NAO says government IT could save £290m each year

Pressure on government ministers and their departments is mounting over their expenditure and delivery of large ICT transformation programmes.

Pressure on government ministers and their departments is mounting over their expenditure and delivery of large ICT transformation programmes. While this has been a longstanding source of informed comment from campaigning journalists such as Tony Collins, and politicians such as Edward Leigh, chairman of the Public Accounts Committee, there is a crescendo of criticism developing, focused mainly on the delivery of the Connecting for Health programme in the NHS, writes Clive Seddon, partner at Pinsent Masons.

Given this backdrop, it is perhaps surprising that there has been so little publicity and comment given to two National Audit Office reports, Central Government's Management of Service Contracts and Good Practice Contract Management Framework, published in December 2008.

The conclusions and recommendations of these reports are based on a survey conducted across 35 government organisations. They conclude that better contract management by government departments could generate efficiency savings of between £160m and £290m per annum, against an annual spend on service contracts of £12bn for 2007-8.

Massive potential saving

This is a massive potential saving. With UK plc concentrating on its expenditure line due to a collapse in confidence, growth and revenue, is the government going to make a similar, co-ordinated and concentrated effort to do the same? With government already proclaiming that its approach is "joined up", there is much still to be done.

The NAO estimates that only 2% of annual spend, approximately £240m, is incurred in managing government service contracts. The private sector will generally spend around 5% of total cost on similar activities. The reports are critical of this expenditure allocation and the lack of attention and prioritisation given to contract management. It recommends that government needs to do more, in a better way, if improvements are going to be effected and the projected savings realised.

The old adage that contracts should be put in the drawer, so as not to interfere with the parties' relationship, is criticised. The NAO implores government departments to deduct service credits from suppliers where they are entitled to do so use price benchmarking and market testing to obtain value for money for the taxpayer and use an industry standard, comprehensive approach to risk.

The reports, however, go much further than mildly rebuking government departments for a lack of spine and prioritisation of resources. They recommend:

  • The adoption of a new contract management framework
  • Government departments benchmark their current contracts against the framework and, if deficient, implement improvements
  • Ownership of contract management responsibility at senior level, suggesting commercial directors or heads of procurement as likely candidates
  • They identify the contract manager as being key to future successful service delivery.

On any view, the NAO recommendations and adoption of the new contract framework, to be applied to all contracts, is a major change programme in its own right. It involves a comprehensive rethink as to how governance, project management, change control and the allocation of risk are dealt with in government contracts and how contract managers and their seniors engage with suppliers during the delivery phase of all major ICT projects.

Current government contract practice in relation to ICT services is set out in the OGC Model ICT Services Agreement (MSA) and accompanying OGC guidance published in 2002.

The MSA prescribes a governance process involving programme and project boards and project managers, which is widely used across Government. It is not clear from the reports as to how the MSA and guidance fit with the new contract management framework. Perhaps this will become clear when further guidance is issued by the OGC in March 2009. Given the prominence accorded to the role of the contract manager in the framework, and the NAO's recommendation that they should be integrated during the final stages of the procurement process, the absence of reference to contract managers in the current MSA needs to be rectified and reconciled with existing practice. This will require more than simply a drafting amendment to the MSA.

Control and empowerment

Finally, the NAO reports place heavy emphasis upon government departments taking control, actively managing the service provider and the risks associated with private sector service delivery. To do this effectively, government departments need to allocate time and resources to appointing, training and empowering personnel with the right skills.

As Computer Weekly has reported many times, the risks attached to these ambitious programmes are immense. The MSA and its predecessor the CCTA standard form, allocates risk firmly to the service provider. If government departments implement the NAO recommendations, it may be that the allocation of risk to suppliers will change. Will government departments be prepared to finally accept one of the McCartney Report truisms, namely that the risk of service failure of a government programme ultimately falls upon the government department delivering the change programme?

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