Recently in transparency and accountability Category

CSC paid 0.5% tax on £1.5bn outsource

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Public Accounts Committee chair Margaret Hodge rebukes Starbucks for low tax payments - 12 NOV 2012.pngComputer Sciences Corporation has paid just half a percent in tax on £1.5bn income it earned from the 10-year outsource deal it did with with Royal Mail in 2003.

The revelation comes from Computer Weekly's analysis of eight years of accounts published to date by CSC Business Systems Limited, the private vehicle Royal Mail put its IT division into when it privatised that part of its backoffice in 2003.

In the week MPs on the Public Accounts Committee rebuked multinationals Amazon, Google, and Starbucks for paying little or no tax while making £billions in UK sales, Private Eye also reported tax-avoiding arrangements used by other major government IT suppliers: Accenture, Capgemini, Fujitsu, HP, and IBM.

Delving into the accounts of CSC's Royal Mail deal sheds some light on how IT suppliers can win big government contracts by cutting prices to kamikaze-levels. And then make up the difference by ruthlessly cutting costs. They avoid disaster in the interim by claiming tax rebates.

The losses are built into the outsource model, say accountancy experts. Non-payment of tax is built in too - since companies only pay tax on their profits. But a loss-making outsource will still generate income for its parent - in the form of inter-group payments that go unrecorded under UK accounting rules.

Shady

Should multinationals be taxed on inter-group payments that get recorded officially not as repatriated profits but costs taken out before profits are calculated for taxation? That's what the Public Accounts Committee was getting at this week.

For IT outsourcers, the question is whether sustained losses can be justified when buyer and seller effectively set the costs and revenues of the deal when they set it up. Or whether the industry is predicated on an unsavoury system of officially-sanctioned tax evasion and back-door cuts.

CSC Business Systems Limited - Tax credits and Income - 2004 to 2011.pngCSC made a cumulative loss of £12.4m on its £1.5bn Royal Mail contract. It started turning a meagre profit in 2009 after it had finished cutting 63 per cent of the staff (1,082 people) it acquired under the deal.

It got £61.6m of tax credits when it was making a loss. And has since going profitable paid only 0.5 per cent tax on its £1.5bn income - that's £7.8m.

The shape of this arrangement would have been set out by CSC and Royal Mail when they got together to do the deal in 2003, said the director of a big-ten accounting house, who asked to remain anonymous.

Set up

"Generally for a long term contract Step 1 is what are we going to do. Step 2 is what will it cost. You budget for that over 10 years and price it accordingly.

"Part of the pricing strategy might be, 'We can do it more efficiently if we cut back on staff. And that would have been planned from the outset," he said.

CSC Business Systems Limited - Income, Costs and Losses - 2003 to 2011.pngThe planning can be seen clearly in the accounts of CSC Business Systems Limited, its Royal Mail outsource venture, which reported fairly consistent income and expenditure for the duration of the contract.

The contract had a mid-way renegotiation built into it. That passed on to Royal Mail, in the form of lower prices, the lower costs CSC was enjoying as a consequence of the 1,000 job cuts it made in the first years.

Otherwise it was business as usual, year-in, year-out: losses, tax credits, job cuts and opaque inter-group payments; followed by meagre profits and minuscule tax payments on a £1.5bn business.

If it was standard practice to run an outsourcing contract like clockwork, why was this clock running so badly that it never had any money to pay tax?

Lost profit

"The fair question is why a company has gone for 10 years, turned over £1.5bn and hardly made any money out of it," said John Brace a forensic accountant with Harwood Hutton and former president of the Association of Chartered Certified Accountants.

"Why have they not made any money on £1.5bn of turnover? They made £35m in recent years. But the net result is they have not made a row of beans out of £1.5bn. Is that the intended plan, or is it incompetence, or is it just bad luck?" he said.

Lee Ayling, IT outsourcing expert and management consulting partner at KPMG, said: "They've taken a bunch of costs in the first years and then made a profit in the last part.

"That's very typical for an IT outsourcing contract. They take a bit of business where they can essentially restructure the cost profile into a shape they can make a profit on."

CSC Business Systems Limited - Wages, losses and tax credits - 2004 to 2011.pngCSC got a tax credit of £43m for its Royal Mail business in 10 months it traded in its first fiscal year.

It cut 500 staff in the period. £17m of the tax break went to its parent as a write-off against its losses. It got that back in cash. The rest was raised against capital it laid out for the Royal Mail unit.

At the end of the period it recorded debts to its parent of £53.9m. It cannot be known how much CSC Business Systems Limited actually paid to its parent company that year. Nor any year. UK accounting rules do not require them to be reported.

The IT outsource industry usually does this within accounting rules. Although CSC is subject to an ongoing fraud investigation by the US Securities and Exchange Commission that includes its UK business, there is no reason at all to suspect CSC of foul play in its Royal Mail outsource. It has itself taken steps to route out financial errors and sack people responsible. Everything looked above board in the accounts of CSC Business Systems Limited to the three senior accountants who looked at Computer Weekly's summary of its numbers.

Business as usual

It was not only above board. It was par for the course, said the experts.

"There's nothing here that looks remotely surprising or remotely worthy of criticism. It's absolutely bog standard," said the accounting director who did not want to be named.

Par for the course, that is, to run at a loss, hide inter-company payments made before tax is calculated and only claim meagre profit for the tail of the contract.

Turning a cynical eye over the numbers, Brace said the outsource model might be a way for public bodies to pass the buck for downsizing. The outsourcer goes to the union with its losses in the first year and says, 'If we don't make cuts we could all be out of a job'.

However, he said, "One has to be careful about what conclusions one draws. It might all be perfectly straight forward - they went into the contract knowing they were going to suffer a bit of pain in the early years and that it would pan out and start operating reasonably well."

A government source said today it was looking at making an upfront declaration of tax and revenues a requirement of public bids. But such an idea would be fruitless (the government already knows what tax companies pay - and anyone can see it in their accounts) unless it either publishes a league table, or sets a tax bar below which companies will be prohibited from supplying government.

CSC was unavailable for comment.

Cornwall caught in bed with BT as councillors raise red card

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Patient Mr Alec Butteriss using Bosch Telehealth device in South Yorkshire.jpgCouncillors might have put Cornwall's privatisation on probation. But the council had already begun acting as a joint venture partner with BT.

They voted unanimously Tuesday to suspend a proposal to put up to £800m of public services into a company in which BT would own a majority stake.

BT planned to transform it into a hub from which it would manage the privatisation of other council services around the country, and to operate a telehealth business.

Councillors withheld their approval and said they wanted to scrutinise the deal properly before approving it.

But a "confidential" BT brochure mailed to councillors by Cornwall's own executive last Friday said Cornwall was already working with BT on bids for business from other public authorities.

"We are already in three competitive bid situations for Telehealth/care with Australia Telehealth, Northumbria Telehealth and Hampshire Telecare; where we have named Cornwall as our partner," it said.

"And have an expression of interest from others including Surrey."

BT had been one of two companies competing to acquire Cornish public services. The other, Computer Sciences Corporation, pulled out last Wednesday - just two days before BT's admission that it had already been operating as Cornwall's partner.

Thumbnail image for Steve Double, Cornwall Council.jpgCouncillor Steve Double, who had led the process for the Cabinet till his resignation last week, told Cornwall Council chamber Tuesday that competition law had forbidden councillors from having proper scrutiny of the procurement.

This had apparently suited Kevin Lavery, Cornwall Council CEO. He had written, in his books on local government privatisation, that councillors should be engineered out of the council executive's decision making process. That's what Councillor Jan Powell told the chamber on Tuesday.

Lavery's attempts at local government privatisation had last run into trouble when he was CEO of Newcastle City Council in 2001.

Kevin Lavery - Cornwall Council CEO - kevin-9.pngHe tried to form what was then a pioneering strategic partnership, with BT.

Councillors opposed him. He resigned and they tore up BT's bid. Lavery spent the the best part of the next decade doing outsourcing on the supply side, including a stint as head of local government at BT.

Now a council worker again at Cornwall, he has had no specific meetings with BT. History is repeating itself all the same.

Fresh air

Yet things will be different from now on, Councillor Double told his colleagues before Tuesday's vote.

