21 July 2003
Comments on the Treasury's review of the use of PFI in public sector IT projects
Edward Leigh MP, Chair of the House of Commons Public Accounts Committee
From our work at the Committee of Public Accounts we are well aware of the risks attached to IT projects, whatever the form of procurement. It is certainly true to say that a number of PFI IT projects we have seen have been little short of disasters. But we must not think that removing PFI will alone solve the perennial problems that arise. There is no substitute for informed and sensible management without which any large IT project is likely to fail.
Howard Flight MP, Shadow Chief Secretary to the Treasury
The waste over the last few years in terms of overruns and errors is a serious problem, which have cost in the region of £1 billion. With the knock-on effect of opportunity losses, the total is as least twice that. The PFI Treasury Traskforce spent about a year with its model contract with IT which clearly hasn't been successful.
I question whether the issue is about whether to PFI-subcontract or do it in-house. The fundamental issue is the State trying to impose IT solutions from high.
A country we might have something to learn from is Italy, which has a small central government unit to monitor and approve public sector IT projects, and with the power to cancel early to prevent over-run and waste. One of the key things it looks at is whether in planning IT, there is the right involvement by those who have to use the system, as is now the norm in the private sector anyway.
Mark Serwotka, General Secretary, Public and Commercial Services Union, representing 288,000 members working in government departments, agencies, public bodes, and in a number of private companies, notably in IT.
The government are beginning to recognise that PFI and value for money doesn't necessarily mean the same thing. It's a step but a very small step, elements of which look to address issues surrounding two tier workforces. However the fact remains PFI is seriously flawed.
The government should look more imaginatively at its human resources in the IT sector and look at the addressing the decline of in house IT expertise. Upskilling IT co-ordinators and enabling staff who have already been privatised to return public sector employment ensuring that the public sector has the skills necessary to ensure quality IT services are delivered.
Glyn Evans, Head of e-services at the London Borough of Camden and Chair of Socitm's Information Age Government Group
The PFI credit regime has never been particularly appropriate for ICT projects, for two reasons. First, contract length in ICT projects is now typically seven to ten years. The overhead involved in obtaining PFI credits, which might be justifably for, say, a building management contract of thirty years is simply not appropriate for contracts of this length. In effect, all you do is put up the price as the extra cost is recovered over a short timescale. The second reason is that in a rapidly changing environment (a fundamental aspect of the ICT industry) you need a much more flexible contract than is in effect possible with a PFI arrangement. We must, however, be careful not to throw the baby out with the bath water here. There is very important role for public private partnerships in delivering ICT in government, irrespective of whether such partnerships attract PFI credits.
John Higgins, Director General, Intellect, the UK-based association representing 1,000 IT, telecommunications and electronics organisations
Our members have long expressed disquiet about PFI and we raised these concerns with the Government. To this end, we are pleased with this announcement, which we believe represents another important step in the development of a maturing, intelligent relationship between customers and suppliers in the public sector.
PFI only works when there are clearly defined outcomes. This rarely applied to IT-enabled business change projects. With such projects the technology and their requirements regularly changed within a long-term arrangement.
IT is fundamental to the public sector reform agenda and therefore it is crucial that the correct funding systems are in place, which support this work. Removing complexity from financing structures will ensure a more competitive market, increased value for money and more successful projects.
Through its ongoing dialogue with the Office of Government Commerce, Intellect will seek to ensure that new guidance on IT procurement for Government departments is produced which is beneficial to customers, suppliers and most importantly, the citizen.
John Kershaw, with over 35 years experience in government purchasing, is an expert provider of independent advice on procurement
It appears almost impossible for the Government to do much right these days, but the Treasury's PFI Report published last week seems timely and well-balanced, with guidelines for the future that could limit the continued extension of PFI into so many inappropriate schemes. The headline presumption against using PFI in IT projects reflects a past confusion in the minds of many Public Sector clients that faster is better and that information flows seamlessly into knowledge. The effect of this Report is likely to be a re-orientation of IS project direction away from systems capability and into effective service delivery. In turn, we can perhaps hope for improved supplier/customer relationships, between less-naïve public procurement officials and implementation contractors who have shed pre-occupations with the short life-cycles of specific technology and can concentrate on jointly facilitating long-term continuous improvement in output performances.
Martin Brampton, Managing Director Black Sheep Research
Technological innovation involves risk. PFI has often been based on the mistaken assumption that the commercial sector is not risk averse. It is very risk averse, and it is also sophisticated in its use of contract terms. It is also skilled at financial engineering. Skilled financiers often creates the appearance of benefits that, in reality, are merely cosmetic. Purchasers in the public sector have frequently been ill schooled in capital asset allocation techniques.
Colin Akhurst, Business Development Director, Northgate - a leading provider of software applications and outsourcing solutions to the public sector, HR and corporate markets
Northgate welcomes the Treasury's announcement, with regards the future of PFI in IT projects, as a step in the right direction. This decision highlights that there are issues above and beyond that of funding that need to be taken into consideration for a project to succeed.
PFI, in itself is not the mechanism for successful project delivery as financing of a project is only an element of the whole. In our experience it is successful partnership governance between two parties that underpins project success. Governance, joint objectives and a mutual understanding of each parties' objectives and ability to contribute is essential.
It is Northgate's belief that projects need to begin with the establishment of a sustainable customer relationship and a mutual understanding of the commitments from both sides. This will involve the management of operational, organisational, external and business benefit risks, as well as those regarding finance and budget. It is only through understanding these limitations and objectives that public and private sector bodies can successfully work together to ensure the benefits are realised.