PASC Government and IT Report – Our verdict: it is not all bad, but shame about the title
Written by: Sureyya Cansoy on 28 July, 2011I have spent the day looking at the Public Administration Select Committee report on Government and IT, which was published this morning (which was difficult to miss given that it was reported by BBC and the broadsheets). My first observation was that it carried unfortunately a very negative title – ‘Government and IT – “a recipe for rip-offs”: time for a new approach’, which seemed to have been designed to grab the headlines. And it did just that! It is, therefore, not surprising that the press coverage of the report has been largely negative of government ICT and the industry.
However, I want to look at the positives of the report, before attempting to address some of the heavy-handed comments the committee has made.
What we liked….Intellect provided written evidence to the inquiry in January and appeared in front of the committee in March. When we gave evidence to the committee we made it clear that the IT industry supports the government’s ambition to deliver better public services through efficient use of IT. But we also emphasised that there were a number of key recommendations which we have been making for some time that government needs to adopt. We think that the PASC report includes some positive recommendations to improve public sector ICT that link back to areas we have highlighted before. Picking up on a small number of examples, we welcome the recommendations on the following points:
• IT must be fully integrated into policy making
• There is no such thing as an IT project – government must focus on what they want to achieve and not the technology.
• Government must become a more intelligent customer by recruiting people with the skills to procure and manage IT contracts.
• Strong leadership and accountability are required to drive change.
The committee’s view that the supplier base should be widened to offer more opportunities to SMEs is welcomed by Intellect which represents many SME businesses and actively support their involvement in government projects. However, I should also emphasise that we believe that best results for government can be achieved by a diverse ecosystem of different suppliers, large and small, doing different things. One of the biggest barriers for SMEs and new entrants to the market is the cost and length of procurement. By making procurement simpler, faster and cheaper, government can open up the market to many new players, including SMEs.
What concerned us…The allegations of anti-competitive behaviour and suggestion of an industry cartel cause great concern for us and our members. We strongly believe that such allegations are completely unfounded. In our evidence to the committee we made it clear that there was no evidence to support claims that the technology industry operates a cartel, and that such claims were inaccurate and misleading.
We were also very concerned about the suggestion that Whitehall’s approach to IT had been a “recipe for rip-offs”. Those who know the industry well will know that doing business with government can be costly because of the long procurement processes involved and government customers’ non-standard requirements. Pricing therefore inevitably reflects the fact that government over-prescribes its requirements. For this to change, the government needs to make radical changes to the procurement process to avoid the impression of overcharging.
On the point that the market is dominated by a small number of large companies, we feel that report paints a “black and white” picture of the market in terms of how it portrays large and small suppliers, when in reality this is a very complex area with companies of all sizes working in partnerships and consortia.
Alistair Hardie, who is the SME Champion on Intellect’s Board, and MD of an SME, told me earlier today: “On behalf of our SME members I don’t believe SME’s are disadvantaged by large ICT companies in any unfair way at all. As we all know, many public sector procurement practices remain SME unfriendly but that is not the fault of large ICT companies.” On accusations of cartel behaviour, he told me “SME ICT companies don’t see any sign of large companies colluding. Quite the opposite, we see them in fierce competition.”
So…As suppliers, it is in our industry’s interest that the government is a happy customer. This report certainly doesn’t give the impression that we’re at that point. But it also acknowledges that the potential rewards of using technology to reform services are enormous. Now, it’s up to government, as well as large and small companies alike to step up to the challenge and work together to help the government drive reform.
Tags: cartel, Government ICT, IT procurement, oligopoly, PASC, Public Administration Select Committee
28 July, 2011 at 6:30 pm
Why do you think the MPs went so far as to give it the controversial title? There HAVE to be changes in the cosy relationship between government and big IT suppliers. Why? I’m just going to say News International.
The competitive advantage SMEs offer is that they are demonstrably better at delivering value for money than large suppliers. The evidence is out there. what they cannot deal with is long and convoluted procurement processes, and they cannot deliver results without intelligent supplier management from the government side.
I do agree that “..doing business with government can be costly because of the long procurement processes involved” but not that they necessarily have non-standard requirements any more than any other organisation. Agile developers exist to develop ‘non-standard requirements”.
I believe the ‘cartel’ accusation arises from the general lack of interest by the large suppliers (and, it has to be said, their customers) in real, objective, comparable measures of productivity and delivered value. The large suppliers’ attempts to work with and round the government’s procurement process and over-specification of requirements instead of educating them in effective and efficient delivery of value from IT have created a conspiracy of ignorance, which may be unintentional, but is nevertheless not in the taxpayers best interests.
It has to change. I for one hope this report is not buried alongside other similar past reports. It is time for transparency in IT performance, and a joint focus on delivering better outcomes for the taxpayer. Not least in reducing costs and improving the success rate of software projects.
28 July, 2011 at 6:47 pm
There is no need to look for cartels or any other underhand dealings. The problems are built in to our UK government procurement system.