Councillors would be permitted to scrutinise the BT deal, where before the details had been withheld. While CSC and BT where in competition, procurement law forbade councillors from seeing the details of their bids, Double told Councillors. Now the council was simply giving the business to BT, they could see the details. Competition law didn't apply when there was no competition.

This is what it would take for public representatives to be permitted to see a bid to privatise their services before they were called upon to approve it. They would get all the facts to settle the public/private debate. Lavery would meanwhile be vindicated if BT's plans passed muster.

The first signs were however that the new transparency was not actually very enlightening. Not in the way it was supposed to be.

Things started moving as soon as CSC dropped out last week. The council executive joined BT in wooing councillors ahead of Tuesday's big vote. It pulled half of them into a meeting on Wednesday where four BT sales managers inundated them with promises and forecasts of greatness and prosperity. The only minuted, critical voice came from Unison the union.

Neil Rogers - president of Global Government for BT Global Services - neilrogers3.jpgThen Friday, the council executive sequestered the services of Cornwall's scrutiny office, which was meant to have taken an independent position on the outsource, to email a BT promotional pack to councillors.The scrutiny office also helped BT and Cornwall executives organise a promotional roadshow they did last Thursday. The email included a sales letter from Neil Rogers, president of Global Government for BT Global Services, and the "confidential" BT brochure.

Hot air

The brochure, styled as a "business plan", set out an incredible vision for "BT Cornwall".

BT wanted to build a "Global Centre of Excellence" for telehealth and telecare in Cornwall. It would do this by assimilating assets acquired from Cornwall's NHS Trusts. It would turn Cornwall into one node in a network of "business hubs and Centres of Excellence" it was building from its outsource deals across the public sector. Telehealth would become Cornwall's specialism in the national and global economy.

BT Vision for Cornwall - From BT brochure - OCT 2012.pngBT also wanted to acquire Cornwall's procurement expertise. Yet its sales patter may have misled Cornwall councillors.

"BT is currently seeking a UK base for a Procurement Centre of Excellence, from which to support other UK public sector opportunities," said the brochure.

"Cornwall Council has an established procurement service that is rated as upper quartile by government audits," it said.

"BT proposes to use its expertise to further develop the service as a tradable procurement service."

Thus it implied it might also put its national procurement hub in Cornwall as well, if it could only nab Cornwall's procurement office.

This is what councillors who supported the bid where saying.

But BT is already building a "Procurement Centre of Excellence" out of an outsource it did with Lancashire County Council last year. Now called One Connect Limited, BT Lancashire's backoffice aims, like Cornwall, to grow by assimilating the backoffices of other public authorities.

BT's "business plan" did not say how Cornwall would fit into its grand plan of global and regional "Centres of Excellence".

Might it have a mid-term plan to discard staff superfluous to the needs of a Centre's specialism? If BT had already set up procurement elsewhere, might it want to acquire Cornwall's procurement office only to strip its knowledge assets and kill it off?

It might be too soon to call it a carve-up. As well as procurement, BT acquired various Lancashire services outside its alloted specialism. It picked up payroll, HR, and IT as well. Their superfluity might not become apparent for some years yet.

BT Lancashire One Connect Limited Centre of Excellence Annual Report graphic.pngLancashire's distinct district authorities are disparate from a corporate point of view. Not all of them went in on BT's deal from the off. It might take BT the full term of its 10 year contract to acquire all their assets. Only then might it decide it doesn't need human resources in Lancashire because it has an HR Centre of Excellence in, say, Derbyshire.

Allure

For now, BT just needs to get the sale. It has 400 field sales agents leaning on chief executives in every public authority and NHS Trust in the UK.

That's what it told Cornwall councillors. And that a team of 27 people supported its sales force by firing concentrated campaigns at targeted authorities.

In Cornwall this involved producing a brochure that looked like a business plan but left out the downside risks a sensible business manager would demand to see. The document is stuffed full of pastel-coloured promises. It has all the allure of the full-moon at a rave party, rendered as a tea-shop oil painting by a pony-tailed retiree who once took acid. Some councillors went goggle-eyed over it.

BT promo people taking note.pngNot so Nigel Pearce, Liberal Democrat councillor for Bude South, who said in Tuesday's debate: "The problem with this bid is there's too much marketing."

"There's very little information on the finance," he said.

"And also about the operation, how its going to work, the nuts and bolts. We do need to avoid some of the flannel-speak."

The choice, however, was clear. It was the difference between the soothing noises made by BT's army-sized sales and marketing department and the infamous Barnet Graph of Doom that claims to show how council budgets will be squeezed so severely by 2030 that they will need to flog off their services. The logic is peccable.

BT's marketing conjured a vision of Cornwall as a high-tech hub, networked not just across the Country but the Commonwealth. What it actually means is Cornwall will be the site of a medical call-centre. The attraction for BT is Cornwall's unusually large population of dependants.

Demographics

Cornwall has fewer youngsters than the UK average, and more retirees, who's incomes are less then average, and half of whom are dependant on care. This is a unique asset in the world of telehealth and telecare, where services are automated, commoditized and delivered over BT phone and network cables.

The idea is that BT Cornwall becomes to the infirm what the City of London is to the rich: an international hub for the incapable and insensible. In years to come, it will employ a small army of joy-stick operators to direct drone mechanoids in the wiping of back-sides half way across the world.

BT's brochure proposed that Cornwall's uniquely dependent population would be a valuable testbed for its telehealth technologies. It proposed setting up an "R&D centre" in Cornwall to "develop new ways of delivering telehealth services".

BT Telehealth showroom - pulse_pic.jpgThis would employ five people primarily concerned with identifying innovative local firms who could be subsumed into BT Health, to give it a competitive edge with rival telehealth centres one presumes will be springing up in Bangladesh and Bolivia.

They would report to BT's real R&D centre in Martlesham, Suffolk, which employs not five but three and a half thousand people. BT recently opened a Telehealth showroom there.

For BT, the race is on for Telehealth in the UK. NHS and Social Services are abuzz with the idea. Housing Associations have a head start.

BT lost a bid to run telecare in Northern Ireland last year to a consortium led by Tunstall Health Care, the market leader, that operates a Centre of Incontinence or whatever you call it in Doncaster, South Yorkshire. It makes about £200m-a-year from 2.5m dependants in over 30 countries. It is a leader in the supply of alarm pendants for old people who take a fall.

Pressure

BT is counting on Cornwall to help it win tenders in a national government programme called 3millionlives, which aims to get 3m patients and dependants tended remotely across the NHS by 2018.

The Department of Health reckons £70bn of the UK health budget goes on care of people with long term conditions, the target market for telehealth and telecare. That's 15m people. 3millionlives will therefore turn the tap on a £23bn market, or whatever part of it can be administered remotely.

Things start moving next month. Formal tenders start in "early 2013". This may explain why BT gave Cornwall councillors an ultimatum this week: it would keep its offer on the table only until March.

Fiona Ferguson - Cornwall Council Councillor for Truro Trehaverne - Cabinet Portfolio Holder for Corporate Resources - bigpic.jpgFiona Ferguson, a member of the Cornwall Council Cabinet that backed the plan, passed the ultimatum on to councillors on Tuesday. She neglected to mention BT's own spring deadline.

But she did insist the council acted urgently. And she painted a desperate picture of the Cornish health system: "There are very serious challenges in adult social care and health," she said.

"There was a lot in the proposed contract about that. I recently spent 24 hours in Treliske [Hospital] with my father who had a fall. And there was trolley after trolley of people in exactly the same situation."

Tragically, at that very moment Carolyn Rule, Ferguson's Cabinet colleague responsible for Health and Wellbeing, was lying, collapsed outside the council chamber door.

Council leader Jim Currie interrupted proceedings to report that Rule had apparently fainted, but it was feared her situation might be much worse.

They just didn't know. Twenty minutes had passed since she left the chamber and collapsed outside its door. She was a very unhealthy colour and could still not sit up. It would be another five minutes before an ambulance arrived.

Fear

Thankfully, Rule got a clean bill of health at the hospital. She had a check-up and was released later that day. But it was a worrying reminder of the sort of pressures felt by the health service in a rural county like Cornwall, where people were often far from help.

Julian German - Cornwall Council Councillor - Independent - Roseland - bigpic.jpgThe dilemma was stark. Councillor Julian German had spelt it out earlier.

