How governments become addicted to suppliers like Fujitsu
- Reference: 1704978010
- News link: https://www.theregister.co.uk/2024/01/11/fujitsu_public_procurement/
- Source link:
Leaping into focus is Fujitsu, the supplier of a controversial £2.3 billion ($2.94 billion) accounting system, Horizon. Between 2000 and 2015, 736 managers of local Post Office branches around Britain were criminally convicted of financial fraud when errors in the system were to blame. Some of them spent time in prison and were left bankrupt after the wrongful accusations. At least two subpostmasters committed suicide in the wake of the accusations, one taking his life after the Post Office said he owed the branch hundreds of thousands of pounds.
In [1]2020 , six former Post Office subpostmasters caught up in the Horizon scandal became the first to have their names formally cleared after the Court of Appeal quashed their wrongful criminal convictions. The court quashed [2]39 more convictions in 2021. A statutory inquiry was launched in 2021.
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While politicians and commentators call for convictions to be overturned and compensation claims to be expedited, media outlets have also been adding up how much government work Fujitsu has won during the sorry saga.
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The [6]Financial Times calculated that the Japanese vendor had won £4.9 billion ($6.25 billion) — jointly and as sole bidder — since the courts ruled the Horizon system was not robust in December 2019. It reckons the figure is £3.6 billion ($4.6 billion) since British prime minister Rishi Sunak entered front-line politics, according to the analysis of data compiled by public procurement research firm Tussell.
Broadcaster [7]ITV said Fujitsu had won more than 150 government contracts since the Post Office stopped prosecuting its staff over financial discrepancies. Meanwhile, [8]Sky News announced Fujitsu had won £6.8 billion ($8.68 billion) in public contracts since 2012, also working with Tussell.
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While the public and the mainstream media may be shocked at the figures Fujitsu has been winning, Register readers may not be. After all, El Reg has [10]covered many of these deals as the ink dried, as well as [11]questioning why a proper inquiry was not launched sooner. The question is why a supplier of the system behind the Post Office scandal — the inquiry is yet to determine whether it is culpable for the system's failures — has been rewarded with a small fortune in work.
To understand, look at one of the deals far removed from central government and London's self-perpetuating media machine.
What Northern Ireland's libraries can tell us about government procurement
In January 2020, Libraries Northern Ireland, which runs public libraries in the territory, [12]extended an IT services contract with Fujitsu worth £12 million ($15.3 million) after running out of time to complete the tender process. The 29-months extension came after Fujitsu won a five-year deal worth £25 million ($32 million) in 2013. That contract included an option to extend for two years, which Libraries NI took in 2018, with the total value eventually amounting to £33.6 million ($42.9 million). The contract was set to end in April 2020.
The contract notice explained moving to an alternative supplier was not advisable as "the system and licenses are not readily interchangeable or interoperable. Any attempt to transfer systems without an adequate transition period poses an unjustifiable risk of business disruption and total network failure."
In August 2022, NI Libraries finally announced the winner of the competition for a strategic partner to "deliver modern and innovative IT services." [13]Fujitsu won the £27 million ($34.5 million), seven year deal.
Account management teams within large IT contractors are better resources than commercial teams within clients, and they have worked on more deals...
It's perfectly possible the global tech firm was the best supplier bidding, but the provincial book hoarder is not the only government body which seems to have a Fujitsu addiction.
In March 2022, UK tax authority HMRC has awarded [14]Fujitsu a £250 million ($319 million) contract for managed desktop services (MDS), extending a deal that dates back to 2017.
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In October 2020, the HMRC also [16]awarded Fujitsu a £168.8 million ($215 million) deal without competition to ensure critical applications running customs checks were still in place while the much-delayed replacement was finished. It [17]later said the Customs Handling of Import and Export Freight (CHIEF) system would end its life in September 2022. It is now expected to retire in March 2024.
In 2021, the [18]Home Office handed Fujitsu a £5 million ($6.3 million) contract to support a border system beset with delays.
Also under the Home Office's remit, a Police National Computer contract was awarded to Fujitsu in August 2022 after [19]no other companies bid for the work . The £48 million ($61 million) deal was listed as a "Single Tender Action," indicating that it is a direct contract with Fujitsu as sole supplier. A year earlier, [20]413,000 records of evidence were lost from the central database.
Another Fujitsu system — inherited when it bought UK supplier ICL in 1998 — [21]contributed to systematic errors which led to more than £1 billion ($1.28 billion) of state pensions not being paid out to pensioners.
Fujitsu is one of many...
The apparent news that Fujitsu wins so much government work has prompted breastbeating among politicians of all persuasions.
