How to play the government IT game
Public sector technology projects are some of the largest in Europe
Public sector technology projects are some of the largest in Europe. But are they rich pickings for the dilligent reseller or a business already sewn up by the select few? Ken Young investigates
What was due in 2012, was thought to cost £5bn, but is now estimated to cost £15bn? Answer: the Identity Card Scheme.
Who is facing possible court action over a previous government contract but looks set to win the biggest government IT contract of all time? Answer: EDS.
The firm is facing court action over the failure of the tax credits system, yet is in pole position to win the £4bn Ministry of Defence (MoD) information infrastructure contract.
The world of government IT contracting is lively to say the least. The budgets are up in the stratosphere and the possibility for PR disasters seemingly endless.
Government IT has two main task-masters. MP John Hutton and Ian Watmore, the former managing director of Accenture UK. Hutton (not to be confused with the Lord Hutton of BBC-bashing fame) as chancellor of the Dutchy of Lancaster is answerable to parliament for every problem hitting a government IT project. Meanwhile the Cabinet Office has an e-government unit headed up by chief information officer Ian Watmore.
With a budget of around £2.3bn per year, their watching brief includes 20 key projects and soon could include the ID card system — if the government achieves its aim of passing the ID card legislation.
Government projects with the largest budgets and consequently the most potential for the IT industry are: the Criminal Justice system; Homeland security system; Lorry Road User Charging system; MoD infrastructure; the NHS IT system, and the National Spatial Address infrastructure (a new centralised address database). The government is also continually developing its e-government activities primarily through a plethora of web sites – currently totalling 4,000 (all ending in .gov.uk).
New contracts trickle out of this huge procurement system every few months. Most recently, HM Customs & Excise shortlisted seven suppliers for the Lorry Road User Charging system. These include IBM, Capita, and Siemens.
Not surprisingly, most large scale projects are bagged by approved firms – BT, Mitel, Capita, Onyx, CSC, Microsoft, Oracle, Atos Origin, Fujitsu, Cable and Wireless (C&W), Accenture, Schlumberger Sema, IBM – to name but a few.
A full list of such government approved firms can be found on the Government IT Catalogues: GCat, an IT & telecoms hardware and maintenance services catalogue and the SCat, IT and business consultancy services. Most resellers and some distributors team with such suppliers to secure a share of the business.
But recent news that the GCat listing is to be reduced in size when it emerges as the rebranded ‘Catalist’ has not gone down well with the channel, with many resellers saying that the list should increase rather than decrease. In June OGCbuying.solutions, the procurement arm of the Office of Government Commerce (OGC), conducted a beauty contest for the new listing with contracts expected to be awarded in February 2005 and running for five years.
But the government continues to promote the idea of a more open market for suppliers. In a recent interview with The Guardian Ian Watmore, head of e-government, said: “I don’t believe, in general, that the government should employ people to do work the marketplace does better. You can’t turn the clock back – government IT is in the hands of the market.”
There are also signs that the government is seeking to break up contacts into smaller units to increase competition, reduce possible risks, and provide a form of comparison where possible.
This new approach was evident when in June the Office of the Deputy Prime Minister announced that it was looking for two outsourcing partners to take over the running of its desktop and IT infrastructure. It is offering two, five-year, manage and support contracts, one mostly covering London, the other the regions.
Most resellers with public sector work say that the most important aspect of gaining such work is developing relationships with target organisations so that you actually assist in the creation of a tender in the first instance.
When it comes to pitching for government contracts, most in the industry say formal systems for tendering are hardly worth the time of day. Despite listings of all contracts over £100,000 on the Official Journal of the European Union (OJEU, formerly OJEC), it is often treated as a journal of record rather than a real opportunity to bid.
John Shaw is global business director at provider ABM, which had a contract to help design and implement the Scottish Intelligence Database, a system for sharing information among Scotland’s 17,000 police officers and 17,000 support offices.
He said that the firm does not bid for business on OJEU: “If we see something we haven’t heard about on OJEU, it is too late. We have to know a lot about a tender before we bid; we have to be sure that we really know what the customer wants and that we have a chance of making a credible bid. That is far more likely when we have heard about the tender though our own contacts.”
ABM works in the specialist area of criminal intelligence software. He feels that the company had an ace card because it is platform agnostic. “We have the benefit of being suitable for any platform which can be a benefit to a customer. It means they can drive a harder bargain with the hardware and software suppliers because they are not using a proprietary solution.” Like a number of suppliers he also talks of the benefit of taking a lead role: “We also sometimes act as a partner so that we take on the risk of working with any third parties.”
Such a primary role is usually the preserve of approved suppliers. Stratus, which also provides systems to the Police (recently Sussex police) and to ambulance services, said that the key for a GCat listed supplier is gaining prime contractor responsibility.
