Results tagged “Capgemini”

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.

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.

Never-ending megadeals embarrass gov ICT strategy

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Ten days before Cabinet Office gave a recent progress report on its flagship ICT policy to end oligopolistic megadeals, it signed two such megadeals worth over £1bn combined.

At £525m a-piece, the two key contracts DWP will use to deliver Universal Credit could not have come at a more inconvenient time. DWP needed to produce a massive system in a hurry. So it signed massive contracts with Accenture and IBM, two suppliers in the "oligopoly" that government pledged in its ICT Strategy it would "put to an end".

The central planks of its ICT policy - the means by which it would end oligopolistic megadeals: open source, open standards and software re-use - are meanwhile floundering.

Conservative condemnation of Labour's record of big IT bodges rested before the 2010 general election on its pledge to prohibit projects costing more than £100m. It made a meal out of the matter, lambasting Labour's big IT failures: the Child Support Agency, Identity Cards and the NHS National Programme for IT.

These failures already have a lot in common with the coalition's Universal Credit: big transactional systems managing flagship government policies that concern the big departments of state.

Diminishing returns

A "presumption" against such deals became coalition policy. It also adopted a "presumption" against the use of the "competitive dialogue" procurement procedure, as Francis Maude said last month it had.

Both the Universal Credit contracts were let after competitive dialogues 10 days earlier. This time last year, Maude promised no more megadeals. This year, he's saying no more gold plated contracts. Next year it will be, no ground left to give.

There is already a presumption against Competitive Dialogue, in European competition law. The procedure can only be used in exceptional circumstances: it has questionable competitive credentials. It allows government agencies to pre-qualify suppliers in complex procurements before deciding which ones are permitted to bid. In each of the Universal Credit contracts the government invited only two suppliers to bid.

So what did government mean when it said such deals would be broken up into £100m chunks "wherever possible"?

Computer Weekly put the question to HMRC and DWP heads of IT at the aforementioned suppliers' conference: what criteria determine when "wherever possible" is not possible?

They couldn't answer.

Because there are no such criteria.

Can we therefore assume that "wherever possible" is not possible simply when one of the big departments needs to produce a big system? I.e., that it is business as usual between government and its ICT "oligopoly".

The coalition has kept the National Programme for IT going (simultaneously scoring political points by condemning it). The CSA system was not merely scrapped, it was replaced. Identity Cards were always to use existing government biometric and biographical databases. Those databases live-on under the Con-Dems and may yet be used for the same purposes. (Now with the Interception Modernization Programme, the coalition plans to build more such databases, breaking another pre-election promise).

Universal Credit has similarly employed contractual arrangements set up under Labour: the Application Deployment Services framework procurement launched in March 2009. (Cabinet Office has also pledged to dispense with frameworks). Two contracts worth about £600m are still to be let under the ASD competition. Capgemini has been given a £70m corner of the deal. That with the IBM and Accenture contracts will run until 2018.

Universal Credit

Computer Weekly put it to Kenny Robertson, DWP IT director, that if the government wanted to break its IT contracts up and give more business to SMEs then these DWP contracts would have been an ideal opportunity.

"You ignore the timing of this," he said. "What do you expect people to do, tip their contracts upside down and start afresh? That competition has been running for several years. It's been openly competed. You can't just stop business change."

ASD replaced an existing contract not due to expire until 2014, four years after July 2010 when the coalition imposed its moratorium on and reconsideration of major IT contracts.

DWP let ASD after a competition that lasted two-and-a-half years, incorporating the moratorium and austerity contract renegotiations under which the government claimed to have saved £1bn and would reap a further £2bn savings.

Accenture (and others)

This all seemed to have no effect on Universal Credit. DWP awarded Accenture, Capgemini and IBM the topmost of the range of possible contract values it budgeted in 2009 before the coalition government changed the rules on ICT and started renegotiating contracts.

Robertson had told an earlier meeting of suppliers DWP had already made progress by splitting what used to be a single £multi-billion contract with EDS. (Though its parts are worth half-a-billion a-piece and this was done under Labour, remember).