If Cornwall didn't do a deal with BT, "there won't be a world-wide Centre of Excellence for telehealth and telecare in Bodmin," he said.

Neither would there be a "procurement Centre of Excellence in Cornwall", said German.

Neither would BT deliver the promised cuts in those services it acquired from the council.

Neither would it create 1,043 jobs that would be "committed in contract".

BT's proposal had actually only guaranteed 350 new jobs. It had estimated that business might also grow quickly enough to create another 512 jobs.

The other 181 jobs in BT's 1,043 forecast were people it already employed at a "Truro retail facility". BT had promised not to make them redundant for the life of the telehealth contract. It was like a number from a dodgy dossier.

But you got the idea. The choice for Cornwall was whether or not to invest its resources in BT's telehealth gambit.

The original reason why Cornwall had started down the path that led it into talks with BT in the first place was now forgotten. Was it to pass the buck for a backoffice cull? Whatever it was, it was now second place.

Cornwall's priorities and all other alternatives would now be held up for comparison against against BT's business plan, that pastel vision that had infected the collective mind of Cornwall's Council Chamber on Tuesday like a mall shopper's retail lobotomy.

Councillors had stopped to recover their bearings. But BT had become the default setting.

The Department of Health, incidentally, refuses to talk of its telehealth initiative in terms of market-size and supply-side opportunities.

It likens telehealth to the introduction of the stethoscope: an inconspicuous tool that will slip into the complex arrangement of systems and people that make the National Health Service work.

The department insists it will leave local trusts to incorporate the technology in the way they see fit. It has not insisted Trusts can only do telehealth if they sell off their assets and go into business flogging the services themselves.

It betrays no sign of embarking on a frenetic pursuit of a corporation's marketing dream; nor that it has adopted the false dilemma that has echoed hypnotically around the corridors of Cornwall Council: that do-nothing is not an option, unless you want to miss out on the prize. Don't miss out on the prize.

Other befoolery put to the council chamber this week included the suggestion that the outsource is not ideological or political. And that battery-level councillors cannot understand the complex contractual matters that have been occupying the Cabinet's superior minds.

Or perhaps even that Cornwall is in crisis. Lavery himself wrote in the Guardian last week that that at 8 per cent growth, Cornwall's economic success is second only to the City of London.

Perhaps councillors will gather their wits by considering whether Cornwall needs BT as much as BT needs Cornwall, or whether BT needs Cornwall as much as Cornwall needs BT.

What competition means for Cornwall

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Cornwall smugglers postcard.jpgAs Cornwall Council leader Alec Robertson faces a vote of no-confidence today over plans to outsource £800m of public services, the proposals are looking weaker than a my-dog-ate-it excuse for missing school homework.

Ruling councillors and executives have resorted to dubious justifications for the deal as it has come under increasing scrutiny from people demanding answers to the simple question: why do it?

There might be very good reasons why Cornwall's Council and health Trusts should shove their revenue, benefits, human resources, contact centre, libraries and some frontline care services into a profit-making venture with an IT outsourcer. There might be good reason why Cornwall should take only a minority stake in the venture, even though it will use its own cheap credit lines to finance the deal.

But Cornwall hasn't given them. Its reticence does of course hide a much bigger story than the one it's giving councillors.

Since Cornwall is transferring its public resources to a private vehicle (commanded by whichever of BT or CSC wins the bid) it's going to be operating in a market where it will have to fight, dog-eat-dog for survival. But the council has not even produced a market forecast. Councillors scrutinising the deal have not been told how Cornwall thinks it might manage in competition with other local authorities that are also launching backoffice corporations.

Such forethought is more important than ever since Southwest One, a similar outsource venture in nearby Somerset, ran into serious trouble this year.

Southwest One logo.jpgBooty

What happens when Cornwall Council Corp goes head to head with Southwest One? Might Cornwall Corp be so successful that it puts Somerset out of business?

It sounds absurd but this is the game these local authorities have got themselves into: the aggressive business of backoffice outsourcing, where prices get slashed and jobs get sent overseas. Outsourcing is one thing. Going into outsourcing is quite another.

It is the sort of world in which Cornwall Corp might crush Somerset Inc in open competition, and then celebrate when it wins the contract to do social services to the unemployed call-centre workers that subsequently flood the soup kitchens and underpasses of Yeovil.

It is a heartless world in which there is no public accountability. It is the sort of world in which some fat-cat BT executive might use the money he makes running Yeovil social services to buy a dainty little cottage overlooking the sea in St.Ives, his preferred location ever since Somerset got so full of scummy, out of work no-hopers from Southwest One.

Yet Somerset might actually turn its troubled Southwest One venture round. It might annihilate Cornwall Corp before it even gets off the ground, beating it to every contract with outsourcing councils up and down the country.

Somerset might then open an office in Truro, in a sort of corporate takeover of council services. Or it might keep all the jobs in Somerset, and manage Cornwall remotely like a digital Queen Victoria administering an overseas Empire of primitive peoples. Somerset could sell Cornwall Corp's premises off as holiday lets.

But this new market for privatised council services won't just be Somerset and Cornwall in a bloody fight to the death. Other public bodies around the country are going on the game as well.

Privateers

The most glaring question, after who will reign supreme, is therefore one that the public authorities behind these ventures have been most unwilling to answer: how much business must their backoffice spin-offs generate before they become viable, so they don't end up like Southwest One.

How much business must they generate before they turn a profit? How many other councils must they do backoffice outsource deals with so they can attain these targets? How many assimilated council backoffices does it take to make a privatisation work? And how many corporate council spin-offs can the market take before it becomes saturated?

Cornwall has not even shown councillors the proposed business plans. Its Single Issue Panel, tasked especially with scrutinising the deal, is negotiating terms to see the details. They expect to be let into a locked room where they can see the documents for an allotted time but will not be permitted to make notes or take anything away.

That may explain why the deal's advocates have been able to talk it up with nonsense statements.

That's what Councillor Steve Double, portfolio holder for the Cornwall outsource, sounded like he was doing when on 26 September he wrote fellow councillors an urgent email rebuttal to points raised by critics.

Steve Double, Cornwall Council.jpgDouble had been put in an awkward spot by Southwest One. Somerset had intended its venture to do the backoffices for public authorities across the whole of South West England. It failed. Somerset's backoffice venture subsequently went stale. Southwest One is now said with emphasis on the second word.

Ahoy

Cornwall would be different, Double told his fellow councillors.

Cornwall's backoffice company was going to pitch for business from councils in London and the South East. Its horizons weren't limited to the West country. It was going into the TeleHealth business as well - the business of using a computer system to remotely administer health and social care. It had one eye on the future and one eye on national triumph.

"All of this makes the context completely different from SouthWestOne where IBM was hoped to sell services to other South West Councils," said Double.

Southwest One had in fact broadened its own horizons this year too, after it nearly went bankrupt.

It is now pitching for backoffice business from councils all over the country, like Cornwall proposes to do. It is desperate to make up nearly £60m of losses. IBM, its parent, is desperate to recover some £60m of accumulated debt and other credit lines. The competition will be tough.

It may therefore be too soon to talk of a carve up. But the TeleHealth bit of Cornwall's proposal (the shiniest bauble ever since it was tacked onto the proposal, after the council Cabinet approved the outsource in July 2011) has given Cornwall Corp a unique selling point among other privatising councils.

TeleHealth

The plan for a Cornwall TeleHealth Corp has also lent a chimera of credence to the idea that the venture will bring jobs to Cornwall.

Alec Robertson, Cornwall Council.jpegRobertson guaranteed it would produce 500 jobs. The jobs have not yet been guaranteed by either of the suppliers. But they will apparently be guaranteed when they do guarantee them, presumably in a manner that can be depended upon.

Cornwall TeleHealth Corp will also be a boon of special significance for its outsource supplier, no matter which of BT or CSC win the business.

This pair were responsible for the disastrous NHS records system called the National Programme for IT. They may have been slow to deliver it (five years late, it is not yet finished) but they have moved quickly now there's new public assets up for grabs.

Cornwall will give them a way to resell their NHS systems into local government. NHS health records will be allied with social security records in the Cornwall system. It will become the fulcrum of health integration with social security, as well as benefits and other public services.

