Unprofessional outsourcing decisions still haunt government digital future

Profile picture for user slauchlan By Stuart Lauchlan December 9, 2014

The UK government wants to break free of bad outsourcing contracts.
But IT decision makers are still signing new deals with the usual suspects, even when they're supposedly in purdah.

Margaret Hodge
Margaret Hodge MP in typical pose

At yesterday’s Think Cloud Vendors conference in London (see Derek's write-up here), there was much talk about how the existing ‘big ticket’ outsourcing contracts that have been in place in the UK public sector wlll be winding down over the coming 12-18 months.

The theory runs that as these come to an end, their replacements will be smaller, cloud services-based deals, typically with a substantial SME component in the supplier line-up.

That’s fine as a theory goes, but a report out from government watchdogs today exposes the harsh reality that there’s a lot of work that will need to be done if UK public sector bosses are to be weaned off their addiction to the traditional outsourcing establishment, including those that the taxpayer had been led to believe were in purdah!

To recap, last year Serco and G4S were both referred to the UK’s Serious Fraud Office for overcharging the government on electronic monitoring contracts.

At the same time, both companies were told to undergo “corporate renewal” and the impression was given by the Cabinet Office - which has ultimate sanction over IT and services policy - that any business with the two was on hold pending the outcome of that “renewal”.

This was seen as an encouraging example of the current administration’s determination to clamp down on bad practices among the vendor ‘old guard’, the so-called ‘oligopoly’ of large suppliers that has dominated that UK IT political landscape, with even the Prime Minister David Cameron chipping in to state:

If the investigation finds that the culture of those companies is broken in some way, then you might need to strike them off other government contracts.

When the going gets tough, carry on as before

Tough talking, but not backed up by tough action it seems. An investigation by the House of Commons Public Accounts Committee (PAC) found that far from being suspended from business, Serco and G4S picked up 14 bits of new work during their ‘probation’ period, worth a total of £350 million.

These came from five major government departments - the Department of Health, the Ministry of Justice, the Department for Business, Innovation and Skills, the Ministry of Defence and HM Revenue & Customs, but:

the quantum of additional work that was awarded to the companies during the period was not clearly communicated to parliament at the time.

PAC chair Margaret Hodge said:

The impression the government left was that all business with these two companies was on hold until the outcome of a review…Instead, what we uncovered was that they had given extensions and new contracts.


Government set to pull IT snouts out of the trough

Why won’t governments take contract management seriously?

How digital demands will revolutionize the outsourcing establishment

Giants vs SMEs: the battle for the UK public sector

The PAC (again!) urged the government to stay on track to break up large contracts. But Hodge warned that things have been left to drift off course:

Departments have taken their eye off the ball and placed too much trust in contractors and relied too much on the information contractors supply. Contracts need to be managed at a sufficiently senior level, with strong accountability in place, by people with the right commercial expertise.

Government must guard against quasi-monopoly suppliers becoming too important to fail, and encourage competition through, for example, splitting up contracts to encourage small and medium sized enterprises to bid for work.

Government’s current approach to contracting gives too much advantage to contractors.

Same old same old?

She went on to question the attitudes of some of the main contractors to government (without naming names), warning:

Too often the ethical standards of contractors have been found wanting. It seems that some suppliers have lost sight of the fact that they are delivering public services, and that brings with it an expectation to do so in accordance with public service standards.

The legitimate pursuit of profit does not justify the illegitimate failure to conduct the business in an ethical manner. A culture of revenue and profit driven performance incentives has too often been misaligned with the needs of the public who fund and depend on these services.

For its part, the Cabinet Office has finally admitted that despite any good intentions,  it is essentially unable to blacklist companies from new contracts because of European Union procurement restrictions.

That’s an admission that may well give succor to some of the ‘oligopoly’ whose acceptance of the smaller/cloud/digital vision has been token and at times grudging in the extreme.

But it bodes singularly badly for a future in which the norm becomes SME-empowered cloud services deals.

My take

In London today, the UK government is chairing the inaugural meeting of the D5 - a conference of five leading digital governments - and quite rightly celebrating the successes of the Government Digital Service (GDS). Last week I flagged up the lead that the G-Cloud program has over other European Union nations.

All that’s great. But until the Whitehall establishment goes ‘cold turkey’ on the its habitual default fix of reaching for the ‘big ticket’ outsourcers, the revolution will stutter on but not ignite.

With 12-18 months of winding down on the ‘bad’ contracts we’ve heard so much about in recent years, we’re up against the clock for the IT decision makers on the front line of government to get with the program.