8 Following two failed projects going back to 1992, the Department decided in 1996 to procure a PFI contract for the Libra project. By the end of the procurement there was effectively only one formal bidder (ICL) for the contract which meant that the Department was unable to maintain competitive tension throughout the procurement process. ICL was chosen as the preferred bidder although the Department was aware of the problems ICL was having with another government IT project. This made it even more important for the Department to satisfy itself thoroughly as to the technical competence of the bidder to deliver a project of such size and complexity. With hindsight the Department should also have verified that the financial model on which the tender was based was sound and reflected the Department's requirements, although at the time Treasury Task Force advice was that this was not a requirement.
9 The project hit problems and was renegotiated twice after contract signature. ICL came back to the Department twice for more money. On the first occasion this was on the grounds that it had overestimated the revenues and underestimated the costs of the contract and that without additional funding it would be unable to continue with the contract. On the second occasion it was because the delays to the development timescale, caused by a number of different factors, had increased ICL's costs. On each occasion the Department renegotiated contract terms that it considered provided value for money and at the same time delivered a financially acceptable outcome for ICL. By July 2001 ICL was in breach of the contract because it was unable to deliver the core application to the first site. But the Department did not terminate the contract and sue for damages because it considered that this would have triggered potentially costly litigation and counter-claims from ICL, and would have jeopardised the timely delivery of much needed improvements to IT systems in magistrates' courts. Negotiations were completed and both parties remained committed to the project.
10 In July 2002, after considering the options available, the Department signed a variation to the contract with ICL to deliver only the national IT infrastructure and office automation facilities. During January 2003 the Department expects to sign a separate contract with STL to provide the core software application to support court work. A systems integrator will then be appointed towards the end of 2003 to roll out and run the application. The main developments in the course of the project are set out in Figure 2 and at Appendix 2.
11 The cost of the project has also increased significantly in the four years since the original contract was signed (Figure 3). The Department is paying a great deal more for a contract only 8.5 years in length that will last only until 2007, although the scope of the requirement has expanded. The new termination date was chosen to align it with the end of two other major contracts and will enable a replacement contract to provide a strategic way ahead. The Department estimates that the equivalent contract cost of the current proposal over 14.5 years would be £557 million. This figure cannot be compared directly with the contract cost of £319 million for the contract agreed in May 2000 as the new agreement includes the provision of 2,500 additional PCs and associated printers as well as a number of enhancements to the office automation service, such as Internet browsing.