No Minister: Pointing to the IT rip-offs

Dick Vinegar says that he recognises allegations aired in the PASC report on government IT from a long time ago

Select committees have become quite aggressive of late as with culture, media and sport's grilling of the Murdoch family and the public administration select committee has joined the fray with its vitriolic commentary on the incestuous relationship between large IT companies and government departments.

The title of its report, Government and IT: A Recipe for Rip-Offs , sets the tone, and reminds me of Frank Dobson's description of the big companies as "intergalactic rip-off merchants". The committee's evidence for the attack came from a private meeting with small suppliers private because the SMEs were concerned that if they were openly critical, they could lose business. That says something about Whitehall's procurement executives.

One of the main gripes was a total lack of information about how much IT systems actually cost, and there were allegations "that a lack of benchmarking data enabled large systems integrators to charge between seven to 10 times more than their standard commercial costs". That's pretty shocking, but it does not entirely surprise me.

It takes me back to the 1970s, when I was a faceless executive in a large IT company. I was grumbling to a manager that our software department had quoted what seemed to an absurd amount of money for a relatively simple government job. He responded: "It takes £6,000 for us to get out of bed in the morning, and the bill goes up to £60,000 just to get a team together and start work." Silly me, I had forgotten that all the big company overheads had to loaded onto the price: the glossy ferns in the atrium, the chief executive's salary, the flights to Silicon Valley, the four figure subscriptions to trade associations. That was 1970. In 2011, I imagine it would cost at least £15,000 to get out of bed.

I was happy to join a personal computer dealer a few years later. The prices for everything we charged were modest and affordable, and we had virtually no overheads; which explains why the mainframe industry, made up of big companies, imploded after a few years, leaving small companies selling PCs to mop up.

Ian Watmore, at one time government CIO, has defended the departments' lack of benchmarking information, because "there could be difficulties in attempting to secure benchmarking data for more complex projects". The small companies rejected this, because their private sector customers were happy to provide benchmark costs for their projects, however complex. The small suppliers claimed that this lack of benchmarks made it difficult for them to compete, and difficult for procurement officials to "challenge and hold to account current providers".

The committee recommends that all IT procurement contracts should be published in full. It is a radical proposal that would break the mantra of "commercial confidentiality" which has hidden a multitude of bad contracts and rendered the Gateway Reviews ineffective. Permanent secretaries would have nowhere to hide, and be forced to get their procurement houses in order.

PASC also attacked projects that were too long, singling out the 13 year HMRC contract with Capgemini, on the grounds they are too complex, with too opaque an assessment of costs and benefits. But such long contracts have given government procurement executives an easy life.

I have been saying this kind of thing for years, and I am delighted to see that it is now open season on the big IT companies. The Government IT Strategy , published in March, referred them as an "oligopoly", and the committee quoted the view of one of the SMEs that they were a "cartel". This enraged Intellect, the industry's trade association, which thundered "such a suggestion is not only inaccurate and misleading, but also potentially damaging to an industry that is a vital part of the UK economy." Hmm€Â¦, Intellect represents both large and small IT companies. I would have thought it was inappropriate to take sides.

Anyway, it is nice to see a select committee stirring up such a hornet's nest I recommend the PASC report; it includes the kind of talk I like to hear. Whether it does any good is another matter. The cosy culture at the top of Whitehall and industry has resisted attempts to break it down for decades. After all, Sir Humphrey is likely to get a lucrative job with GRM (Galactic Rip-off Merchants plc) when he retires and collects his gong.