If a Government contract was signed for £3.0bn with estimated profits of £300m yet actual costs are £8.5bn, shouldn't Cap Gemini be nursing a loss of £5.5bn rather than a profit of £1bn!?!
A HMRC spokesman said government auditors concluded the contract was offering good value for money.
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It wasn't a £3bn contract and the BBC doesn't mention one important fact (presumably because they don't know) - if HMRC ask for something that wasn't in the original contract they pay more for it. You don't pay for your shopping at Asda and then go back and put more things in your trolley without paying any more (unless you're a chav or a Scouser).
Thanks for the correction.
A £3bn contract must be the ultimate loss leader in that case!
I believe it was actually £12bn for 10 years with an option to extend for 2 years. The money pays for the IT and business support services but not for extras such as if HMRC decide to introduce a new system or a new tax is created or they decide that their employees all need to have 21" widescreen TFTs (I made that up, it's not happening!). It seems like a lot of money for a support contract but it's a huge department - around 120,000 employees - and responsible for most of the Treasury's income and the screwy systems are mostly inherited from EDS.
This happens all the time.
The government issues a tender for, say 12,000 PCs to run word, excel and EMail, they specify English keyboards, 15inch monitors and because they will be networked 500Mb HD and 100Mb NW cards. They also want installation and training. All this is high spec at the time. It goes to tender. The people tendering get prices for the minimum spec that will meet these requirements. Remember that offering higher specs or trying to anticipate the real requirements means your price is higher and you may lose the bid. Eventually, a very long time later, the tender ends and the contract is awarded to the winner.
So the winner starts to deliver the project. They then meet the end users. By this time of course people have identified other uses, DBs, Modelling, as with 12,000 users there are many different users and roles. So now they have to change the requirements. By this time of course the supplier has already arranged to purchase the 12,000 Pentium 1's, 100Mb switches, etc. which are all that is required to meet the spec. The new machines will cost more, plus the server storage and network requirements, which had been estimated based on simple file transfers now need to consider online DB access and SQL queries means the network and server farm now needs upgrading as well. The training is now different as well. Of course now there is no tendering and the margin which was cut to the bone to get the tender can be brought back to normal. Of course the rules still only allow the minimum changes. So that could mean instead of upgrading the whole NW to 1Gb only 90% is done.
At the end of it you are five years down the line still installing basic systems that are lower spec than the users are giving their kids for homework. In some cases the first time they meet these end users as well. The suppliers are unhappy because there are being perceived as rip off merchants installing poor systems and making massive profits, the government is unhappy because the system is performing poorly, over budget and behind schedule and the public are unhappy because of the waste of money.
Personally I think it all stems from the government’s requirement to control everything centrally. Because of this the only way is to think big. Why go through the trauma of preparing a few hundred bids when you can get away with one. Government believes you buy big and you get big savings. It's true but companies get the same saving because of the volume without buying them all at once.
In addition the requirement for approved suppliers, massive blocks of work scheduled over decades, rigid rules managed by people that change roles every two years plus the requirement that the customer, another branch of the government, will supply key components, thus are themselves suppliers to the supplier means that government projects are unnecessarily rigid, defined down to the nth detail, misunderstood by the procurement team, on the customer side, and are woolly enough to allow ambiguity in responsibilities. The rigidity also means they cannot anticipate changes in technology or working practise. One of the funniest bits is that government put things in pots. You can have a pot to finance maintenance for a system and if that is going to be under spent you can’t just dip into it to fund something that is overspent. You need to request more money for the particular pot of the overspent item. In addition the targets for the procurement team, and what they get marked on, are costs plus adherence to requirements and the targets for the suppliers is delivery to schedule. Nothing there about fitness of use, cost effective or future proofing as they can’t be defined.
Now big business rarely does big projects like this. They say we will update all our 12,000 PCs and ensure they are word, excel and Email capable. They set up a programme and split it in phases, site A, B etc. Or on a targeted role basis such as SMT, marketing, warehouse. They target the ones that will give the major benefits and quickest ROI. They may allocate £12M over 5 years to do it but they won’t make the money committed. The project can be cancelled at any time. Each year that project would be justified and the systems would be the latest specs. Neither is this usually mandated from HQ. They just leave the subsidiaries to get on with it mandating certain standards and keeping an eye on the financial side but not down to item level. Generally not interfering in policy decisions either but as with all things the bigger they get the more rules get made.
IMO Government gets poor value for money not because they are thick but because they are badly managed and has so many rules to follow. Everything else flows from that.
Bag, excellent post. Tragically, it's the taxpayer who ulitmately is getting bad value for money if the Government is!
My experience of public secotr procurement suggested that the senior decision makers were living in "splendid isolation", it would be far better to involve the users within the decision process.
Continuous specification change prevented any testing before systems went live either!
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