IT systems in magistrates' courts have been inadequate for many years and a common IT strategy for magistrates' courts has been called for since the 1980s. After two failed projects in the early 1990s, the Lord Chancellor's Department (the Department) decided in 1996 to procure a PFI contract for a national standard IT system called Libra. The Department received only one bid, from ICL (now called Fujitsu Services), for £146 million. ICL raised its bid by 25% after being named preferred bidder and in December 1998 the Department signed a deal with ICL for a 10.5 year contract at a price of £184 million.
The contract was renegotiated twice, each time ICL asking for more money. As a result of the first re-negotiation, a revised contract for 14.5 years at a price of £319 million was signed in May 2000. Within ten months ICL informed the Department it was in financial difficulties even at the price negotiated a year before. Negotiations for ICL to continue with the whole contract failed, and the Department reached agreement for ICL to deliver only the infrastructure at a cost of £232 million over 8.5 years. The Department has signed a separate contract with STL to provide the core software application. A systems integrator will be appointed towards the end of 2003 to roll out and run the application. The total cost of the project is now estimated at £390 million for just 8.5 years of service, rather than the original 10.5 years (Figure 1).
On the basis of a Report by the Comptroller and Auditor General1, the Committee took evidence from the Lord Chancellor's Department, the Court Service Agency and Fujitsu Services on three main issues: developing the IT project; handling the PFI procurement; and dealing with the post-contract negotiations.
Figure 1: The rising cost of the Libra project
| May 1998 | Dec 1998 original contract | May 2000 revised contract | July 2002 | |
| Contract costs | ||||
| Infrastructure (£m) | 94 | 119 | not known | 232 |
| Core application (£m) | 52 | 65 | not known | 86 |
| Total contract costs (£m) | 146 | 184 | 319 | 318 |
| Internal project costs (£m) | 10 | 10 | 18 | 12 |
| Additional enhancements and other costs (£m) | 0 | 0 | 0 | 60 |
| Total project costs (£m) | 156 | 194 | 337 | 390 |
| Contract length (years) | 11 | 10.5 | 14.5 | 8.5 |
Source: Lord Chancellor's Department, Fujitsu Services
We draw the following main conclusions from our examination.
• This is one of the worst PFI deals that we have seen. The Department procured a contract to provide services to 42 Magistrates' Courts Committees over which it did not have real authority or control. It ran a poor competition, attracting only one bidder, and it failed to take decisive action when ICL did not deliver what was required. For its part, ICL did not understand the Department's requirements, took on excessive risk and underpriced its bid. It performed poorly throughout and could not meet the target dates for delivery of the core application. As a result of these failures the cost of the project has more than doubled in just four years to almost £400 million and magistrates' courts still do not have the IT systems they need to manage their workload properly.
• Departments will not achieve the full benefits of introducing IT if they do not redesign business processes in parallel. The Department chose to develop IT to support existing processes rather than redesigning business processes in parallel with new IT. This approach contributed to the project's difficulties because the Department was unable to achieve a single view of requirements for the new system across Magistrates' Courts Committees.
• Competitive procurements of PFI projects are essential. The Department was unable to maintain competitive tension as all potential bidders bar ICL dropped out during the procurement process and the Department was left with just one bidder. A single bid for a major complex project is seldom likely to achieve value for money. That only one bid was received should have alerted the Department to the fact that its project may not have been sufficiently well designed to attract competition.
• Where contractors are not delivering what is required of them, departments should be prepared to terminate contracts. Despite ICL's poor performance, the Department decided to negotiate rather than terminate the contract when ICL was in breach of the contract. Departments need to make their contractors aware that termination is a very real factor in their relationship, which should not automatically be seen as the most difficult and risky option. Risk transfer does not really take place if departments are unwilling to terminate a PFI contract or take legal action when a contractor fails to deliver.
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1 C&AG's Report, New IT systems for Magistrates' Courts: the Libra project (HC 327, Session 2002-03)