Session 2010-11
Publications on the internet

CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 715 - iii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Public Administration SELECT Committee

Good Governance: The effective use of IT

Tuesday 22 March 2011

Mark Adams-Wright, David Wilde anD Martin Ferguson

JOE HARLEY, MALColm Whitehouse, Phil Pavitt and Mark Holden

Evidence heard in Public Questions 255 - 341

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Public Administration Select Committee

on Tuesday 22 March 2011

Members present:

Mr Bernard Jenkin (Chair)

Kelvin Hopkins

Greg Mulholland

________________

Examination of Witnesses

Witnesses: Mark Adams-Wright, Chief Information Officer, Suffolk County Council, David Wilde, Chief Information Officer, Westminster City Council and Martin Ferguson, Head of Policy, SOCITM, gave evidence.

Q255 Chair : I welcome you to this session about the Government use of IT. We are finding this Inquiry quite challenging but very interesting. Could you identify each of yourselves for the record?

David Wilde: David Wilde, Chief Information Officer for City of Westminster.

Mark Adams-Wright: Mark Adams-Wright, Chief Information Officer, Suffolk County Council.

Martin Ferguson: Martin Ferguson, Head of Policy for SOCITM and Associate Lecturer, University of Birmingham.

Q256 Chair : Thank you for joining us. Mr Ferguson, in your evidence you made it clear that you felt that central Government needed to consult local government more about decisions about IT before making them. What would be the benefits of this close cooperation?

Martin Ferguson: I would like to answer that by pointing to a particular example, which would be the Public Sector Network. This was something that SOCITM envisaged in the late 1990s, in fact, and at the time central Government was not a listening ear. The issue arose again in the last Government’s ICT strategy when the Public Sector Network was proposed-so a secure network across the whole of local public services and central Government public services. The proposal was for a major procurement of a national network.

We were not consulted on that, but later on, as those things developed, the local CIO Council, which is a body that SOCITM-the Society of IT Management-was involved with, put forward the proposal that actually we should be talking about a network of networks-in other words taking advantage of the networks that already existed at the local level in local public services. In Kent, in London, in Wales we have existing high bandwidth networks for the public sector already in existence, and our argument was, "Well, why not join these up on a national basis around common standards?"

Q257 Chair : So is this more an issue about Government operating to Open Standards?

Martin Ferguson: Indeed so. We would argue that there is a strong need for central Government to take a lead, but in consultation with local government. Our issue is that we have this Local CIO Council that reports to a CIO Council-Chief Information Officer Council-at the national level. But we do not have a direct line from local public services into the development of strategy for implementing Government policy in relation to IT and business change or to Ministers.

Q258 Chair : But is this not simply a failure of central Government to understand the resources that could be available to them if they were to open their eyes and look?

Martin Ferguson: I think it is and again I go back to the PSN, Public Sector Network, example. There are assets out there, already in existence-why not reuse them?

Q259 Chair : Other witnesses have argued that the real problem is the Government does not consider the IT question during policy developments until they are already very far down the track with the policy. How do you think we should address that?

Martin Ferguson: I think one of the ways in which that could be addressed is by looking to local government. The approach we take, which is very much of starting at the policy end of the spectrum, is: what are the key policies in a particular area? What are the policy drivers? What are the priorities that need to be pursued in terms of reforming local public services and making local public services more efficient? We then drive the information requirements and business change around those policy priorities and the technology to then underpin that, rather than starting at the technology end of the spectrum, as we would argue has been the case with many central Government projects.

Indeed, our concern, for example at the present time, is around the Universal Credit. That seems to be being driven towards another big Government IT project, when we would argue that the best procurement in terms of practice is at this what we call pan-local level, which is a term we use in our response. From the work that SOCITM has done over the last 10-plus years in our annual IT Trends survey in local public services, there is plenty of evidence that we get better value for money than central Government does through big framework contracts and the like.

Q260 Chair : When you say pan-local, pan-public sector governance, what do you mean by that in terms of a governance strategy and our protection in commissioning? Aren’t we just making things more complicated for ourselves by trying to be too comprehensive?

Martin Ferguson: I do not think we are because, assuming that we have interoperability standards and common standards in terms of architecture set at the central level, we can then procure against those. The point is we do not have those at the moment. But if we procure against those, by doing it at the pan-local level you are actually encouraging a degree of competition in the market that is not encouraged to the same degree by central Government procurement contracts.

Q261 Chair : Encourages competition? How do you mean? I do not understand that at all.

Martin Ferguson: Our experience is that by working at that pan-local level-so that could be at a county level for example-you are working at a scale that is sufficiently large for suppliers to be interested in the work being tendered, and that then invites a number of interested parties to tender for the work. Because at that level we are closer to understanding what the policy priorities are for the particular locality, the needs of the local public services in those areas, we get a much better tie-up between the client and suppliers-a better dialogue, a better understanding-which all comes back to my point that, at the end of the day, we end up with better unit costs at that scale of procurement than has been the case with central Government contracts.

Q262 Chair : My next question is perhaps more for the whole panel. We know that the Government is about to publish an ICT strategy. Has local government been involved in or consulted about it?

Martin Ferguson: Certainly, from the Society of IT Management’s point of view, we have not been directly involved at all. We have had, arguably, indirect involvement in that until the end of December we had a representative from the Cabinet Office sitting on the Local CIO Council, and last July in fact John Suffolk, then Government CIO, asked the Local CIO Council to prepare a local public services perspective on Government ICT strategy; in other words, taking Government ICT strategy, how would you implement that in practice in localities in the local public services arena? We have been working hard to develop that perspective. It is actually in online consultation at the present time and offers to central Government a parallel to, as you say, the forthcoming Government ICT strategy. I am meeting shortly with Bill McCluggage, Deputy Government CIO, and Chris Chant, Director of Digital Delivery, to ensure that there is a good fit between that local perspective and the forthcoming Government ICT strategy.

Q263 Chair : Mr Adams-Wright or Mr Wilde, have either of you been involved in the formulation of this ICT strategy and what are you expecting of it?

Mark Adams-Wright: No. From my perspective, from Suffolk’s view of the world, which is a little different from everybody else’s just at the moment in terms of pace if nothing else, we have engaged in a number of discussions and debates around strategic topics with central Government, particularly around cloud strategies and so on. It is very much a case of a discussion around a strategy that is happening, rather than a collaborative effort. So, for me not very much.

David Wilde: A short answer, no. I have had some point-to-point discussions with individuals in central Government around particular systems, services and what have you, but certainly nothing strategic.

Q264 Chair : So you do not feel you are going to have joint ownership of this document anyway?

David Wilde: No.

Martin Ferguson: We do find it quite extraordinary that there is a strategy that I believe will be talking about Open IT, and yet the process for developing that strategy has been closed.

Chair : I think that is called an irony.

Q265 Kelvin Hopkins : What you are saying suggests that the Government is looking only to the ICT companies, the providers of ICT, not the users, and the White Paper will be dominated by providers rather than users. Do you think they are making a big mistake in that respect and they should be asking local authorities and even Government departments internally what should be policy?

Martin Ferguson: Our view from SOCITM is certainly that the track record of Government in that respect is not good, and we say that in our response. We can go back to numerous examples, and I think you are well aware of failures of big Government IT projects that are, essentially, provider led, technology led. Our evidence from the local government scene is quite the reverse. Our projects are business change projects, they are business led, and the technology fits within that framework of the business requirement within local public services. We would certainly hold that up as an exemplar of the way that we should be approaching-

Q266 Chair : You think local government is much better at this than central Government?

Martin Ferguson: I would argue that, certainly, yes.

Q267 Chair : And what is the evidence of that?

David Wilde: I think it is less about the end user; it is more about purchasers. I think the aggregate spend of local government in IT is probably greater than that of central Government. I am fairly confident about that. Also, I think we have a much more diverse-but personally I do not think diverse enough-supplier base that we procure from. All of that is being missed if we are looking at an inward-facing central IT strategy.

Q268 Chair : In terms of there being Open Standards, the Government are developing Open Standards and local government is not even being consulted about what Open Standards to have.

Martin Ferguson: There has not been any consultation so far.

Q269 Kelvin Hopkins : Does this betray an ongoing suspicion by Government, by politics, that somehow public institutions-particularly local authorities-are not to be trusted, whereas the private sector can be trusted? Certainly this was the case, I think, under New Labour. I speak as a Labour MP, but not necessarily New Labour. There was a deep suspicion of local government and an attempt to move as much as possible of what they do out from local political control. Is that a factor, do you think, in all this?

