Select Committee on Public Accounts Minutes of Evidence

Annex A


  The history below covers the early stages of the project.

Procurement (October 1996—December 1998)

  30.  The decision to seek a single supplier to deliver IT services to the magistrates' courts was taken in 1996. The services were to be delivered under the Private Finance Initiative (PFI). The objectives of the project were:

    —  To develop a new, bespoke, software application to replace the three existing legacy systems, with additional functionality;

    —  To provide links between the system and those elsewhere in the CJS organisations;

    —  To provide a new infrastructure and associated equipment;

    —  To provide office automation products.

  31.  The procurement was advertised in the Official Journal of the European Communities in October 1996. We received three expressions of interest. They were from FS and Unisys acting as a single bidding consortium; EDS with STL Technologies; and TRW/Bull. The latter dropped out early in the initial discussions, leaving two potential bidders.

  32.  The final version of the Statement of Business Requirement (SBR) was issued to the two bidders in the summer of 1997, following extensive consultation with MCCs and the bidders. The bidders were asked to provide detailed proposals showing how they intended to meet the requirements. Both sets of proposals were deficient—principally on the level of detail. They were both asked to provide more detailed proposals as to how they intended to meet each of the requirements, their plans, development approach, team organisation and numbers and technical solution. These were worked up in discussion with the procurement team and finally delivered as part of the tender. In parallel with this process draft contracts were negotiated with each supplier. In the case of the FS/Unisys consortium, it was agreed between the two companies that FS would be the prime contractor.

  33.  The advisors on the project were Bird and Bird (legal) and Hambros Bank (financial). Also, the Treasury PFI Taskforce were involved throughout—advising on PFI aspects.

  34.  In April 1998 the two bidders were invited to submit tenders. During the three week tender period, EDS withdrew.

  35.  Following post-tender negotiations, the final deal was agreed in December 1998 at a contract value of £1 84 million. The contract was awarded on 21 December 1998. The proposals from FS were taken through the full evaluation process following submission of their tender to ensure they were acceptable and value for money.

Award of Contract to First Renegotiation (January 1999—May 2000)

  36.  The first stage of the project involved FS carrying out a detailed analysis of the requirements.

  37.  In October 1999, FS approached the Department requesting a renegotiation of the contract. Their financial projections had assumed significant early revenues and the project was causing problems with their borrowing. Before agreeing to enter negotiations, we commissioned two studies. The first, carried out by independent consultants, was to assess whether the project should be saved and FS's capability of delivering. The answer was affirmative in both cases. The second study was carried out by Ernst and Young into their financial model. It concluded that the model contained major flaws and that the position was worse than FS had declared. It was agreed that a new financial model would be produced and jointly paid for and owned by the two parties to establish a proper baseline for any negotiations. That work was undertaken by Ernst and Young.

  38.  In March 2000 we concluded an agreement for a revised deal. The main changes were:

    —  An extension of the contract length by four years (this was provided for in the original contract);

    —  Implementation of the office automation service in all MCCs 9 months prior to the forecast date for them to take the new software application;

    —  Reprofiled payments to FS involving additional cash in the early stages in return for a reduction of the on-going service charges for the remainder of the contract;

    —  A profit sharing scheme.

  39.  The overall effect was to increase the value of the contract from £184 million to £319 million. All of the increase was for early services for office automation and the extra four years of service at the end of the contract so there was no real increase in costs. The Treasury agreed to provide an additional £23 million in 2001-02 and 2002-03.

  40.  The revised contract was signed in May 2000.

  41.  The delivery of the first stage of the project, to rollout successfully the new IT infrastructure, started as planned in October 2000 and has continued to date broadly on schedule apart from a small number of MCCs where local circumstances such as new building plans had to be taken into account. Rollout has now been achieved in 86% of MCCs. This includes the delivery, operation and support of a network linking all magistrates' courts, with all staff working in the magistrates' courts being provided with desktop PCs, running standard office software, and providing access through these PCs to their main legacy systems. The new PCs replaced older ones as well as dumb terminals connected to legacy systems. To date, about 9,500 out of the total 11,000 staff in the magistrates' courts now have access to these facilities. All these staff have full internal e-mail across their own MCCs and the other MCCs as well as to external organisations. It also means that the platform for the delivery of new software and the benefits, which accrue from this, is in place ahead of a new application.

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