Lessons from the Olympics: The recovery will not be outsourced


The BBC summarises an article in the Independent on the effect the G4S experience has had on Philip Hammond's "starting prejudice" that the public sector could learn from the private sector. The G4S saga has shown only too clearly that is not always the case. The lessons should, however, have been learned from the National Plan for IT. In retrospect this will probably be seen as having been the zenith of "the Anderson approach to public service delivery.". NPfIT was planned by those seconded to help rebuild the Labour party after its defeat in 1992. In the end they could not deliver and managed to walk away almost without penalty after a former colleague (now in charge of implementation) let them off the hook - despite the spluttering of the then opposition. BT, CSC and Fujitsu were left to pick up the impossible, costing billions GBP to their shareholders as well as to the UK taxpayer.

Unfortunately, by then, many of those responsible for planning NPfIT and other delayed big bang exercises (such as ID "cards") had moved successfully into Central Government planning and procurement. This year the reshuffles have seen former Andersen (renamed as Accenture in 2001) consultants succeeding former Andersen consultants - despite a change of Government. Little wonder that the drive to get UK Central Government IT spend into line with that of other countries (who typically spend 30% less for equivalent products and services) is making such slow progress . More-over forward spend also appears mired in consultant driven "delayed big bang" projects (such as the DWP Universal Credit) and high overhead frameworks (such as BDUK and PSN for broadband and communications and Ed Milliband's Smart Meters project).

Meanwhile Local Government attempts to respond to a 28% cut in funding are gathering pace ; based on pooling residual in-house expertise rather than hiring in consultants with no experience of delivering value for money in a public sector environment. They are also learning from "smart procurement" in other parts of the EU, using the Directives to get round the obstacles placed in their way by central government attempts to hire consultants to find ways of using state aid to protect incumbent suppliers and outdated outsourcing models.

I am now yesterday's man but believe we can do very much worse that look back to the last time a new Conservative Government inherited such a dire situation - and learn from what they did well, as well as from their (our) mistakes.

In 1977 I moved from ICL, where one of my responsibilities had been checking the cost/risk profile for major intra-UK turnkey bids. My last exercise had entailed forecasting the IT needs of the then nationalised industries over the next five years. I joined the Wellcome Foundation as a corporate planner (Europe, Middle and Far East), including looking at the risk profile of big turnkey projects (from vaccine plants in Tropical Africa and factories in the Philippines or Indonesia, to public health projects in the Middle East and nursing homes in the UK.

Because I no longer worked for an IT supplier, I was trusted to help with Conservative policy studies on computing and communications issues. Later Wellcome also allowed me time off to work on a paper for Cabinet Office on the computerisation of PAYE and, more generally, to look at the economics of outsourcing (not just for IT).

It quickly became apparent that PFI-style leasing deals (which had become popular when the Callaghan government ran out of money) only made financial sense if the private sector was at least 15% more efficient than the public sector (to cover the extra cost of risk funding). More-over outsourcing (whether public or private sector) only made sense if it enabled the sharing of scarce/expensive resources (e.g. skills or equipment) across multiple clients. Thus we (Wellcome) could make very attractive bids for testing and quality control services but little else. It also made sense for us to also outsource our global commercial IT and communications network but not our research and production systems or the related global quality assurance operation (which even then enabled us to organise a product recall inside 48 hours of a report anywhere in the world, including over Christmas and the New Year when most networks and computer centres used to go off air for maintenance).

If one applied similar analyses to the UK public sector it was apparent that there was the potential for massive savings from shared services, but the legal and cultural barriers were such that this was commonly only practical by sharing a common private sector supplier. Unfortunately, this lesson was lost sight of when outsourcing gathered pace as a response to the IT skills shortages of the 1980s. We saw complex customised outsourcing contracts which wiped out not only the potential savings to both client and supplier from shared systems, but also the flexibility to respond to change. Instead of seeing a reversal of policy we then saw layer of consultants and lawyers on both sides to specify theoretically optimised solutions which, by definition, would become sub-optimal before the implementation date.

All the major suppliers, consultancies and law firms were complicit. I am probably unfair is calling it "the Andersen approach" because they were "merely" very much more professional in hiring bright young MBAs and turning them into impressive consultants who knew everything about everything - but had never personally delivered anything.

However, one thing is for certain, economic recovery is more likely to be once again, as in the past, be based on bringing core tasks back in house to be handled by those emotionally (not just contractually) committed to the job. Whether or not you think the worst is now over, read not just your Machiavelli but your Shackleton.