The importance of being honest

To lose one PC may be regarded as a misfortune, but to lose 6,000? The Prison Service found it had underestimated the volume of...

To lose one PC may be regarded as a misfortune, but to lose 6,000? The Prison Service found it had underestimated the volume of business to its outsourcing supplier EDS by up to 50%. Tony Collins talks to Derek Howard, IT director of the Prison Service, about how he overcame this and other difficulties.

The job description should have read: "There's nothing conventional about working here". When Derek Howard left Inland Revenue - he is a former tax inspector - and became IT director of the Prison Service in November 2001, he had to tackle difficulties rarely discussed on management courses.

How, for instance, do you bring 18,000 new PCs and monitors into prisons while ensuring that the empty boxes leave with no guests of Her Majesty curled inside?

Howard smiles broadly as he reflects on this and other successes on a Prison Service IT contract worth hundreds of millions of pounds, with Texas-based EDS.

Many IT directors ooze pride when they think how many of their projects have delivered a return on investment within a year or two. Howard is particularly proud that, in less than three years, 137 prisons have had antiquated systems replaced with new without a single escapee.

"Supporting IT in a prison is very difficult because of the security. The sheer logistics of a programme of this size are tremendous. It was always something both parties knew we had to manage very well. It would not help us in our relationship with EDS if someone escaped as a result of the project. Happily we can say that the PCs have been delivered and nobody has escaped," he says.

Countering the risk of break-outs was one of a series of difficulties that have been overcome by EDS and the Prison Service while the outsourcing contract bedded down.

The biggest challenge was dealing with the consequences of some lost PCs. Nobody would be surprised if one or two PCs went missing - these were prisons after all - but 6,000 lost PCs?

To be fair to Howard, the PCs were there all the time but were missed when the counting was done.

Officials had signed a contract for EDS to take over the Prison Service's systems without having any real idea how many systems there were. The golden rule of outsourcing had been broken: understand your business thoroughly before you contract it out. The Prison Service was able to privatise prisons successfully because it understood the business of running prisons. It did not have that same understanding of the technology.

It is not unusual for an organisation to underestimate the number of its PCs. It is unusual is to underestimate by such a large margin. Under the terms of the contract, EDS would have to replace all PCs and support the new systems. This left the supplier with a huge extra commitment.

It was an easy mistake to make. The Prison Service could not simply hire people to count the PCs. Visitors must go through layers of procedural and physical checks, and then must be escorted around prisons. Also, the plethora of locked doors and the geography of prisons, some of which are farms and others castles, does not make counting PCs easy.

"Some attempt had been made to count the PCs but it obviously wasn't successful," says Howard.

When the contract was signed with EDS in 2000 it was assumed there were about 12,500 PCs. There were in fact about 18,500. "The relationship at the outset proved difficult. By nature of the fact that we didn't have centralised IT, nobody realised at first that we had much more equipment than we thought."

It was more than a year into the contract before the extent of the underestimate became clear. "It took us a long time to get out and visit prisons and find out the requirements of each site. Due diligence was not a separate process. It was part of going out to prisons to get the information to do the upgrades. The more prisons we visited, the more it became clear the numbers did not add up."

Yet it was not the number of extra PCs that presented the real problem. Over the term of the 12-year contract, the Prison Service could spread the cost of another 6,000 PCs, including their replacement and maintenance. The problem was the software and volume of business run on the PCs. EDS was faced with having to run a volume of business that was up to 50% greater than it expected. A further complication was the fact that the supplier had taken on the risks of uncertainties in the contract. This was a Public Private Partnership. The idea was that the supplier carried out a due diligence exercise to satisfy itself of the risks. But could EDS staff be expected to double-check the number of PCs in 137 prisons?

It was not only EDS' problem. The Prison Service had budgeted in the contract for a volume of business based on 12,500 PCs. It could not afford simply to pay for EDS to support 18,500 systems.

The problem gave Howard a strong incentive to cut costs by scrapping every application and every PC that was not strictly necessary, but the size of the extra commitment strained the relationship with EDS.

There was a degree of mutual mistrust: would EDS seek to exploit the situation to boost its profit margins? Would the Prison Service try unreasonably to get EDS to absorb the extra costs?

"It took us a long time to get our heads together to get a joint approach to solving it," says Howard. "We resolved the issues in 2002 having started in 2000. We got off to a slow start because it took a while on both sides to get into a partnership frame of mind. When we actually sat down together to agree solutions, it did not take us that long."

