Scepticism over end of big government IT deals

22 December 2010

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24 December 2010 | Lindsay Clark

Industry experts have reacted with scepticism to the UK government’s promise to end “mega IT contracts”.

A business outsourcing group pointed out that vendors would be unlikely to provide the capital investment necessary for government IT projects without a substantial revenue stream. And an IT consultant predicted that the size of computer software services and hardware deals would grow again.

Last month, Cabinet Office minister Francis Maude told the government’s largest suppliers: “The days of the mega IT contracts are over.”

His office has announced controls to ensure all new IT contracts worth more than £1 million are approved centrally, while more than 300 ICT projects have been reviewed. It is working with departments to stop or de-scope contracts totalling £1 billion.

Alex Sandercock, director of IT procurement consultancy Turnstone, said a number of smaller contracts could be easier for the government to manage. However, she forecast the size of deals would grow as the argument for economies of scale returned – although the government was unlikely to return to the scale of the past.

Yet reducing the size of contracts did not address the skills gap in managing IT procurement, Sandercock said. The government needs time and resource to manage the supply base, she added. “Unless that is addressed, the same problems will occur again and again, [regardless of] the size of the contract.”

The £12 billion National Programme for IT in the NHS is the type of IT procurement the government has promised to end. But Martyn Hart, chairman of the National Outsourcing Association, said the government would struggle to get private sector capital investment for IT projects if it reduced the size of the deals.

He also forecast a return to larger contracts. “It’s the only way to liberate the cash,” he said. “If the government has not got the money and they want the private sector to invest, then they are going to have to bend somewhat to the private sector.”

He pointed out that reducing the size of the contracts would result in increased procurement costs. “Even if you paid the same in terms of price, you’d pay more in time with the procurement, with all the people you would need. Meanwhile, they are cutting staff.”

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