Public sector IT projects overrun by £9bn, says report

Research published by the European Services Strategy Unit has reported major cost overruns in the majority of outsourced public sector IT projects.

Research published by the European Services Strategy Unit has reported major cost overruns in the majority of outsourced public sector IT projects.

It showed 105 projects had a total cost overrun of £9bn, with an average percentage cost overrun of 30.5%. It also showed that 30% of contracts were terminated and that 57% of projects experience cost overruns.

The report looked at all large outsourced projects in central government. The NHS, local authorities, public bodies and agencies, and contracts operating prior to 1996/97 were excluded. Out of 105 projects, 60 overran in terms of cost.

The main IT companies with overruns and delays are EDS, Liberata, Fujitsu, IBM. Accenture, Atos Origin, Capita, ITNet (now Serco), Siemens and BT.

The report said the reason for underestimation of costs was that the public sector often only focuses on the procurement stage of projects, without considering the cost of implementation and training.

Other reasons include the private sector overstating its ability to deliver and underestimating the complexity of public service provision. Public sector managers also use management consultants who "predictably encourage outsourcing" but whose conclusions are rarely challenged or assessed.

Another reason, the report says, is that pressure for substantial savings and "seamless one-stop contact centres" leads to some projects applying the "latest technology", when a more incremental approach may be more desirable.

Dexter Whitfield, author of the report and ESSU director, said, "The scope of the failures is shocking. The remedies do not lie in tinkering with the procurement process but with root and branch change in the modernisation of public services.

"The government's commitment to commissioning and contestability does not address any of the fundamental causes and will only make matters worse for ICT projects in the next decade."




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