The Federal Government in the States accepts  tenders for their IT projects from a wide-range of competent, innovative software companies.  In Britain, by contrast, 11 firms account for 80% of the UK government  IT projects, despite some spectacular disasters. Why is this? We send Richard Morris to investigate.

Integrity Checks Required!

Although both the States and Europe have strict checks in place to ensure fairness in the way that large Public IT projects are awarded to the IT industry, they aren't always seen to be working: A huge amount of creative energy is spent finding ways around these rules. For example, It has become the norm for some large IT contracting companies to pitch prices for government contracts at artificially low levels, in the confident expectation that later revisions and extensions will create inflated contracts of between four and six times the initial contract price. A classic way of flouting the strict procurement rules is to disguise the true cost to the public by assigning them to subsequent software upgrades and new licences. The Public officials appointed to see fair play have, at times, been far to ready to accept inducements from the larger, wealthier, of the competing companies.

Logicon trick

Take for example Oracle's database contract fiasco with California, which a few years ago drew a balloon of criticism when it was discovered that the State's taxpayers were paying a massive $41m (£20 million) more than was needed - and this on a deal the company proposed would save the state millions of dollars.

When an audit report was produced, it found that California only employed 230,000 staff, only a quarter of whom required access to a database. Yet the Oracle deal covered 270,000 staff.

The incorrect figures by Oracle's contractor on the deal were supplied by, Northrop Grumman Information Technology (called  Logicon when the deal was signed), who would have received $28 million in commission.    

It was later discovered that Oracle won the contract largely thanks to one of their former employees, who was then working in Governor Davis' office as chief technology officer. 

'Although Logicon was responsible for initiating the sales presentations that resulted in the ELA (enterprise licensing agreement), none of the three departments thoroughly validated the data in Logicon's proposal, a small effort that might have saved the State millions of taxpayer dollars,' wrote the auditor.

A dollar a Davis

Things got even fishier when Governor Davis' office received $25,000 in campaign contributions five days after the deal was signed; this was in addition to £50,000 Oracle le it had already contributed to Davis' campaign purse.

But Davis was not the only Californian politician to receive a gift from the Redwood-based firm. Just about every elected official who had received a major contribution from Oracle had some measure of control over Oracle government business, or held influence over the multi- million dollar software contract. This included the Attorney General Bill Lockyer, who received $50,000 from the company and was one of a handful of state attorney general still pursuing Oracle's competitor, Microsoft, on antitrust charges.

California cancelled the deal a few weeks later, the FBI investigated the suspicious offer of money and Governor Davis was 'recalled' – only the second US Governor in American history to be thrown out of office.

And like California, city officials in Toronto found to their cost that Oracle was not too good at maths but managed to extract themselves from their own $11m Oracle public licence contract that auditors estimated was ten times the number of licences  what the city actually needed.

In another case, government IT officials in Ohio changed their information technology contracting rules when costs unexpectedly skyrocketed after Oracle assured the state that they would save money on software upgrades and new licences. In fact Oracle’ s figures were 15 times higher than the state's own estimate.

It is unfair to single out Oracle, as there are plenty of Oracle's customers who are happy with the company, its services and its software. The state of Montana, for example, signed a five-year Oracle contract that closely resembled California's deal. It is merely that Oracle were unfortunate in that the California case was subjected to a great deal of scrutiny at the time. Many others aren't.

The Bourne Legacy, the Texan Connection.

Sir John Bourne, the former head of the UK's National Audit Office (NAO), the chief investigator into Whitehall waste and extravagance, admitted recently that he had accepted lavish hospitality from firms his organisation was supposed to be investigating.

These lavish gifts included  hospitality from the near monopolistic lead government supplier of Government IT systems, the Texas-based EDS ( Electronic Data Systems) , which was being scrutinised by the NAO for failings connected to their contracts at the the Child Support Agency, the Ministry of Defence and HM Revenue & Customs and others.

Despite these very public failings, EDS have done very well out of the UK Taxpayer and the Treasury. Their initial 'phase one' 10 year non-fixed contract with HM Revenue & Customs (HMRC), which is responsible for collecting Tax revenues in Britain, was estimated to be worth some $4 billion or £2 billion alone, according to one of the NAO's press bulletins. 

Bourne Freebie

Just after winning another $8 billion (£4 million) UK government extension contract in 2006, EDS paid for Bourne to visit the football World Cup Final in Germany in 2006, to watch England play rugby at Twickenham, and also paid for him to attend a polo event with his wife.

There is no allegation that Bourne did anything illegal in accepting largesse from the Americans, but it did bring accusations of 'inappropriate behavior' and was at the very least a conflict of interest. It also helpfully exposed the murky world of political lobbyists and corporate spin.