DWP could now actually see what prices it was paying for its constituent parts, said Robertson. It had no idea, by implication, what the constituent parts of its last arrangement were costing. The Universal Credit contracts had, he said, incorporated policy measures including employing more SMEs on the job. But if the HMRC's £8.5bn deal with Capgemini is anything to go by, the ambitions of such requirements may fall well short of the ideal the coalition presented to voters.

So what happens if, as it looks, the government has let the glue of its strategy go soft - the open source, open standards and software re-use by which it intended to cut its £16bn of ICT expenditure and deliver it in ways other than through its clutch of large integrators?

Robertson claimed shifting the infrastructure of government was not an easy thing to do. Other senior civil servants have made the same defence. "The particular hole we are in took us an enourmously long time to dig - bear with us, we are working hard to get out of it," Liam Maxwell, Cabinet Office ICT futures director, told suppliers recently.

The big departments of state have their major business tied up for years to come. The big suppliers will not freely give up market share. The big ideas in the coalition ICT strategy will need the government to give them some welly if they have any hope of being anything more.
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HMRC rethinks £8.5bn megadeal as large suppliers resist flagship IT reforms

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HMRC Coat of Arms on wall.pngHM Revenue & Customs has begun reassessing its £8.5bn IT deal with Capgemini in advance of it expiring in 2017.

The rethink will shed light on how tough it is proving for the government to push through its flagship IT reforms, which include a pledge to curtail contracts worth more than £100m - a fraction of the cost of deals typically done by the the large departments of state - departments that show no sign of quelling their appetite for large deals.

The first hints of possible sanctions against large suppliers have meanwhile begun leaking out of the Cabinet Office as it becomes apparent they are not accommodating the aims of its ICT strategy without a struggle.

But government has officially adopted a less "adversarial" approach than it took over cost-cutting contract renegotiations Cabinet Office held with suppliers in 2010 because it is ill-equipped to carry out its reforms by doing its own systems integration for its £17bn annual programme of IT work. It has taken a conciliatory tone into talks it has begun with suppliers in follow-up to the memorandums of understanding it signed with them on concluding the 2010 negotiations.

HMRC CIO Phil Pavitt has submitted a proposal to the departmental board for reforming its IT outsourcing contract when its 13-year-old deal with Capgemini concludes in 2017, two years after the government that pledged to bring such deals to an end will have finished its term in office.

Pavitt told Computer Weekly a renewed deal would conform with government ICT strategy, but it would not open the door to any more SMEs than were already subcontracted to work for HMRC by Capgemini.

"You can sense the mood of the current strategy. I can't tell you what will happen. It will be more in line with government strategy today than perhaps this contract that was let seven years ago.

"If you are asking if SMEs will have a higher value of the contract. Then yes I can assure that will be the case. Will the volume of SMEs go up, probably not," he said.

SME-SchME

That was the measure by which the government said it should be judged: that 25 per cent of public expenditure must be placed with SMEs. Pavitt said HMRC would strive to meet the target.

But Cabinet Office dispensed with the value target when last week it sought applause for its efforts to bring more innovative, small IT companies in on government business. Chief procurement officer John Collington said the volume of contracts awarded to SMEs had gone up from 5 to 44 per cent between January and September 2011. He claimed this a triumph but did not divulge the proportion of SME contracts by value when he bragged to suppliers about it at a Cabinet Office conference.

Stephen Allot, crown representative for SMEs, told a side-meeting at the same conference that "as far as we can tell", government did only 7 per cent of its business direct with SMEs. This figure was from 2009/10.

Government didn't know how much business it did indirectly with SMEs - through those systems integrators that held its large IT contracts, though this figure would contribute to its 25 per cent target. It had moreover not considered whether profit margins SIs made on subcontracting (a controversial issue) would be separated from any indirect SME business total it counted towards the 25 per cent.

The problem was that large suppliers were not supplying the data - they didn't even collect it. Cabinet Office intended to tackle large suppliers over the matter. An official request was on its way. And the terms by which they subcontracted to SMEs were unacceptable to government.