Yet why Cornwall can't do TeleHealth itself, and then pay these suppliers simply to supply, is another matter to which the Single Issue Panel has not yet been privy.

Cornwall's entire NHS has got behind the scheme, including the Kernow Clinical Commissioning Group, which will take over from the existing Primary Care Trust when the coalition government's plan to "devolve" the NHS in 2013 to those privateers more commonly known with inexplicable affection as GPs.

Cornwall has also failed to communicate why it needs to give its outsource supplier a controlling 51 per cent interest in its services.

The county could use its own cheap credit lines to finance its own TeleHealth, or to restructure its own services. But Cornwall didn't attempt to develop such an idea into a proposal that could be given serious consideration alongside the outsource. Nor did it develop the other options that first made the outsource idea look less threatening when they were put alongside it on the table, briefly, in 2011.

Lavery

Why indeed had Cornwall not opted to do this all in-house, asked independent councillor Mark Kaczmarek in Cornwall's Cabinet meeting in July.

Kevin Lavery, Cornwall Council CEO.jpegCornwall chief executive Kevin Lavery, once head of local government for BT, and a career, supply-side advocate of privatisation, said the council should put its services into a commercial venture because only a commercial venture could behave like a commercial venture. He used the proposal to justify itself on its own terms.

"An 'in-house' option would not be in a position to offer the commercial skills which a private sector partner could offer," the meeting minutes attributed to Lavery.

"As an example, a dedicated sales team already existed within both of the two potential private sector partners and it would not be a practicable option for the Authority to try and create such a sales team as it would take a significant amount of time and investment," he explained.

It was just the sort of circular nonsense you would expect but would dearly hope, when you knelt down beside your bed and prayed at night, did not really pass for thinking in the high offices of the public sector.

But it is not all so bad. A push into Kent and the South East will be just the ticket for Lavery, who had pushed Conservative transformation work at Kent and London councils early in his career, and who later managed contracts in those regions for BT. That's also where BT has its NHS contracts. And it is where Lavery now proposes to pitch his outsource joint venture with BT, or CSC if the latter wins the bid.

When Kaczmarek asked Lavery why not do it in-house, the poacher-turned-gamekeeper might have said conversely, well the outsource company has got this bloody sales team. It's surplus to requirements. Isn't it?

NHSIT deal too good to be true

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Fairy tale for a sick child.jpgThe Department for Health has refused to divulge details of a deal that was meant to fulfil its promise to scrap the NHS National Programme. It may have done such a bad deal that it daren't allow public scrutiny of it.

It struck an "interim" conclusion of an extraordinarily protracted contract dispute with lead National Programme supplier Computer Sciences Corporation last week.

But it agreed to accept a less well endowed version of the software it originally contracted from CSC in 2003 - a Patient Administration System - because the supplier has still not finished it. The government is also considering putting up more central funds to cover the cost of trusts that seek to acquire systems outside of the NHS contract, Computer Weekly can reveal.

Just a week after the department said it had "saved" £1bn after concluding contract renegotiations with CSC, its refusal to divulge specific financial details has raised the prospect it will be getting less for more - not, as it promised - more for less.

£1bn "saving"

The department has been so evasive about the details of what pricing it agreed in the CSC settlement - negotiations over which were led by the Cabinet Office - that its own trumpeted saving no longer looks credible.

Thumbnail image for Chris Grayling, health minister, on the day of his removal from the Department of Health.pngThe little it has been prepared to say was buried last Tuesday under the news maelstrom caused by the government's Cabinet reshuffle.

After more than a week of cat and mouse games over the facts of the deal, the department has said nothing more than would imply it had written CSC a blank cheque.

Thus almost two years to the day after it said it had already scrapped the programme, and a year after it said it was still dismantling it but more rapidly than before, it slipped out that it hadn't really scrapped it at all. It has since refused to say anything more about it than vague and evasive restatements of the stultifying public relations statement it made last Tuesday.

The department said it saved £1bn by scrapping an obligation for NHS Trusts to buy CSC systems. It portrayed this as a liberation of the NHS from the last Labour government's communist-leaning, top-down diktats. But what it actually meant was that it had merely removed a commitment to implement a predetermined number of systems from its own contract with CSC.

It would not say precisely how it calculated the £1bn - coincidentally, the same amount CSC wrote off against the contract last December, seven months after the two parties struck their last but aborted interim agreement.

Slippery

And it has been issuing slippery replies to questions about pricing settled in the agreement. When CW asked how much money it had put up for CSC systems under the agreement, it said disingenuously it understood the question to mean CSC systems delivered outside the programme, for which of course there was no money. It dragged out this misunderstanding for seven successive working days.

When CW asked how much money it had put up for each Trust installing CSC's software, it said it could not say how much because the software and support terms were variable. It said the same for those 10 Trusts already delivering CSC software, which were handled separately by the CSC settlement.

"It would be misleading to give specific figures," said a department spokesman in an email.

How then had it determined that it had saved £1bn, if it did not know how much it was paying?

How could it even have renegotiated its CSC contract without agreeing a price?

And how could NHS Trusts use the central IT funding it had set up for them, if they did not know how much was available?

Had the cost-conscious coalition government written CSC a blank cheque?

Thumbnail image for CSC India Headquarters.pngComputer Sciences Cowpowayshen

CSC itself proved as evasive after the deal was announced last Tuesday.

By the end of the week, after Computer Weekly complained about the contempt it was showing for those citizens and patients for whom it was ultimately responsible under its government contract, and the culture of secrecy within which it obscured its horse trading over public money, CSC put its top NHS man up for interview: Guy Hains, the international vice president who has led the supplier's dealings over its failed NHS venture.

But CSC pulled out the next day. It did not want to face difficult questions. News had also broken of further bizarre evidence that was alleged to link CSC to the abduction and torture of people under the US Central Intelligence Agency's demented War On Terror.

The NHS had apparently played the 'torture flights' card in its negotiations over the summer. But it dropped its concern for human rights when it signed the deal. It issued an identical brush off as had the Ministry of Defence and Transport for London when Reprieve, the charity that unearthed documents seeming to link CSC to the torture flights, asked them to justify doing business with the supplier.

"We asked CSC for clarification on these allegations. They have assured us that CSC adheres to its Corporate Responsibility Programme which includes an affirmative Human Rights statement," a Department for Health spokeswoman said in an email. CSC has not denied the allegations.

Contradiction

When CSC finally sent its own statement about the NHS contract settlement by email, it said it had agreed pricing terms with the Department for Health. It would not reveal actual numbers but figures had been agreed.

Its Lorenzo patient administration software had been cut back into a core system it was ready to deliver and additional components it had not yet finished. They were priced separately, as were services to implement and run them. None of the actual numbers were deemed fit for mortal ears.

Of the £2bn that it may be deduced the government has now agreed to pay of its original £3bn CSC contract, it was not clear whether it was reserved for payment only of those core systems, and that the optional extras would cost extra for NHS Trusts, along with the services to go with them.

And would CSC still get its £2bn if it failed to install its software at but a few Trusts?

Free market

This remains a possibility. As Hains told investors in April: it's a complicated system - it can take up to 12 months to implement it at a hospital.

"Its a 9 to 12 month programme to take the system and put it into a hospital and turn off the legacy infrastructure," said Hains. "There's usually very complex interfacing. All of that requires a huge amount of planning.

"So from day go one you are looking at switching over the first system some 9 to 12 months later. We are ready to do that. So we don't have ramp up time from the point at which we sign the agreement. We have plans in place to take on the first Trusts, and have built up their plans so they are ready to go," he said.

It is most likely therefore that the Department for Health had already established precisely how many Trusts wanted to buy CSC's software, and has got commitments from all them.

So it can remove any contractual mandate and pose as free market liberator, and still strike an agreement with CSC for a set number of systems for a defined amount - all the while churning out vapid chuff chuff from its PR department to deflect any attempts at scrutiny that might expose how bad its deal is compared to that struck by its predecessors under a Labour government.

Thumbnail image for Francis Maude launching the Conservative Technology Manifesto - 30 MAR 2010.pngBehind the chuff, the government has settled for exactly what it said it was vanquishing: a top-down, centrally funded, one-size-fits-all, national IT project with an unreliable supplier on dubious terms.

