A committee of MPs has branded an IT contract with Fujitsu as "one of the worst private finance initiative deals that we have seen", after costs more than doubled and major risks were transferred back to the government.
The Libra contract, to replace outdated and incompatible equipment with standardised case management software across more than 300 magistrates courts, was signed in 1998.
But, faced with losses after under-pricing its bid, Fujitsu twice threatened to quit: the first time in 1999 only months after the deal was signed, and again in 2001, when Fujitsu had already started to deliver office automation systems to hundreds of magistrates courts. Rather than terminate the contract, the Lord Chancellor's Department agreed to pay more and absolve Fujitsu from responsibility for delivering core case management software for the courts.
In return for receiving more money, Fujitsu provided extra hardware to a larger number of users. The total costs of the project have risen to £390m, from Fujitsu's original tender of £146m.
The report from the House of Commons Public Accounts Committee (PAC), published today, criticised the Lord Chancellor's Department for its decision to develop the Libra IT system before redesigning the courts' business processes. "The department recognised that ideally the development of best business processes should have come before seeking an IT solution," it said.
The report has implications for the £2.3bn NHS national programme for IT. The department of Health is also seeking IT solutions before redesigning business processes. By the end of this year it is to due to sign contracts with local service providers.
The PAC report also revealed that the Lord Chancellor's Department was concerned at its inability to impose business change on end-users: a similar problem may arise if the Department of Health cannot persuade doctors to adopt new NHS IT systems.
Reports on Libra by the PAC and public spending watchdog the National Audit Office were produced after an MP on the committee, Richard Bacon, suggested that auditors study confidential documents that were obtained by Computer Weekly.
Despite an investigation and an independent report by Gartner, the PAC said it could not ascertain full details of the £232m due to be paid to Fujitsu. The company had provided a breakdown, "But this was unconvincing in demonstrating that £232m was not an excessive price to pay for just the infrastructure element of the Libra project," it said.
Fujitsu said it had not made money on the project and had written off £32.5m on software development. It said PFI was not an ideal basis for a software development contract and it was naive to suppose that all the risks could be transferred to the supplier.
Spending watchdog slams magistrates IT project as one of the worst PFI deals ever seen >>