Examination of Witnesses (Questions 120-130)
Monday 15 December 2003
Mr Mike Eland, Mr Len Morris, and Mr Kevin Franklin
Q120 Mr Williams: To the National Audit
Office. What comes out of this is really something we should expect
in IT contracts of this sort, is it not? To sign up to rapidly
evolving technology and evolving software availability to a long-term
contract is almost a contradiction in terms, is it not? How far,
based on our experience of IT contracts, and it may well be that
you need to look at this again, is it the rate of change which
invalidates the contracts before they actually reach their time
of expiry?
Sir John Bourn: Experience shows
that on both sides there is a greater interest in trying to make
progress within the ambit of a contract than seeking to put it
to one side and saying it is cancelled and starting from scratch.
Whatever the range of issues, you find the desire on behalf of
the two parties to avoid, if they can, putting the contract to
one side. On the general issue, you see a developing experience
here. In the early stages, people thought it was not too difficult
to set up a contract which would enable substantial change to
be accommodated within it. I think there was an optimistic view
on the part of departments and on contractors that this would
be possible. You are finding that both departments and contractors
come to recognise that the degree of change is much greater than
they thought and they are trying their best, within the ambit
of the contract, to grapple with this; not always successfully,
as we have often had to point out, but with experience one hopes
to see that on both the contractors' side and the departments'
side they will get better at it.
Q121 Mr Williams: I am sorry, this is
unfair really, but do you think we are going to see more variability
built in to the contracts or perhaps a move to shorter PFI IT
contracts in order to have options when it comes to making significant
changes?
Sir John Bourn: I think there
will be a greater emphasis on dates for reconsideration of the
contract. You find that these are often covered. There will be
an added emphasis on saying after five years we really must look
at these together to see whether we are quite happy with it, whether
we want to go on with it, what changes we want to make in it.
I think that a greater emphasis on full-scale re-examination,
with the possibility of break points during the 20 year- or 25
year-period, will be increasingly written into it—. I think
that will get more attention.
Q122 Mr Williams: To Treasury—apologies
for bouncing you. How far are you thinking or is there any thinking
going on in Treasury about the need to build in or to start developing
safeguards in order to reach perfectly desirable ability to make
changes within the system which is evolving technologically, but
also is subject to policy changes inevitably in a political environment?
Mr Glicksman: That is a very fair
point. Perhaps I ought just to put on the record the point Mr
Allan alluded to earlier in his questions. In July, the government
announced that there would be a presumption against PFI for IT
projects in future.
Q123 Mr Williams: Really? I missed that.
Mr Glicksman: Yes. There are probably
three main reasons for that. One is that in construction projects
PFI has delivered a step change in performance, but in IT projects,
although there are some successful IT PFI projects—and this
is perhaps one of them—it has not really delivered the same
sort of step change in performance that it has with construction
projects. It has been difficult to attract private finance from
third parties into IT PFI projects, so the private finance has
mainly been provided by the companies themselves, which obviously
generates difficulties for the companies. On the point you were
just alluding to, that it is a very rapidly developing area, it
is difficult to construct contracts which will cater for the very
rapid change of technological development over the sort of timescale
which enables a contractor to get a return on the initial investment,
which they need to do in a PFI project. The government announced
in July, that there will be a presumption against PFI in future
and last Friday the Office of Government Commerce issued a consultation
paper on future forms of contract for IT projects.
Mr Williams: I must say that I am much
relieved that while I get there eventually, Treasury has got there
before me. I am delighted. Thank you.
Q124 Mr Allan: On the point of incentives,
the obvious incentive to a business is to reduce their transaction
costs by pushing a button in a Sage accounts package, or whatever
they use and shipping their VAT return off. There is lots of talk
about this, but how far are you away from delivering it? At what
point will Mr or Mrs Smith in Sheffield be able to do something
like that, which I can see would really make your system succeed?
Mr Eland: We would hope to roll
out the full VAT project from June this coming year, 2004.
Q125 Mr Allan: Is that still a separate
screen? It is not integrated into their system.
Mr Morris: It stores up the screen.
If you take Sage for example, they do two software releases a
year, in January and September. We have been talking to them,
along with the e-envoy and other software vendors. The next possible
window for us is September 2004.
Q126 Mr Allan: It is a distinct possibility.
Mr Morris: That is a distinct
possibility. We have been talking to other software vendors about
doing the same thing.
Q127 Mr Field: This is to the Treasury
representative. Given that we wait for the day as a committee
to receive a report about a government inspired IT project which
is a success, all of them have a common factor about them, apart
from not working, that is that they employ experts from outside
and devise systems which are then imposed on the department. For
example, in the CSA now, they have a system where the vast majority
of the established cases cannot be transferred to the new IT procedure.
Has the Treasury thought of reversing this project and trying
to build a project from the grassroots upwards so that you would
see which new project worked in a local office and then spread
it upwards instead of actually doing the reverse process?
Mr Glicksman: First of all, I
should not allow to remain on the record the statement that there
are no successful IT projects.
Q128 Mr Field: What are they?
Mr Glicksman: The reports the
NAO do for the Committee inevitably tend to focus on things which
have gone wrong and which need to have lessons drawn from them.
Q129 Mr Field: We give you notice that
we should like a little note about the successes.[3]
We will not press you now. Go back to camp and get some ammunition.
Mr Glicksman: I am not an expert
on the CSA's IT project so I would not want to get involved in
a discussion about that, but the document Mr Trickett referred
to in his questions, the Treasury guidance which was issued in
February of this year, set out some guidance for departments on
major IT projects. It was drawn up with the help of the National
Audit Office. It set out various issues, including not going for
the Big Bang approach, but trying to pilot projects and build
them up on a modular basis; very much the sort of things you were
just suggesting. The sort of lessons you were referring to are
ones which are very much taken to heart by the Office of Government
Commerce.
Q130 Mr Field: When you do us a note
on the successes, might you tell us whether any projects are now
being modelled on that style, the home grown rather than imported
from outside, if you could?
Mr Glicksman: May I take your
points away and discuss them with the Office of Government Commerce
and ask them to prepare something?[4]
Mr Field: Absolutely; of course. That
would be good. Thank you.
Chairman: Thank you very much for appearing
before us. In the last 20 minutes we have had an interesting debate
which has opened up about the nature of PFI contracts with IT
projects. It would have been useful if we had known about this
announcement by the Office of Government Commerce before, but
thank you very much for informing us, even at this late stage.
Clearly the cost benefit analysis was wildly optimistic. Benefits
of 12:1 simply have not materialised and within a year they were
down to 4:1. What they will end up with we do not know. Certainly
we do know that the response to the electronic VAT returns service
has been very disappointing indeed. However, this is an interesting
effort and we have had a useful debate to which we shall return
in our report. Thank you very much, gentlemen.
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