"The National Programme for IT embodies the type of unpopular top-down programme that has been imposed on front-line NHS staff in the past," said Cabinet Office minister Francis Maude in the Department for Health press release last week.

Sir David Nicholson, chief executive, NHS.png"The NPfIT has provided us with a foundation. But we now need to move on if we are going to achieve the efficiency and effectiveness required in today's health service," said NHS chief executive Sir David Nicholson in the same statement.

Under the new arrangement, the government not only de-scoped the NHS system, it extended the duration of CSC's contract another two years, to 2016.

You had to read that on the website of the US stock market regulator, the only entity privileged to get information about what CSC, Cabinet Office and Department for Health are really doing on behalf of the British people.

Bad deal

In the balance of things, the government has probably not saved any money at all. The concession it did get - a removal of its volume purchasing commitment to CSC - may be offset by the loss of a volume discount. The £1bn "saving" will mean fewer implementations, probably at a higher unit cost. It is even likely that so few trusts will sign up and can be served software before the end of the contract period that "saving" £1bn is simple.

The government is in addition seeking to provide central funds for Trusts to buy non-CSC systems. Thus the cost of the programme goes down with one supplier and up with a variety of others.  

"We have given local NHS organisations the power to make their own decisions about which IT systems they use. The Department for Health is considering the most appropriate mechanism through which trusts may access central funding to support these kinds of capital investments," said a Department for Health spokesman in rare fit of candour.

This is what passes for transparency and accountability under the ConDem government that has made such a song and dance about it. Where are all those armchair auditors Francis Maude talks about? Probably concentrating on those drips of disclosure the government makes when transparency is in its interest.

How Europe did 20 years of backroom deals with Microsoft
1999: Reseller cartel makes it nice and cosy

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How Europe did 20 years of backroom deals with Microsoft
1999: Reseller cartel makes it nice and cosy"> | More
Osim Uastro Zero-Gravity Full-Body Massage Chair.jpgWhile prosecutors in Europe and the US struggled to restrain Microsoft's monopoly in the late 90s, their own compadres in the European Commission's Information Directorate demonstrated in gobsmacking style just what little difference they were making, even in their own back yard.

Within six months of both the US Department of Justice and the European Commission competition directorate making landmark anti-trust moves against Microsoft's monopoly in late 1998, the the EC Information Directorate (DIGIT) had moved to entrench and extend Microsoft's monopoly over its own computing infrastructure.

DIGIT was sticking Microsoft everywhere. And it no longer had to justify doing it without a competition - as it might when, say, buying comfy chairs.

The EC had found a particular brand of chair was especially comfortable, thank you very much. Why should it bother telling other chair suppliers when it was about to spend a few more millions of Euros on chairs, when it had no intention of giving them a chance to compete for the business?

Because the procurement rules said they should. And DIGIT's excuses for doing backroom deals with Microsoft were starting to sound a bit lame.

So DIGIT found a way round the procurement rules. It wouldn't need to justify its backroom Microsoft deals anymore because it wasn't going to buy its Microsoft software from Microsoft anymore. It was going to buy its Microsoft software from a Microsoft reseller.

Comfy

This was a nice arrangement. It meant that for the first time in nearly a decade of buying Microsoft, the EC would have a fair and open competition to determine who got to supply the software that ran its PC infrastructure and tooled up its officials.

Well, a sort of competition. Only Microsoft resellers could compete to win the EC competition to find a Microsoft reseller. This somehow got past the procurement rules. A Microsoft reseller won the competition. It supplied the commission with Microsoft software.

There was just one snag, though. Microsoft had the market for Microsoft resellers tied up. So it could set the terms by which the EC did business with them. And it did.

So the EC found that after it had gone through all the cost and effort to run a public competition for a Microsoft reseller, it still had to do a backroom deal with Microsoft: to agree the prices and terms by which the Microsoft reseller would do business with the EC. It made the competition look like a bit of a sham.

"Microsoft offers different types of agreements under which price reductions and maintenance delivered by the resellers can be obtained," explained the EC report that claimed to justify doing another backroom deal with Microsoft.

"The reseller applies his margin on the retail price negotiated between the Commission and Microsoft," it said. These were Microsoft's procurement rules.

EC Informatics - Report to Advisory Committee on Contracts concerning Microsoft - 21 JUN 1999 - Splash.pngThe paperwork was more of a formality than usual. DIGIT made its Report to the Advisory Committee on Contracts Concerning Microsoft Software Products and Associated Services on 21 June - just nine days before the last Microsoft licensing agreement ran out.

There wasn't much bother about it all. The EC could only really gift its business to Microsoft after prospecting the market to ensure it really had no alternative. There would be no point running a competition for a software supplier if Microsoft was the only game in town.

Formality

As it happened, Microsoft did have a monopoly. It was therefore, to all effect, the only game in town.

It had in fact 95 per cent of the operating system market. It had a similar share of the market for office software. It was using its monopolies to extend into other areas of software like the internet, which had earned it a wrap on the knuckles from the US department for Justice just six months before. And it it was extending its monopoly into servers, a situation that the EC competition police were investigating at that very moment after complaints in 1998 from Microsoft rival Sun Microsystems. Microsoft wasn't really the only game in town. That's just how it seemed to procurement officers, and the market.

So DIGIT's market survey came up trumps for Microsoft:

"The Microsoft range of products and services used by the Commission is only available from Microsoft," it said.

"It is not possible to acquire similar products at the same level of quality from other suppliers," it said.

That was all it said. It was the usual justification for doing a backroom deal with Microsoft: only Microsoft could supply Microsoft.

But this matter of a Microsoft reseller confused matters. Did it mean that it was no longer the case that only Microsoft could supply Microsoft, but that only Microsoft could sell Microsoft software licences that could only be bought through Microsoft resellers through a fair competition open only to Microsoft resellers? The effect was the same.

Open standards? You'll know one when you see one, says Microsoft

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voodoo_doll.jpgYou can't define an open standard, said Microsoft's policy director in an interview with Computer Weekly. But you know one when you see one.

That has become the essence of Microsoft's opposition to the UK government's open standards policy, according to Steve Mutkoski, worldwide policy director of international government affairs at Microsoft. You can't put your finger on it. And what'n'ever it is, it ain't what the open standards movement says it is.

It wasn't always so. How we got talking about this, in the atrium of Microsoft's swish London headquarters, was that the software giant had used a curious tactic to defeat UK open standards policy. Computer Weekly was trying to shed some light on it.

When Microsoft, the open movement's most powerful enemy, saw the UK hoist the open standards banner it did not try to have it pulled down. It tried to have the colours changed.

This is what the public consultation that closes Monday is all about. Microsoft and its cohorts in the proprietary software business tried to persuade the UK to their wording when it codifies open standards in official policy. The government asked for public support: is an open standard what we say it is or what Microsoft says it is?

Microsoft had used a dastardly ingenious tactic: steal your enemy's language of identity and you render him powerless. The open movement had evolved its own meanings for the words it used to define itself. 'Open standard' was the most important and most powerful, particularly since governments had started trying to put it on official headed paper. Its meaning had been forged in opposition to the proprietary software model. It and UK policy had been defined in explicit opposition to Microsoft's business practices. The movement had defined its own terms. Now Microsoft and its cohorts in the International Standards Organisation and Business Software Alliance wanted them rewritten on their own terms. They sought to impose their own meanings on their enemies' language, and when it was written on official paper their enemies would be metamorphosed into their own likeness. It was voodoo magic.

Microsoft Cardinal Place London.jpgBack in London

That was however no reason to dismiss the proprietary lobby outright. It had been so persuasive in private meetings and letters that the government pulled its first official definition of an open standard. If Microsoft had given a good reason it deserved to be exposed to the light of day.

So far we only had the what, not the why. Leaked correspondence revealed Microsoft and its partners had insisted patent holders should be permitted to stake royalty claims over open standards just as they did over every other sort of standard. They claimed the right to label proprietary, patented standards as open standards. It seemed nonsensical. There had to be a reason why.

Computer Weekly got its chance to find out when Microsoft's director of policy flew in from Seattle on one of those unusually sunny mornings in March. Mutkoski had come to personally lead the lobbying. Neither of us knew then how the lobbying was to backfire. But the important questions would still need answering.

