Department opts for a small-is-beautiful approach to IT contracts
following strategy review.
The Department for Work and Pensions is planning fundamental
changes in how it buys and manages IT projects after a series of
disasters involving multimillionpound contracts. It is also drawing
up plans for new IT deals that could be worth more than
£600m.
Computer Weekly has learned that the DWP wants to prevent failures
by arranging smaller contracts with more suppliers, reducing the
scope, duration and complexity of individual projects, and avoiding
the Private Finance Initiative as a source of funding.
If this approach is adopted by other departments it could reduce
the risk of government IT disasters, experts believe. But the DWP's
move towards "bite-sized" contracts is in stark contrast to the
approach taken by some other Whitehall departments.
The Department of Health, for instance, plans to award a series of
IT contracts that may be worth more than £1bn each over 10 years,
and the Inland Revenue is preparing an IT outsourcing deal worth
more than £3bn with one consortium.
The DWP has issued a "prior information notice" declaring that it
may place IT contracts worth more than £600m.
Suppliers say the new deals could make the DWP less reliant on its
current main IT contractors, which include the Affinity consortium,
comprising EDS, IBM, PricewaterhouseCoopers and A T Kearney.
The DWP signed an "Accord" contract with the Affinity consortium
worth more than £1bn in 2000, under the Private Finance Initiative,
to help to provide the "next generation of IS/IT systems and
services to underpin the [DWP's] modernisation agenda".
EDS has declined to comment on the DWP's policy change.
It remains unclear whether the department's review of its IT
strategy will mean changes to existing contracts.
Asked whether the Accord contracts would be affected by plans to
change the way it buys IT, a DWP spokesperson initially said, "We
are considering our contractual arrangements as a result of the
update to our IS/IT strategy." But after further questions about
the implications for the contract the DWP appeared to back-track
and said Accord PFI contracts are "not being reviewed as a matter
of course".
Computer Weekly understands, however, that the DWP has come under
pressure from the Treasury to review PFI contracts, including those
awarded to EDS under Accord.
Many PFI deals in central government have failed or have terminated
prematurely. The DWP has itself suffered from a series of
high-profile IT failures. When it was the Department of Social
Security it lost £6m in a project to computerise the administration
of welfare benefits. A second similar project, Operational
Strategy, cost more than three times its original declared budget
of £713m.
In 1999, the DWP was a partner in the failed £1bn Pathway project
which was supposed to provide a benefits card for claimants. More
recent DWP projects, such as an IT upgrade at the Child Support
Agency, have run into trouble.
To manage its new IT strategy, the DWP has recruited senior IT
specialists from the private sector, including Rob Westcott,
previously chief information officer with General Motors.
The DWP spokesperson said, "We have updated our IS/IT strategy in
line with evidence from change programmes across the economy that
show the benefits of focusing on more frequent, smaller incremental
improvements to our IT [and] reducing the scope, duration and
complexity of individual projects."