Information and Communications Technology
Focus
44. This year's Annual Report describes how, in 2000,
the Foreign Office set itself a "strategic target" of
using Information and Communications Technology (ICT) to "transform
ourselves from a headquarters with outstations into a single online
global organisation."[68]
One part of this strategy was the Focus programme, which aimed
to, "provide the FCO with a new global registry and intranet,
allowing more efficient management, sifting, storage and retrieval
of information."[69]
45. In December 2002, however, Bill Rammell MP, the
FCO Minister responsible, gave the following response to a written
parliamentary question regarding overspend on the Focus project:
A contract for £10.5 million was awarded
to Fujitsu in January 2002, as part of an initial budgeted cost
of £23 million over six years. This estimate has now risen
to £42 million because of the increased scope of the project.
Given the scale of this increase and other relevant factors the
Secretary of State is conducting an urgent review of the whole
future of this programme.[70]
46. This was followed by a Written Ministerial Statement
by the Foreign Secretary in April of this year, in which he told
the House:
We reviewed all the FCO's Information and Communications
Technology programmes earlier this year, in the light of the financial
constraints we face. Given the relative low priority of the Focus
Programme and a substantial increase in its estimated cost from
£23.5 million to £42 million over six years (reflecting
significant changes to the scope of the programme which involved
a greater training requirement, enhanced security arrangements
and, post-11 September, a considerable extra investment in Back-up
and Disaster Recovery), we decided to negotiate the cancellation
of the contract for the Focus Programme. Agreement was reached
with Fujitsu and the cancellation took effect from 31 March 2003.
At the point of cancellation, the FCO had spent
in the region of £9.5 million on the Focus Programme. From
this expenditure, we will retain a global electronic Directory
and a facility allowing on-line discussion groups to help cross-departmental
team working. The Directory will provide the FCO with savings
estimated at £2.5 million over the next five years. We will
also be using one of the software licences bought as part of the
Focus Programme to develop a new FCO Intranet.[71]
47. In one of its memoranda to the Committee during
the course of the inquiry, the FCO provided further details of
the cancellation. It reported that it was only, "later in
2002, when the team leading the programme understood the full
scope of the business change required to make best use of the
Focus system, that the costs of training and business change could
be accurately predicted."[72]
48. We raised the cancellation of the Focus project
with the Permanent Under-Secretary and the Director General of
Corporate Affairs, Mr Peter Collecott, when they gave oral evidence
to the Committee.[73]
The latter confirmed that the total outlay for the project, including
the cancellation fee payable to Fujitsu, was £9.5 million.
Mr Collecott, "reckoned that the assets that we had already
obtained were worth £2.5 million, which means that there
is a total deficit, if you like, of £7 million."[74]
Sir Michael Jay expressed his regret at the failure of the project
and the impact this would have on the Office's ICT modernisation
programme. He indicated that the main reason for the unforeseen
increase in the project's cost was the impact of the events of
September 11 2001 and the consequent need to re-examine the Office's
contingency plans and introduce business continuity plans.[75]
49. We conclude that the cancellation of the Focus
project and the consequent cost incurred by the Foreign Office
was an extremely unfortunate incident. We recommend that, in its
response to this Report, the Foreign Office set out:
a) what lessons have been learned from the
cancellation of Focus for other, similar, ICT projects;
b) what adverse impact is likely to result
on the Office's ICT "strategic target" (i.e. transforming
from "a headquarters with outstations into a single online
global organisation"); and
c) how the services that the Focus programme
was to have provided will now be delivered.
50. We also noted with concern that there was no
reference to the Focus project's cancellation, or its cost, in
the Annual Report 2003. In fact, the term 'Focus' was not used
at all in the Report and mention was only made of the two systems
that were 'salvaged' from the cancellation of the larger project,
under the title "Knowledge management".[76]
In reply to a written question from the Committee, the Office
admitted that the "more descriptive title was preferred once
the decision was taken to cancel the main Focus project. On reflection,
the drafting should have made this clearer."[77]
Given our comments above (see paragraph 9) about the need for
candour in departmental reports, we agree with this reflection.
The Committee concludes that it is unacceptable for a loss
of approximately £7 million of taxpayers' money to be disguised
in a departmental annual report. We recommend that any such losses
in the future must be reported fully and candidly.
FTN
51. In our Report on last year's Annual Report, we
registered our surprise that it contained no reference to the
fact that in January 2002 Global Crossing, the PFI provider of
the Foreign Office Telecommunications Network (FTN) programme,
had filed for provisional liquidation in the US courts.[78]
We were pleased to note, therefore, the more comprehensive account
of developments in this matter in the 2003 Annual Report:
The parent company of our PFI supplier for FTN
services, Global Crossing, is currently in Chapter 11 bankruptcy
proceedings in the US. At the time of writing, US regulatory authorities
are assessing the company's plans for restructuring and the prospects
for it emerging from Chapter 11 look good. There is nevertheless
a risk that Global Crossing UK may not be able to fulfil its contract
with the FCO, though it is currently doing so. The FCO is monitoring
the situation closely and is keeping in close touch with the company,
its potential investors, other Whitehall customers and the US
authorities to ensure we can respond swiftly to any change in
the situation. It has prepared a detailed contingency plan to
ensure no loss of FTN services in the UK or overseas should Global
Crossing itself cease to be able to deliver the service.[79]
52. The Committee remains concerned, however, that
the FCO entered into a PFI contract with Global Crossing apparently
unaware of the problems being experienced at that time by its
US parent company, and the potential impact they could have on
the success of this vital modernisation programme. It would certainly
appear to raise serious questions about the original process of
due diligence undertaken by the Foreign Office, and the role of
the Cabinet Office in supervising that process. We recommend
that, in its response to this Report, the Foreign Office explain
why it failed to identify the risk of Global Crossing's parent
company facing bankruptcy, and the consequent impact on the delivery
of the FTN programme, during the negotiation of the contract,
whether private sector firms undertook due diligence work on behalf
of the FCO before the contract was entered into, and, if so, whether
the FCO considers it has grounds for initiating proceedings against
any of the firms in question.
68 Departmental Report 2003,
p 142 Back
69
HC Deb, 12 December 2002 , col 458W Back
70
Ibid. Back
71
HC Deb, 28 April 2003, col 1WS Back
72
Ev 66, para 28 Back
73
QQ 35-43 Back
74
Q 36 Back
75
Q 41 and Ev 66, para 28 Back
76
Departmental Report 2003, p 143 Back
77
Ev 66, para 28 Back
78
Foreign Affairs Committee, Twelfth Report of Session 2001-02,
Foreign and Commonwealth Office Annual Report 2002, HC
826, paras 67-69 Back
79
Departmental Report 2003, p 143 Back
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