Mark Adams-Wright: If I may? What I tend to find is that there was a view, certainly from my perspective, that previous public organisations in the local arena were perhaps less professional in the IT space than the private sector. Whilst public servants continued in those roles and there was not much cross-fertilisation between the private and public sector that continued to be the case. I think over the last five years there has visibly been a number of senior players who have come from private IT organisations into the public sector, and that has changed that feeling, but I do not necessarily think that all of the senior officers in the public sector have necessarily understood how that works. I come from a private background into the public sector, and therefore bring some of that experience with me that you talk about there, because I do not necessarily feel I need to go to the private sector to get the points of view that some may still feel they do at senior levels.

Martin Ferguson: I think that is a pointer towards the fact that the relationship between the private sector and local public service people is actually generally very good and is different, I think, in some ways from that which exists centrally. What I mean by that is the skill base we are talking about now for Chief Information Officers, Heads of IT, Directors of IT in local public services has changed and is changing. Now we are talking about people who are leaders, are able to work with the leadership in local public services; they are accountable; they are concerned with governance arrangements; they are concerned with strategic commissioning and output-based and outcome-based contracts; they are concerned with risk and opportunity; and they are concerned with performance management and realising benefits and savings. I think this is a different skill set and it is one that SOCITM has been very much behind developing in the local scene. As a professional association we see that very much as our role, so we have accreditation systems, we have a skills framework, which has been expanded to take on board that strategic level of skill and competency. There is no equivalent of SOCITM in central Government.

Q270 Greg Mulholland: Mr Adams-Wright, if I could turn to Suffolk?

Mark Adams-Wright: Yes.

Greg Mulholland: I would like to ask a few questions, because obviously Suffolk announced that they are going to be outsourcing the majority of services and saving 30% on the budget. Can I ask you what role you see IT playing in that very substantial decision?

Mark Adams-Wright: The first thing I would say is Suffolk is not really outsourcing its services. It is somewhat of a misnomer. What we are doing is moving towards being a strategic council with service delivery moved outside of the core council. That does not mean outsourcing in the traditional way, in very much a function-to-function view. It is very much a redesign effort around how we do certain things that are required in the public space that we are responsible for. It is not an outsource as such; it is very much more opportunistic and far more entrepreneurial than just that.

Where IT plays a role in that is quite key in actually continuing to keep what we refer to as the ecosystem around public service in place, which means as the council divests itself of being a service leader and becomes more strategic, it is likely to still need to keep control of legal entity on some of these things, possibly of the data and the facts that are owned and managed by some of these particular trusts or plcs, however that particular organisation comes up. We see ICT as the pure backbone for that ecosystem, and what we need to do is produce a system that can work across Suffolk-Suffolk plc if you like-that actually links everybody together. We are very focused on Open Standards and on live technologies that are quick to stand up and easy to use and adopt; the kind of things that actually create what we would call a virtual township across Suffolk, so that it is easy for anybody within that ecosystem to do business with one another.

Q271 Greg Mulholland: Are you using the opportunity of this change of approach to rethink how you use IT in delivering some of those services-

Mark Adams-Wright: Absolutely.

Q272 Greg Mulholland: -and that is regardless of who is actually delivering it?

Mark Adams- Wright: We are.

Q273 Greg Mulholland: Have you got some examples you could give us?

Mark Adams-Wright: Yes. Absolutely. We are very much a traditional local authority in terms of the way our IT infrastructure is set up-very much with thick applications of things. We have our major tier one applications: our Oracles, our finances, all those types of things. But as we look forward we know that we are going to need to be a lot leaner in the way we do things. We will still need functions but we will need them in a different way. Rather than being a fairly linear relationship between a single entity council and a single supplier, we won’t be; we will be many potential users of one single supplier system, so we have to change and evolve.

We will be looking to reduce our infrastructure dramatically between now and 2014/2015. We will never get rid of it totally, because there will still be some niche things that will be needed within that Suffolk ecosystem, but dramatically. We are pushing forward to work to basing all of our services on a private and public cloud base. We are investing in our public-sector services network, which is currently going in the floor and will be complete by January next year, which will link up all of our schools and our corporate sites into one network. It has been architected and designed to then be able to leverage over and beyond to support that ecosystem as it breaks up. Our website is being redesigned now in a completely different manner using Open Source standards, very much transactionally driven to support the shift agenda that we have put in place, but also completely able to be leveraged by any number of organisations that might wish to further down the line in terms of the cost to stand up, the technology and the ability to leverage off that single platform.

Q274 Chair : How do you leverage off a county council website? What does that mean?

Mark Adams-Wright: We have chosen to use a technical standard, and we have created a platform from that standard. What we are doing in building our website creates what we call templated websiting; in other words somebody could take that template and at a very, very minimal cost build all of their information into that template and put it on the same backbone that we already have, which means the interoperability between those sites is enhanced nth-fold from using different technologies and different standards.

Q275 Chair : What does that mean for the user?

Mark Adams-Wright: It means that, effectively, when we get down to the nitty-gritty of what we need to do in that ecosystem, which is share data-

Q276 Chair : Give an example of what that means? So, how would a county council ratepayer or council-tax payer understand or see a benefit of that? What is their experience going to be?

Mark Adams-Wright: If we take one of the divested entities that might be looking at the personalisation agenda through health, and we set that up and they use one of those websites and they set that up, as a citizen, when you have your personalised budget and you look how you are going to spend that and what services you will need from that, you will have a front-door website, but all the websites where all the information sits across the Suffolk system will be across the same backbone. So, it will be able to source itself through those websites.

The citizen will not get signposted and required to hit multiple points in order to get its answer. The website and the front door will do that all for them to link them up to where they need to be, because at the moment, if you need to do something that crosses across public barriers or public organisations, you need to go and hit them all separately to line up all the information you need to make a decision as part of needing a service in Suffolk. What this will do is allow you to have a single entry point, and that single entry point will then allow that to all be joined back together to deliver you an answer.

Q277 Greg Mulholland: Are there any specific examples you could give with regards to specific council services? Obviously, as the Chair has pointed out, there is a danger with our Inquiry that we will become too concerned with talking about cloud computing and Agile development and all the rest of it. Of course, in the end what we are interested in is how this will help deliver services and avoid some of the costly failures of the past. So do you think you could give us a couple of examples of specific types of services?

Mark Adams-Wright: At the moment we are obviously going through our divestment programme. It is a fairly major change agenda for the council, and most of the major pieces of work have not gone out yet and divested. What I can use is the example of one of the things that currently sits on that backbone, which is a website called onesuffolk, which is jointly funded by the districts and boroughs in Suffolk. What it does is it aggregates lots and lots of information about Suffolk into one place, and it also links off the back of that to other parts of the Suffolk structure. If you have a request you just go into that one place and it then directs you to where you want to go, so you get all your answers from one point of entry.

Q278 Chair : I am sorry; this is still a mystery to me. County councils do social services. If I am a social services user , how will I use your website differently from another county council?

Mark Adams-Wright: It is not so much that it will be different in that way. The fact is that the county council in Suffolk will have divested itself of services; therefore, from a member of the public’s point of view, it can look more complicated as that goes out, because it will not necessarily understand which particular parts of that ecosystem will be responsible for delivering parts of those agendas. What this is doing is facilitating that change to happen, to take the complexity away from the citizen by using the IT as the enabler to do so.

Martin Ferguson: Can I just come in and illustrate it, forgive me, by using a personal example? When my daughter was in her early teens she contracted ME and at that point, as the parents, we were dealing with 10 different public-service and third-sector organisations, all independently, all separately. All had a separate record of my daughter. What we are talking about here is the principle of being able to address public services-which includes those delivered by social enterprises, by the third sector and so on-with the need and to be able to be channelled to the various services that would be relevant, but at the same time for those services to be aware of each other, subject to consent, obviously, in terms of data protection, which is where standards and interoperability are important. In that particular instance, with the education department of the county council we were dealing with the school, with the transport service and the home tuition service, and every single one of them had a separate record of my daughter and her current state of need.

Q279 Chair : So, under this system there will not be a need for separate records?

Martin Ferguson: There would be separate records but they would be capable of being joined in such a way that the different service providers were aware of what others were doing.

Q280 Kelvin Hopkins : This all sounds wonderful and obviously Mr Ferguson’s explanation is more down to earth and more understandable. Mr Adams-Wright is obviously a man who is on top of his job and knows everything, but you speak in a jargon, a language, that I do not really understand. I am probably like most county councillors, who would hear you speak and say, "He is very clever; he knows what he is doing. Leave it to him." But I am just thinking, like the Chairman: I have a middle-aged woman who has not got a computer, who is not computer literate, but her father is developing Alzheimer’s. She has to go to somebody at the council and say, "‘Help." What actually happens? She cannot press keys on a computer because she has not got one. What happens?

