Over-ambitious project stumbles

Outsourcing rule number one: don't outsource major chunks of your business when it is changing or unstable. Ignore this rule and...

Outsourcing rule number one: don't outsource major chunks of your business when it is changing or unstable. Ignore this rule and the contract is likely to end in tears.

The government's Armed Forces Personnel Administration Agency (AFPAA) is the latest example of an IT user which has learnt the hard way about how not to outsource a key project.

The £300m IT services contract with Electronic Data Systems (EDS) - to handle pay and HR administration for all the armed forces - "was not as successful" as it could have been, according to the deputy chief of defence staff (personnel), Malcolm Pledger.

In official speak that means the project was a nightmare.

The agency was formed to provide pay, pension and personnel administration to all services staff, from SAS troops to chefs. In 1997, only nine months after it was formed, it signed a 12-year PFI deal with EDS. One of the main aims was to merge the separate army, navy and air force's pay and personnel systems into one.

As the three services run different systems which require regular changes to reflect new legislation for pay and conditions, this was no easy task.

The armed forces agency, then, was trying to outsource its business, develop new business processes and achieve cost savings.

EDS however, was adamant that it was up to the job. The agency hoped that it could generate the necessary cost savings to keep within the original contract price.

But the ambition of the project proved too much for both sides and the contract had to be "reconstructed". A single system for pay and personnel has yet to materialise, although both sides insist they are back on track.

Pledger has admitted that both sides were naive. Let his candid admission serve as a warning to both users and suppliers.
This was last published in November 2001

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