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Government sees dramatic supplier drop off for tower contracts

Kathleen Hall

Whitehall departments spearheading moves to break up large system integrator contracts into separate ‘towers’ have seen a dramatic drop off in suppliers bidding to co-ordinate the multiple providers.

Under the tower model the government intends to move away from large IT service management contracts handled by a single prime outsourcer, to a structure where the separate IT components – such as hosting, applications development, security and desktop support – are contracted to different providers. One provider will then take on the role of Service Integration and Management (SIAM) to manage the various towers, without holding any of the tower contracts itself.

The tower and SIAM outsourcing structure has been heralded as a way of breaking the oligopoly of IT suppliers in government.

The Foreign and Commonwealth Office (FCO) and the Ministry of Justice (MoJ) have been early adopters of the model and are currently seeking a SIAM provider. However, both have seen a significant drop out in the numbers of suppliers bidding in the first round of the procurement: down from eight to three and four to two, respectively.  

Computer Weekly understands that Logica, Detica and IBM are the remaining suppliers for the FCO contract; while Lockheed and IBM are now the last suppliers in the MoJ bidding process.

One of the suppliers who dropped out of the running told Computer Weekly that almost every supplier had a different reason for pulling out.  However, a common issue with the current SIAM model is that suppliers are not allowed to bid for the towers as well as the integrator piece, said the supplier who asked not to be named.

Arguably this takes away the incentive of being the SIAM because the towers typically have higher revenues attached to them.

Alan Mather, partner at government consultancy Rainmaker Solutions, said the SIAM concept is more complicated than simply breaking up the large contracts of the past and creating a phantom integrator who will bring everything together. “For me this is showing that the incumbents think that the money is in hosting, end user devices, etc... 

“Those suppliers not already doing business with the departments think they won't break past the incumbents so are looking at SIAM.  But many are then dropping out of SIAM as they can't see what the levers of control are and how to get the other contract holders to do things when SIAM isn't the prime, yet are still having to take a share of the risk.” 

John Pendlebury-Green, co-founder of consultancy firm Landseer Partners, believes the recent drop out in suppliers reflects the newness of the SIAM concept, as the process is still being refined and suppliers are sounding out the commercial model.

But he agrees the issue of co-ordinating contracts could be the trickiest aspect of SIAM. “The simple answer is that if the SIAM does not have the contractual relationship with the tower suppliers then the SIAM must be totally aligned with the customer with the right governance and the right levers together with the total support of the end-client when required.

“Co-operation agreements and even master services agreements are all well and good when things are going well but it is when things go seriously wrong that the right governance processes, incentives and behaviours will need be acted upon,” he said.

“SIAM is not the easy option – it requires intelligent customers, and, importantly, intelligent suppliers.”

An FCO spokesman told Computer Weekly the department would issue a shortlist of suppliers in November and announce the contract award in spring. “We still have a competitive field of three extremely capable suppliers to choose from. Our plans are unchanged,” he said.

An MoJ spokeswoman said:  "While a number of potential providers have pulled out of the procurement process, this will not affect the on-going competition for services. We are committed to concluding the procurement process and providing value for money for the taxpayer."


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