Mark Adams-Wright: Obviously, understanding from my perspective as the ICT lead I would look at it from a technical perspective, so it is far easier for me to talk about it in that light, but what the enabling council will do-and this is the term; we call it "strategic" or "enabling" council-is it will start that process off. Now, there is an electronic route, and I have started to explain there how that might look, but clearly the same infrastructure will be repeated at a very physical level by the council. They will not stop being that point of contact for the individual but, obviously, as the services are actually delivered elsewhere, they can link that up, because there will be the knowledge base within the council to do that physically.

Q281 Kelvin Hopkins : But who will she go and see? Does she go to the county hall, ring up somebody on the telephone-because she can probably use the telephone-and say, "Help."

Mark Adams-Wright: Yes.

Q282 Kelvin Hopkins : And there will be a person who will then bring help?

Mark Adams-Wright: Yes. That will not change. That single point of entry will not change. It is really what is happening in the background, I think, that changes, rather than all of that complication, all of that linking together that currently sits within the boundaries of the county council, moving away into a number of potential other entities. So, that person for the contact, whether it be through phone, face-to-face-whatever the contact will be-will be responsible for linking that ecosystem back together. The technology part is one stream of that that supports it. Obviously, there is the face-to-face stream and there would also be a telephony stream that would be useable in that instance.

Q283 Greg Mulholland: A final question: I think it would be worth saying it would be useful, if not in the written evidence, to supply some specific examples of how it will improve the delivery of services for the ordinary council-tax payer at a better efficiency/cost, because that is obviously what we are interested in. Can I ask you: what lessons do you think central Government can learn from what you are doing in Suffolk?

Mark Adams-Wright: I am under no illusions of the difficulty and the scale of what we are trying to do. It breaks a number of pre-existing concepts about the way that you deliver service through local government. We face challenges that we will need to address. Some of them are quite clear. Some of them are around IT security. The more widespread you make your ecosystem the more complex it becomes to retain security and drive cost out by making it a simpler system to use. I think there is a lot to be learnt from central Government in terms of the IT security agenda. That is certainly one that we talk about a lot as we try and become more lean in terms of cost-coming together with a security agenda that works more practicably.

There will be lots of issues around data management. From a technological point of view we are building a data warehouse to bring all the data in from that system so that everybody can use it, but there are lots and lots of complexities in doing that and we will have to face those challenges. Obviously, in doing all of this, creating that ecosystem in itself and having people work in that interoperable way, from a political, practical and operational point of view, is going to be a big challenge. Central Government in almost this post-bureaucratic age is going to face very similar types of breakdown in terms of moving away from larger central costs into a more sculptured landscape of costs, where different types of organisations are going to exist to deliver types of services and ICT is going to almost be that constant that will need to keep everybody linked together, whether it be around information or whether it just be around understanding who is doing what for whom.

From a central Government point of view there are going to be some difficulties in breaking down some of the older ideas of the larger organisational sets. We have had to do that around our directorates, which is the map for us, and try and take that and dramatically change the power bases, if you like, within the council-being those verticals-into a far more homogenous corporate centre. That is not without pain and difficulty, and I think it is a journey that inevitably has to happen in order to move into that sort of space.

Q284 Kelvin Hopkins : I can lead on, if I may. I understand, if I may say, that some residents of Westminster cannot contact people now that things have been outsourced and everything is electronic. They leave messages and nobody gets back to them, and the accountability seems to have gone. It is not the wonderful world that we hear: that things have been outsourced and work better. They do not actually work better. Residents are saying, "We used to be able to get in touch with a person in the town hall and something would happen." Now they leave messages on answer phones and whatever: nothing happens. Is this the future: that we are all going to be talking to electronics and no human being, and they will not come back to us when we leave messages?

Chair : Westminster was mentioned. I think perhaps we will hear from Mr Wilde.

David Wilde: Yes, certainly. I think a lot of this is about perception at the time. I have spoken with many of those residents when I have been at resident committees and what have you, and there are residents who say, "I cannot get hold of the person I used to be able to get hold of," but there are many other residents that say, "Actually, somebody is answering the phone now," so there is that balance between the two.

More importantly, I think, it is not just about the phone: it is also about the internet and it is also about reducing duplication of service. So, building on some of the stuff Mark was saying: why should somebody tell us their name and address 10 times over to do 10 different services? We know it; we collect council tax from them. Why can’t we use that to make the process for engaging with us actually easier? There are issues around, obviously, information, confidentially and stuff that you can manage through that.

In terms of the outsource/in-source sort of question, I do firmly believe that the extent to which an outsource is successful or not is entirely down to the extent to which you manage that relationship with the supplier, in the same way as the extent to which you manage in-house staff. To me, the in-house/outsource question is consistently in both cases about what is your quality of service? What are your expectations? What is the cost for delivering that service? What benefit are you going to get? You make the decision based on that. Interestingly, in Westminster we do have a reputation for outsourcing most things, but there are actually some services-notably planning and other services-that we deliberately keep in-house, because we take conscious decisions that they are better operating in that environment in that way and the market, frankly, out there is not ready for an outsourced service.

I have a small service of my own within IT, which is the education IT service that supports primary schools, which is still an in-house service and I deliberately keep as an in-house service because the outsource options out there are double the price and for no better quality of service. So, as long as we stick with that pragmatism and the good common sense decision of that good old-fashioned combination of value-what you are getting in terms of quality of service-I think we will be consistent around that.

What does technology do in that space? It can help improve customer experience, but again, it will be as much down to being clear about what the experience needs to be. For instance, complex housing benefit cases do not lend themselves very well to self-service online. Council tax does. In fact, council tax especially lends itself well to direct debit of all things, so it is not purely about particular technology types.

Q285 Chair : Can I just ask of Suffolk, by transferring so much to the private sector by outsourcing so much, aren’t you losing some core skills that will enable all you to understand how those services work and, indeed-we see this in IT-isn’t it the case that outsourcing to large companies to be the prime contractors does not necessarily insulate the purchaser from risk?

Mark Adams-Wright: Part of what is retained within the future council will be the commissioning element of what we do, which will mean there will still be the strategic element remaining in the council that will help bring all of that together, because we have learnt by the very same token that Suffolk has an outsourcing for ICT and has had for a number of years. My role as the commissioner now of that service is to ensure that that continues to deliver what the right strategy is for the council, which I define, but make sure it still offers value for money and all of those other things, and it is delivering the services that remain pertinent and relevant, and that will not be lost to the council because I think as a model we understand how valuable that is.

Q286 Chair : So, Mr Wilde, on the question of shared services and cloud computing, you are currently in the process of sharing IT services with other councils. What challenges does this pose to you?

David Wilde: It is not just about sharing the services; it is about deciding what the mix of outsourced and in-house is going to be as part of that as well. The two, to me, go hand in hand. The challenges: we have some very practical challenges out there, which is protection of individuals and information, because, whilst you can share IT, ultimate political accountability, certainly for sensitive records and most resident records, still remains within the political structures that we have, so we need to be able to reconcile who has access to what information. That is not a difficult thing if you come at it from the beginning clearly understanding who needs to access what and how best to control it and set up the right security models-not particularly complex.

In terms of practical sharing of IT like the techie stuff-desktops, networks, all that kind of stuff-that to me is very straightforward. It is about commercial arrangements and striking the right deals in terms of suppliers. We have just awarded a contract for London, a next generation networks framework agreement, which is led by Westminster but has been deliberately designed to allow any other London local authority, and, in fact, the GLA, to buy into that contract if it is good value to them. That, to me, is good sense and a good approach to the market place and we have very good pricing on the back of it.

The fact that we are all going to be sitting on a network from one provider is actually no different from the provision we have had for the last 20 years. It is just the badge changes; we have three or four network providers that service London. We buy from them. We do not own our own as a general rule.

Q287 Chair : So it would be quite difficult to translate this experience to, say, cross-departmental working in central Government?

David Wilde: I do not think so. I think it is absolutely no different. The challenge in central Government is to think that way. At the end of the day, if you look at a lot of central Government IT network purchases, if we stick with the same line, you will probably find the vast majority are buying from no more than two or three companies on two or three sets of physical infrastructure, but buying it separately.

Q288 Chair : So there is a case for centralising this?

David Wilde: It is whether you centralise or create contracts that allow you to capture the value of scaling up and down.

Q289 Chair : The centre needs to regulate the style of contract in order to enable this to happen?

