IMPROVING THE DELIVERY OF GOVERNMENT IT
PROJECTS
RELATIONSHIPS WITH
SUPPLIERS
Relations between the Department and the supplier
will have a crucial effect on the success of the project
33. The relationship between the Department and the
supplier is vital, and it is highly desirable that departments
develop a relationship in which they are able to share the 'business
vision' with them. Departments must ensure that suppliers fully
understand the details of the requirement when they bid, and that
they pass the understanding on to the team delivering the system.
Key lessons
34. Relations between the Department and the supplier
will have a crucial effect on the success of the project. In particular:
- Departments should maintain a close relationship
with suppliers, but avoid undue reliance on them, and maintain
overall ownership of progress to achieving the intended benefits;
- Departments should ensure that all parties have
a clear understanding of their roles and responsibilities, and
a shared understanding of key terms and deadlines; and
- where suppliers sub-contract work arising from
PFI contracts, departments should satisfy themselves that the
prime supplier's arrangements for managing the sub-contracts are
consistent with the requirement of the main contract.
Ministry of Defence: Project Trawlerman (Annex A No 4)
In 1996 the Ministry of Defence abandoned Project Trawlerman without it ever being used, resulting in a loss of £40 million. The Department recognised that they had relied to too great an extent on assurances provided by the contractor that the system could be delivered, and had had insufficient involvement with them when the project ran into difficulties.
National Insurance Recording System (Annex A No 2a and 2b)
During the hearings on the NIRS2 system we were astonished to find that there did not appear to be a shared understanding between the Contributions Agency and Andersen Consulting of what was meant by 'delivery of Release 1c'. This release converted much of NIRS1 processing to NIRS2 for over 5,000 Contributions Agency staff. The essentials for this release had to be in place by April 1998 so that employees could send their annual returns and employees' records to be updated. They also did not appear to have a shared understanding of each other's responsibilities under the PFI contract.
Immigration and Nationality Directorate Casework Programme (Annex A No 3)
The Comptroller and Auditor General reported in 1999 that Siemens, the department's supplier, had decided to complete the programme of software development without their main sub-contractor, who had been mainly responsible for the IT development. These difficulties, which on the face of it are entirely a matter between Siemens and their sub-contractor, in practice operated to the disadvantage of the Directorate. The Comptroller and Auditor General stated that it is legitimate, as part of managing their own risk, for departments to take a close interest in their supplier's plan for sub-contracting. He said that where suppliers sub-contract work arising from PFI contracts, departments should satisfy themselves that the prime supplier's arrangements for managing the sub-contracts are consistent with the requirements of the main contract.
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Contracts between departments and suppliers must
be clearly set out
35. The increasing use of complex external contracts
for the delivery of major public sector IT projects and the supply
of strategic IT services has highlighted the need for a high degree
of professionalism in the development and management of IT contracts.
It is essential that public sector bodies get the right contracts
in place, and ensure that they employ the right people to manage
them. With large sums of public money at stake, any lack of clarity,
or debatable interpretation in a contract can lead to expensive
misunderstandings that might have to be resolved in the courts.
Key lessons
36. Contracts between departments and suppliers must
be set out clearly. In particular:
- it is essential that the roles and responsibilities
of all parties are fully defined;
- there should be an ongoing process of contract
management during the life of the project to allow for the almost
inevitable change requirements. The aim should be to manage, rather
than police, project contracts;
- departments should ensure that the business implications
of late delivery are reflected in contractual incentives; and
- in highly complex deals, it may well be unavoidable
that some matters cannot be settled in detail at the time that
the contract is signed, but is undesirable for contracts to leave
key issues to be decided later.
National Insurance Recording System (Annex A No 2b)
In our second report on the National Insurance Recording System we stated that in complex major systems of this nature, the relationship between the Agency and its contractors is crucial to success. We were, therefore, astonished by evidence that the two key parties to the NIRS2 contract, the Contributions Agency and Andersen Consulting, did not appear to have developed a shared understanding of what delivery meant, and about each other's roles in implementation. Under the rescheduled contract, NIRS2 was due to go live in time to cope with the impact of the new legislation in April 1998. Yet Andersen Consulting appear to have been under the impression that implementation might take place over a period of six to nine months after acceptance of part of the system in July 1998. This resulted in a lack of a co-ordinated and coherent implementation plan for NIRS2 and weaknesses in contingency planning. We recommended that in future, in any contracts of any kind, the Department should ensure that there is clear contractual understanding of what delivery means.
Immigration and Nationality Directorate Casework Programme (Annex A No 3)
The Comptroller and Auditor General reported that in highly complex deals it can be unavoidable that some matters cannot be settled in detail at the time that the contract is signed. Where these are secondary matters, and where the department have adequate protection against possible abuse by the supplier of the advantageous position they are in, there need not be any great risk to value for money. But when, as in this case, the detailed mechanism for remunerating the supplier depends on post-contract agreement, there could be large risks to the value for money of the deal. The Directorate took steps to protect themselves from these risks, but he stated that it is preferable for suppliers' remuneration to be settled under competitive pressure.
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