Threat to systems integrators

"I've seen some unimpressive contract terms from the major contractors," said Allot. "I won't say any more than that. Some of the SMEs send them to me. Do have a look at your contract conditions and be a bit more thoughtful.

"'Please behave', I think is the best way to put it. We haven't worked out a severe sanctions method yet, but we are thinking about it," he said.

Collington later told the same conference it would make data reporting a contractual requirement after a lone systems integrator - who did not reveal his name - complained that government was asking too much of large suppliers.

Bill Crothers, Home Office commercial director who led MOU talks with six suppliers, said relations between suppliers had "felt a little bit adversarial". The MOU talks had been "a blunt instrument" that just cut back some excess margin.

"We are starting to see some examples of a much more thoughtful process but frankly if we could see more engagement from the suppliers it would be better.

"A much more considered approach would be to reduce cost, not to reduce your margin. The amount of the cost we spend on some of these major SI situations is excessive," he said.

Pavitt told the same conference large SI contracts did give value for money but they had not been well draughted.

"We have to make sure we readjust those contracts. If we can - with our partners. If we can't - against our partners.

"Our intention is to get SI contracts the right side of the line. We gave away too much seven or eight years ago in HMRC. We intend to readjust it so we can take better control, where we can. Sometimes, giving away commercial responsibility has turned out to be wrong in engaging SMEs," said Pavitt.



Bristol Council open source: the allegations in full

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Bristol City Council's failure to deliver on its open source strategy is beginning to make the coalition government's manifesto commitment on open source look incontinent.

The council's own open source strategy is looking ineffectual. Bristol Council cabinet committed to an open source infrastructure a year ago - as long as it was doable. It ordered a pilot but that was discredited by an allegation that it had been fixed. Now the council has refused to release the suspect pilot reports under Freedom of Information, it is time to look at those allegations in full.

Mark Taylor, CEO of Sirius, told MPs in May how, left to establishment suppliers Capgemini and Computacenter, the open source strategy got caught in a thicket of indifference and vested interests.

Bristol set an original deadline for its open source strategy to be costed and risked by November 2010. They told Capgemini to get on with it, said Taylor, but Capgemini did nothing. Bristol told Capg to work with Sirius, who were experienced implementing open source infrastructures for companies like SpecSavers. They ignored Surius, said Taylor in a letter to MPs on the Parliamentary Administration Select Committee (PASC).

The council meanwhile tendered for an open source infrastructure using the £6bn Buying Solutions Framework for Commodity IT Hardware and Software (CHITS). Thus it would be ready to roll when the pilot produced its recommendations.

Five large CHITS suppliers bid for the work: Computacenter, Fujitsu Services, Insight Direct, Softcat and SCC. Sirius complained it was forbidden from bidding for the work because it wasn't on CHITS, a list dominated by the UK's largest infrastructure suppliers. Sirius teamed up as Computacenter's open source advisors and the pair won the business. But things then took a turn for the worst, said Taylor's letter.

Ostracized

"ComputerCenter (sic) began the project by having a series of meetings with Bristol City Council without inviting Sirius or even mentioning that the meetings had occurred.

"Sirius first met with the Council on 17th January at a meeting billed by ComputerCenter as the 'kick off'. On the same day we were included on an email from ComputerCenter's Project Manager referring to earlier meetings and assuming all recommendations to the Council would be proprietary software as usual," said the letter.

From the very start of the work in January, Sirius was already writing formal letters of complaint to Bristol over Computacenter's bias for the proprietary software vendors with which it had a business relationship and against open source.

This bias was a hot topic in Whitehall. Within a month, the Cabinet Office called the UK's systems integrators in for a telling off: why had they been ignoring government requests for open source systems for two years?

Capgemini had not even started the pilot, said Taylor's letter. It had been five months.

So Bristol asked Computacenter and Sirius to do the pilot themselves before implementing its findings. What transpired so frustrated Taylor that his protests put him at loggerheads with Computacenter and had him kicked off the programme.

Taylor complained that Computacenter - one of Microsoft's largest UK resellers - had skewed the pilot's parameters so it came out in favour of Microsoft. Implicit in this allegation was the assumption that Computacenter's profit margins relied on the supply and servicing of proprietary software systems, that these systems raise a relatively high income from their monopoly rents and that an industry established on this model had no interest in alternatives.

