Systematic failure

From the NHS to the DSS, the public sector's record in IT is appalling. By Paul Gosling

News broke last week that the cost of Britain's new air traffic control computer system being installed by Lockheed Martin has jumped from an original pounds 130m to pounds 217m - a 75 per cent increase in six years.

This would be bad enough on its own, but it follows continued speculation about supposed problems with two Department of Social Security IT contracts - the ICL Pathway electronic benefits system and the Andersen Consulting contract to computerise the Contributions Agency records system.

Meanwhile, Wandsworth council has sacked EDS from its housing benefits administration contract, and Kingston council is thinking of doing the same. Whatever the strengths of the public sector, it is becoming increasingly clear that it has an unparalleled record in fouling up on IT contracting. So just why are public bodies so bad with IT, and how can they correct a growing crisis?

Contractors, consultants, the National Audit Office and the Public Accounts Committee all have harsh words for the public sector's record on IT procurement. While there is a variety of reasons for the contracting crisis, some key themes recur with frightening regularity. One factor - which has also been an important consideration in the row over accounting for private finance initiative deals - is that public bodies have been bad at analysing future risks and have failed to contract for which party should bear those risks as situations change. This reflects a level of naivety at even senior levels in the public sector, not just in dealing with IT, but also in how to draw up contract specifications when outsourcing services.

One recent report of the House of Commons' Public Accounts Committee (PAC) investigated the use of the Read codes by the NHS.

A system for barcoding clinical information was developed by Dr James Read, a GP, who sold his copyright on the idea to the NHS, and was then employed by it to oversee the system's introduction.

The committee found an almost unbelievable level of weak management, which led to spiralling costs in the codes' implementation, now standing at pounds 32m and rising fast. Astonishingly, the NHS Executive did not carry out an appraisal of costs, benefits and risks before giving approval to the project. The PAC recommended that in future not only should sound investment appraisals be conducted, but that pilot schemes should be evaluated before implementation. It added that the NHS had made similar mistakes with hospital information systems.

Richard Jones, a partner in PricewaterhouseCoopers' management consulting services, says the problems with IT procurement in the public sector are complex, but often relate to a lack of understanding of IT at senior management level. "Often new ideas, especially in the new technology area, have been generated bottom up, and senior people continue to want the old systems, and don't have a commitment to making the new systems work," he said.

IT skill levels in the public sector are worryingly weak. Whereas the chief executive of Nationwide is an IT specialist, it is difficult to point to anyone in the public services who has risen on a similar career path.

"The public sector promotes broadly based generalists," Mr Jones pointed out. Salary structures for IT personnel in the public sector are in a different world from business, especially with the pay inflation generated by year 2000 compliance and euro preparation. Other problems can be caused by an excessive concentration on keeping costs down, often at the expense of an effective system. "One of the downsides of competitive tendering is that you often leave out all change management processes which would make the contracts work," said Mr Jones. "Procurement rules drive the supplier to keep the price tight, who then leaves out the nice tabs. IT is of no use if the customer doesn't know how to use it."

And contract specifications can change as the client realises that a modification could make the system better, which introduces cost over- runs and delays in specifications.

The good news is that, belatedly, the public sector might be learning. Mr Jones, who is in charge of implementing a major IT project introducing resource accounting at the Ministry of Defence, says that the contract he is currently working to has some good features.

"It includes incentivising us to make the client use the system. It is a very difficult test for us, but it makes us encourage the customer to switch the system on. There are regular reviews, not just a review on final delivery. There is a greater clarity in the client's requirement."

Mike Roache, head of public sector at IT consultants and contractors Cap Gemini, agrees that public bodies are learning from their mistakes. "It is changing," said Mr Roache. "There is far more emphasis on long term, strategic partnerships, not just contracting for individual projects, but to provide whole solutions. It is very difficult to predict in a contract beyond two or three years, and the parties need to build up trust. Some of the contracts with problems now were placed some years ago."

Past mistakes will continue to cause problems, though, not least when the new millennium dawns. The Public Accounts Committee has concluded that the NHS is still disturbingly unready for 2000, and is putting patients' lives at risk.

Action 2000, the UK Government body responsible for raising awareness of the problem, has warned that local authorities are equally ill-prepared. Director Gwynneth Flower said: "I'm very unhappy indeed with local authorities. I ask them what they are doing about traffic lights or parking meters and they say 'nothing'. If traffic lights fail, people will not be able to get to work, and that will hit the economy."