1.13 We published a 2011 report, Information and Communications Technology in government.5 There we quoted the government announcement that "the days of the mega IT contracts were over" 6 and that it would enforce a maximum spend of £100 million on technology contracts. The government also said that departments should implement smaller projects, where possible, using off-the-shelf solutions and 'agile' methodologies.7 We noted that private sector outsourcing should give greater technical capability and efficiencies, but that government had not managed relationships with large suppliers effectively to harness their skills and experience.
1.14 Our 2013 report, The impact of government's ICT savings,8 described how the government was breaking up large contracts with 'system integrators',9 by introducing a new commercial model. This model increases the number of contracts that a department must manage, splitting different types of work (for example developing software applications, networks, data centres and hosting) into smaller contracts known as 'towers'. A government department may also hold a separate contract, known as a service integrator and management contract, to help integrate and run its services. Suppliers compete separately for the towers and service integrator and management contracts. We noted that many existing contracts with large suppliers still had some years to run, so the new approach would take some time to implement.
1.15 The Cabinet Office has defined the advantages of the model as:
• Increasing competition by holding smaller and more frequent procurement exercises, giving more scope for small and medium-sized enterprises to provide services directly to government.
• Reducing risk by specifying common ICT requirements across government, reducing the need for departments to develop their own bespoke solutions.
• Making it easier for departments to adopt innovative digital solutions by ensuring they know more about their ICT architecture.
• Reducing costs by stopping suppliers profiting from their use of subcontractors.10
1.16 In January 2014, the Cabinet Office published its 'red lines' for ICT contracts.11 It stated that:
• it will not allow companies with a contract for providing services to provide system integration in the same part of government;
• the government will not extend existing contracts without a compelling case; and
• new hosting contracts will not last for more than two years.
The Cabinet Office also restated that there should be no ICT contracts worth more than £100 million, unless there was an exceptional reason.
1.17 An Office of Fair Trading report in March 2014 said that competition was not working as well as it could in the public sector ICT market. Reasons for this included that procurement practices were a barrier to entry for new suppliers.12
1.18 Switching to a multi-supplier model has risks during the transition phase and challenges for government in managing many suppliers. Departments will need more, and different, skills and resources to be responsible for selecting and applying technology in their operations.
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5 Comptroller and Auditor General, Cross-government: Information and Communications Technology in government - Landscape Review, Session 2010-11, HC 757, National Audit Office, February 2011.
6 Cabinet Office Minister's speech to supplier summit, published online at: www.cabinetoffice.gov.uk/news/cabinet-office-ministers-speech-supplier-summit, 1 December 2010.
7 Government describes 'agile' as an iterative method for delivering projects in a highly flexible and interactive way.
8 Comptroller and Auditor General, The Cabinet Office: The impact of government's ICT savings, Session 2012-13, HC 887, National Audit Office, January 2013, p. 28.
9 A system integrator is a single supplier that develops and operates most of an organisation's technology services.
10 HM Government, Government ICT Strategy, March 2011. HM Government, Government ICT strategy - strategic implementation plan: Moving from the 'what' to the 'how', October 2011. Cabinet Office, Government Digital Strategy, November 2012.
11 Cabinet Office press release, available at: www.gov.uk/government/news/government-draws-the-line-on-bloated-and-wasteful-it-contracts, 24 January 2014.
12 Office of Fair Trading, Supply of Information and Communications Technology to the Public Sector, March 2014.