Bias

It went right to the heart of the commitment written into the government's coalition agreement to "create a level playing field for open source". The industry was founded by companies like Computacenter on proprietary software by publishers like Microsoft and its business model had become thus fossilised. The open source model was disruptive. The proprietary software industry wasn't going to let it in, no matter how discredited it had become for its cost, waste and failure.

"ComputerCenter showed a clear and persistent bias towards proprietary (invariably Microsoft) software," said Taylor's letter to MPs.

ComputaCenter turned the pilot into "an enormous and costly paper-based check-box exercise" that dragged on for months longer, he said.

But here was the key allegation of bias: Taylor said Computacenter had made the "starting point" of its pilot, "a comparison between how well a Microsoft software stack and an Open Source software stack compared with a Microsoft software feature set". On those terms, nothing could win but Microsoft, not even the largely Novell-based infrastructure the council was already using.

Computacenter in addition "lobbied Bristol to buy a proprietary, not an open source infrastructure. Taylor said Computacenter made him sign a contract forbidding him direct contact with Bristol, the council that had turned his 2010 consulting advice into an ICT strategy championed in person by council leader Barbara Janke.

He was excluded from meetings about the pilot and not informed of others. He relied on Councillor Mark Wright, who authored the council's ICT strategy, to inform him when meetings were happening. He fought against Computacenter's insistence that the council should use proprietary software instead of open source alternatives.

In May, Computacenter submitted a recommendation that, said Taylor, the council use "an essentially entirely proprietary Microsoft stack". Taylor complained and his partnership with Computacenter collapsed.

Computacenter claims the allegations are "potentially libellous" and refuses to discuss them, perhaps highlighting one of the most important aspects of this episode - the question of the government's transparency agenda, as discussed elsewhere.

But the episode raises concerns also about the government's SME-led innovation policy, something else championed by Bristol's "Digital City" strategy. Ultimately, both issues are indicators of the state of the industry, fed as it is by school leavers whose computer education consists of learning to operate Microsoft applications.

As Microsoft celebrates the 30th anniversary of the IBM PC on which it piggy-backed to power it is worth reflecting on how it was, famously, the IBM platform's openness that made it such a success. If anyone cares also to reflect on how the 30-year old industry might benefit from reform, they might find a lack of transparency will work to the detriment of them and everyone else.

Police ICT privatisation kettles coalition strategy

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If you were to look up the UK's most senior police chief and the home secretary on the Police National Database you should not be surprised to score a hit. Because their recent speeches on police ICT were well suspect.

They were also completely at odds with what Cabinet Office experts say is the way to reform public sector IT.

While the Cabinet Office claims to be trying to "put an end to the oligopoly of large suppliers that monopolise its ICT provision," the Home Office and ACPO are preparing plans that will give the oligopoly more billions and more power to call the shots by privatising the National Policing Improvement Agency (NPIA), the quango that manages police ICT.

If its not a case that the right arm doesn't know what the left arm is doing, has the Cabinet Office has been telling porkies or is the police service being sold a pup?

Home Secretary Theresa May .pngHome secretary Theresa May told last week's summer conference of police chiefs that police ICT was a costly mess, so it should be centralised and privatised. The Cabinet Office says public sector ICT is a costly mess, so it should be distributed and its public management strengthened at the centre.

The Cabinet Office angle is that public sector ICT went to pot in the last 20 years because the government stopped being an "intelligent customer".

And why did it do this? Because in the late 80s it closed the Central Computer and Telecommunications Agency (CCTA), the government equivalent of the NPIA, forcing departments to rely on more on Boo Hissstems Integrators. Needless to say they had their own shareholders, not the public at heart and public sector IT became the costly mess it is now.

Even on the face of it, May's story lacks credibility. The NPIA she wants to privatise has already consolidated half of all police ICT contracts. It could be told to get on with the rest if the aim of May's reforms is consolidation, as she claims. The problems May says beset police ICT reside among those contracts not yet managed by the NPIA but by individual forces. Yet she told police chiefs the NPIA was at fault for this mess and justified its privatisation.