So I asked the most pertinent of them. How could it be justified for a patent holder to stake a claim over a standard of software interoperability?

"I can explain that you," said Mutkoski. "But I will also start out with a proposition. Why should it not be the case?"

It was perhaps too much to expect a straightforward answer. This was what in debating circles was known as shifting the burden of proof. The whole point of the interview was to question Microsoft's assertions about open standards. Mutkoski was trying to shift the burden on me to prove the opposite of his case. That wasn't my job, or my cause.

The opposite case, for open standards, had already been made by the coalition government, and other governments before it. They made it openly. It seemed valid. They promised liberation in a world where public computer systems were hog-tied by Microsoft's desktop software monopoly and squished under the weight of Oracle's market power. Microsoft might be the only official monopolist in the room. But 70 per cent of all software bought by government was Oracle. This much was fact.

Steve Stephen Mutkoski - Microsoft.jpgGOTO 10

I put the question again. How did Microsoft justify its attempt to impose royalty claims on open standards?

The answer, said Mutkoski, was that the software industry supported a variety of business models. One of those business models involved people selling proprietary software licences. Those people should be included in the open standards definition.

This was still no reason why. And it was again nonsensical. The point of classifying something is to distinguish it. Create a subset of standards called open standards. Allow all varieties of software standard to be thrown into it and you no longer have a distinct subset. You have a hotch-potch.

But Microsoft might have a valid case waiting to be put cogently. Could he give an example that demonstrated why such royalty claims should be permissible?

"Here's why," said Mutkoski. "You are a products company. You are looking to create great, innovative products that sell. You can either do the R&D yourself, which is going to cost money, or you could license the technology I contribute. I need to get a return on my R&D. I think that's the paradigmatic why."

And it was a why. But it was the why of the proprietary software licensing model. There was still no sensible reason why this model should be imposed on the open movement.

I put it to Mutkoski again. For what reason should anyone be permitted to claim royalties over a standard of software interoperability?

He summoned for his answer the example of those telecoms and electronics-derived media standards that were later to be barred from the UK consultation: mp3, H.264, GSM and 3G. His case was that these standards had been successful despite being bound in hardware-derived patents. He denied there was any reason to distinguishing between hardware and software. His said that in both cases it was simply valid for someone to claim royalties over a standard.

Infinite loop

Yes, but why? What, say, are the H.264 royalty claims for? If we knew that then perhaps we could at least get the heft of a justification, if not the sense.

"I'd have to look there. There's no way I can answer that even in an hour. These are areas that are so complex."

"Do you know what the patent claims are for in H.264?"

"I know what some of them are".

"Can you give me an example?"

"Not off the top of my head".

"This is crucial. This is what I want to understand."

"Maybe you need to talk to a patent lawyer. I'm not involved in any of the organisations well enough to answer the kinds of questions you have about specific patents."

"Well then how can you say for sure that it's desirable to allow royalty claims over standards if you don't know what the basis of your argument is?"

"I think you are asking me to prove a negative. I would flip the question round and say to people who don't want to recognise royalties why they think it's desirable to not have royalties."

He was trying to shift the burden again. And anyway, Mutkoski was a lawyer. He'd been a software licensing counsel and attorney at Microsoft for years. I wasn't asking you to prove a negative, I said. I was asking you to prove your assertion. You are asking me to a negative, I said.

We had reached a dead-end in Microsoft's argument: the proprietary model should be imposed on the open model because the proprietary model. It was argumentum ad morantium. The Cabinet Office had fallen for this.

Mutkoski denied it was so. Innovators must simply be permitted to claim rewards for their efforts, he said. That meant claiming royalties over standards as well as the software implementations that used them. Convince me, I said. You convince me, he said. You can't prove your case, I said. You're tying to shift the burden he said. We were going round in circles, flirting around the software patent debate. That is what it was about for Mutkoski - the legitimacy of software patents.

Microsoft-proposed Cabinet Office open standards PPN.pngBut it wasn't. It was about open standards.

Break

We were having this silly Dervish debate because Microsoft and its cohorts had protested over the UK's attempt to define an open standard as something distinct from proprietary standards. This opposition seemed fatuous as well. If an open standard was distinguished by its not being proprietary then it would by definition not entertain proprietary claims. If its distinction was not that it was not proprietary then it was pointless distinguishing it all: just call it a standard and stop wasting our time.

Yet Microsoft, Oracle, the Business Software Alliance, the International Standards Organisation and the British Standards Institution all told the UK that proprietary standards ought to be included amongst those it called open. There was by their reckoning nothing to distinguish proprietary and open. Microsoft had even mocked up a Cabinet Office Procurement Policy Note, in official wording, that included an open standards definition with a proprietary clause stuffed in it. Standards constituted of proprietary licence terms known as FRAND were, it insisted, open.

When Computer Weekly asked these organisations to release the open standards definitions they had been pushing on the UK, they all refused. They weren't all that open themselves. The information got out anyway in a leak and a Freedom of Information request. When CW pushed them to justify their position, they either withdrew it or, as did Oracle, refused to speak. As has already been written, ISO said it did not even know what an open standard was, though it had been telling government how it should write its definition.

What has not been revealed before now is that BSI went further in distancing itself from the whole affair.

David Bell, BSI head of policy, told Computer Weekly: "We don't talk about open standards because it's not a concept that we - it's not part of our terminology. 'Open standards' is just not part of the vocabulary we use."

Bell's was the only sensible contribution the proprietary camp had made to the whole debate. Perhaps Mutkoski would make a similar climbdown when asked to clarify Microsoft's definition of an open standard.

He didn't quite climb down. He transmogrified. There was now no way to define an open standard for certain. It meant different things to different people. "From my experience," said Mutkoski, "its a spectrum".

Spectrums are what psychologists use to identify ambiguous mental conditions like autism. The human mind is so complex it can be hard to determine whether someone conforms to something so simplistic as a label. So psychologists determine how someone's behaviour maps to a spectrum of autistic traits. This is how Mutkoski wanted the UK to classify open standards. He reckoned they had five traits. Four of them concerned the way an issuing standards body dealt with them: how overhead costs where covered, that sort of thing. One concerned the actual substance of the standard: and only then to specify that it could be proprietary.

Market failure

Mutkoski's point was you couldn't put your finger on it. Even if Microsoft itself had a proprietary claim over an open standard, it might still be deemed open on the strength of its being formed in an open forum where the voting was arranged equitably and there was a liberal supply of cheese biscuits.

But who in this ambiguous world would determine which standards should be classified open and which proprietary, I asked. If every standard should be treated as an individual case, this spectrum approach implied an unreliable procession of professional assessments, tests and second opinions that might produce unsatisfactory diagnoses.

Let the market decide, said Mutkoski. And when the market failed? The market would correct itself. The standards ecosystem was sophisticated. It was self-correcting.

What went unspoken between us was the unsavoury example of the market failure exemplified in Microsoft's own .doc format, or Oracle's idiosyncratic implementation of Standard SQL. Those market failures could only be seen at a greater perspective than that conceivable by the standards ecosystem itself. The market failures had not corrected themselves. Government had decided to intervene. And even then only to spend its own money more wisely.

The spectrum seemed just another dastardly way to pull the rug out from the open standards movement anyway. A software standard is not a complex system like the human brain. It's not hard to put your finger on it. If you decide that an open standard is an amorphous concept and let anyone define it how they want, you make it impossible to say what it is for sure. It's then whatever you want it to be. Policy formed in this way would have the structural integrity of a freshly laid cow pat, or the semantic certainty of gobbledygook - at least for as long as it took the proprietary camp to have established in practice that all open standards were now proprietary.
Barbie Campaign.jpg
Fairly reasonable

To be fair to Mutkoski, there might still have been something he was failing to get across. He was better at expressing his ideas on paper, he said. He gave me a copy of a paper he had written about open standards: 'Defining Open Standards: A Comparison of Policy and Practice'.

The paper starts out by misrepresenting a famous paper by a Yale law professor on the "I know it when I see it" hardcore pornography ruling of the US Supreme Court, as though to give his case against open standards the appearance of authority.

