BACKGROUND

Information technology offers many opportunities but also presents significant risks

4. In recent years, there have been rapid and continuous technological developments in IT in terms of performance, reliability, data storage capacity and applicability. Computer systems are now far more powerful and flexible than ever before, and important changes occur with increasing frequency. We have seen, for example, rapid advances in telecommunications, the use of web-based technology, and the beginnings of electronic commerce.

5. These innovations provide many opportunities to revolutionise the ways in which all types of organisations carry out their business. For Government departments, in particular, there is the potential for communicating better with the citizen, making savings in the cost of delivering services, reducing unacceptably high levels of fraud, and managing more effectively a wide variety of valuable assets. However, at the same time, recent examples have shown that heavy reliance on IT can also result in unacceptable levels of disruption to the public when the introduction of a system is not thoroughly planned, leading to satisfactory implementation being delayed, or even not working as intended.

The ways in which Government has procured IT has changed significantly over the last two decades

6. Government spends large sums on IT each year. Overall expenditure in the public sector in 1998-99 on IT hardware and software, maintenance and other services was in the region of £7 billion.[2] Figure 1 shows that a large proportion is spent in the defence, health and education sectors. Within central government, a large proportion is spent by a small number of organisations, in particular, the Department of Social Security, the Inland Revenue and HM Customs and Excise.

7. Government has been computerising since the 1950s. Initially, IT was applied to routine and repetitive administrative tasks, or complex calculations. Often projects were large, ambitious and inflexible, and taken forward with limited user involvement. In the 1970s and early 1980s, some projects were undertaken in-house, others by consultants. Yet more involved a mix of public and private sector specialists. Staff shortages and excessive staff turnover presented difficulties, whilst the management of consultants was also a cause for concern. By the late 1980s, there was greater recognition of the need for overall strategies for investment in IT, and the need to place relationships with suppliers on a more commercial footing. Figure 2 shows the changes in procurement methods over the last thirty years.

8. Both the 'Next Steps' and Market Testing programmes of the late 1980s and early 1990s resulted in larger IT contracts between Government and suppliers, with IT development contracted out, rather than consultants brought in to assist on projects. A number of departmental IT divisions become executive agencies under the 'Next Steps' initiative, and later, one such agency—DVOIT - was privatised, and the work previously undertaken by the Information Technology Office of the Inland Revenue was outsourced. The latter provided for a 10-year 'strategic partnership' for computer services. Shortly after, the Department of Social Security's Information Technology Services Agency outsourced their service delivery operations and awarded contracts to three major companies.

9. From 1992 the Private Finance Initiative has promoted the procurement of major projects as packages in which the private sector designs, builds, finances and operates the project, possibly for many years. This is in contrast to traditional procurement in which the public sector provide all the finance and, typically, takes much of the development risk. A number of deals have involved the implementation of IT provision, including the new National Insurance Recording System, on which we have reported.[3]

10. A recent approach has been the development of framework deals, in which departments work closely with suppliers. Contracts are phased and let on a modular basis so that competition can apply at subsequent stages, and other suppliers can be brought in as appropriate. The Department of Social Security's ACCORD programme, announced in 1998, is an example, where the Department have established a close, long-running relationship with a single preferred Service Provider to design, develop, implement and operate their IT strategy. At the same time, they announced that they intend to work with three service providers for the provision of a wide range of IT services in the future.

MAKING THE MOST OF IT IS A KEY PART OF THE MODERNISING GOVERNMENT PROPOSALS

11. The current Government has placed IT at the centre of its programme of renewal and reform of public services. In particular, IT is seen as one of the main means by which the customer-focus of the public sector can be developed. Its 1999 White Paper 'Modernising Government'[4] stated that

'Information technology is revolutionising our lives, including the way we work, the way we communicate and the way we learn. The information age offers huge scope for organising government activities in new, innovative and better ways and for making life easier for the public by providing public services in integrated, imaginative and more convenient forms like the single gateways, the Internet and digital TV.'

The White Paper argues that government has not kept sufficient pace with broader developments in IT. In addition, it has taken a very decentralised approach to IT procurement that has meant it has not maximised the benefits of technology for government as a whole. As a result, departments and other bodies have incompatible systems that are not integrated.

12. One of the Government's five commitments in the White Paper is to introduce information age government, which would 'use the new technology to meet the needs of citizens and business, and not trail behind technological developments.' In particular, it wishes to:

• make it easier for businesses and individuals to deal with government.

• enable government to offer services and information through new media.

• improve communications between different parts of government.

• give staff better access to information to help them deal more efficiently and more helpfully with the public.

• make it easier for different parts of government to work in partnership, for example, central and local government.

• help government to become a learning organisation by improving access to, and organisation of, information.

13. The White Paper states that 25 per cent of dealings with Government should be capable of being done by the public electronically by 2002 (100 per cent by 2008), and has identified activities the Government intends that citizens should be able to undertake in this way. The Government is also developing a corporate IT strategy to encourage greater convergence and co-ordination across the public sector.

Improving the delivery of Government IT projects

14. The Committee welcomes the promises in the White Paper of a more co-ordinated approach to IT across Government, and recognises the growing awareness of the need for a more strategic approach to IT, exemplified by developments in departments such as Social Security and in the National Health Service. The Committee also welcomes the recent announcement of a Cabinet Office review of major Government IT projects, designed to ensure future systems run effectively, deliver value for money, and apply best practice learned from previous projects. The Committee appreciates that it is often problem cases that are drawn to its attention, and it is aware that many IT projects in the private sector have experienced similar problems or have been abandoned, although usually without the attendant publicity attracted by public sector cases.

15. However, the Committee is very concerned at the number of Government IT projects that are not delivered on time or at all, are completed over budget, and either fail to match specifications or require significant changes before they are satisfactory. In such cases citizens lose out both as taxpayers and customers, as additional expenditure is incurred to rectify problems, and the achievement of anticipated benefits, including improved services, is deferred.

16. The Committee and its predecessors, as well as the Comptroller and Auditor General, have reported on problems with Government IT projects on more than 25 occasions during the 1990s. Some of these reports have commented on specific projects, whilst others have examined IT systems as part of a broader examination of organisational performance. The reports cover all parts of Government, and a wide range of problems, both technological and managerial. These problems have had a wide range of impacts, including on the quality of service to the citizen, on the effective use of public funds, on the ability of organisations to account for their use of public funds, and on the management and development of the business of these public bodies.

17. The appearance of this report, which draws on these published reports, reflects the Committee's concern that failure to deliver Government IT projects jeopardises the success of the Government's broad and ambitious programme of 'Modernising Government'. Of particular concern is that:

• fourteen of these reports have been published in the lifetime of this Committee;

• problems continue to occur in areas where the Committee has made recommendations in the past; and,

• similar problems have occurred under successive new methods of procurement, including most recently, Private Finance Initiative deals.

18. The following paragraphs summarise the key lessons as regards:

• the inception and design of projects;

• managing projects;

• relationships with suppliers; and

• post-implementation issues.

Fuller details of the individual cases are contained in Annex A.

3  46^th Report Session 1997-98; 22nd Report Session 1998-99 Back

4  Cm 4310 Back