Private service

As the home secretary told police chiefs that a "commercial" NPIA would be "more efficient", the Southern Cross OAP empire was collapsing on foundations made of neglected pensioners and desperate staff, demonstrating what private sector efficiency really means for public service.

This is no minor concern when one thinks of ICT assets for which NPIA is responsible, which includes all those things that raised fears of the modern police service becoming a hi-tech Stasi, such as the national intelligence, DNA, fingerprint and number plate databases. Run for profit, assets like these will make surveillance campaigners fears of "function creep" in state snooping seem somewhat understated. A public NPIA might do more than defend the public purse from profiteering suppliers.

Ominous looking data centre.pngOne plan mulled by the privateers is giving these assets to the Metropolitan Police Service (MPS). The police tech "GovCo" would only be allowed to keep anything it builds anew. This is likely to be motivated more by the concerns of potential capital investors than privacy.

Sir Hugh Orde, chief chief at the Association of Police Chiefs (ACPO), made it a financial issue when he took to the conference podium after the home secretary last week.

He gave a few backhanded complements to the NPIA before claiming it had landed forces with an "unexpected" charge of £5.2m for running the Police National Database.

Yet Orde and other police chiefs knew full well about the charges because they set them in conjunction with the Home Office as members of the NPIA board.

Orde nevertheless warned rising police ICT costs had become such a "significant risks to the service" they would force forces to axe Bobbies.

Woe betide anything that threatens the livelihoods of our beloved Bobbies. Orde turned the NPIA into a threat to the police and declared for a radical solution - "a reality check".

And what was this radical solution? He didn't say. But May had already told us: privatise the bastards quick, before they bring the service down.

Lord Wasserman.pngFor a real dose of reality, consider whether a profiteering police agency will charge forces any less for its services than the NPIA already does. And remember the mooted plan involves giving existing databases to the MPS, which will still want forces to pay their bit for their running costs.

You won't get any more reality than that because the advice on which May is acting remains unpublished. It comes from her special advisor Lord Wasserman, who was due to publish his report on the "Future of Police IT" last December. Orde knows about it already. All the public knows so far is what he and May said last week.

Wasserman's advice has been to give private companies a greater say and local forces less, which does not bode well for the Future of Police ICT. The interests of those private companies, like Capgemini, Logica and Northrop Grumman, run contrary to the cause of more efficient and cost effective government IT, as the Cabinet Office has been saying.

May unwittingly clarified this when she gave her reasons for the further consolidation of police ICT. Suppliers were spending in excess of £1m a-time bidding for work at each of the 43 local police forces when they could save money by bidding for just one central contract, she said.

But the only companies that could afford to bid for contracts at all 43 agencies are those same oligopoly suppliers who the Cabinet Office wants to bring down a peg.

May reckons in other words that police force should restructure their ICT for the convenience of for large suppliers.

The government ICT strategy proposes a different solution: Open Source, Open Standards and Software Re-use, a policy that would preserve local autonomy and break the neck-hold the ICT oligopoly has on the public sector.

That strategy's being overlooked - particularly by those privatising police ICT - because it's not in the interest of large ICT suppliers.

Wasserman, May and Orde have yet to present a convincing argument that their unpublished policy acts in any other interest.

HMRC orders supply chain to heel

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HMRC building.png
HM Revenue and Customs has ordered ICT suppliers to step in line as it tries to cut costs from one of the UK's largest computing infrastructures and fix the perceived failures of one of the government's largest outsourcing contracts.

The initiative has seen HMRC take steps to address a problem Cabinet Office has sworn to tackle as part of its ICT Strategy: the exclusion of SMEs from government business and the tight control the UK's public sector ICT oligopoly has over government contracts.

In close collaboration with Cabinet Office, HMRC has told Capgemini to include SMEs in project meetings in Whitehall, indicating the extent to which the 240 suppliers to whom Capgemini subcontracts work its £8.5bn Aspire contract have been excluded to date.

HMRC has also ordered suppliers to open their kimonos so it can see for itself if it's getting value for money from them. The main criticism against large contracts has been the power they give outsourcing firms to inflate prices and suppress innovation.