Nevertheless, Mutkoski's proposition is that open standards have a fundamental problem: they rely for evidence of their own integrity on nothing but self-referential confidence. The problem with his critique is that it denies the open movement the right to self-determination. (Also ironically for a software patent expert, the paper he misrepresented is about freedom of speech). His analysis reduces the open standards policy efforts of the UK, Europe and India into a dissembling knot of gripes and picked hairs.

It's hard to put your finger on what an open standard is because different organisations have defined it in different ways, the paper says. What it does not say is this is most true of those who drafted open standards definitions after capitulating to the proprietary lobby. It's like saying laws against embezzlement are unworkable because some countries have loopholes in which gangsters operate freely. Just ask any gangster, he'll tell you its unworkable.

This left just one question for the proprietary camp. If an open standard was one that included proprietary licence terms, what was a non-open standard? Surely there would be nothing to distinguish them?

"I think that most people would probably agree that a non-open standard is a specification created by a single company, held within the company and not shared with anyone else, not available for licensing, not available for implementation," said Mutkoski.

But that wouldn't be a standard at all, I said. "It could be though," said Mutkoski. Ah so its whatever you say it is. I know it when I smell it.

TfL spends £100m on temporary helpdesk

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Transport for London has spent £100m on a temporary contract that is still running after five and half years and will be clocking up more costs until 2014.

TfL gave a temporary IT contract to Computer Sciences Corporation in December 2006 after terminating an existing deal with Capgemini, claiming the stop-gap would be for just a year. But the temporary arrangement has been refreshed at least three times already.

TfL revealed the full cost of the temporary contract under coalition government orders to publish all contracts above £25m. TfL has like other departments not published its contract. But it did disclose a budget of £100m+ for CSC's "Marathon", the name of the temporary desktop computer contract.

A TfL spokeswoman said £100m was the total TfL had paid CSC under the temporary contract since 2006. The bill was inflated in January with another £21m for what the spokeswoman said was another temporary contract with CSC. This one would last until 2014.

She said TfL had extended its CSC contract again in 2011 while it conducted another IT review. Called "Project Horizon", it was completed in January. But TfL still needed more time to work out how it should organize its contracts. In 2007, TfL said it needed just a few months to work out how to organize its IT contracts. Then it stalled for more time until 2009 when it launched Project Horizon.

The spokeswoman said: "In August 2011, TfL had a contract providing a single point of contact for all IT incidents, the central helpdesk was provided by CSC. Following the completion of project Horizon in January 2012, the decision was made to extend the CSC contract to 2014 in order to provide time for us to complete the sourcing review and undertake and award any resultant procurement."

"Since the structural changes to TfL under Project Horizon, the information management team now operates for the whole organisation. In light of the new structure and emerging commercial and technological supply models we are in the process of reviewing the multi-sourcing arrangements to ensure they fully meet our business needs and provide the best service," she said.

CSC revealed January's temporary contract renewal in April, one week before its new CEO Mike Lawrie made his first presentation to Wall Street after joining the company in March. CSC had not had any good news in the UK since its 2009 cloud contract renewal with Royal Mail.

Liz Benison, CSC UK president, said in a press release: "We are delighted to be extending our relationship with TFL."

The temporary contract was set up by Phil Pavitt. Now chief information officer at HM Revenue & Customs, Pavitt is locked into a £multi-billion contract with Capgemini until 2017.

After Pavitt left TfL for HMRC, the transport body claimed to save money on its IT by bringing services back in-house from CSC. This is known only to have amounted to £6.7m over 2007 and 2009, according to TfL's board minutes.

Other budgeted TfL IT expenditure includes £100m+ with IBM for the congestion charge "enforcement" system, another £100m+ to Siemens for other congestion charge systems, £50-100m to NSL Limited for information systems and taxi licensing services, up to £25m to BT for an Automatic Vehicle Location system, up to £25m for SAP software licences and "maintenance", £25m for SAP managed services and application hosting and £25m to Computacenter for other hardware and software.

FOI shows bureaucratic bungle behind open standards u-turn

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Standards institutions persisted in their opposition to the UK's open standards policy after Cabinet Office minister Francis Maude reassured them their fears about it were unfounded, according to letters released to Computer Weekly under Freedom of Information.

The revelation raises questions about the minister's subsequent withdrawal of the UK policy, on 30 November, which was by then under no substantial pressure bar lobbying from large US software companies and, bizarrely, the record industry.

A letter sent by Maude in June last year, and obtained by Computer Weekly, showed how he had even then already extinguished threats and fears raised by opponents of the UK open standards policy in official standards bodies in Chiswick and Geneva.

The International Standards Organisation and its UK franchise, the British Standards Organisation, had threatened that the coalition government would be in breach of international agreements if it persisted with the policy. This would have meant expulsion from the international standards community, a threat so severe that it sent the Cabinet Office into a tailspin of public consultations.

But the standards bodies had got it all wrong - and this they later admitted.

The letters now obtained by Computer Weekly suggest they either misunderstood the policy because their executive officers did not understand software standards issues, or they wilfully misinterpreted it to protect their business interests. Neither organisation was available for comment.

Francis Maude - Cabinet Office minister - letter to ISO - International Standards Organiastion - on open standards - page 1 - JUN 2011.pngISO had written to Maude on 18 May to protest UK policy amounted to a bar on its standards, which were protected by law.

It said the UK was otherwise seeking to distribute ISO standards free of charge.

Letter

Maude's reply in June told ISO it was mistaken. UK policy would require public procurement officials to specify open standards only "wherever possible". It recognised that not all technology the government required would satisfy its preference for open standards.

The upshot was that ISO standards might not be listed among those the UK recognised as open and mandated for use in public systems. The list was a measure to avoid problems like that experienced at Bristol City Council, which said it was locked-in to using proprietary Microsoft systems against its wishes.

But, Maude assured: "We do not plan to preclude their inclusion if they are the most fit for purpose in delivering our business needs. Therefore ISO, IEC and BSI standards may be included in the catalogue and in UK procurements."

The rules would have meant standards like the Open Document Format were mandated for use in government systems, while proprietary formats like, say, Adobe's pdf were approved for limited purposes in recognition of the fact that they had cornered a specific market in which there were no known alternatives.

It is not clear why ISO and BSI persist in lobbying against this policy on those points which the minister had assured them were misunderstood.

Meeting

Maude met with Mike Low, BSI director of standards, in the week of 23 July to discuss the matter. But Lowe, a civil engineer who has held his post since 2003, was not satisfied.

BSI email to Cabinet Office summarising meeting between Mike Low and Francis Maude - 27 JUL 2011.pngLow said in an email to Maude on 27 July that he and the minister agreed UK policy should not rely on so narrow a definition of an open standard that it excluded other standards deemed important.

Speaking as UK representative of ISO, and in apparent ignorance of Maude's May letter, he said the government would "allay their fears" if it revised its definition of an open standard in a way that would encompass ISO standards.

He went on: "We recommend you clarify that the term open is not regarding the pricing/licensing models but the fact they must have been produced through an open process."

The sticking point for ISO was that part of UK policy said an open standard was one that prevented anyone from restricting its use through patent fees or licence terms.

Since Maude later retracted the policy (on 30 November) and put the question of what is an open standard out to public consultation, it looked like the minister had caved in on an IT policy that defined his party's position on matters as wide as open source software and how best to avoid Labour IT disasters like the NHS National Programme for IT.

Tea-cup

BSI later confirmed that it had been assured by Maude's explanation. But only after Liam Maxwell, Cabinet Office director of ICT futures, had gone over it again with David Bell, BSI head of policy, in October. Maxwell gave the same assurances Maude had given in June and, presumably, July. This time, BSI said later, "We were reassured". Yet it still maintained its opposition to UK policy, only now without apparent justification.

In January, ISO said its 18 May letter had sought clarification on UK policy, expressing its fear that its standards "might no longer be eligible" for public systems in the UK because they didn't meet the UK definition of an open standard.

"In a reply in June 2011 the Minister of Cabinet Office noted the concerns raised and indicated these would be considered along with the results of the survey. We understand the UK Government is further considering actions it will take on the matter. In view of this we want to see what the UK Government's response will be to the analysis of survey results," said ISO.

It gave no indication that its concerns had already been addressed in a manner that had "reassured" its UK representative.

Labour IT mandarins make comeback bid for global transformation

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The last Labour government's "Transformational Government" project has been rebirthed in California as a plan for world-wide reform of seismic proportions.