He adds, "You have to have a mindset that doesn't start by wanting to say: how did you get into this mess, but a mindset that says: how are we going to solve this problem?"

The outcome of the negotiations over the revised contract was a stronger relationship, a bond of trust. The financial consequences of underestimating the number of PCs was shared.

Officials agreed to pay EDS tens of millions of pounds extra, spread over the life of the contract, but they also negotiated enhanced services from the supplier at no further cost. For example, end-users wanted and were given longer "hand-holding" support from EDS when new systems were installed.

"It's difficult to make a change in a contract on a single item because it introduces the idea of a winner and a loser. But if you have a whole bundle of things you want to do, both parties can feel they are getting better value of the changes. Clearing the air and improving the relationship has enabled us jointly to deliver. We have met our target of completing the roll-out of a new desktop infrastructure by 31 March 2003."

Clearly Howard enjoys running the Prison Service's IT, not least because the challenges are endless. "I find it is a fascinating business to be in, a big change from doing taxes." There are many rewards. The advent of e-mail has been so well received that Howard has been all but mobbed by some grateful prison officials. One reason for the love of e-mail is that because of the number of locked gates it's no simple task to go from one end of the prison to another to collect or see documents.

Now, when a prison governor has a senior management meeting, he can send a debriefing note by e-mail in minutes. "Some people are just blown away by that."

For Howard the challenges continue. Even installing a network is rarely straightforward. One prison in Leicester is a former castle built in 1825. Drilling through its 12ft thick wall to install cables is not practical so EDS has discovered a way of running the wide and local area networks through existing phone wires. Elsewhere, an entire prison has been networked wirelessly to central systems because the site was too remote for BT to run wires economically to a telephone exchange.

The most anxious man in any prison is the boss; so the commissioner for correctional services, Martin Narey is particularly glad that EDS and the Prison Service have overcome their initial difficulties. "I see this as a success after a difficult gestation, offering value for money with a genuine spirit of partnership. This is at last a success story for Home Office IT."

That is true, assuming that nobody drops their guard the next time the Prison Service replaces its PCs.

Is it normal to lose 6,000 PCs?

The Prison Service is not alone in not knowing how much equipment and support contracts it possessed when contracting out its IT to an external supplier.

In 1995 Computer Weekly was leaked details of discussions between British Aerospace and its supplier, services firm Computer Sciences. CSC had written to British Aerospace seeking up to £30m in compensation for potential liabilities arising from the previous year's outsourcing deal, which was worth about £900m over 10 years. The potential liabilities were for hardware leases, software licences, pension costs and BT lines. British Aerospace did not accept all the claims as valid, though the disagreements were resolved amicably. CSC's Tom Williams said at the time, "On a contract of this size there are bound to be questions of refinement." 

Similarly, at Inland Revenue, the price of the contract rose by £203m as a result of what was described as "post-contract verification". The Revenue had continued to develop its IT technology services between preparing the invitation to tender and the award of the contract in 1994, so a post-contract verification exercise was carried out to value the assets and liabilities actually transferred to EDS. The £203m adjustment was 20% of the value of the entire £1bn contract over 10 years.

The Prison Service's discovery that it had 50% more PCs than it thought, about 6,000 extra, added tens of millions of pounds to a contract which is thought to be worth about £300m over its 12-year lifetime.

Is there anything different about managing criminals?

Yes. About three-quarters of prisoners cannot read or write, around the same number have either drug or alcohol problems, and nearly 70% have mental health problems. "We need to better manage information about prisoners," says Derek Howard, IT director of the Prison Service. "A huge aspect of our business is delivering drug detox and educational programmes."

What does the Prison Service do apart from lock people up?

Running a prison service is a little like running a £2.4bn a year hotel business which has to accept guests whether it has vacancies or not. There are 137 prisons, 72,000 prisoners, and about 42,000 end-users. "If a judge gives someone a life sentence today, we cannot put them on a waiting list," says the Prison Service's Derek Howard. Prisons provide everything prisoners need in their lives: food, education, clothing, medical services, dentistry, and in some cases in-cell television. "We don't go outside for anything," he says.

A system to curb re-offending

One of the key systems EDS is building is an offender assessment system. This will help prison officers assess the risk of re-offending so it can better manage those risks. "We want to help prison staff have the skills and information they need to reduce re-offending, for example by advising people on the education of prisoners," says IT director Derek Howard. Improving the self-esteem of prisoners cuts their risk of re-offending.   "At the other end of the scale there may be a public safety issue and we will have a better handle on our ability to share that information with the probation service or the police," he adds.

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