Board directors of major Government IT suppliers have good reason to vote Tory
Plans for major outsourcing deals already underway in private?
Sir Peter Gershon, adviser to the Conservative Party, says a new government should “stop any major new spending on IT projects and cancel existing projects which are not worth completing”.
That said, Sir Peter advises the Conservatives that they can make the “major savings” they are seeking by “deciding that all back-office functions will be outsourced within 18 months unless they demonstrate best private sector practice”.
Lest there be any doubt that the Conservatives would initiative a series of major new outsourcing projects Sir Peter says in a statement:
“A new Government should outsource its back-office processing functions without any delay to realise substantial savings.”
He adds: “Outsourcing will require proven providers to make improvements in value for money, with greater speed and certainty than leaving them in-house and to reflect these savings in contract prices.”
So it looks like some major outsourcing deals will be signed as soon as possible after any Tory win, subject to European tendering legislation.
It was the Tories that contracted out about 2,000 IT staff at HM Revenue and Customs [then Inland Revenue] in 1994 in what was then the biggest IT-related deal of its kind, worth about £1bn over 10 years. The contract changed hands in 2004 when Capgemini took over from EDS.
The department’s outsourced IT now costs taxpayers about £8bn, eight times more than it did in 1994, though more work has been added including about £1bn worth of IT from Customs and Excise.
Are these the sort of efficiencies savings we would see?
David Cameron spoke repeatedly in the Prime Ministerial debates aboutthe £6bn of efficiency savings the Conservatives plan to make in thisfinancial year.
In one of the leaders’ debates, Cameronsaid: “… What we say is save £6bn in the coming current year inorder to stop the jobs tax which we think will derail the recovery.”
TheConservative Manifesto makes a similar commitment:
“Wewill provide an emergency Budgetwithin 50 days of taking office to set out a credible will plan foreliminating the bulk of the structural current budget deficit over aParliament…
“We will start by cutting a net £6 billion ofwasteful departmental spending in the financial year 2010/11.
“Formergovernment advisers Sir Peter Gershon and Dr Martin Read have advisedus that savings of £12 billion across all departmental spending arepossible in-year without affecting the quality of frontline services.These are over and above any savings already planned by Labour.”
The”savings” in more detail
Dr Martin Read, the other leadingConservative adviser on efficiency cuts, was chief executive of IT services company Logica from 1993 to 2007and was anon-executive director of pharmacy firm Boots and supermarket Asda. In2008 he led a government study that identified how savingscould be made on government IT and back-office administration.
Read’sadvise to the Conservatives is to save money by inviting IT and othersuppliers to agree to “direct price reductions”. While being promisednew outsourcing deals?
The Department of Health achieved smallreductions in the cost of BT’s £1bn NPfIT local service providercontract in London. But the Department cut £2 from BT’s contractualcommitments for every £1 that BT cut from the overall price of the LSPcontract. This was great for BT’s finances but questionable value formoney for taxpayers.
Are these the sort of efficiency savings theConservatives have planned?
It’s also worth mentioning, perhaps,that in large outsourcing deals it’s not unusual for suppliers to offerlarge up-front savings in return for higher fees in the final years ofthe contract.
Would the Tories claim large upfront savings from their new outsourcing deals and saylittle or nothing about the overall value for money? The deals could end up like PFI contracts – ostensibly cheap at the outset and very costly in the long term.