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Information Technology (Defra)

Volume 403: debated on Tuesday 8 April 2003

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Motion made, and Question proposed, That this House do now adjourn.— [Joan Ryan.]

7.18 pm

I am delighted to have secured this debate, at the fifth or sixth time of asking.

Before coming to the House in 1997, I worked for three decades in the world of information technology. I worked in a range of jobs, from software development through systems analysis and lecturing to project and team management. All that experience was in local government, so it is not surprising that I have taken a keen interest in the use of IT in national Government—and especially in the sad Gadarene rush of Departments towards the expensive abandonment of control called "outsourcing".

When I joined the new Select Committee on Environment, Food and Rural Affairs after the 2001 election, one of our reports was on the performance of the new Department. I think I am right in saying that we were all disappointed at the weak, perhaps even woeful, approach to IT.

My public sector experience has been that outsourcing can often be the last desperate act of an IT-illiterate top management who are drowning in a whirlpool of technology they do not understand and who are seduced by private sector IT sharks into buying solutions claimed to be a panacea For all ills, including their organisational incompetence.

The new DEFRA, top management were said to be the finest available in what was always likely to be a Department with numerous challenges. As an MP representing a rural constituency, with a personal focus on environmental issues, I was and am convinced that the new Department has the ability to boost the quality of life for millions, especially with the Ministers it now has, so I regretted the lack of an IT strategy, other than to sell off IT and throw DEFRA to the mercies of the private sector.

Under the previous Government, IT services went through a market-testing programme that brought flexibility in terms of numbers and skills while the Department retained control and the ability swiftly to reposition staff if necessary without incurring penalties, financial or otherwise. Years later, the better quality service programme suggested better utilisation of the private sector arid better investment within the Department but not the transfer of the in-house capability. Following the end of the foot and mouth outbreak, internal management decided that the BQS recommendations were no longer viable and that a new review to include looking at outsourcing the service should take place.

The Department rushed to finalise its IT strategy by the end of March 2003 in response o criticisms from the Select Committee and to meet its timetable for procurement. As that strategy did not exist before the decision to privatise the IT services, it has been heavily influenced by the privatisation proposals. It is therefore a strategy to support the programme rather than reflect the true business needs of DEFRA.

The Office of Government Commerce gateway one report stated:
"There remains a strong resistance from the trade unions and the majority of Defra staff. There is a serious risk of disruption to business through poor morale, loss of staff, or industrial action. Delays in decision making and consequent uncertainty amongst Defra staff and management as to which individuals are in scope and how services will be provided is leading to reduced support for the privatisation option".

Its recommendation was that within the programme greater leadership needed to be demonstrated by committing to take bold and early decisions in order to remove uncertainty and de-risk delivery, for example, through staff retention strategies. That report was written on 11 December 2002 and DEFRA has still not produced any staff retention measures, other than token concessions at Guildford, where fewer than 50 per cent. of the Department's total IT staff work; there are no current measures to help the rest.

I am concerned about the staff retention issue. There are considerable skills in that sector. IT in this area is complex and needs the skills that are at Guildford. What are the hon. Gentleman's comments about how DEFRA can retain those skills within the plans that it has?

I think that that is possible given imagination and knowledge, which are not necessarily always present in the right places—although that is one of the questions that I shall put to the Minister at the end of my speech.

A notice placed in the Official Journal of the European Union includes the following statement:
"For guidance, the current spend"
for DEFRA IT
"is approximately 85 million GBP per annum."

It further states:
"The contract will be for an initial term of 7 to 10 years with the ability to extend up to a maximum contract term of 17 years subject to mutually agreeable terms."

The Department is, therefore, considering tying itself into a contract worth £1 billion. The Ministry of Agriculture, Fisheries and Food and DEFRA has never committed that sort of expenditure to IT before. It is difficult to know what may have to be cut down the line to ensure that those future bills are met.