The first issue which raises the price of procurements is that of fair competition. To run a transparent competition which does not break any of the EU procurement rules and which is robust against future objections is a very long and expensive business. The company I work for has just emerged victorious from a two-year bid process for the supply of police equipment, and I estimate the cost to us was between 1 and 1.5 million pounds. The other competitors must have suffered similar costs (until the time they withdrew) and I guess the government’s expenditure was more. The process was undoubtedly squeaky clean, but only the very biggest companies can afford this kind of exercise, and the SMEs are forced out.
The second issue relates to the very ethic of the civil service. Over the period of a big procurement, say three years, it is almost certain that the senior government managers will change. The UK tradition is that senior people are promoted or moved every two or three years, and so the experience of any particular project is lost. Government procurement teams suffer from a lack of continuity, and in particular a constant increase and decrease of their inhouse numbers which are subject to whatever current policy is in place in respect of outsourcing and consultancy. Without a stable, properly-sized and technically competent buyer, there is no chance of a value-for-money procurement.
29 July, 2011 at 8:36 am
[...] Sureyya Cansoy at Intellect, in giving her organisation’s response to the report, quotes Alistair Hardie, who is the SME Champion on Intellect’s Board, and MD of an [...]
29 July, 2011 at 9:38 am
“On behalf of our SME members I don’t believe SME’s are disadvantaged by large ICT companies in any unfair way at all. As we all know, many public sector procurement practices remain SME unfriendly but that is not the fault of large ICT companies.”
I think I’m struggling with the rhetorical subtlety employed here.
Large procurements favour large companies. Market concentration disadvantages SMEs. Is it then, monopsonistic behaviour? Or is nothing wrong? Does nothing need to be done? If something does need to be done would large companies encourage the doing?
Coase’s theory of the firm highlights the problem of disproportionate (nonlinear) increase of internal transaction costs as firms increase in size. Is it different for government organisations that seem to use the single note tune “economies of scale?”
As a taxpayer, if government is issuing long term contacts for £bn then I think I want lengthy procurement in the hope that the outcomes are right.
If however, local offices get local budgetary authority with accountability and consequences, then it moves to local procurement, (reduction in systemic risk) but would be dependent upon open standards, interoperability, propobably producing a heterogenous technology environment (so making a contribution to systemic cyber security) then suddenly local SMEs are better placed. Market concentration falls, classical economics suggests costs fall.
It seems to work in Canada and Holland according to Dunleavy at al.
“On accusations of cartel behaviour, he told me “SME ICT companies don’t see any sign of large companies colluding. Quite the opposite, we see them in fierce competition.”
I believe this is known as “argumentum ad ignorantiam” asbence of evidence is not evidence of absence. How SMEs would be in a position to see anything other than what they were intended to see? That’s why we have competition authorities with powers to look for things that people don’t want them to see. I’m not arguing the reverse is true, either. We didn’t criticise large ICT companies, our disappointment was that the report did not uncover anyrhing new: bit.ly/p6mtGs
If governance is the problem, what are they doing currently?
29 July, 2011 at 2:04 pm
I confess to being the coiner of the phrase adopted by PASC. But it was not my doing that it achieved such a high profile. In essence it has been cut out of context and pasted into a generalisation which is not true. It was quoted in paragraph 102. It was taken from a longer statement made in January where I felt I was far more blanced in my view. Like a parson’s egg http://wp.me/p14MGf-fb.
7. How well do current procurement policies and practices work?
The evidence is mixed. Sometimes they do. Sometimes they don’t. Most local authority projects work to budget and many are delivered on time. The headline problem is the failure of big projects. There’s an adequate OGC Gateway process. It just isn’t followed, or improperly understood. If private sector projects are aware of a great risk of failure, they will often cancel projects on behalf of the shareholders.
Good programme management, and all that it entails, is the missing ingredient. The best programmes integrate the work of clients and suppliers in a working partnership. They have common goals and clear leadership. There is clarity of governance and accountability.
Complete outsourcing is a recipe for rip-offs. The client must have matching skills or employ an independent programme management consultant.
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So it was a plea for good governance, not a diatribe against all suppliers. I hope you can forgive me.
4 August, 2011 at 1:17 pm
Commenting on the PASC report, LinuxIT, the UK’s Open Source specialist (www.linuxit.com), said that they welcomed the Select Committee’s report and are ready to contribute to improving the value derived from Government IT projects, in particular the Committee’s view that Government needs to actively embrace Open Source/Open Standards technologies. As a fast growing SME specialising in the Open Source technology and associated professional services space LinuxIT can provide impartial, informed advice to central and local Government, and would urge them to engage either directly or through their System Integrator. LinuxIT have over 12 years experience in the field and have already engaged with the Cabinet Office contributing towards the delivery of their Open-Source Policy. ”What’s called for here is a win-win-win outcome.’’ commented Mike Curtis, LinuxIT Executive Director for Service. ‘’With Government and Systems Integrators, and SMEs like us, all benefiting from a new approach centred upon sound management practices, and a blended technology approach that underpins Government’s technology needs, as well as providing value for money for the tax payer.”