A very cosy relationship

Bourne's critics said he should have spent more time investigating  the reason why EDS were allowed to escape paying $44 million balance on the $144.6 million compensation that it agreed with the Revenue in 2005, over failures in the computer system used to launch tax credits designed to help left some poor families out of poverty.

The EDS/HMRC compensation deal included a $52 million payment in kind, contingent on EDS actually winning new business from the government. At current rates of repayment it would take 106 years to complete the compensation payment.  

Edward Leigh, chairman of the UK Government's Public Affairs Committee, said last week that HMRC is threatening another round of legal action against EDS.

'It was always a very bad idea for the Government to have to commission new work from the contractor EDS in order to recover compensation for the poorly performing Tax Credits computer system'.

In the event, EDS has stumped up very little of the £26.5 million of the settlement to be paid under this arrangement. If the full amount of the settlement, £71.25 million, is not paid over by the end of 2008, then HMRC must be prepared to return to the courts.'

If EDS had a proven track record in delivering reliable computer systems on time, then the principle of  commissioning new work in order to recover compensation might have merit. However it is difficult to forget

• The Child Support Agency (CSA) IT system: This has been branded as one of the 'worst public administration scandals in modern times'. At the heart of the problem was the CS2 IT system developed by EDS, which cost £539m. EDS received at least £381m - £46m less than the original contract value when the deal was signed in 2000. The CSA has since been scrapped. 
• The EDS-led ATLAS consortium that is overhauling all the UK's defense IT This project is seriously behind schedule. The intial phase was awarded in March 2005 and in December 2006 EDS was given the second $8 billion phase without competition. Under the original contract 62,800 IT workstations should have been delivered by 31 July 2007, yet just six months later ATLAS had only delivered 22,000.
• The Joint Personnel Administration (JPA) system This is the new system under which all armed forces personnel are now paid. Figures show that during the last 10 12,500 personnel across all services were underpaid.
• IT systems at the Department for Work and Pensions In 2004 80,000 civil servants stared at blank computer screens and reverted to writing out benefit cheques by hand after a routine EDS upgrade knocked out 80,000 computers.

And still the UK government's love affair with EDS continues. In January it  signed a new £2.6bn contract with the Texas-based computer giant. The Department for Work and Pensions (DWP) says its five-year deal with EDS will result in substantial savings while delivering an improved service through the 'realignment' of existing contracts.

Many in the IT industry, even those employed by government, must wonder just how technology consultants land the contracts they do with a track record like this. The answer is, of course, that the government itself must have a high share of the blame for these failures, and it is often naive to lay all responsibility on the contractor. A company like EDS accepts the odium without complaint because it knows that it will be rewarded with further contracts. Also, it is the projects that fail that stick in the mind.

The Way Forward

Richard Childs, a prominent US IT industry figure,  says that both the Federal and state government has tried to get a grip on the way it runs IT . Individual public officials, he says, are at last getting the message that they have to check and re-check contractual obligations, and particularly financial targets.

In fact, many of the measures now used in the US first originated in the landmark 'McCartney' report on IT, published by the UK Cabinet Office in 2000. This is the review  that conceded  IT projects were too often late, over budget or failed to work, and that government, both local and central, needed to change its ways.

The big idea was that this was too important to be left to specialists. Top-level leadership was needed to ensure not just that the IT worked but that the 'business change' did, too. McCartney recommended that every project have a 'senior responsible owner' with real clout.

It also suggested that projects be independently reviewed before being allowed to pass critical stages. This idea was developed into the Office of Government Commerce's Gateway reviews, which provide reality checks for risky projects.

Gateway

Eight years after McCartney, John Higgins, director general of the IT trade association, Intellect, says that government and industry are getting better at running projects. But too often, the project owner is not senior enough. 'The senior responsible owner has to be someone who has responsibility for operational objectives; it can't just be the IT director.'

The UK Parliament's Public Accounts Committee's recent report focused mainly on Gateway, which it describes as the measure that has shown the most promise.

One third of projects bypass the crucial first two Gateway stages, entering the process only when they have already gathered momentum. When they do happen, reviews repeatedly highlight the same shortcomings which include poor testing of code.

Gateway reviews award a red, amber or green colour code to denote each project's status. Red means take action immediately.

On another angle, the report warns that the UK government depends too much on too few IT suppliers – unlike America. Just 11 firms account for 80% of the UK government  market whereas in the US the Federal Government accepts  tenders from a wide-range of competent, innovative but smaller consultants. 

In a letter to a London evening newspaper, a vice president of EDS, said that the government's track record with computer projects is about the same as private industry's. 'While this isn't good enough, nobody talks about the projects that work.'

But while projects that don't work produce such excellent sticks with which to beat politicians with (on both sides of the Atlantic) then the media are unlikely to pay much attention to successes.