‘Departments should take it as a warning sign that their proposed Private Finance Initiative projects may not be workable if few bidders show initial interest and others withdraw as the procurement process continues,” said Sir John Bourn, auditor general.
Bourn said a best business-process model should be drawn up before any IT solution is sought. In the case of a single tender, departments should take care to ensure value for money by developing an expected-cost model for the bid. He added that up-to-date contingency plans should be in place in case contracts go wrong.
The recommendations follow a report on the shortcomings of the Lord Chancellor’s department’s Libra project to link magistrates’ courts via a single computer system. The project, which the report described as ‘the shoddiest ever’, overran, went over budget and failed to meet users’ needs.
The report said some problems occurred because the department tried to improve existing business processes at the same time as the new IT system was being developed.
The report also criticised the department for only inviting one bidder for the job and so eliminating competitiveness in the procurement process.
When Fujitsu Services – formerly ICL – won the contract in 1998, its first bid was £148m over 11 years, but this rose to £184m over ten-and-a-half years by the time the contract was signed.
The £184m contract was later renegotiated twice, first because ICL had overestimated revenues and underestimated costs. In May 2000, a price of £319m was agreed for a new 14-and-a-half year contract. ICL and the department later began renegotiations, but were unable to reach agreement.
Although ICL was in breach of the contract, the department continued with the deal to avoid potentially expensive court costs.
In July 2002, a new contract was signed for £232m over eight-and-a-half years to deliver a national IT infrastructure and office automation facilities.
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