Mark Hall, deputy CIO at HMRC, told government IT managers at a recent Inside Government conference, its changes were part of a programme to better manage its "commercial model" with suppliers.

"We have started a new process called Tripartite," he said, "Which is where we were always challenged, around getting everybody to the table.

"So now when we have conversations, the prime contractor, ourselves and the SME delivering the goods are in the same conversation.

"We are working around cost savings and working very closely and collaboratively with the cabinet office. This is not just about what we can negotiate, its about what UK government can negotiate," he said.

Suppliers told to open up

HMRC aimed to cut £900m, 25 per cent of its cost base. The other major reform programme involved identifying "value chains". That meant understanding where its expenditure was delivering value, from the citizen "right through to the to the final piece of technology in the supplier".

"This is quite challenging for supply chains because it demands transparency," said Hall.

"You need to be able to open up and look at the whole supply chain. This is not dissimilar to what motor manufacturers or logistics companies do. It's the same as Lean, but where Lean works bottom up, we are doing it top down," he said.

HMRC tap.png
HMRC was in addition scrapping unwanted computer systems to cut the cost of processing £435bn revenues and £39bn of payments it transacts with 38m citizens and businesses every year.

"It's about moving from a complicated legacy estate due to multiple inheritances, to what would be a simplified IT estate based on just 13 core platforms," he said.

HMRC hoped the consolidation would be self-financing. Savings taken from decommissioned IT systems would be pumped back into the rationalisation programme.

The ICT Strategy had nevertheless not changed HMRC's "direction of travel" since Cabinet Office launched it in March, said Hall.

"Its made us think slightly differently," he said.

It was not dissimilar to the last strategy, published under the Labour government in January 2010. But he did concede it was less about centrally provisioning an enterprise architecture and more about collaboration and the Agile methodology.

Agility problems

HMRC felt Agile was a challenge, though, when it had to rely so much on external suppliers.

"The new approach is far more agile, far more collaborative," said Hall.

"The question is then how do you [create] a delivery approach that allows that to happen, because agility's great but you do all need to work in the same way," he said.

It's in-house team of 200 developers were "increasingly" being turned to Agile. Their future reform was assured and was being examined.

Marion Sinclair, information systems strategist at Kensington & Chelsea Borough Council, asked Hall an Agile question, though she didn't mention the A-word.

Was there any way to align IT with business processes in a way that allowed projects to keep up with the speed of change and deliver efficiencies sooner? Hall said HMRC was trying to do that with Lean process re-engineering. It took power from IT people and put it in the hands of process people.

HMRC was meanwhile still wringing savings out of its £8.5bn contract with HMRC. It had renegotiated the contract in 2006, 2007 and 2009. It would realise £125m of savings from the latest negotiations this financial year. They would equate to £1.2bn of savings over its life.

Doom clouds gather over parliamentary IT hearing

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A couple of the great mandarins of government IT got top billing at the Parliamentary inquiry into computing last week. They set a gloomy scene for the government's forthcoming IT strategy, which CW anticipates will be published on Wednesday.

They were upstaged by a bunch of small town IT directors who chirped on about the information policy principles everybody expects to become formal policy, and which they claim to be adopting already: small, agile, open, interoperable, entrepreneurial.

Goverment CIO Holds Court at the PASC - edit - 22 March 2011.pngIt was tempting to think of this as the Old Guard's last gasp. It was a horrible sight.

Joe Harley, government CIO and chief of IT at the Department for Work and Pensions, and Phil Pavitt, CIO at the megalithic HM Revenue and Customs, lumbered on about how well their multi-billion pound contracts were performing, using PR-approved factoids that ticked all the faddish boxes.

They showed just how deep the IT establishment is dug into these most powerful departments of state and propped up the 10-year, multi-billion pound alliances it has with the large IT suppliers. The government might not have machinery big enough to shift them.

It looked awful for government policy, awful for the open source movement that has driven its reforming bent and awful, paradoxically, for the neo-Labour movement these old boys represent: a lose-lose situation the extent of which is hidden by confidentiality clauses from all but a chosen few.