DEFRA is a new organisation and still coming to terms with its remit. It is going through major changes. Lord Haskins is reviewing the links of all the countryside agencies, for example. There are over 30 current reviews of the work and infrastructure of the Department and those can hardly allow a clear picture of the potential IT work load. This is a time for flexibility, not for rigid contracting out of services. It is not the time to try to privatise IT service delivery, which nowadays, if not core to, is at least the lifeblood of any business.

An IT strategy has at last been produced, and the management board has insisted on the corporate governance of IT. Both were sorely needed, and although required for the outsourcing, they will also allow internal staff to be more efficient and cost-effective. However, it is difficult to understand why the Department's own staff are not being allowed the opportunity to show their worth under this new regime, especially given the extra funding being made available to improve the infrastructure, rather than wasting taxpayers' money on privatisation—unless, of course, this is a purely political decision.

The Department is also rightly trying to improve the infrastructure before privatisation takes place. The maxim is: never outsource a problem, and I agree with that. However, it is not as if this action and the investment have not been sought before by in-house staff, who are now asking why they were denied this opportunity to work efficiently, and why it is being granted to an external supplier.

While the privatisation programme has been meandering along, staff have been providing an excellent service. There has been a preference exercise, and details of which posts will be TUPE-ed to the external supplier are about to be issued. If a sufficient number of unhappy staff take their careers elsewhere, DEFRA business continuity will be seriously compromised. But the Department is not offering staff any incentives to remain. During the foot and mouth crisis, in-house IT staff worked long hours in remote locations for many weeks away from home, setting up emergency IT networks to improve communication. At the height of the crisis, the Department tried to get additional support from the private sector, but—surprise, surprise—it was found to be inflexible and extortionately expensive. How will DEFRA cope with future emergencies without the flexibility of its in-house capability? No modern business can divorce IT from its day-to-day business requirement skills. To do so is restrictive, backward-looking, not cost-effective and very unlikely to attract able young people into the work force.

The list of recent Government IT failures linked to private finance initiatives, public-private partnerships or outsourcing grows ever longer. The consequent cost to the public purse has become truly astonishing. I shall briefly touch on two examples, as they provide important lessons for DEFRA. As a justice of the peace, I had close experience of computerisation within magistrates courts. The Libra system, which linked courts, was an abysmal failure and needed total re-designing last year at a cost of some £134 million. The coruscating National Audit Office report into that debacle points to serious mistakes, which could be replicated by DEFRA. The Inland Revenue, with which I had many contacts as an accountant, is now trying to re-tender contracts worth £5 billion over 10 years. However, EDS and Accenture are so embedded after a 12-year contract that other companies cannot really take part in the tender process. So the Inland Revenue—and the taxpayer—will enjoy astonishingly poor value in the marketplace.

Whitehall has never learned the IT lessons of the 1992 Wessex disaster. The audit report into that health authority found a management style that discouraged criticism and open debate, led to too close a relationship between the authority and suppliers, and imposed systems on resistant IT specialists. This has a good deal of resonance for DEFRA.

So what are the main reasons for the two frequent failures in Government IT contracts? At the edge of what void do I feel DEFRA is perilously teetering? The size of contracts means that competition is rare, because only a handful of companies is able to provide services on such a large scale. There is also an attitude in Whitehall of never taking risks with the unknown. Almost all IT contracts in government go to five companies: EDS, Accenture, ICL/Fujitsu, BT and IBM.

The private sector cancels more quickly if it has financial or time problems with a company. The Government tend to carry on topping up the costs and extending the deadlines. The IT industry knows that there is little IT expertise in senior positions within Government Departments, so control is effectively handed over to the contractors. Private companies build in expensive clauses for change. The Government constantly change requirements in Departments such as DEFRA—which is still, as I said, an emerging structure—and at the whim of EU legislation. This can make long-term contracts hugely expensive.