Liam Byrne, Labour MP and chair of the Commons business committee, told the Financial Times: "Ministers cannot and must not reward failure any further. It's vital there's now a moratorium on new contracts for Fujitsu until we've got to the bottom of this terrible miscarriage of justice."
The problem is that it's not just Fujitsu. In 2022, Fujitsu's partner in HMRC's £10 billion ($12.7 billion) Aspire contract, Capgemini, [22]won a £215 million ($274 million) contract for work on systems included in Aspire, which began in 2004 and was supposed to last 10 years. The contract was extended multiple times but was again supposed to end in 2022. HMRC denied it was extending Aspire again, but Capgemini will look after "some" of the same systems included in the mega deal, as will Fujitsu, [23]which has won similar work .
The general gnashing of teeth in the media belies the government's problem with Fujitsu and many other so-called "strategic" tech suppliers (Accenture, Capita, CGI and IBM are also among them, according to Tussell).
A commercial director at a global firm once told me, "they do it to you much more than you do it to them." He meant that account management teams within large IT contractors are better resourced than commercial teams within clients, and they have worked on more deals. A client might renegotiate or procure a big deal once every few years; the supplier will manage several a quarter. Meanwhile, vendor-side executives get bonuses for maximising revenue and margins.
The same is true on the technical side. When clients outsource, skills go with the work. Being retained by the client is rarely the best option in terms of pay or experience.
The combined dearth of technical and commercial skills within a government puts its bodies at the mercy of the big contractors. How can you hope to re-procure a system or secure value out of the suppliers if you don't understand enough about what the system does? Commercially, how can you renegotiate or manage the contract if you don't have the commensurate skills and experience? While this is the case, it is less risky to go with an incumbent supplier than to find an alternative, presenting suppliers with the upper hand in terms of their margins and performance. The government can't simply press ctrl alt delete on the system.
Yet, we don't see the technical or commercial skills in government to deal with the challenges. In fact, the opposite is the case.
Chair of Parliament's spending watchdog Meg Hillier [24]said last year that the government's technology programs are "hobbled by staff shortages, and a lack of support, accountability and focus from the top… The government talks of its ambitions for digital transformation and efficiency, while actively cutting the very roles which could help achieve them."
[25]39 Post Office convictions quashed after Fujitsu evidence about Horizon IT platform called into question
[26]Post Office faces potential criminal probe over Fujitsu IT system's accounting failures
[27]UK Post Office admits false accusations after computer system cockup
[28]UK.gov announces review – not proper inquiry – into Fujitsu and Post Office's Horizon IT scandal
There is no sign of budgets for the necessary upskilling. The Autumn Statement [29]forecast £61.7 billion ($79 billion) in discretionary fiscal tightening in the coming final year, with £28.0 billion ($35.7 billion, or 45 percent) to come from reductions in departmental spending.
Meanwhile, the UK government is embarking on [30]another multi-billion wave of major IT contracting . HMRC is in the middle of its £7 billion ($8.9 billion) Technology Sourcing Programme.
All of the major Whitehall departments are procuring shared services deals, which will see them move ERP systems to the cloud, and some departments combine with others to use the same systems in multiple billion-pound projects of staggering complexity. Watchdog the Infrastructure and Projects Authority has [31]already sounded a "Red" warning on HRMC's project – [32]the £500 million ($638.3 million) procurement launched in December. Other departments have launched their competitions, although funding is in doubt beyond the current spending review, which ends in 2024-2025.
