Pressure on government ministers and their departments
is mounting over their expenditure and delivery of large ICT
transformation programmes. While this has been a longstanding
source of informed comment from campaigning journalists such
as
Tony Collins, and politicians such asEdward Leigh, chairman of the Public
Accounts Committee, there is a crescendo of criticism developing,
focused mainly on the delivery of the Connecting for Health
programme in the NHS, writes Clive Seddon, partner at
Pinsent Masons.
Given this backdrop, it is perhaps surprising that there has
been so little publicity and comment given to two National Audit
Office reports,
Central Government's Management of Service Contracts and Good
Practice Contract Management Framework, published in December
2008.
The conclusions and recommendations of these reports are based
on a survey conducted across 35 government organisations. They
conclude that better contract management by government departments
could generate efficiency savings of between £160m and £290m per
annum, against an annual spend on service contracts of £12bn for
2007-8.
Massive potential saving
This is a massive potential saving. With UK plc concentrating on
its expenditure line due to a collapse in confidence, growth and
revenue, is the government going to make a similar, co-ordinated
and concentrated effort to do the same? With government already
proclaiming that its approach is "joined up", there is much still
to be done.
The NAO estimates that only 2% of annual spend, approximately
£240m, is incurred in managing government service contracts. The
private sector will generally spend around 5% of total cost on
similar activities. The reports are critical of this expenditure
allocation and the lack of attention and prioritisation given to
contract management. It recommends that government needs to do
more, in a better way, if improvements are going to be effected and
the projected savings realised.
The old adage that contracts should be put in the drawer, so as
not to interfere with the parties' relationship, is criticised. The
NAO implores government departments to deduct service credits from
suppliers where they are entitled to do so use price benchmarking
and market testing to obtain value for money for the taxpayer and
use an industry standard, comprehensive approach to risk.
The reports, however, go much further than mildly rebuking
government departments for a lack of spine and prioritisation of
resources. They recommend:
- The adoption of a new contract management framework
- Government departments benchmark their current contracts
against the framework and, if deficient, implement
improvements
- Ownership of contract management responsibility at senior
level, suggesting commercial directors or heads of procurement as
likely candidates
- They identify the contract manager as being key to future
successful service delivery.
On any view, the NAO recommendations and adoption of the new
contract framework, to be applied to all contracts, is a major
change programme in its own right. It involves a comprehensive
rethink as to how governance, project management, change control
and the allocation of risk are dealt with in government contracts
and how contract managers and their seniors engage with suppliers
during the delivery phase of all major ICT projects.
Current government contract practice in relation to ICT services
is set out in the
OGC Model
ICT Services Agreement (MSA) and accompanying OGC guidance
published in 2002.
The MSA prescribes a governance process involving programme and
project boards and project managers, which is widely used across
Government. It is not clear from the reports as to how the MSA and
guidance fit with the new contract management framework. Perhaps
this will become clear when further guidance is issued by the OGC
in March 2009. Given the prominence accorded to the role of the
contract manager in the framework, and the NAO's recommendation
that they should be integrated during the final stages of the
procurement process, the absence of reference to contract managers
in the current MSA needs to be rectified and reconciled with
existing practice. This will require more than simply a drafting
amendment to the MSA.
Control and empowerment
Finally, the NAO reports place heavy emphasis upon government
departments taking control, actively managing the service provider
and the risks associated with private sector service delivery. To
do this effectively, government departments need to allocate time
and resources to appointing, training and empowering personnel with
the right skills.
As
Computer Weekly has reported many times, the risks attached to
these ambitious programmes are immense. The MSA and its predecessor
the CCTA standard form, allocates risk firmly to the service
provider. If government departments implement the NAO
recommendations, it may be that the allocation of risk to suppliers
will change. Will government departments be prepared to finally
accept one of the McCartney Report truisms, namely that the risk of
service failure of a government programme ultimately falls upon the
government department delivering the change programme?