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Government and IT- "A Recipe For Rip-Offs": Time For A New Approach - Public Administration Committee Contents


3  Lack of Information

14. The data we needed to assess the current state of government IT proved hard to come by. To overcome this lack of information we sent a questionnaire to a number of Government Departments to secure more detail about their IT operations. The quality of the responses was variable.[33] This was not because Departments were unwilling to release this information, but because the data we requested did not exist. The Minister was open with us about the lack of information on this issue:

    the quality of our central data is very poor. When we were renegotiating contracts last summer with the biggest suppliers, the central data was woefully inadequate, and we only got the data in the first instance by asking the suppliers themselves.[34]

The Government has already committed to improve the quality of the data held centrally.[35]

15. Having access to up-to-date and accurate information about government IT is essential if the Government is to reform its IT successfully. Without it the Cabinet Office will be unable to monitor and enforce its programme of reforms. We were particularly shocked to learn that, on coming to office, the Minister had to ask the IT suppliers for information about the value of their contracts. We welcome the Government's commitment to rectifying this situation. We recommend that the Government work with the NAO to identify which data it needs to gather to monitor the progress of its reforms and outline in its response to this Report what information will be collected by departments and how frequently this data will be gathered.

Benchmarking

16. Our evidence shows that central government IT expenditure is less cost-effective than either the private sector or local government. Socitm's annual IT Trends survey indicates that local government secures better value for money than central government:

    It is widely accepted that 3% is a benchmark of good practice in the private sector service industries for ICT spend as a percentage of total revenue expenditure. Socitm benchmarking in recent years has demonstrated that local government organisations spend consistently less than 3% [on ICT...] the average for the percentage of total revenue expenditure spent on ICT in central government departments is at least 5%.[36]

Other figures confirmed this. According to the UK Central Government IT Benchmarking Study conducted by Gartner[37] in 2005 median total cost of ownership per Government desktop was running at £2,300, when best practice was around £1,800 a year[38] The Network for the Post-Bureaucratic Age found that Departments were paying between £800 and £1,600 per annum for each computer. Other figures have shown that the Cabinet Office spent an average of £3,664 per desktop computer for each full-time employee.[39] At a time when the annual deficit is necessitating large reductions in public spending, such waste is unacceptable.

17. In addition to paying higher than average prices for some goods, Sir Phillip Green's efficiency review of government spending also identified a high degree of price variation for the same item across different Departments.[40] The review identified the "very poor" quality of data as one of the reasons for the Government's failure to achieve better value for money. Similarly Socitm pointed out that:

    Benchmarking is an essential first step to service improvement. [...]The very fact that it is so difficult to obtain comparative data about ICT costs and performance for central government speaks volumes.[41]

18. When we raised these issues with Ian Watmore he agreed that the Government should do more to assess and compare its expenditure and performance, saying it was "a really fertile area to explore".[42] However, he cautioned that there could be difficulties in attempting to secure benchmarking data for more complex projects, such as those that dealt with retirement pensions.[43]

19. The SMEs that contributed to our private seminar were unimpressed by this response, saying that benchmarking was routinely conducted amongst their private sector clients, even for complex bespoke projects. They did not agree that the nature of government presented any special challenges. They also alleged that a lack of benchmarking data enabled large systems integrators (SIs) to charge between 7 to 10 times more than their standard commercial costs.

20. The poor benchmarking of central government's IT expenditure is unacceptable. Without this information it will not be possible for the Government to advance effectively its cost reduction agenda. We recommend that the Government should investigate the claims of overcharging put to us and seek to identify reliable and comparable cost benchmarks, and collect accurate information from departments in order to compare with those benchmarks. Where possible bespoke projects should also be benchmarked, and the Government should trial ways of conducting benchmarking exercises for its more complex projects. The Government should use independent and specialist advisers and the NAO to assist with identifying objective benchmarking measurements.

TRANSPARENCY

21. Making detailed information on IT expenditure publicly available for scrutiny would enhance the Government's ability to generate savings, by allowing external challenge of its spending decisions. The Government has already taken steps to provide more information about IT projects and expenditure in general, especially through the work of the Transparency Board and its publication of contracts on Contract Finder.[44]

22. To realise the full benefits of transparency, this is not sufficient. More information should be made public by default. If the Government want external experts to suggest ways of how it can reduce expenditure, publication of the raw spend on IT reveals little. Wherever possible the Government should provide information about system architecture and design, about the hardware and software it uses, and the rate paid for commodities and services. This would enable external commentators and the incumbents' competitors to be in a better position to suggest ways in which existing systems and services could be delivered differently, as well as at a lower cost. In the longer term it would enable potential alternative suppliers to compete more effectively for blocks of work.

23. We recognise that there will be resistance to this approach. Governments have traditionally limited their ability to publish this information by signing commercial confidentiality agreements with companies. In future such agreements must be severely restricted to enable the Government to publish detailed contractual information about how much they are paying for different services and products within a contract. This should disadvantage nobody if all suppliers are treated the same. Our predecessor Committee examined the issue of commercial confidentiality in government contracts in 1998. It concluded that those bidding for government contracts should regard the need to be open about what they were providing to government as "part of the cost of doing business with the public sector" arguing that "publishing details of successful tenders may encourage new suppliers to come forward with more competitive bids when contracts are renewed."[45]

24. More challenging will be the obstacles to using this information to achieve a better deal once a contract has been signed. The Government cannot easily cancel an existing contract if it subsequently receives ideas for a better or more cost effective approach. In some cases it will be necessary to wait until a contract comes up for renewal to realise these savings. Therefore the Government should seek to disaggregate its large contracts to reduce both their scope and length. The Government should also consider, as an interim measure, renegotiating terms with the incumbent, encouraging the company to reduce cost where other groups have provided evidence that it is possible to deliver outcomes in a more effective manner. It could also encourage the incumbent supplier to sub-contract the work to another company better able to reduce costs.

25. Making data about expenditure available is not only a good discipline for departments; it also allows the Government to harness independent views on how to deliver services more cost effectively. The Government should publish in full all contracts. It should publish as much information as possible about how it runs its IT to enable effective benchmarking and to allow external experts to suggest different and more economical and effective ways of running its systems. Feedback it receives based on this information should be used to challenge and hold to account current providers, and to renegotiate, disaggregate and re-compete existing contracts where it becomes clear that more cost effective delivery mechanisms are available.


33   Available on-line at Error! Bookmark not defined.  Back

34   Q 497 [Mr Maude] Back

35   Q 522 Back

36   Ev 136 Back

37   A leading information technology research and advisory company. Back

38   Quoted in "G-Cloud will save £1.2 billion says John Suffolk, government CIO", CIO, 19th October 2010. See Error! Bookmark not defined.  Back

39   "Cabinet Office paying £3,664 per desktop computer", PC Pro 13 May 2011 Error! Bookmark not defined. Back

40   Error! Bookmark not defined. Back

41   Ev 137 Back

42   Q 503 Back

43   Q 531 Back

44   Error! Bookmark not defined. Back

45   Public Administration Select Committee, Third Report of the Session 1997-98, Your Right to Know: The Government's Proposals for a Freedom of Information Act, HC 398 Back


 
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Prepared 28 July 2011