Government Departments are also rarely able to pin liability on private companies, which are much smarter at writing contracts. So taxpayers end up carrying the extra costs of delay and poor specification. The Minister should not just take my word for the bottomless bear-traps that lie down the outsourcing route. He should listen to how key advisers slam Whitehall IT suppliers. They say:
"Strategic IT partnerships between the public and private sector have no future unless suppliers get their act together, stop making exorbitant claims and deliver true value for the whole life of contracts."
That blunt message was delivered at the recent conference of the Institute of Economic Affairs by no less a personage than Peter Gershon, chief executive of the Office of Government Commerce, which is responsible for Government procurement policy. He said that only a miserable one in three of UK public sector IT projects were at all successful. He warned IT suppliers that the Public Accounts Committee saw partnering as a mechanism for suppliers to take "nave public sector clients" for a ride.

I absolutely agree with every word. IT suppliers often regard Government as a cash cow. If the Government really want to emulate the private sector, in which they have such touching and abiding faith, they should look at the sector's present attitude to outsourcing. Companies are going for shorter-term contracts, and for rebuilding internal IT provision to increase flexibility and competition. In today's market, there is no sense in the long-term contracts that DEFRA is pursuing.

Many outsourcing contracts entered into during the 1990s are coming up for renewal, and the hard-earned experience from those contracts too frequently reveals that services failed to deliver the anticipated benefits, that the exact scope of the outsourced services was unclear, and that there were insufficient contractual remedies to ensure proper supplier performance. We need no crystal ball: the stack of critical reports casts a shadow right down Whitehall.

In addition to the points raised in my speech, there are four key questions that I hope that my right hon. Friend the Minister will address, either now or in writing.

How much money has DEFRA spent on employing consultants on the IT privatisation project in the past year? What is the average daily rate paid to those consultants?

Given that the Office of Government Commerce made strong recommendations last year to DEFRA to introduce a staff retention strategy because of the risk of skills loss to the privatisation project, what measures has DEFRA introduced to ensure skilled staff are not lost to the Department?

Will the Minister explain what is meant by the statement by the permanent secretary that IT was not part of the "core business" of DEFRA? Is it not true that any modern organisation must have an effective and reactive IT service embedded in its core business if it is to provide efficient delivery?

Finally, the recent Official Journal of the European Union advertisement seeking expressions of interest from IT suppliers contains the statement that the current spend for DEFRA IT is approximately £85 million a year. Will the Secretary of State or the Minister provide a breakdown to show how that figure was arrived at? Will they also provide a similar breakdown for IT spending in MAFF or DEFRA over the previous three years?

Finally, I am relieved that DEFRA has adopted a more sensible approach to corporate governance and corporate data, and that it is, albeit slowly, feeling its way towards a higher profile for IT and a coherent strategy for its utilisation. I say sincerely that all of that is most welcome. IT is common ground for top civil servants, and lowly Back Benchers, but the chosen route of privatisation is as astonishing as it is unnecessary. It could well prove to be a most costly folly, which will doubtless be criticised by future MPs and Ministers, but defended by that impervious layer of top civil servants who forget nothing and learn nothing, and who are paid for by poor, long-suffering taxpayers and citizens.

7.33 pm

I begin by congratulating my hon. Friend on obtaining a debate on what I agree is a most important issue. I regret to say that he is well out of date, and that some of his criticisms relate to the past and not to the present. However, he ended on a positive note. I warmed to that, and suggest that, if my hon. Friend wishes, I could discuss some of the issues raised in the debate with him in the future.

Like my hon. Friend the Member for North-West Leicestershire (David Taylor), my experience before entering the House was in local government, where I was chair of finance. More recently, as a member of the Government, I have seen both good and bad in IT procurement. For that reason, when I took on my present responsibilities, I very strongly questioned the recommendations of officials, and challenged their presumptions. I can tell my hon. Friend that I would have been happy to discuss with him the way in which we have approached the Department's IT strategy over recent months, and I hope that we will be able to discuss the matter in the future. In addition, the hon. Member for Guildford (Sue Doughty), who intervened in my hon. Friend's speech earlier, has spoken to me on a couple of occasions about her concerns on this matter. I think that she well knows the amount of time that I have put in as I have attempted to ensure that the Department gets this matter right. One of the most important issues is indeed that of staff retention. We have demonstrated a commitment to IT staff working at Guildford until at least April 2007. We have also made a commitment to follow high standards of transfer and a commitment to the training and development of all staff—not only the staff who might be outsourced or retained, but all staff, treating them as individuals. As far as loyalty payments to staff are concerned, there is no business justification for that at the moment because loss rates are low. Incentives include wider career opportunities for many staff working for specialist IT organisations, as well as those retained in the Department.

