What government procurement lessons can be learnt from the West Coast franchise debacle

14 December 2012

Chris Smith

Chris Smith

Former Head of Digital Transformation

Earlier this month the government announced that it is extending the West Coast franchise with Virgin for a further two years, after the tendering process was abandoned. This is clearly disappointing news for the taxpayer as we are now paying Virgin to continue running the service, but great news for Richard Branson.

Does this suggest that the government is unable to run large complex procurement exercises? And if so, what needs to be put in place to change this? Cleary the economic models that Department for Transport officials were using had some inaccurate assumptions. But HMG has history here of large scale procurement projects which have failed to deliver the expected results.

And if you focus on IT projects the picture becomes even worse. There is long list of failed projects and an alarming frequency of them happening. But why is this?

According to research from Oxford University, IT projects are 20 times more likely times more likely to run out of control than other business projects, and one in six of them do so with average cost overrun of 200%.

Why do government IT project fail?

Philip Virgo, Secretary General of EURIM, a UK political advisory body, has written a lucid and insightful article  describing the dynamics that cause government projects to tank. Here are Philip's six reasons that government IT projects fail:

  1. Analysis of business needs, missing or wrong: failure to undertake a proper needs analysis. Failure to consult those in the front line of delivery, or in receipt of services, is endemic among those planning new policy initiatives or changes to existing systems
  2. Needs change before implementation: the churn of ministers and political priorities is significantly faster than that of technology. It has been suggested that suppliers commonly bid low on the original specification to get the opportunity to make profits on the subsequent changes
  3. Over-ambition: about what is achievable in practice, given the people, time and budgets available
  4. Delays: particularly in agreeing priorities between conflicting objectives, leading to delays in planning and procurement
  5. Lack of top customer management involvement: and lack of high-level skills, training or experience in planning, procurement or implementation. This lack of training and experience on the part of the customer causes and compounds the previous four problems
  6. Supplier project or team management: usually because the 'B' team is trying to salvage an already doomed system, after the 'A' team has moved on to the next bid.

So what lessons can be learnt and will things ever change or are processes so intrenched that nothing will ever happen? If the root cause of government IT failures lies somewhere in the structure and relationships between political masters and civil servants, then spectacular melt downs like the West Coast Rail franchise won't disappear any time soon.

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