Research published by the
European Services Strategy Unithas reported
major cost overruns in the majority ofoutsourced public sector IT
projects.
It showed 105 projects had a total cost overrun of £9bn, with an
average percentage cost overrun of 30.5%. It also showed that 30%
of contracts were terminated and that 57% of projects experience
cost overruns.
The
report looked at all large outsourced projects in central
government. The NHS, local authorities, public bodies and agencies,
and contracts operating prior to 1996/97 were excluded. Out of 105
projects, 60 overran in terms of cost.
The main IT companies with overruns and delays are EDS,
Liberata, Fujitsu, IBM. Accenture, Atos Origin, Capita, ITNet (now
Serco), Siemens and BT.
The report said the reason for underestimation of costs was that
the public sector often only focuses on the procurement stage of
projects, without considering the cost of implementation and
training.
Other reasons include the private sector overstating its ability
to deliver and underestimating the complexity of public service
provision. Public sector managers also use management consultants
who "predictably encourage outsourcing" but whose conclusions are
rarely challenged or assessed.
Another reason, the report says, is that pressure for
substantial savings and "seamless one-stop contact centres" leads
to some projects applying the "latest technology", when a more
incremental approach may be more desirable.
Dexter Whitfield, author of the report and ESSU director, said,
"The scope of the failures is shocking. The remedies do not lie in
tinkering with the procurement process but with root and branch
change in the modernisation of public services.
"The government's commitment to commissioning and contestability
does not address any of the fundamental causes and will only make
matters worse for ICT projects in the next decade."