Public sector buyers: how to exit large IT contracts

Will Green is news editor of Supply Management
28 November 2017

The UK government has issued guidance to civil servants on how to withdraw from large IT contracts.

In a report the government said in the past organisations had entered into outsourcing contracts for up to 10 years that were found to “no longer represent value for money” and their structures “constrain the relevant organisations from modernising technical environments”.

The report said disaggregating large IT contracts, defined as those with spend of more than £20m per year, could achieve savings of more than 40%.

Former Cabinet Office minister Lord Francis Maude, who spent five years in the department, previously told SM IT was the biggest area of spend for the UK government and it was “notorious around the world for failed and expensive government IT projects”.

The guidance said moving from a single vendor to a multi vendor environment with elements of insourcing was “a complex process” that could take up to four years.

“Incumbent suppliers need to see the opportunity to potentially become future suppliers, in order to ensure full cooperation throughout the exit process,” said the report.

The report said a business case should be produced for the preferred level of disaggregation, while the scale and pace of the process would vary based on factors including organisational maturity, size and adaptability to change.

Exit provisions in contracts should enable the separation of individual services and partial termination “without punitive financial implications and include provisions for updates if required”, said the guidance.

The term of any new contract for services should be “for the shortest appropriate duration” to enable flexibility and avoid vendor lock-in, taking into account vendor investment, attractiveness to the market, organisational costs and ability to manage frequent change. For commodity IT this will be up to two years and between three to seven years for service agreements, said the report.

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