Why does the UK keep getting beaten up by IT suppliers?

Tech and commercial functions need to get in shape for the challenges ahead

It's a line Brits love to quote: "You're a big man, but you're in bad shape. With me, it's a full-time job. Now, behave yourself." Michael Caine's iconic dialogue as the Get Carter protagonist sums up how tech companies see the government: big, in bad shape, and here to do what they say.

While the UK government wants to focus attention on the civil service's adoption of AI and what it calls a "blueprint for a modern digital government," eyeing a theoretical £45 billion ($55 billion) in productivity savings, a report from the National Audit Office (NAO) demonstrates the extent of the government's challenge.

It found that when it comes to IT contracts, the government, which spends £23 billion ($28 billion) a year on technology, offers "limited technical evaluation of contracts, with technical risks downplayed." Then, after contracts are signed, the government tends to discover unforeseen technical complexities that are "too fundamental" for any change control process to deal with.

The newly appointed chair of Parliament's spending watchdog, Geoffrey Clifton-Brown, said digital commercial skills were "in short supply and government is not making the most of the limited expertise it has."

The Public Accounts Committee (PAC) leader said: "Government has managed digital suppliers poorly, and the center of government has not provided direction to help departments become intelligent clients."

We don't have to look too far to find the evidence. Earlier this month, The Register revealed that His Majesty's Revenue & Customs (HMRC) handed Accenture an additional £35.2 million ($44 million) without competition on a £70.4 million ($88 million) contract that was never tendered. Accenture, the supplier benefiting from the deal, runs the National Insurance and PAYE System (NPS).

The initial contract was awarded in 2022 to "disaggregate" the system and make it more "open and independently maintainable." However, Accenture and HMRC decided it needed another £35 million ($44 million) because of a "significant increase in the project work which was not envisaged and catered for at the time of the direct award."

Who did not "envisage" this increase? HMRC or Accenture? The government department admitted that "change of supplier is not feasible for technical reasons, as NPS has extremely high levels of technical and functional complexity."

Tech burden

A skeptic might be driven to the assumption that HMRC doesn't really know how the tech on which it runs the National Insurance system works. One can imagine supplier account managers looking at their quarterly targets and saying to the engineers: "Tell them we need to flip the polarity on the flux capacitors and we'll add another £35 million to the bill," before putting in an order for the latest BMW 8 Series.

Later research with the help of government procurement specialists Tussell showed that in five years, HMRC had awarded more than half a billion in non-competitive contracts to three suppliers, part of a £10 billion ($12.5 billion) arrangement that started in 2004 and was supposed to end in 2017. The NAO described the deal, Aspire, as expensive, but that has hardly encouraged HMRC to shop around. In total, it has awarded £3.8 billion ($4.7 billion) to the former Aspire suppliers – Accenture, Fujitsu, and Capgemini – in the last five years. And yes, Accenture built the NPS system while contracted under Aspire.

For the largest tech suppliers, both in software and IT services, maximizing revenue and margin from every customer is a full-time job. As a customer, the government seems to lack the commensurate focus.

To its credit, HMRC has tried to break the stranglehold on its technology contracts with the Technology Sourcing Programme (TSP), designed to break its five biggest IT contracts into 30 smaller, more flexible ones, aiming to access the latest technology and bring its IT estate up to date. But the latest Accenture award shows it is not there yet.

The problem is people, not technology. In 2023, the PAC found that the number of digital, data, and technology professionals in the UK civil service amounts to around 4.5 percent of the workforce, "less than half the number it needs when compared to an equivalent industry average of between 8 percent and 12 percent."

It found "pay constraints mean that government departments are unable to fully compete with the private sector in hard-to-recruit roles."

It may be unpalatable to taxpayers to see the government award massive pay rises to its tech and commercial professionals, or recruit with similarly attractive packages, but unless it does, suppliers will continue to laugh all the way to the bank.

Signs so far do not inspire confidence. Two years ago, the PAC warned digital skills shortages are "self-inflicted through counter-productive staffing cuts." But the incoming government, much like its predecessor, is likely to push through job cuts in the quest for savings.

The question of which jobs will be cut remains open. With its latest promise to make government more efficient with the majority of its technology – where have we heard that before? – the Starmer administration is planning a Digital Commercial Centre of Excellence. With it, the government wants to help public sector organizations "negotiate costly contracts together to save money, and open opportunities for smaller UK startups and scale-ups to drive economic growth."

Details on how it will operate and be staffed are yet to be announced. Still, a recently published review pointed out that only 28 percent of civil servants believe they have sufficient internal capabilities to monitor, track, and drive tech supplier performance. Although there are common frameworks to consolidate the buying power of central government, they are not mandatory or universally adopted.

While the intention to create a new approach to contracting and managing big tech suppliers may be a good one, whether the government has the time and determination to follow through is unanswered. In the meantime, there is a lot to do. HMRC has yet to decide on a long-term strategy for replacing the aging SAP system, with the nation processing £750 billion ($968 billion) of transactions a year. Meanwhile projects to replace ERP systems across Whitehall departments amounting to billions of pounds are under way. The stakes could scarcely be higher. ®

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