“This means that we take full responsibility for managing the contract, informing the customer, and being a single point of contact,” said Clare Parry-Jones, managing director at Stratus.
She agreed with ABMs’ Shaw that if you first see a tender on OJEU you are probably too late. “By the time it appears on OJEU, they have usually done a fair bit of background work and even have some suppliers in the pipeline, so it is often too late.” She said it is far more the norm to be involved with pilot projects, or proof of concept trials, or to be developing ideas with an existing customer, as was the case with Sussex Police.
Meanwhile the continuing focus on e-government has meant something of a windfall for firms with specific expertise in online publishing. Content management software firm Futuremedia has a two-year contract with the Criminal Prosecution Serv-ice to develop an e-learning portal based on existing hardware. “They already had the hardware it was just a matter of making sure they had Flash software on all the clients,” said Mike Cawood, account manager at Futuremedia.
He said that a key factor with such work is the status of the organisation. “The Criminal Prosecution Service is very highly regarded. But in this case that also means a lot of complex jargon and very specific approaches to how they want the system to work. But it is a clear example of how the need for powerful portals is a strong requirement right now.” The portal, which uses the firm’s proprietary content management software, currently has 820 users and will be rolled out to 7,000 users during the contract period.
But there are critics of the government’s slow pace of reform when it comes to procurement policy.
Dave Birch director, at IT consultancy Consult Hyperion, which has contracts with the Home Office and police force, said that there needs to be a shake-up in the procurement process so that resellers and SMEs can bring their skills to the table. “It is my belief that the current procurement system is too complex and time-consuming for most small firms. As a result the government doesn’t benefit from a large amount of talent and innovation that they offer.”
Birch said that his firm considered gaining approved status on SCat but found it too unwieldy. Eventually, like many smaller firms, it decided to partner with one of the approved suppliers it found on the list and is now in the process of getting approved status on the forthcoming Catalist system. He said that it may be useful if the UK looked to the procurement system used in Hong Kong. “The Hong Kong system is rigorous. You are not allowed to have any contact with the tendering party prior to the request for tender. That makes it a very level playing field.”
Tony Heyworth, marketing director at video specialists Polycom, agreed with Birch. “We work 100 per cent through the channel and believe that the government could get better value, better service and better response if it bought from smaller firms. At least the Gershon Review is helping to drive new approaches to profit and loss and efficiencies in procuring.” With significant wins in the health sector his advice to resellers is simple: “Promote your healthcare and IT skills and find out what is going on in your local NHS Trusts.”
But for many it is the sheer complexity that is the barrier. Peter Barker, head of data at Matrix Communications, a network infrastructure provider, concurred with the view that government contracts can be difficult to navigate. “We have won a number of public sector contracts and the key is doing relevant research. You have to read the white papers and regional documentation to understand how key contracts are being organised. In addition you have to talk directly to government or health bodies to see how they are implementing IT. A lot of NHS Trusts for example are confused about local and national priorities so it is essential to see what is happening on the ground.”
He notes that it can be a lot harder finding out what is going on in England compared to Wales, where the company has upgraded a LAN and security infrastructure at Withybush Hospital, part of Pembrokeshire and Derwen NHS.
Chris Durnan, managing director and sales director at security distributor Peapod, said government and local government work makes up 50 per cent of the company’s business by virtue of it partnering with approved suppliers. He said the tending system is cutthroat.
“It’s a game of price. Even for very small contracts they will now collect a handful of quotes and compare on price because they are under so much pressure to get a bargain. The truth is there is not much margin on the basic business. It’s all about the consulting and value add that you can get.”
Not surprisingly Energis, which won the contract for the Government Secure Intranet against stiff competition, is less critical. “We won because we were able to understand the needs of the OGC and the departments involved and to deliver a committed team with our partners Fujitsu and MessageLabs,” said Paul Hayman, director of public services at Energis.
The firm secured a seven-year contract in 2003 and has since created a secure intranet linking 350,00 government and central government users winning the business from the incumbent supplier C&W. He advised bidding firms to: “Get inside the head of government; understand the art of the possible in terms of the technology; and deliver a federated approach.”
Similar comments are given from Mastek, the IT services supplier that teamed with Capita on the govern-ment’s recently created Child Trust Fund. With much of its development work taking place in India, the firm it is an example of how procurement is now spread across the globe. Joe Venkataramen, Mastek director, is sensitive to charges that this takes work out of the UK. “It’s solely about cost and quality. We believe that the key is insourcing customer-facing work and outsourcing back-office work. We see ourselves as an Anglo-English company with a conscience.”
There is little doubt the government is more market-facing than ever before. Whether it is creating more opportunities for IT resellers remains to be proven, but the sheer size of total spend ensures that public sector work remains an area deserving attention.