When the media focus on Fujitsu dies down, under-resourced and under-skilled public sector tech and commercial teams will experience painful fiscal tightening, the same tech giants will return to the trough, their shareholders will reap the benefits almost regardless of performance... and the world of government IT will continue to turn. ®
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[1] https://www.theregister.com/2020/12/11/post_office_horizon_scandal_first_subpostmasters_cleared/
[2] https://www.theregister.com/2021/04/23/post_office_scandal_fujitsu_convictions_quashed/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/publicsector&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZaAeu1v6RYB9IAK2HkZhXAAAAMo&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/publicsector&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZaAeu1v6RYB9IAK2HkZhXAAAAMo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/publicsector&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZaAeu1v6RYB9IAK2HkZhXAAAAMo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.ft.com/content/c38044f3-05cb-45a2-abbd-bc1b03551d9d
[7] https://www.itv.com/news/2024-01-08/fujitsu-has-won-more-than-150-government-contracts-since-horizon-scandal
[8] https://news.sky.com/story/post-office-scandal-horizon-developer-fujitsu-handed-6-8bn-in-public-contracts-since-2012-13045291
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/publicsector&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZaAeu1v6RYB9IAK2HkZhXAAAAMo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2013/07/09/post_office_admits_false_accusations_after_computer_system_cockup/
[11] https://www.theregister.com/2020/06/11/ukgov_post_office_fujitsu_horizon_review/
[12] https://www.theregister.com/2020/01/16/fujitsu_libraries/
[13] https://www.find-tender.service.gov.uk/Notice/021009-2022
[14] https://www.theregister.com/2022/03/31/hmrc_fujitsu_extension/
[15] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/publicsector&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZaAeu1v6RYB9IAK2HkZhXAAAAMo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[16] https://www.theregister.com/2020/10/13/fujitsu_hmrc_contract/
[17] https://www.theregister.com/2021/11/08/chief_retirement/
[18] https://www.theregister.com/2021/09/09/fujitsu_border_crossing_contract/
[19] https://www.theregister.com/2022/08/23/police_national_computer_fujitsu/
[20] https://www.theregister.com/2021/05/26/home_office_slams_pnc_tech/
[21] https://www.theregister.com/2021/09/22/icl_mainframe_uk_pension_errors/
[22] https://www.theregister.com/2022/03/28/hmrc_extends_capgemini_deal_from/
[23] https://www.theregister.com/2022/03/31/hmrc_fujitsu_extension/
[24] https://www.theregister.com/2023/09/13/uk_government_efficiency_held_back/
[25] https://www.theregister.com/2021/04/23/post_office_scandal_fujitsu_convictions_quashed/
[26] https://www.theregister.com/2019/12/18/post_office_trial_fujitsu_horizon_judgment/
[27] https://www.theregister.com/2013/07/09/post_office_admits_false_accusations_after_computer_system_cockup/
[28] https://www.theregister.com/2020/06/11/ukgov_post_office_fujitsu_horizon_review/
[29] https://obr.uk/box/the-implications-of-the-governments-departmental-spending-plans/
[30] https://www.theregister.com/2021/12/07/hmrc_procurement_timetable/
[31] https://www.theregister.com/2021/12/07/hmrc_procurement_timetable/
[32] https://www.theregister.com/2023/12/19/uk_tax_collect_launches_500/
[33] https://whitepapers.theregister.com/
Re: Don't forget NPfIT
£465M according to digital health.net
Corruption
It's not only "addiction" but also corruption as government has deliberately made it more difficult for other businesses to participate in tenders by enacting changes to IR35 that prevent smaller businesses from operating.
Small business effectively can't participate.
Medium business can no longer effective subcontract parts they lack expertise in.
Cowboys like Fujitsu then become a "safe bet".
Re: Corruption
I agree. Govt procurement frameworks are inherently geared to the big players, who, in my experience, couldn't come up with a new idea if you put it on a plate for them.
We responded to a RFP recently and were asked if we had made a mistake on our costing becuase we were considerably under the published budget. I'm a UK tax payer, saving the govt money is a good thing!!
Re: Corruption
Do tell me how a small business could manage AND support a software system deployed to 1000s of terminals, including updates and maintenance. I'm sure we would all love to get involved in that.
These systems are complicated its why its the same half dozen supplier names because they are the only suppliers that can afford the huge costs involved
Re: Corruption
"1000s of terminals" sounds scary, but it really doesn't matter. Small teams can build robust complex systems.
Maintenance and updates are a separate thing. If systems required to have good documentation and interoperability, there wouldn't be a need for a single big company to service them.
they are the only suppliers that can afford the huge costs involved
This is another fallacy. In corrupt system of course the tenders will be structured in such a way that only the big players could realistically participate.
Re: Corruption
Internal IT departments have done it since forever and on a pretty tiny budget too. The development (and thus support) team for a complex piece of software rolled out to thousands is often a couple of people and a coffee machine. I spent much of my career writing bits of software to do stuff that was apparently complicated and/or difficult, it's just what programmers do. Backed up by a competent ops team to do first-line support, that sort of development was unremarkable. If the software had problems that evaded testing, it was fed back to the team immediately and fixed, as was stuff that wasn't technically a problem but which annoyed users, hence the Problem Report/Change Request forms.
Okay, a lot of this is going back to the days of mainframes, minis and clusters but I honestly don't see what's changed (I mean other than the omni-menace that is ISO-9000, but even stuff like that is hardly a deal-breaker).
Re: Corruption
Right. And in that case, the original team remain on hand to maintain and support the system while they do other tasks within the internal IT dept. There is therefore an incentive to make a simple, robust and maintainable system given that it is they who will be supporting it. Whereas if you sub it out then the support bods will be low-paid plebs with no understanding of the system, long after the dev team have moved on.