Big Society ITopia

It had all looked bright and breezy as the Public Administration Select Committee's inquiry into government IT set into its third week.

Three local government IT chiefs cheerily extolled the virtues of an IT ecosystem modeled not on power hierarchies but on the networked society.

Socialization - Solidarity - Humanity.pngTheir ideology makes the Big Society sound desirable as well as possible, if only it wasn't also used as an excuse to slash and burn public services.

The idea is that interoperable computer systems and open data will form a "backbone", or "glue", or "WD40" on which it is possible to imagine civic Britain as the primordial soup, humming with evolutionary potential, bustling with community co-operatives and do-gooding corporations.

This take on the Big Society vision has become so irrefutable it even has Marxist academics praising the health-giving properties of free-forming, quasi-capitalist societies.

That's what Professor David Harvey told BBC's Hard Talk when he published a book on the subject last year.

Homogeneity was losing favour with the left as well as the right. Diverse, decentralised, self-deterministic communities had proven their worth, Harvey told the Beeb's Sarah Montague.

"Utopia is about continuous change," he said. "Human beings are astonishingly creative. Capitalism has got to the point where its not using that any more."

What crippling contradiction it can cause, to be so transported when such ideas are presented by executives from Tory councils among those most zealously making the public service cuts being used to force through these reforms.

While we hear persuasive chatter from the likes of Mark Adams-Wright, chief information officer of Suffolk, the "virtual" county council, and David Wilde, the CIO at Westminster City, the Old Guard lets the side down. The IT establishment hasn't got a reason why. It doesn't have an ideology. It doesn't even have a spiel that can justify its ugly great contracts.

Kelvin Hopkins MP.pngIt's left to PASC members like Kelvin Hopkins, Labour MP for Luton North, to meet these upstarts in debate.

Watkins pelted them: outsourced public services in places like Westminster are supposed to be "wonderful", he said. But they're not.

Then IT suppliers bamboozle public bodies and charge them outrageous fees, he said.

And what about private care homes, he said, which are dreadful despite being propped up with public subsidies?

Universal credit

The Big Society ITerati doesn't have answers to questions like this. Neither did Professor Harvey, funnily enough.

The Old Guard at least has big IT contracts, and we haven't seen the last of them, for all the talk we've heard from Cabinet Office Minister Francis Maude.

Most of Universal Credit, the coalition's first gargantuan IT project, was already being shoed into existing contracts with large suppliers without an open competition, the Old Guard told the Committee.

They didn't say why, or how. But Malcolm Whitehouse, group applications director for the DWP said something about how important it was to keep the same people on because they knew the ropes. African dictators are fond of that excuse.

CIO Harley claimed the government had learned its lesson from past IT failures, before trotting out a list of things he was doing to make his multi-billion pound IT contracts more palatable.

The committee heard earlier how 400 benefits systems in local government were serviced by just two or three suppliers.

Storm Clouds.pngBad omen

Socitm has been warning that the large government departments will block the Big Society reforms.

And so it seems the Cabinet Office IT strategy may be forced into a fudge with the very IT oligarchy it has been chipping at for the last six months.

So Pavitt said HMRC liked this idea that government IT systems might be broken up into smaller, interoperable components.

But he said it would be "foolish" to break up HMRC's existing system. It handled £435bn of tax and transacted with the DWP 3bn times-a-year.

It is also locked into a 13-year, £8.5bn contract with Capgemini.

Pavitt trotted out some tired old marketing slogans to shore this Aspire contract up in front of the Committee. It will have cut £1bn from HRMC's IT costs by the time it terminates in 2017, he said. It has even built an open source website.

No matter that the work was only meant to cost £3bn when it was contracted in 2004. Nor that its three year-extension from 2014 is to cost as much as the contract is supposed to have saved over its life.

Nor that HMRC will likely to have no choice but to grant another five-year trigger-extension in 2017. The deal is so uncompetitive HRMC had to pay Capgemini and others nearly £52m to take it on.

It's so uncompetitive HMRC has to build artificial incentives into the contract, as though it were the Department for Health trying to force an NHS trust to mimic the market.