David Wilde: Exactly. That to me is more comfortable than centralising a network. We have had one of those since 1997; it was called GSI and I think we saw-and there is plenty of evidence out there-as time went on it became less value for money. I think centralising the commercial arrangements and keeping them regularly rotated-so regularly refreshed-means you can keep on top of pricing without compromising service.

Q290 Chair : Now, your objective to be 100% migrated to the cloud by 2015 and to have divested yourself of all infrastructure, does that mean people’s council tax records are on Google Docs? What does it actually mean?

David Wilde: No, it means they will be in third-party services, certainly. It will not necessarily be Google and the public cloud. They will be in secure environments, but they will be secure environments that other authorities might be using as well. In fact, if you take our council tax records today, they are actually sitting in Capita’s infrastructure in the South East. They are not in London and they have not been for probably five years. So, we have already done much of that.

One of the great misnomers about the cloud is the leap from "cloud: therefore it is Google", whereas to me cloud is about making good use of much better commercial infrastructure than the stuff I am looking after in City Hall down the road, which is on some of the most expensive real estate in the country. Why would I do that?

Q291 Chair : Is there anything that you won’t be putting into the cloud for security reasons?

David Wilde: No.

Q292 Chair : Nothing?

David Wilde: No, nothing, not in Westminster. No. We are more than satisfied with the extent of the security arrangements provided by commercial providers. Our discussion, our debate and our decisions are based around whether it is UK based or whether it is EEA based-European Economic Area-or what we would allow beyond that, and they are very much information, governance decisions around compliance with Freedom of Information Act, Data Protection Act and the like.

Q293 Chair : So do you think the Government’s concept of a "Gcloud", their own nationalised cloud, is mistaken for most Government data?

David Wilde: Why have a nationalised one when there are plenty of privatised ones there already?

Q294 Chair : The Government does need to create its own cloud to benefit from cloud content.

David Wilde: Again, I do not think so. If we look at where much of central Government is today, much of the infrastructure is already outsourced, and it is outsourced with third parties. In effect a lot of the Government is already part way there in terms of commercial, almost cloud-based services. The challenge, I guess, is the extent to which you collaborate across those at an interdepartmental level, and also I think the other challenge, the central local government challenge, is: when do we start sharing across that boundary? The most obvious examples in there are benefits. We have two large Government departments responsible for means-tested benefits and we have 400-plus local authorities responsible for one sliver of means-tested benefit, which is housing benefit, and between them there are 400 housing benefit systems, plus these big central Government ones.

Q295 Kelvin Hopkins : We have touched on the lack of in-house skill, particularly at central Government level and the ability to manage these big companies. Are they effectively prisoners of the big companies in that they have not got the skills to make the judgments, but when things go wrong the companies-there are so few of them-come back and say, "We know we have made a mistake, but give us another contract and we will put it right." They just make more money out of central Government; that is what has happened in the past.

David Wilde: It is certainly an ongoing challenge, I think, across the public sector-both local and central Government have suffered from this-as well as the private sector, but less visibly. Some of the hardest lessons that organisations learn is the point at which you retain key skills in-house so that you can appropriately manage those outsourced services. Now, I have worked in a number of organisations where I have gone in and restructured around putting those key skills in place, and I am not saying they are right, but my view on it-and they seem to work so far-is strategic leadership must stay in-house otherwise you will be sold the product that your supplier wants you to buy.

Technical design authority, understanding where all your IT is, is absolutely something that needs to be in-house, but you do not need to retain the architects that build the components. Security and configuration management is something that must stay in-house because no matter how much you outsource you cannot outsource responsibility for managing that data. You cannot outsource the responsibility of data controller. The other area that too often, I think, is missed on outsource arrangements is strong, commercial management or service delivery management, which is quite often the one I see missing when I go into outsourced organisations, where they have done those key technical components but they do not have the commercial nous to keep pace with what is going on with the marketplace.

Q296 Kelvin Hopkins : Another potential problem, as I would see it, both in local government and national Government, is that you get the loss-leader situation, where an IT company comes and offers you a wonderful package. I am not an IT specialist; I speak to three gentlemen like you who can bemuse me with your language, and I say, "Fine, go ahead." Then next year you come back and say, "Actually, it costs a bit more than we said." You suddenly find a 50% cost increase on the second year and another increase on the third year, and I am your prisoner. I can do nothing about it. The private sector, big manufacturing companies, surely do not operate like that?

David Wilde: There are a number of private-sector companies that have fallen into the same trap. I think they probably learn the lessons a bit more quickly because the shareholders are a lot less patient and they want it sorted. In central and local government, absolutely: to me that is good procurement practice; that is understanding what you are buying, and whenever I go out to procure goods and services I look at total lifecycle, and there are simple things that you must do in that, which is nail down what the price is over time; be absolutely clear about things like indexation, inflation and what have you, and get that out at the beginning.

The other thing to do-and increasingly we are seeing it happen in the public sector and it is healthy-is shorten the contract terms. 10-year deals: who on earth knows what IT is going to look like in 10 years’ time? With the service providers out there now-and this is where the cloud has actually been quite helpful-the commoditisation of IT over the last two to three years has made three- to five-year contracts much more realistic propositions, and it is those shorter contracts, frankly, that can reduce that risk of that lock-in.

We do have an issue in the UK-and it is common, I think, elsewhere in the world-that public sector services, because of the way quite often they have been constructed over time, by their nature may have locked in a small number of suppliers around particular sectors. One of my particular bugbears, which I have spoken publicly about before, is in fact housing benefit, where there are only two or three suppliers in the UK that dominate the market. So there are 400 buyers but only two or three sellers. That is not a healthy environment to operate in. How do we break that? Probably through some radical change on how we operate the service, but that is a difficult thing to do.

Q297 Kelvin Hopkins : I cannot imagine General Motors-there is a big plant in Luton, where I am Member of Parliament-allowing themselves to get into this situation when every second of the track moving is so crucial. They could not possibly allow that to happen; they must have had their own in-house expertise.

David Wilde: I think if I remember rightly General Motors did get exactly in that hole a number of years ago with EDS, and it cost them a lot of money to get out of it. Sainsbury’s is another example. There are a number of private-sector examples. Maybe the other lesson is maybe we should pay attention to what they did and perhaps bring some of that into play in the public sector.

Q298 Kelvin Hopkins : I must say my prejudice is against contracting out-my position on the left might suggest that-and indeed where services have been contracted out they have often gone wrong. Private care homes are now in a terrible situation, begging Government for money to keep them going when we had perfectly good in-house direct care homes, which I know, because I have visited them in my constituency, all closed down. So there were direct labour organisations, which used to be superb-some of them, not all of them, used to be absolutely superb-that the private sector could not touch in terms of efficiency, management control and whatever, and they were just brilliant. I saw them live 20 years ago. All contracted out now. Is it not the case that costs could go up rather than down if they are contracted out?

David Wilde: Again, it is back to my earlier point, I think. I have seen examples, like you, of in-house services that performed well, have been outsourced and have performed poorly, but if you lose sight of what the service is there to do, how you measure that and how much it costs to deliver it, yes, costs will go up. Again, I do not make the distinction between in-house and outsourced as a principle point. I think it is about consistency of how you measure that service across both, and then the rest is really about value for money. It is as simple as that.

Q299 Greg Mulholland: If I can just fire one of your quotes back to you-not yours but Westminster Council’s-which is one that I think stood out from the written evidence, Mr Wilde. In the written evidence Westminster Council said that there was not normally, and I quote, "a strong enough link to the desired business outcome through the operational or policy lead responsible. Too often IT is viewed as a dark art or worse still something that will just deliver without needing to engage with the deliverers," so rather poetic as well as an important point that we have explored in our other evidence sessions. How at Westminster have you tried to ensure that there is that strong link between IT and the actual policy-the business outcome that you are desiring?

David Wilde: We cover it in three main ways. The first one is the strategy that I wrote when I first got there. Now, that was an IT strategy that sets out the infrastructure-free stuff that you have covered, but also importantly covered how we are going to engage with the public; how we are going to engage with business, the lines of business out there. What was important was not writing the strategy or even getting it approved by the Cabinet Member. What was important was getting it approved by other directors in the organisation and Cabinet itself so that they can understand. I was challenged very hard by the scrutiny committees when I wrote it to make sure that it was reasonably plain English, your point earlier, because what they did not want was tech speak. They recognised the infrastructure-free principle but what they did not want was detail on how it was constructed. So that was point one; that set the standard; that is where we were going to go.