I turn to the four questions that my hon. Friend asked. On the cost of consultants and the question of spend, it would be best if I write to him. I shall touch on his question about core business in a moment. The point of tackling the whole way in which we manage IT in DEFRA is that the Department exists to manage a programme of radical and far-reaching change. My hon. Friend rightly mentioned some of the changes that we are trying to bring about, which include: the concept of sustainable development; balancing economic, social, environmental and conservation issues across a range of aspects of public policy; for the first time, effectively addressing rural economies and communities as part of the mainstream activities of the Department; waste management issues; major shifts in rural land use; and many other issues within the Department's wide portfolio. Delivery of those changes needs to be fully supported by a very broad capability in terms of information technology. There are two strands—first, to get the IT strategy right and, secondly, to get our supply and delivery arrangements right.

The DEFRA IT strategy document sets out how IT will best support DEFRA over the coming years. It is a pragmatic document, not some IT flight of fancy, and it is strongly supported by those delivering services to external and internal customers within the Department. It has been reviewed by one of the most experienced consultants at the Office of Government Commerce, who described it as credible, as having a good level of buy-in and as reflecting a great deal of progress, and who stated that all those factors contribute to a positive sense that the task that DEFRA has set itself is achievable.

The strategy has two key aspects, the first of which is that it involves the delivery of a wide range of new systems. First, we have the big development—worth more than £50 million—of the England rural development programme, and we have the Rural Payments Agency, which deals with EU subsidy payments to 70,000 farmers. Secondly, we have technical developments such as radiological monitoring and the surveillance of animal disease outbreaks. Thirdly, we have the customer livestock and land use registers to provide consistent information. The second key aspect of the strategy is that it involves pragmatic implementation—first, a phased approach and, secondly, extensive use of best practice for IT projects such as using Office of Government Commerce gateway reviews.

That is the context in which the outsourcing programme must be understood. So, why are we doing it? I would say exactly the same as the Permanent Secretary—providing IT is not our core business. As far as DEFRA is concerned, IT is a big business in itself. An immense range of new supply and delivery arrangements are needed to support the IT strategy. That involves not just small changes to existing services, but the need to establish a new technical infrastructure—not only in IT, but terms of changes to the way in which DEFRA undertakes its business. There are issues of customer relationships, geographical information, science, disease monitoring, payments and management information. Is it wise to run such an ambitious range of work outside one's core business? It is not possible for the Department to be technically expert in everything.

Which came first—the decision to privatise or the IT strategy? If it was the former, that flies in the face of all the potentially successful approaches to IT that I have encountered over decades.

As far as I am concerned, we have had to grapple with the immense programme of change and the need to get IT that was appropriate to the demands on the Department in relation to its policy objectives. The question then was how best to develop and deliver an IT strategy. That was the order of things. As in all such things, the question of the chicken and the egg arises, because people are looking at how to deliver the policy. However, as far as I am concerned, the first task with officials has been to tease out what the Department needs to do and how we could best ensure that what we did was served by the right IT strategy. Over the period in which we have worked our way through this and into the processes of the gateway strategy, the chickens and eggs have got themselves into order. I believe that we are getting things right.

Outsourcing IT best supports the necessary specialisations that are required in DEFRA. I did not come to that view easily. As I have said, I had many questions about the way in which the Department was approaching its new challenge. People should remember that we addressed these questions immediately after a new Department had come into being through the bringing together of two large sections of previous Government Departments with a set of major new responsibilities. We considered internal restructuring, but that would not give us what we needed because of the complexity of the changes required. We need access to a large pool of experience and talent at the cutting edge of IT.