Capgemini logo.pngHush hush

The lions share of the money goes to Capgemini and its two main subcontractors, Accenture and Fujitsu.

HRMC pays Capgemini over £800m-a-year for everything from application development and data centres, to call centres and maintenance.

Another 238 suppliers get a piece of those billions. One must wonder why there aren't more of them. But we don't get to see the numbers.

Even the Cabinet Office's much trumpeted bulk renegotiation of Capgemini's government business is commercial in confidence. Capgemini's executives and major shareholders will have the details. We shall have to trust them and the Whitehall mandarins to ensure what little competition they have is sporting enough.

HMRC benefits as new PAYE system issues wrong tax codes

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The introduction of new Pay As You Earn computer systems at HM Revenue and Customs means that many people are being sent, and will be sent in coming weeks, incorrect tax codes, according to the Chartered Institute of Taxation. 

When mistakes happen, it appears that taxpayers will usually pay more tax than they should, unless they spot the error and contact HMRC. 

The Institute says that HMRC is issuing around 25 million tax coding notices this year, double the number issued last year, and "a significant proportion of these are wrong".

Is Fujitsu's predicted decline out of line with market?

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Fujitsu has announced that it is cutting 1,200 UK jobs, equivalent to 10% of its UK workforce, reports Ovum.

Fujitsu predicts a decline in revenue of 7% in the UK for the full-year 2010. This compares with growth of 4% to £1.65 billion in FY09.

Ovum adds:

"...We remain convinced that Fujitsu's position is not symptomatic of a broader decline at the top end of the UK IT services market. Recent good progress from other major players such as IBM (£265 million - National Identity Scheme), HP/EDS (£1 billion - Aviva), Capgemini (12.7% growth in 1H09) and CSC (£385 million - National Identity Scheme) show that there is still life in the market for big deals in both the public and commercial sectors...

Confidential HMRC "Quantum" papers on cost-cutting plan

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Confidential papers on Project Quantum, a plan to cut costs at HM Revenue Customs by at least £205m a year, have reached me.

The papers are the joint works of HM Revenue and Customs, Capgemini and Fujitsu, the three main partners in the Aspire contract.

This is what some of the papers say about Project Quantum:

"Aspire has been fully engaged with IMS [information management solutions - part of HMRC] trying to meet the three Quantum objectives since early April.

"During [this] time the nature of the challenge and potential for solutions has clarified.

"Aspire is absolutely committed to continue the journey to deliver success for HMRC on Quantum.

Did HMRC scrap offshore idea after leak to media?

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Capgemini has confirmed in an internal message to its staff that the idea of outsourcing some of its work for HM Revenue and Customs has been "debated and explored" - and there are no plans to change the contractual position to allow this to happen.

It says that the "Aspire" outsourcing contract with HMRC - which is worth about £8.5bn over its life - prohibits any aspect of the work being delivered from outside of the UK.  

In a message to Capgemini employees who are working on the Aspire contract, the Capgemini Aspire CEO says:

"Although the concept of offshoring has been debated and explored, there are no plans to change this contractual position as part of Quantum."

HMRC to offshore tax work? Follow-ups by Times, Telegraph and Mail

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The Times, Daily Telegraph and Daily Mail have reported our article on HM Revenue and Customs' Quantum project - a scheme which seeks savings of £205m a year on HMRC's IT budget. Our article was also mentioned on BBC and commercial radio news

Their reports include HMRC denials that some of the work being done by the Capgemini under its £8.5bn outsourcing contract with the department could be transferred to India to save money.

Interestingly, HMRC gave Computer Weekly gave no such denial when we had asked it to comment on the possibility of tax work going to India.

HMRC to outsource sensitive tax work to India?

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So far the Government hasn't allowed sensitive tax, health, or DWP welfare benefit data to go abroad for routine processing, though batches of tax records may go overseas in emergencies, to fix problems. 

That could change. A set of documents seen by Computer Weekly shows that the potential for off-shoring future HMRC work is being considered as part of an internal project called Quantum. A report on the findings of the Quantum team is expected next month.


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