It also set within it how we were going to engage with the rest of the organisation. Now, when I first arrived I inherited something called an IT board, which I was the chair of. I scrapped it; it was pointless. We replaced it with four boards around four lines of business: an adults’ IT board chaired by the adults’ director; a children’s IT board chaired by the children’s director; a built environment IT board chaired by the director that covered the built environment and also worked with planning; and I chaired the last one, which was corporate systems, so HR, finances and desktops and what have you. Now what was important there: I sat on all of them, which was horrendous for the diary, but I had the business leaders chairing those boards and making the decisions on how IT is going to change what they do. IT became an integral part of their change programmes, which were about restructuring how their services were going to be delivered. I was there to challenge; I was there to bring into play what IT could do, so a little bit of sales activity, but, critically, it was not me deciding what we were going to spend money on in IT systems; it was them. That, as a result, has enabled us to take significant cost out and significantly improve services across all four areas. So that is two.

The third part really is about demonstrating the basic IT works and demonstrating-the point on in-house and outsourced earlier-in really simple terms that the IT will do what it says it will do-the really basic stuff. The IT that I inherited when I got there had very poor ratings with staff, and we had problems with public access equipment in the libraries. We spent the first six to nine months sorting out a supplier that was failing to deliver, which was a fairly painful process, and sorting out public access IT equipment in libraries, because actually that had a massive impact on an awful lot of residents and duff kit for the public is just not on: so, fixing those basic things. As a result we have raised the satisfaction levels and the confidence in IT to deliver in the organisation to a point where we could have proper conversations around the more transformational stuff. They are really the three things that we brought into play.

Chair : A very useful answer. Thank you.

Martin Ferguson: Could I just say in local government that is not uncommon. Indeed we have taken a step of, in local government, developing our own methodology. Birmingham City Council has facilitated that; it is called CHAMPS2. We have recognised that the MSP, Managing Successful Programmes, and PRINCE2 methodologies, which are about programmes and projects IT, are not actually appropriate for dealing with business change. So what David is saying: we are starting here with policy, priorities, business change, and the CHAMPS2 methodology provides that opportunity to involve staff, get the governance arrangements right in terms of the key people who are responsible for services making those decisions and realising the benefits and savings out of the programme of change. That is what that methodology does and it is freely available-it is in the public domain-to any public organisation to use and, indeed, it is being used around the world, including Brisbane City Council, for example.

Q300 Greg Mulholland: The final million dollar question or actually billion dollar question is: considering the very poor record that central Government has in terms of delivering IT projects and not having that clearly linked to defined business/policy outcomes, what can central Government learn from what you are doing to take forward to try to improve that?

David Wilde: My challenge when I arrived at Westminster was interesting and very direct and to the point. My question I asked at the end of my member panel was: "What do you want me to do?" To which the answer came back straight away: "Sort out the supplier, reduce the cost and make it work." That is a pretty clear mandate. So, in simple terms you properly align IT to the business-properly align it-and get the business owners to sign off on what the project does with their eyes open. What does this really mean? What I mean is, do not look to IT to make Government work better. It won’t. It can enable it but it will not do it on its own. That is probably one of the harshest lessons that the national project for IT-the health one, learnt. So, I think that link-what you want is directors general in Whitehall signing off on these things. What you want is CIOs advising them as to the right course of action and challenging what they are doing, but critically, those guys need to be signing off knowing the full impact of what is going to be done in terms of the bottom line. Again, Westminster is very focused on the bottom line.

Q301 Chair : Mr Ferguson, you mentioned earlier that IT costs in local government, unit costs, are much lower than central Government. Why is that and what do you think central Government is doing wrong?

Martin Ferguson: I think it is because at the level at which we procure, which typically is through local purchasing organisations and the like, so it is local authorities cooperating together around particular contracts and procurements, we are able to be much more flexible. For example, using reverse auctions is one particular way of procuring desktop PCs that has been used in a number of situations, but a whole range of different procurement methods have been used. I think it comes back, as I say, to closer and more constructive relationships with the supplier community, a better understanding of suppliers and what we are trying to achieve. It is that expectation that it is not about the technology; it is actually about what the technology can do for the public services, and that ability to then drive costs down through a competitive procurement process that is genuinely competitive at that level.

Q302 Chair : And could you actually produce figures that prove your case?

Martin Ferguson: We do have figures; I can make those available to Committee members.

Q303 Chair : If you could submit a memorandum to us-

Martin Ferguson: Certainly.

Q304 Chair : -with those figures, I think that would be of great interest to us. Mr Wilde, the corollary of you getting the service heads to chair their IT boards means that the Permanent Secretary of the Treasury should chair the IT board for HMRC-or at least the Chief Executive of HMRC should chair the IT board-or the Chief Executive or the Permanent Secretary at DWP should chair the IT board at DWP. Is this your experience of what we do?

David Wilde: It was not the Chief Executive that chaired any of those boards; it was the next step down and I think that is what is really important, because at the Chief Executive level, you are putting a layer up, then it is only going to come down. If you are deliberately targeting at DG level, a more appropriate example, if we take HMRC as an example, would be the DG responsible for VAT chairing a board that has IT, and what IT is going to do on how you collect VAT. In DWP the person responsible for invalidity benefits or disability benefits, the DG responsible for unemployment benefits. It is that kind or relationship, because you are closer to what the business is about then and the CIO can engage in a way that can facilitate change. A big challenge of course, with both organisations, which we do not have, is they have large delivery agencies as well. So, as well as having a Whitehall core, you have, in the case of DWP, Jobcentre Plus; in the case of HMRC, the delivery arms around revenue collection and the old Customs and Excise setup. But I do not think that is insurmountable; it is just finding the right people who are accountable for that change and putting them in charge.

Q305 Chair : So the rule should be: if your department is ordering the system, you should be chairing the working party that is procuring the system.

David Wilde: Yes.

Q306 Chair : It is not something that line management can get rid of to a systems department?

David Wilde: Absolutely not. Absolutely not.

Q307 Chair : Is that what tends to go wrong?

David Wilde: I think it is a major issue, absolutely right. Where is the buy-in to change if somebody else is doing it?

Q308 Chair : Right, buy-in for change, because actually incorporating systems is about corporate change.

David Wilde: It is. Absolutely right.

Q309 Chair : Very good. Finally, I should have just mentioned at the beginning of the session I prefer to declare an informal interest. The chairman of Fujitsu Europe is a very close personal friend of mine, but that is just on the record. Can I ask a final question to each of you: what are the particular recommendations you are looking for our report to make? If you have got one each, that would be jolly useful.

Mark Adams-Wright: For me my recommendation, what I would like to see is more Open Standards and a better link with sensible policies for local government to link into central Government with. That is a very practical, on-the-ground view for me.

David Wilde: I would like to see an IT strategy that is based around the services we deliver to the public, not around central and local government.

Martin Ferguson: I would like to see that stronger link between the local and central built around-as David says, exactly that point-delivering to citizens what really matters to them. For example, in the Universal Credit arena we do challenge the approach that is being taken at the moment that does not take into account that wealth of expertise and knowledge that is available at the local level about how to deliver benefits effectively. We need to bring those things together to ensure a successful implementation of a project like that.

Chair : Gentlemen, thank you very much indeed. It has been a most useful session and no doubt we will think very deeply on your preferred recommendations as well. Thank you very much.

Examination of Witnesses

Witnesses: Joe Harley, Director General and Chief Information Officer, DWP, Malcolm Whitehouse, Group Applications Director, DWP, Phil Pavitt, Director General and Chief Information Officer, HMRC and Mark Holden, Director Projects and Programmes, HMRC, gave evidence.

Q310 Chair: Thank you very much indeed, gentlemen, for joining us to give evidence to our Inquiry on the use of IT in Government. Can I just place on record an informal declaration of interest that the Chairman of Fujitsu Europe is a close personal friend? Could each of you introduce yourselves for the record?

Malcolm Whitehouse: I am Malcolm Whitehouse, Group Applications Director for DWP.

Joe Harley: My name is Joe Harley; I am Chief Information Officer for DWP and for the Government.

Phil Pavitt: I am Phil Pavitt; I am the Director General for Change and the CIO for HMRC.

Mark Holden: Mark Holden; I am the Director for Projects and Programmes for HMRC.

Q311 Chair: You are in the firing line: you get a lot of flak, don’t you? Can I start by asking why you think Government has such a bad record on procuring IT?

Joe Harley: I think it is patchy, Chair. We recognise that there have been problems in the past; some things we could have done better with, for sure. What I do believe we can do, though, is really learn the lessons from the past, and I believe in the Department we really are learning those lessons now. We have a very comprehensive lessons-learnt database, which we share with the project and professional community. We share that database and those lessons of what has worked and what has not with new projects when they emerge. We have strengthened our governance-I think that is a key element-through our investment committee and our change committees, and we assess all our key projects against the NAO’s common causes of failure, and we constantly keep abreast of that. The commercial, off-the-shelf packages we use now as a matter of routine, and we break down the projects into manageable components.

