppliers and key players in Whitehall departments, it seems that most of the suppliers are starting to fall in line with the procurement reforms, thanks to the hard line that has been taken up until now. Although there is still a long way to go, the wheels are moving and the suppliers are starting to get that these reforms aren’t going away anytime soon.

However, what will happen if the suppliers start doing and saying all the right things, and yet the projects continue to fail? Ministers and key reformers in the Cabinet Office need to be ready to explain what they have done to fulfil their end of the bargain. Although hiring 100 commercially savvy experts will go some way to filling the gap, that’s not going to be enough. There needs to be a complete overhaul and re-education of how to manage large public sector contracts, with those in junior positions (as well as the suppliers) micromanaged until the bitter end.

The Crown Commercial Service also needs to make itself an invaluable resource to all government departments, where it stands side-by-side next to those in charge of all contract dealings, ready to throw its commercial weight when it sees things going awry. Given the recent heavy-handed reforms, this is an achievable goal.

But if this issue isn’t addressed – and soon – I’m afraid the suppliers will be well within their rights to start pointing the fingers straight back at Whitehall for its poor governance.

Copyright © 2013 IDG Communications, Inc.

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