Our challenge has been to make our strategy a success. Having taken care not to rush the early stages, we are now moving ahead, ensuring that we are building on the needs of the departmental change programme and the IT strategy. Since being given ministerial responsibility, I have taken a personal interest in this. I took the initiative and discussed our options and possible approaches with Peter Gershon, who, as my hon. Friend the Member for North-West Leicestershire said, is the head of the Office of Government Commerce. I did that to ensure that we learned from what had happened elsewhere. My hon. Friend rightly referred to some of Peter Gershon's comments on the way in which experience elsewhere in Whitehall should be learned from. I ensured that we had a gateway zero review before setting out; I visited Guildford and met trade union representatives; I offered opportunities for training; and I upgraded the human resources input to the programme in discussion with our officials. That is why I am now certain that we are on the right track—as has been confirmed following the Office of Government Commerce gateway three review in March, to which I have already referred.

We are now ready to go. We are launching procurement in the Official Journal of the European Union and we expect to award the contract by summer 2004. We are aiming for success through learning lessons, through consulting widely, through drawing on consultancy experience and through managing the risks. We have recently appointed an IT director from the private sector who has led previous outsourcing projects. We are recruiting more key people to the management team. We are looking to use people who have done this before and done it well.

In the light of comments made by my hon. Friend, I want to make it clear that we are not handing over our destiny. The Department is not handing over the direction of IT or selling off the family silver, as my hon. Friend rather suggested that we were. Outsourcing is only a part of what we are doing. We are developing internal skills in the business management of IT; we are developing clearer governance; and we are developing more long-term planning, as in the IT strategy. We are retaining the capability to manage the supplier, and the arrangements for that are being planned now. We are working with all in DEFRA to ensure that we are ready for a new service and that the new service gives the users of IT in the Department what they need.

I must stress that we are not neglecting our staff. We have published our human resources strategy, which defines the values and principles that will ensure that staff are supported and treated fairly. I have made this clear to the staff and I am happy to state it here now: I want us to value every member of staff in DEFRA, whether they are members of staff whose future will be as part of the internal operations—the intelligent customer function—or they are members of staff who will move to a private sector supplier or find themselves elsewhere. That is why we have put such emphasis on the human resources strategy.

Those DEFRA staff who transfer to the new supplier will do so under the Transfer of Undertakings (Protection of Employment) Regulations 1981. Senior officials managing the programme have regularly and frequently consulted departmental trade union representatives, in particular on issues of concern to staff. Again, the increased emphasis on human resources has allowed us to improve and intensify that work.

An extensive and varied training and development programme is under way for staff who are affected by the programme, including a one-to-one counselling programme. That programme is a big undertaking. We have not taken it on lightly and would not be doing this if we did not believe that it was the right way forward for the Department.

I am grateful for the Minister's comments. Before he concludes his remarks, however, will he briefly answer my questions? Why was not at least a fraction of the hugely increased resources that are to be spent on IT in DEFRA made available to existing staff who could have demonstrated what they were worth and drawn deeply on the skills that they have developed in the years that they have given to MAFF and DEFRA?

We are increasing resources for IT because we have initiated a more ambitious IT programme for a vastly increased Department. We are in a different ballgame. As I said, we have tried to support staff as a part of that programme. We have not intended to leave staff behind and to look outside DEFRA. We have tried to carry staff with us and have put a programme in place to increase and improve their skills so that they can be part of the new arrangements. That reflects our ambition. We very much want the staff to be part of the future of DEFRA.

The basic point is that DEFRA has a major programme to deliver. We are ambitious to do that in the most modern way possible and to use IT to the best. That is why our programme of change in the Department is underpinned by a well developed and linked IT strategy, and by plans for IT outsourcing that is capable of meeting the Department's wide-ranging needs. Providing that service is in the best interests of the public and all those whom we serve on the range of matters for which we are responsible. It is also the best way to ensure that our staff have the tools to do the job.

Question put and agreed to.

Adjourned accordingly at fourteen minutes to Eight o'clock.