I think we are really learning the lessons, Chair, and whilst there have been mistakes in the past, I think we are starting to get a track record now of delivery. I think DWP is recognised as a department that does deliver, and in recent times, with the Employment and Support Allowance and more recently the State Pensions Reform, we are starting to see an emerging track record of delivery. There is much to do, to be honest, and capability improvement is key in all of that. I think we are learning on how to improve capability.

Q312 Chair: But this has been going on for 15 years, with the pain of failed IT projects. What is changing now that has not changed before? Perhaps I can ask one of the other witnesses. Mr Pavitt?

Phil Pavitt: Thank you, Chair. Like Joe has said, there are a number of things that are going on. Government is in transition. I think there have been failures both in the private and the public sector; we are not immune from that. I think the challenge is to learn from those things in how quickly you make that transition and that learning. We had a joint programme recently with a pensions reform programme, which we delivered to many vulnerable people in the UK, a very successful programme. That obviously does not get quite as good press as some of the ones that have failed in the past. You can come to HMRC and look at selfassessment online, which is again one of the biggest used online processes: 7 million people used it this year, 31 January. It is one of the busiest websites and transactional processes in the world, and a tremendous success story used by many people.

The learning of governance, the learning of lessons in how we procure, the learning of how we break projects into smaller component parts is critical, and that has been going on for the last two or three years, and some of the success rates you will see in the last 18 months are a result of us taking on those learnings.

Q313 Chair: But you both have a long track record in this field. Over that period, each disaster that occurs, is that a different lesson that is being learnt, or is it the same lesson that has not been learnt?

Phil Pavitt: Let me start by answering that I think there are two things: you learn lessons both from success and from failure. We are referring here, of course, to learning just from failure, but those programmes that are successful provide just as much learning as those that do not work out so well. Certainly, when you talk about how well you procure, how well you manage programmes, how good your governance is, they are critical to get right. The big learning for us around the Pensions Reform Programme actually – in the previous session there was a lot of conversation around talking to customers, users, the business designing it – that was very much a businessled, businessdesigned programme. We have learnt that from subsequent programmes that have also been successful. I think there are ways of learning from both success and failure over that period of time.

Q314 Chair: Can you give us examples of solutions that address previous failures that have now proved they can work?

Joe Harley: We may come on to Universal Credit, Chair, but one of the things that we are trying to do in Universal Credit that is different is to reuse as much of the IT assets that exist, rather than developing everything from scratch. So together with the use of commercially available packages and the reuse of existing assets we are finding that reduces the risk to delivery. Those are the main things that are different.

We are also in Universal Credit-and Malcolm may wish to comment on this-using a different methodology called the Agile methodology for projects and programmes, and this was a recommendation from the recent Institute for Government report that recommended Agile as a development methodology. We are using that, we are trying to be innovative and creative, reusing what we already have, and we have a new way of doing things, delivering things quicker, and derisking it.

Q315 Greg Mulholland: I think it is fair to say that there is something of a collective feeling of anxiety over the scale of the two big projects that are coming forward, because of the experiences that there have been with regard to Government IT. When it comes to the Universal Credit and the realtime information, how confident are both of you from both departments that these very large projects will be successful, and what are you doing differently from some of the projects in the past that have not worked?

Joe Harley: Thank you. Could I just say that, from a Universal Credit point of view, the project is off to a great start. We have the team in place; we have the executive sponsorship there. We have strong governance now set up; we have steering groups for the IT component, the policy component and the overall delivery. We have shared governance arrangements with HMRC, and we have a ministerial oversight committee.

We have recently completed with the Major Projects Authority, the new Cabinet Office body, a starting gate, and they have given us a good rating on that. They felt that the start we have had in Universal Credit is impressive. So, a good start. What we are doing differently is the Agile approach, the reuse of components that I have talked about and the early engagement of the supplier community in helping us move forward.

Malcolm Whitehouse: I would like to just go back to the example that Joe referred to, the Employment and Support Allowance, where we learnt quite a lot in terms of both how we set out the technology to be used at an early point in time so the engagement of our suppliers in the programme is very clear, but also so the technology components that would be used to make that work incorporate about 60% to 70% reuse from other activity. That gave us the start point that allowed us to be confident in both the timescale and the estimates that we had, so that meeting the October deadline in 2008 was something that we had high confidence in. We have built on that to look at the component set that we need for Universal Credit to effectively identify those areas where we can reuse things that are in place in the Department and things that are in place elsewhere, and hence the relationship with HMRC for realtime information.

Fundamentally, one of the major challenges in delivering large programmes in Government using IT is around the engagement with policy and with the customer base, which is why we have introduced the use of Agile as part of the delivery programme as we go forwards. This allows us to make sure that, during the short iterative developments that we are working through with the known technologies, we can engage with our customers in early testing of the customer journeys, which are part of the development proposition. That gives us the ability to really prove out at a very early stage that what we are using will work, but more than that: what we are using, what we are putting in place, will actually work with the customer base that we are addressing.

Q316 Greg Mulholland: And what about the realtime information?

Phil Pavitt: Let me start, and perhaps Mark will want to join in in a moment. There are three or four biggest lessons we have had from both our successes and areas that perhaps have not worked as well over the last few years. I guess the first is around governance, so this is very much a business-led project: business are sponsoring it, running it, developing it, and as Joe refers to, we have actually learnt from that to extend our governance between our two organisations. We are already heavily involved; as day-to-day work between us, there are over 3 billion transactions that go between us per annum anyway as two authorities. The governance structure that goes around that is critical.

The second part we have learnt is around business planning. Business readiness has probably been one of the biggest areas of criticality that we have got wrong in the past, where often IT has arrived and the business has not always quite been ready for it, and so in parallel to doing the technology we are actually working really hard on this and other similar programmes to make sure that the businesses are redesigned so that they are ready to take on all the new technology, and the new processes that go with that are also done just as critically.

The third area of course is reusing what we have. We have an enormous legacy system. Just to put into perspective the sheer size of what we are looking after in HMRC, we are looking after the income of £435 billion of tax. We have enormous systems that are running that, and reinventing all that would be foolish, so we are actually using many of the assets we have today to help design this answer. Mark was the leader on that programme, I don’t know whether you want to just add to that, but those are some of the biggest lessons that we are learning to ensure it actually works coming forward.

Mark Holden: Indeed. If I can just add one other dimension to that, which is we are very much minded that we need to design our services going forward around our customer needs as well as the departmental and wider Government needs. So to that end we have a number of stakeholder forums that we have already engaged in getting feedback on the proposals. We have obviously just gone through the consultation around the realtime information, and we even had representations from a number of bodies on the main programme board, so we really are putting the customer at the heart of our design and our development process.

Q317 Greg Mulholland: Thank you for that. Clearly the success of the Universal Credit is partially dependent on realtime information being operational, so can I ask how you are ensuring that the two systems will be fully interoperable, but can I also specifically ask on the DWP side, if RTI takes longer to develop than is hoped, are there are contingency plans for the Universal Credit to make sure that is still deliverable?

Joe Harley: I think one of the things that we have put in place that will help the overall delivery is that we are doing, next month, an end-to-end review of the entire technology solution, from HMRC through to DWP. This will be an end-to-end technical review, we will do it fairly frequently going forward and we will have an independent assessment of that. This will again add to the assurance around the solutions that are being provided. In terms of a contingency, maybe Malcolm will talk about that, but any programme, of course, needs to develop contingency plans, and we are in the course of doing that.

Malcolm Whitehouse: Coming back to the specific question, which is the interoperability and the connection between the two, we started working jointly in the summer of last year to look at the requirement. The fundamental requirement is around the data from realtime information, which allows us to understand gross and net pay, and the deductions that are made as a consequence will go into the calculation of the Universal Credit taper, as it is known, but fundamentally what people will get as a consequence of their entitlement. We agreed the requirements set for the data at the end of last year, which has gone into the development process, and also have started work on the nonfunctional requirements in terms of scalability and performance and service-level arrangements that need to be in place.

We have developed the file transfer protocols between the two agencies to be very clear on how we will handle and encrypt the data transfer between the organisations, and then as part of that planning going forwards we have a number of key integration points at which we will test out the solution, which gives us the opportunity to prove at an early stage that interoperability is not a challenge. There will be a later point at which we will then test the actual data that comes through as a consequence of employer payroll takeup as it feeds the information into the realtime information depository, and that will give us the opportunity to prove out at that stage that these will work in practice and at scale. As I say, we have a number of key integration points planned over the course of the next two years.