Four leading emissaries of the initiative teamed up in London this month to argue against the UK's open standards policy and have tried to persuade the Cabinet Office to adopt their policy instead.

The group, convened as the Transformation Government Framework Technical Committee of the OASIS standards organisation, was formed in collaboration with Microsoft by officials of a government that became synonymous with IT disasters. It has recruited the World Bank and other international institutions to persuade governments around the world to adopt its transformational policy.

The TGF Committee has told governments they should drop policies that address technology directly - policies like the UK's open standards policy. It has discussed instead a plan for a world-wide technical standards body and its members have expressed a preference for the controversial FRAND standards the UK has been trying to purge from its computing infrastructure.

Having been launched at a December 2010 World Bank meeting on the premise that the market had already settled all standards dilemmas of any importance, the OASIS TGF proposed in its first official publications this Spring a reform programme that incorporated privatization, civil service job cuts and a hegemonous computing architecture that all governments must follow.

OASIS TGF TC.pngClose-knit

Former deputy e-Envoy Chris Parker formulated the plan with the help of Microsoft worldwide policy director Steve Mutkoski. It was published by his company CS Transform, which had been paid by Microsoft to do work on the theme.

John Borras, a consultant for CS Transform and a senior member of OASIS, convened the OASIS TGF committee around the CS Transform plans. Borras had worked under Parker in Labour's Cabinet Office as director of technology. Other founding members of the committee included Peter Brown, managing director of a Brussels-based software consultancy called Pensive SA, where Borras also worked as chairman, and Andy Hopkirk, who as a director of the UK National Computing Centre in 2000 had helped Borras and Parker implement the Labour government's IT strategy.

Brown, Hopkirk, Mutkoski and Parker argued against the UK coalition government's policy at the first meeting of the Cabinet Office's open standards consultation on 4 April. This was the same team that had launched the TGF with Borras at the World Bank.

Ajit Joakar, another opponent of government policy at the Cabinet Office meeting, was notable for support he gave Mutkoski and Parker when they first elaborated early ideas for the TGF committee in 2009. Linda Humphries, the Cabinet Office policy official who convened the April meeting, was a junior official when Borras, Parker and Hopkirk held their senior posts there.

Denials

Borras told Computer Weekly the World Bank, European Commission and the European Regional Information Society Association were all "keen" to implement the committee's plans. The World Bank is currently formulating an ICT strategy for developing countries, while ERISA represents local governments across Europe.

He denied the plans had been formulated from narrow interests. "There's no chumminess," he said. The OASIS committee was "open and transparent".

"I've worked with many of these people over the years. Working for the UK government, I built a network of contacts around the world.

"We feel technology is not a barrier any more. So the focus has moved to business change. Governments are not organised in a way that is conducive to delivering online services. They need to restructure the way they do business. We are trying to help them on the best way of doing that," said Borras.

He denied his group was promoting a political agenda. He said TGF had not proposed privatisation and job cuts - described in his committee's Framework as "mixed economy service provision" and "restructuring of the public labour market". He said the plan was for "restructuring of operations to maximise the delivery of services...in the most efficient way". His committee had met with Cabinet Office officials who were considering its proposals.

Connections

Chris Parker told Computer Weekly Borras had known nothing about the Transformational Government plans being formulated at CS Transform until they were sent to him in 2010. He said Borras had merely been a consultant at CS Transform on a project basis. Parker said the original transformation plan had been formulated by Parker himself and Bill Edwards, a CS Transform director who also worked with Borras and Parker at the Labour e-Envoy Office as director of e-Communications, and also as managing director of Directgov. Edwards also joined their OASIS TGF committee.

Parker also played down Microsoft's involvement. He said CS Transform earned most of its income from governments. It had been paid by Microsoft but not specifically to produce the TGF proposals.

The TGF proposals were however formulated in collaboration Microsoft and CS Transform has co-branded a Microsoft brochure on the topic. Parker refused to discuss specific work CS Transform had done for Microsoft and whether the work had been supplied by Mutkoski, his colleague on the OASIS TGF.

Borras had in fact also worked for Parker at Gov3, the consulting firm the latter formed with Edwards on leaving the Labour Cabinet Office in 2004. Andrew Pinder, who as UK e-Envoy had been their ultimate boss in Labour's Cabinet Office, had launched Gov3 with them. Their work at the Cabinet Office had controversially produced a government system that forced people to use Microsoft technology.

Gov3 had similar proposals to those CS Transform adapted with the help of Microsoft to form the OASIS TGF committee. It was similar to their work at the Labour Cabinet Office. Borras said it was in fact an "evolution" of that work. The Gov3 work was also supported by the World Bank, where Borras, Edwards and Parker are official e-government advisers.

Borras said the OASIS TGF proposals did not require governments to adopt specific standards. But it was a topic the committee would address. It currently required government's to implement their computing infrastructure using the OASIS Service Oriented Architecture Reference Model.

UK saves 5 quid on Oracle

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Oracle president Safra Catz and CEO Larry Ellison in USA Today.jpgThe Cabinet Office has shaved about a fiver off the cost of an Oracle licence after high powered negotiations in which minister Francis Maude pressed the flesh with Oracle president Safra Catz.

The minister claimed a coup for tax payers on Wednesday after concluding negotiations over a memorandum of understanding that sets prices central government departments will pay for Oracle software.

But while Maude's office claimed the deal gave British citizens more transparency over government business, it refused to clarify the dubious source of the £75m saving the minister claimed he had made with the deal.

The deal is supposed to save £75m over three years. But only a portion of the headline number came from an actual discount you could spit and shake on.

The rest came from shared services and licence sharing. That meant that some of £75m was derived from government offices buying fewer Oracle licences. This imaginary number was inflated by extrapolating its value over three further years when these non-Oracle licences would not be bought and therefore the money not spent and never even earmarked for spending could be accounted as a saving.

Licence sharing was similarly swizzed up as a saving for tax payers by making it sound as though Oracle had conferred on the government the special privilege of taking software bought but no longer needed by one department and sticking it in another department.

Cabinet Office refused to say what the actual discount was. A spokeswoman said it was "commercial in confidence". Yet it had been happy to trot out the £75m "saving" in a press release and claim it a boon for tax payers.

Pennies

It is doubtful the government made any saving worth talking about, if at all. A disgruntled government officer complained in November about Oracle's hold over public sector IT. 70 per cent of all software licences bought by central government departments were for Oracle software. That was 10 million licences.

The deal Maude parped about this week was for more licenses than those in central government. It covered emergency services as well. But his department couldn't say how many licences the deal concerned. Lets say for argument's sake it was just those 10m in central government. And lets assume for now the entire £75m "saving" was derived from a spit'n'shake discount. That would mean the government had saved £7.50 per Oracle licence over three years. That's £2.50 per licence per year.

But since the material discount was just one portion of the claimed saving, it would be generous to assume the government had saved even as much as a fiver on the cost of a licence. That's £1.60 per licence per year.

There may not, however, have been even that much of a saving to shout about.

The Office of Government Commerce (now called the Government Procurement Service) has had a similar MOU with Oracle since 2003. It started its last major round of MOU negotiations in 2009. The current discount arrangement sounds similar to the last. It is likely derived from the standard cost-price of Oracle software, similar to the MOU it has with Microsoft, not the actual current government spend on Oracle. That would make three imaginary numbers contributing to the £75m total.

So what has HM Maude really done for us?

The Oracle MOU might be such a poor deal that no-one takes it up, thus helping Maude achieve his promise to cut government's unhealthy dependency on a few suppliers, and so save real money and promote innovation.

The aforementioned disgruntled officer - the then outgoing deputy government chief information officer Bill McLuggage - had complained about the stifling effect government's Oracle dependence had on the market, on innovation and prices.

The Cabinet Office was today unable to say what it had done to reduce its Oracle dependency. CW has been waiting for Cabinet Office to clarify its numbers since Wednesday.

McLuggage had derived his Oracle numbers from a long promised survey of government ICT spending, which is yet in its infancy. This Assets and Services Knowledge Base (ASS KIT) is supposed to tell government what it's spending and what discount it's actually getting, something it's been promising to do for more than a decade.

Cabinet Office is not making the ASS KIT data available to the public - only to its suppliers. So much for transparency.

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