Does centralised ICT procurement give better value?

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Ministers are talking of massive decentralisation to save money except for procurement where there are supposedly massive savings from bulk buying or ICT, where the savings from systems inter-operability and the re-use of previously purchased software can be substantial. But are such savings, incluidng with regard to ICT, more than wiped out by the tiers of overhead and inflexibility along the supply chain? 

I recently heard of a consultant who used to work independently for £350 a day who is now charged by one of HMG's "strategic suppliers" at between £500 and £1,800 per day. And the newly negotiated rates are "confidential" because of the favourable terms extracted from the "strategic suppliers".  I have also heard allegations that £10's of millions of savings with a three year payback are being foregone because they would get in the way of negotiating a long term deal with the incumbent  - who may subcontract to the SME concerned [and pigs might fly because the incumbent uses proprietary software].

Frameworks such as Desktop21 look attractive when compared to traditional cost of ownership models. But private sector employers, running deperimeterrised security, are now claiming to make massive savings by leaving employees to buy the equipment of their choice, and running the corporate applications on them within, for example, java sandboxes.

When it comes to complex networked applications it is being claimed by those organising local shared services that splitting complex procurements between the 20% or so that really does need integration skills from the 80% that can use commodity products and services can save 30 - 70% of the overall cost. It is also being said that those with commercially confidential deals that link the two are being locked into expensive and inflexible arrangements that will deny them the savings that will be achieved as others move into a world where gigabit circuits for business and social use are commonplace.

I was in charge of contract vetting for the Public Corporations sector of a major ICT supplier during the days of CCTA list prices. Those able to buy from the CCTA list did indeed get the lowest unit price. But they rarely got the best value for money. I was regularly involved in "risk reduction" exercises where we might strip out 30% or more of the price (in one case over 50%) while improving our own profitablity - by changing the approach and using different products and services. Such exercises were not welcomed by salesmen or area managers whose commission was linked to revenue rather than profit. They were not welcomed by buyers whose prestige and perks were linked to what they spent rather than what they delivered. My talents were therefore only used when business was a risk because the Finance Directors, theirs and ours, were asking awkward questions. My proposals also had to delivered be in an oblique way so as to save face: "a changed requirement", "a new technology breakthrough" - even though I was nearly always recommending the re-use of what was already available.  

Later I set the global office systems (as opposed to R&D systems or production systems)  procurement policy for the export division of a multi-national with subsidiaries in most of the members of the Unitied Nations. Most of the systems were supplied by one of a handful of well-known suppliers but the efficiency and competance of their support and maintenance operations varied widely: one was better in East Africa, another in South Africa,.another in South America. It also changed over time. The policy was that the subsidiaries and agents could buy what they wanted - provided the applications could communicate, using test loads of our choice, with those from the three main suppliers which we had been able to make inter-operate in the UK. It was the nearest we could get in the early 1980s to an open standards policy.

There is indeed a very good case for part of what Ministers are saying: e.g. a centrally mandated requirement to use open inter-operability standards and to look at what is already being used elsewhere. There may also be a good case for a new "CCTA list". But I suspect that there may be a better case for a central catalogue of all the frameworks and pricelists on offer with the requirement to justify to the National Audit Office why the cheapest has not been used - with track record, quality of service, local support, flexibility all being acceptable as good reasons - provided they were stated in the OJEU submission.

At this point I tend to get annoyed with those who blame the EU requirements for the esoteric, labyrinthine, lawyer driven, uniquely English (the Scots, Welsh and Irish are more communautaire) public sector procurement processes. 

Also, I may be very old-fashioned, but can see no justification for commercial confidentiality after any bidding or tendering process is over. In the 1970s we had to accept that whatever we said while bidding for business would be known by our competitors as soon as we had won. If we had a great new idea which we did not want copied, we had to line the bids up in parallel.

We could mouth all the justifications for confidentiality but no-one would listen.

Later I was a trustee of a charity making its biggest equipment purchase in a over decade (including replacing the pumps, filtering and heating equipment for a swimming pool that was being refurbished). The others leading the process were either retired engineers who thought they understood the equipment being bought and were using their contacts to research the track records of the potential suppliers, or they were retired Civil Service Accounting officers with experience of a variety of tendering processes. I gained a great respect for the networking abilities of mechanical engineers and for the prejudices of the pre-Armstrong Civil Service.  

Meanwhile I fear that the contrast between commercial confidentiality at the heart of government and open-ness at the fringes will means that the public sector will contirnue to pay well over the European average for ICT products and services and also continue to receive less value for money     

 

 

 

 

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This page contains a single entry by Philip Virgo published on November 19, 2010 10:33 AM.

Why consumers give up on cybersecurity was the previous entry in this blog.

What really happens when IT meets politics is the next entry in this blog.

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