Q318 Greg Mulholland: In terms of the suppliers who are delivering these big projects, did existing Government contracts mean that they went to existing suppliers automatically, whether or not they were actually the best-placed suppliers to deliver this, or were you able to consider alternative suppliers who might be better suited to this type of project?

Joe Harley: The DWP will be a bit of both. We are using some existing frameworks at the moment for a range of suppliers to help us at this point.

Q319 Chair: Sorry, when you say "existing frameworks", that means you have to go through a lead supplier to access other suppliers. Is that correct?

Joe Harley: Not necessarily; a framework can be access to a range of suppliers that have previously prequalified for a particular piece of business, so we can do both. But what we are running at the moment is an open competition, where we have been out to the market, we hope to award that business in the summer, and that will provide an opportunity for a new contribution from the supply community, so it is through an open competition basically.

Malcolm Whitehouse: What we have been working through is a capability-based framework to ensure that the supply community have the skills, the capability and capacity to do the work that we need in Universal Credits and elsewhere. One of the fundamental pieces of learning that we have found-and this was through both the Employment and Support Allowance and more recent projects and programmes-is that while reuse of technical capability helps in terms of setting out the underlying infrastructure that you use to deliver the IT to enable our business programmes, the other important element is to have reuse of the skills and the people that have been involved in that, and so using the framework gives us the opportunity to engage suppliers that already have that knowledge and can bring it to bear. The reuse is both the components that we have but also critical knowledge that means that you can build on that very rapidly.

Q320 Greg Mulholland: Are you confident that existing frameworks have meant that the procurement process has been flexible enough to engage the right suppliers?

Joe Harley: I think on the Universal Credit space, the open competition that we are running now gives flexibility, so yes.

Q321 Greg Mulholland: What about realtime information?

Phil Pavitt: In terms of realtime, we are primarily reusing most of our legacy systems for the core revision of the service, so that has been procured through our framework agreement we have with Aspire, which is the conglomerate of organisations that serve us on the IT space. They are the experts, certainly on the legacy engines that run PAYE and the sheer size and scale of what we are doing. For one unique part of this we have also brought in through the Aspire contract the use of VocaLink, which again are the world leading experts in banking transactions at volume. So for us in terms of getting the best of breed in what we need to deliver, but also primarily using the systems we already have, because most of ours is around reuse, for the majority of this space we are using Aspire and VocaLink, although VocaLink does come through the Aspire contract for the first time as part of this deal.

Q322 Chair: That has been highlighted to us as rather a problem for your department: that in order to benefit from a subcontractor like VocaLink they have to come through the Aspire contract. That cannot be an efficient way of purchasing VocaLink services.

Phil Pavitt: Mark can answer the detail, because Mark has managed the commercial process through this. But just to set out any supplier that comes through the Aspire contract: what we gain from that is a number of things. First of all obviously we gain Aspire; Capgemini are the prime operator of the space I am just about to describe. They provide us a level of reassurance that we can either provide on our side or we can ask them to provide for us, and that is what they are doing for us: that lessens the bureaucracy and gives us higher flexibility in terms of how we go to market. It also allows us, of course, to have access to quite a few suppliers in the market.

Q323 Chair: Allows you to have access to quite a few suppliers? You are the Government. Surely you can have access to any supplier you want?

Phil Pavitt: We can do, but sometimes we have to make sure they are first pertinent, particularly of what we need to manage and deliver. We have over 240 suppliers coming through that: managing those individually would be quite a heavy bandwidth for a Government department to manage, so we are using Aspire to do that for us.

Q324 Chair: But the problem is that when VocaLink want to talk to you, they cannot: they have to go through Aspire. If you want to talk to VocaLink, you cannot: you have to go through Aspire.

Phil Pavitt: Without wishing to contradict you, unfortunately, we do meet VocaLink and many other suppliers directly, face to face. They are involved in the programme boards to run things. Commercially, when we say "go through" it does not mean there is a wall between us and them. VocaLink spend more time in our offices probably meeting us and our customers face to face than even the Aspire suppliers, so that is actually not completely true, unfortunately.

Chair: Not completely true?

Phil Pavitt: It is not true in that there are some suppliers that have no wish to meet us: they just provide services. But there are many suppliers who have innovations and ideas they want to share with us, and they can directly do that to us.

Q325 Chair: But they cannot initiate a relationship with you: they have to go through Aspire?

Phil Pavitt: Unfortunately they can initiate a relationship. We have a number of ways of placing people into the Aspire ecosystem, which is a supply chain management process. Aspire themselves can do that because they see some of our emerging needs over the next few years, and we ourselves can do that. I myself have placed somebody into the ecosystem just a few months ago; we are not only using their services now, but we think that in the next four or five years that organisation will be important to us, so they are now in the ecosystem, directly through myself.

Mark Holden: I also think it is worth adding that certainly with VocaLink, which is a good example, although it is, as you say, procured through that framework, I have a number of one-to-one meetings with a number of senior executives through the VocaLink organisation. They are able to bring ideas, solutions to the table, so it is not filtered through Aspire. The important thing for us, for a project of this size and the level of integration between the UK’s banking system and our national PAYE system, it would be unwise for us to move away from the people that know those integrated internal systems and allow a completely new person to try and integrate those on a national infrastructure project at this level.

Q326 Chair: If VocaLink wanted to offer you a service and a price, you could talk to them about the service and the price?

Phil Pavitt: Absolutely.

Chair: And there are no constraints on that conversation?

Phil Pavitt: Not at all, no.

Q327 Chair: That is not what we have heard from elsewhere. Why do you think that is?

Mark Holden: I think there is certainly some history. This is a project that has been thought about for many years, and I know that VocaLink have been very keen to get widespread coverage of the ideas and concepts. I think it is only when you get into the detail of how you integrate the national BACS transaction system with our PAYE that some of those intricacies come out that we have to understand where it would be very difficult and very expensive to build a completely new standalone set of infrastructure for the project. So I think it is only as we have got into the more detailed discussions that it has become clear that actually we do need both sides of the equation.

Q328 Chair: But as we move forward to Agile development-and that was mentioned before, and it has been endorsed by the IFG report, as Mr Harley mentioned-surely this kind of direct conversation with a larger and larger number of suppliers is the future, because you are going to be breaking up and modularising the development of your systems?

Phil Pavitt: Indeed, and from our side, whatever methodology you use to deliver projects-Agile or any other-it is making sure you are gaining from your suppliers innovation, ideas, challenges, better prices, or even having those suppliers combining themselves to come and see you. One thing that Aspire certainly does give us is that we do not have to go and combine two or three different supplier components to make up a whole. In fact, they are already doing that for us, and are presenting us a very end-to-end picture of some of our solutions going forward.

We use a number of methods. We have innovation process four times a year, where the businesses and HMRC meet the suppliers in the ecosystem under Aspire and discuss needs from both sides. But also individual organisations are forever bringing ideas; some of them have merit, some of them do not, but they are directly into the IT department and into the businesses themselves. Those conversations are going on all the time.

Q329 Chair: So Mr Harley, have you worked in this way before-in Agile?

Joe Harley: We started a project last year.

Q330 Chair: Can you describe exactly what is different about that project compared with what you have done before?

Joe Harley: The Agile methodology is most useful when one is engaging with citizens or customers directly, where you need to have a customercentric approach to the delivery of the product. So it involves the development, building, testing in a rapid way, so that you deliver solutions that much earlier. That is what we will be doing for Universal Credit and that is what we started last year with another project in the department called the automated service delivery project.

Q331 Chair: So what proportion of your spend on new systems now, or system development, is on Agile development?

Joe Harley: Malcolm, you might be able to help me with this.

Malcolm Whitehouse: We started the automated service delivery programme last year, and looked at the best way to deliver the outcomes. Now, this is focused on straight-through processing for Jobseeker’s Allowance and the very difficult areas involved in change of circumstances for the first two releases, which is how fundamentally we need to understand what has happened to a citizen in their circumstances, their dependence or their earnings levels to be able to digitise, for want of a better word, but to get more of the capability online, so we are delivering a selfservice proposition for this part of delivering Jobseeker’s Allowance.

To make that work what we wanted to be able to do was to engage with our customers to understand where their challenges were in two areas. One is working with the Department: what do they need to do in transitioning between states, but also in terms of the usability of the interfaces that we put in place-the user interface to make that work. That has given us a lot of learning in terms of the approach. So far we have seen an improvement in both speed to delivery and the underlying cost of delivery, and that has given us the confidence in being able to use this on a broader base.

