Government attempts to end big and wasteful IT contracts

The government has published rules to reduce the dominance of small number of IT suppliers offering inflexible contracts

The government has published rules to reduce the dominance of a small number of IT suppliers offering inflexible contracts.

Cabinet Office published what it describes as “red lines” for IT contracts to increase the number and variety of IT suppliers to government.

The rules include limits to the size of contracts in financial terms and the length of agreements as well as breaking up contracts.

The "red lines" are:

  • No IT contract will be allowed over £100m in value – unless there is "an exceptional reason" to do so. Smaller contracts mean competition from the widest possible range of suppliers, said the Cabinet Office.
  • Companies with a contract for service provision will not be allowed to provide system integration in the same part of government. 
  • There will be no automatic contract extensions. The government will no longer extend existing contracts unless there is a compelling case.
  • New hosting contracts will not last for more than two years.

The Cabinet Office said smarter purchasing has already led to savings of £3.8bn in 2012/13 and that a "tighter grip on IT spending, along with progress on the digitisation of services, saved a further £500m.”

Minister for the Cabinet Office, Francis Maude, said: “Big IT and big failure have stalked government for too long; that is why this government is radically rethinking the way it does business. We are creating a more competitive and open market for technology that opens up opportunity for big and small firms. These red lines will ensure the government gets the best technology at the best price and we will be unashamedly militant about enforcing them to provide value for hard-working taxpayers.”

The government’s strategy to use a more varied group of suppliers has led to over a third of the companies on a new procurement framework for building digital public services to be suppliers that have never done business with government before. This includes a significant number of SMEs. 

“The suppliers that have won the opportunity to secure contracts with the public sector through this framework also include a high proportion (84%) of SMEs,” said the Cabinet Office.

In August last year the government said it wanted to put half of all new IT spending through small IT suppliers, doubling the previous target that was designed to break the oligopoly of major system integrators that dominate Whitehall IT.

The objective was revealed in the Cabinet Office’s latest report on progress to put 25% of government spending through small and medium-sized enterprises (SMEs) across all areas of purchasing, by 2015.

In an interview with BBC Radio 4 today, government chief procurement officer Bill Crothers said the oligopoly of big suppliers have had it “too good for too long.”

“It is not acting as if they’re hungry and in a competitive market. That’s appalling,” he said.

In response to the troubled Universal Credit welfare reform project which been criticised for writing off millions of pounds of wasted IT, Maude told Radio 4 that he “hopes it will work.”

“No one knows with these things,” he said. “The way we do things, is very much more build something quickly, test it, prove it, test it with users, so you can’t have certainty about any of these outcomes.”

In October the Office of Fair Trading began a review into the market for supplying IT and communications to the public sector.

Government CTO Liam Maxwell said the government needs access to the most innovative and cost-effective digital solutions: “That means going to the widest range of suppliers, and giving ourselves every opportunity to renegotiate and reassess contacts. It rarely makes sense to simply extend a contract based on yesterday’s technology and prices and these red lines make clear that we are doing business in a different way.”

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