No More Trainwrecks: UK Government Issues New IT Contract Rules

The UK government has attempted to prevent future IT procurement disasters, with new rules that forbid automatic contract extensions and limit all IT contracts to £100 million, unless there is an “exceptional reason” to do otherwise.

Published on Friday, the “red lines” are designed to help avoid costly mistakes like the National Programme for IT, a failed NHS project which is likely to cost the taxpayer a whopping £9.8 billion, and controversies such as the struggles of the Universal Credit welfare programme.

It is hoped that the new rules will encourage competition, and get more Small-to-Medium Businesses (SMBs) involved in the procurement process.

“Big IT and big failure have stalked government for too long; that is why this government is radically rethinking the way it does business,” said Cabinet Office minister Francis Maude. “We are creating a more competitive and open market for technology that opens up opportunity for big and small firms.”

Waste not

In December, the National Audit Office criticised the progress of the Universal Credit programme, saying that poor performance of IT contractors had lost the government £40 million, in addition to £91 million that will have to be written off by 2019. The total cost of the programme, delivered by HP, IBM, BT and Accenture, is expected to reach around £2 billion.

Under the new rules, almost all IT contracts issued by the government will be capped at £100 million. In addition, companies which sell hardware and software to a certain part of the government will not be able to compete for installation and maintenance contracts in the same departments.

Automatic contract extension is also set to become a thing of the past, which means businesses will have to compete every time they want to offer a new service. Finally, all hosting contracts will last no longer than two years.

Some experts say that the £100m threshold is still very high, and will not ensure opportunities for smaller business. Meanwhile, the new hosting contracts have been criticised as too short, taking into account the fact that the procurement process itself can take up to six months.

According to the Cabinet Office, the government is already delivering on its promise to involve an increasing number of SMBs in government IT contracts. More than a third of the companies on the new procurement framework for digital public services have never done business with government before.

“To create the efficient and responsive services that the public demands, government must have access to the most innovative, most cost-effective digital solutions. That means going to the widest range of suppliers, and giving ourselves every opportunity to renegotiate and reassess contacts,” said government CTO Liam Maxwell.

“It rarely makes sense to simply extend a contract based on yesterday’s technology and prices and these red lines make clear that we are doing business in a different way.”

The market for the supply of public sector IT goods and services is still under investigation by the Office of Fair Trading, which is particularly interested in the role of SMBs in the procurement process, and will report on its findings in March.

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