We expect that in Universal Credits the Agile activity will be about 60% of the development. The remainder will be on some of the core infrastructure delivery that we need to support it, which will take a more traditional route to development and delivery than using Agile. But we have already seen the ability to deliver outcomes, which means that we can see the way that the rules base, both in the automated service delivery project and the early work on Universal Credit, is showing us how the policy and legislation translates into business rules that deliver outcomes for the customer.

Q332 Chair: But what proportion of your spend is now spent on Agile development, as opposed to the old, dare I say, failed method?

Malcolm Whitehouse: Can I answer that? It is 60% on both ASD and Universal Credits. What we did not want to do was to take a blanket approach and say, "Right, from now on every project and programme will be Agile," because that requires quite a lot of training, so for every person that goes into our Agile workshops we put them-irrespective of where they have come from-through a threeday learning activity to make sure they really understand what sits underneath it, because it is not just a development methodology; it is also a culture change. It requires empowerment from the people involved.

Chair: But did you say 60%?

Malcolm Whitehouse: 60% on Universal Credit, and then when we get the understanding of how to make this work elsewhere we will start to adopt it more widely. But just to put it into context, in terms of delivering IT support for our business projects, as well as our 15 major projects, we have about 200 very small projects, about 50 to 60 medium-sized projects, and we also undertake 60 to 70 releases against our legacy applications each year. What we did not want to do was to say, "Let’s move everybody immediately," which is a large learning activity.

Q333 Chair: Are there barriers to Agile and Agile development?

Mark Holden: I think it is fair to say that there are areas where Agile is more suitable, particularly for that rapid development, the customerfacing services––

Q334 Chair: But that is a different question: do you find there are obstacles to moving to Agile development where you can identify that it would be a useful methodology?

Mark Holden: I do not think it is as much that there are barriers: we could adopt it where it is appropriate. I think a lot of our IT-enabled business change programmes are very much based on the development or enhancement of our legacy systems, which is not the suitable environment for Agile. So I think it is about horses for courses.

Q335 Chair: Moving on to Open Source and Open Standards, how much success have you had with Open Source development and Open Standards in HMRC?

Phil Pavitt: Open Source has been around for some time now, and in HMRC we have been very fortunate to develop a quite extensive Open Source-based set of solutions. Through Aspire and through the partners that are inside Aspire, we have transformed our website-which, as you know, is one of the largest websites in the UK, if not in Europe-to actually become a completely Open Source technology. This is the website, obviously, which selfassessment and so on runs through, so that is a website on which, as I said before, over 7 million people completed their self-assessment online. Not only is it out there in a very large scale in terms of Open Source, it is very heavily used. Some of the challenges around Open Source in the past were perhaps around security, around volume, around its ability to manage large transactions, as we have certainly seen. We have managed to combine the heavy use of Open Source on the website side in particular also by using Open Source through very established vendors to make sure we have the protection and also get the support going forward. That is Open Source.

In terms of Open Standards as far as HMRC is concerned, we believe we are the leader in the UK Government on that. We develop Open Standards by giving away APIs-application programming interfaces; the ability of people to take a core piece of data and do something with it-a standard to build to. We currently work with just over 1,500 developers for developing those people who are registering in terms of their end of year, in terms of also completing their process for doing their fouryear reconciliation.

Also, of course, we use commercial software providers, and have an extensive use of software providing things like tax online and also VAT. Again, we gave away the core through a set of standards to do that. So Open Source and Open Standards are pretty much the way we do business right now.

Q336 Chair: I am going to jump ahead to one other question. Unfortunately we are very shorthanded today because colleagues have other duties in the House and we are about to lose another colleague, in which case we will have to go into informal session, and I do apologise to you for that, but maybe we will get more out of you. Can I just ask about the role of large suppliers? It has become axiomatic that three suppliers completely dominate the market-it may be more than three suppliers-and there are far more purchasers than suppliers. HMRC, for example, have recently renewed their contract with Capgemini; that locks you in until 2017. Given that we are now looking at different ways of working, is this a sensible course of action? Shouldn’t we be looking to fragment the market with our purchasing activity, rather than to consolidate it?

Phil Pavitt: Well, what we have done recently with Aspire, this is a contract now that has been in some shape or form around in HMRC since 2004, so it is quite a long-term contract––

Q337 Chair: But what is the advantage of a long contract?

Phil Pavitt: I think it brings a number of things: in terms of the sheer size of what we are doing-and you have heard very briefly about the sheer complexity in size of what we are doing-we need stability. We need a strong assurance and a strong reassurance about what we have and what we can do for the future.

Q338 Chair: But the record of these long contracts is first of all that you pay them to create the mess and then you have to pay them again to clear it up.

Phil Pavitt: Let me just try and understand that a bit better. In terms of where we are, obviously we outsource what we had to the previous suppliers, so what they are managing is what we started with in 2004. In terms of clearing things up, there are a number of downsides that people describe on long-term contracts: for example, locked in cost. Now, we have seen over the last two or three years-in fact, only in 2009-a reduction in our costs negotiated with our supplier, Aspire; that is all the members of Aspire, not just Capgemini. It is obviously a multiple contract. We saw a reduction of about £161 per million for the rest for the rest of the period of time, so that is almost a £1 billion saving. So we are seeing that costs are not actually going up, we are seeing those reduced, and we have things like benchmarking and value for money, which is driving down the individual cost on a regular basis.

What we are also seeing, of course, is the other thing big thing about locked in: where do you get innovation from? Where do you get some new stuff? What prevents them saying, "This is just the way it is always going to be." I described to you before about Open Standards and open sourcing. We are not having that experience. Innovation is always a challenge, because we want to make sure that we innovate and they innovate and we do it together, particularly with a business. But actually, we are not seeing some of those downsides. Our biggest challenge will actually be to make sure the market can cope with someone the sheer size of HMRC and how you manage, in this case, 240 suppliers. We are seeing in our contract there are challenges, but we are seeing much of the upside we want to see from it.

Chair: And yet, so little business goes to small- and medium-sized enterprises.

Q339 Greg Mulholland: One suggestion we have heard is that the Government could break up its contracts into smaller pieces, which obviously would then help the small and medium enterprises. Is that realistic, or would that be too much of a challenge for the way Government procures?

Joe Harley: Yes, I think there is much more we can do for small and medium-sized organisations. We really need to try and create a level playing field for them, and the timescale to get procurements done is long-too long, I would say-and costly, not just for Government but for suppliers, and that goes against helping the SMEs. There is more to be done here, and we can break up the contracts a bit more in a way that will help with the level playing field. We do use suppliers, SMEs, in the Department, and some of those are direct and some of those are indirect. But there is more to be done, and this level playing field will help.

Q340 Greg Mulholland: Can I ask, I do not know if this information is available, but is information published on not only how many SMEs the Government currently has direct contracts with but also subcontracts through system integration? That would be very useful, because it is acknowledged, I think, by Government that historically it has been a very low number. Are there numbers available? Are you going to tell us today, or if not could you write to us?

Joe Harley: I will write to you at a Government level, for sure, on the direct and indirect. From a departmental point of view, it is a lot easier to measure the direct contracts, and today in DWP about a third of all our suppliers are SMEs, so we can measure that reasonably well. It is a lot harder to measure the indirect and the subcontracting of SMEs, and even further into the supply chain: second and third tier, where it is very difficult. Some SMEs come out of being an SME because they are growing and developing, others come into it, so it is a changing feast, and it is quite difficult to get your arms around. But we are working with our suppliers on it.

Q341 Chair: A very last question: the Government has said that they are going to mandate that the primes will have to subcontract a proportion of the contract value to SMEs, yet the evidence that we have heard already in our Inquiry is that this simply will not work. What is your view about this practice? Would it not be better for you to contract directly with more SMEs, rather than rely on prime contractors to subcontract to SMEs, who will inevitably be subject to the prime contractors’ interests?

Joe Harley: Well, I think we can do both. I think it depends on the nature of the services. I think for innovative, niche services, where we do use SMEs, direct contracts are fine. Where we are dealing with large-scale infrastructure projects or large scale developments it is much more difficult to see that capability resting with SMEs. So I think that it is an area of more to be done, and in terms of our procurements going forward we will be assessing the quality of those bids for services against how they are going to use SMEs in the course of the discharge of that service. So, it is something we are going to take a real active interest in and promote. It seems it is good business to do.

Chair: Thank you. We will have to go into informal session. It means that we will no longer have an official transcript, but please consider you are continuing on the record, because our Committee adviser and the clerk will take notes.