Monday, January 27, 2014

Government Draws The Line

On Friday, the Cabinet Office announced (or re-announced according to Patricia Hodge) that:
  • no IT contract will be allowed over £100 million in value – unless there is an exceptional reason to do so, smaller contracts mean competition from the widest possible range of suppliers
  • companies with a contract for service provision will not be allowed to provide system integration in the same part of government
  • there will be no automatic contract extensions; the government won’t extend existing contracts unless there is a compelling case
  • new hosting contracts will not last for more than 2 years

I was intrigued by the lower case. Almost like I wrote the press release.
These are the new "red lines" then - I don't think these are re-announcements, they are firming up previous guidance.  When the coalition came to power, there was a presumption against projects over £100m in value; now there appears to be a hard limit (albeit with the caveat around exception reasons, ditto with extensions where there is a "compelling" case).

On the £100m limit:

There may be a perverse consequence here.  Contracts will be split up and/or made shorter to fit within the limit; or contracts may be undervalued with the rest coming in change controls.  Transitions may occur more regularly, increasing costs over the long term.  Integration of the various suppliers may also cost more.  For 20 years, government has bought its IT in huge, single prime (and occasionally double prime) silos.  That is going to be a hard, but necessary, habit to break.

£100m is, of course, still a lot of money.   Suppliers bidding for £100m contracts are likely the same as those bidding for £500m contracts; they are most likely not the same as those bidding for £1m or £5m contracts.

To understand what the new contract landscape looks like will require a slightly different approach to transparency - instead of individual spends or contracts being reported on, it would give a better view if the aggregate set of contracts to achieve a given outcome were reported.  So if HMRC are building a new Import/Export system (for instance), we should be able to visit a site and see the total set of contracts that are connected with that service (including the amounts, durations and suppliers).

On the "service providers" will not be allowed to carry out "system integration" point:
I'm not sure that I follow this but I take it to mean that competition will be forced into the process so that, in my point above about disaggregated contracts, suppliers will be prevented from winning multiple lots (particularly where hardware and software is provided by a company).  That, in theory, has the most consequence for companies like Fujitsu and HP who typically provide their own servers, desktops or laptops when taking on other responsibilities in an outsource deal.
 And no more extensions:

Assuming that there isn't a compelling reason for extension, the contract term is the contract term.  If that rule is going to be rigorously applied to all existing contracts, there are some departments in trouble already who have run out of time for a reprocurement or who will be unable to attract any meaningful competition into such a procurement.  Transparency, again, can help here - which contracts are coming up to their expiry point (let's look ahead 24 months to start with) and what is happening to each of them (along with what actually happened when push came to shove).  That would also help suppliers, particularly small ones, understand the pipeline.
On limiting hosting contracts to 2 years:
That's consistent with the G-Cloud contract term (notwithstanding that some suppliers wrote to GDS last week asking for the term to be extended to 3 years).  But it's also unproven - it's one thing to "copy and paste" a dozen virtual machines from one data centre to another, it's another thing to shift a petabyte of data or a set of load-balanced, firewalled, well-routed network connections.  Government is going to have to practice this - so far, moves of hosting providers have taken a year or more and cost millions (without delivering any tangible business benefit especially given the necessary freezes either side of the move).  It also means trouble for some of the legacy systems that are fragile and hard to move.  The Crown Hosting Service could, at least, limit moves of those kinds of systems to a single transition to their facilities - that would be a big help.

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