The problem is the post office was being prepared for privatisation. The UK government wanted to reduce headcount, increase profits (not to mention cover up any scandalous IT disasters) so that it would look more valuable to a potential buyer.
Re: Corruption..1000's of terminals?
Well one of my family members built a very successful deliberately kept very small company where a 10K to 20K seat project was just a typical bed and butter project. No big deal. Design. Install. Roll out. Support. With clients you have all heard of. Fortune 100 clients etc. If you know what you are doing and a have a small core team of technically first rate people there is little difference between a 100 seat one location rollout and 10K's seat multi location, multi country roll out. If you know what you are doing. Good design and good management scale nicely. Bad design and bad management does n't.
The Big Guys are always hired by technically incompetent customers. Thats a given. Because apart from a few (very few) juniors I've yet to see any technical employees on a Big Guys team that was worth hiring as anything other than maybe a junior QA guy. Maybe. This is especially true of the senior / lead titles.
Governments and technically incompetent big businesses are paying for gold plated peanuts for not very bright monkeys,.
BTDTGTTS
Many years ago, in another life, my employer was invited to "tender" (i.e. waste a fucktonne of money) on a contract that was clearly going to these scumbags. They quite rightly declined.
As did every other bugger. Fujitsu won by default.
Then there were EU regulations about state tenders requiring more than one candidate. Which led to the Alice in Wonderland world of the UK government paying companies to produce tenders that were never going to be accepted. I believe HMRC did that.
However, as with all the other "crises" facing the UK, this won't be fixed until there is a political will to do so (see also: US school shootings).
""the system and licenses are not readily interchangeable or interoperable"
There's a very strong case for legislation to prevent vendor lock-in on government projects and the development of minimum interoperability standards. Quite apart from over-runs and dodgy practices, when systems eventually require replacement it's currently necessary either to rip out the entire extant system and start again from scratch with a new vendor or be locked in to the existing supplier regardless of their performance.
Re: ""the system and licenses are not readily interchangeable or interoperable"
Others have been saying this for years. See the file format wars of the early 2010s. Cabinet Office produced some half decent guidelines which were mysteriously withdrawn and nothing has happend since. At the time someone said "it would be nice not to be here in 10 years time" and now the CMA has opened an inquiry into the problems of lock-in with cloud.
It's always been about interoperability and for some reason (I think we can guess) government of any persuasion has always listened to those with a vested interest in avoiding it.
Re: ""the system and licenses are not readily interchangeable or interoperable"
Let's not forget departments taking money for fighting corruption, being corrupt themselves.
If this behaviour was policed, we might not have this mess today where we pay highest taxes in living memory with nothing to show for it.
I am thinking of taking my years at Fujitsu off my CV....
Please, HMRC, do not change the self-assessment web portal. Yes, it's clunky, it's old fashioned, but IT WORKS.
The last project delivered by the Inland Revenue's internal IT division before it was privatised. All function points delivered working and tested, on time, under budget.
I was seconded to the Revenue's internal IT team way back to help develop something. Same story, the project was delivered on time and under-budget, and also turned out to have spare capacity to do various other interesting things. Some of the internal politics and gnashing of teeth weren't always fun but most were a good bunch and stuff just worked. They did have a bit of a love-affair with ICL (and hence Fujitsu's entrance, sadly) but AIUI the computers and software that were supplied in the ICL years worked well; about the only thing I heard anyone complaining about was a mainframe-based text editor that was apparently a bit shit.
Agreed. I can usually get mine filled in in about 15 minutes; takes me longer tracking down dividend/interest payments than going through the form. It hasn't changed much in about 10 years, I think, but it works. Doesn't need any more bells & whistles.
The old online web portal for lodging and paying VAT worked just fine, and it wasn't even a bit clunky.
But they felt the need to change (ie. get rid of it) and make you run software that connects to their server and makes the data transfer "digitally" cos that's new and trendy and a buzzword.
Some good points here
I worked for one of the named suppliers - IBM - for more than 20 years, then worked for the UK public sector and ran a "small" £37.5m procurement as part of my job. I and my team were highly technically skilled and we had excellent support from the people used to running procurements who advised us on the process but left us to make the decisions. Without both of these aspects, procurements are often doomed, as the article says. On the other hand, if it's done properly with the right people and without too much senior management interference, it makes sense. We completed on time and on budget. As I expected we would.
Big IT projects shouldn't be outsourced. If HMRC is spending £250m on a project, they should be employing the engineers, project managers and architects directly. Pay them a good salary and recruit well so you get the cream of the crop. Once the system is created, they should own all of the IP of the system, and it will be fully documented. They can use contractors if needed here and there, but they should be only used as specific parts of the system, not to deliver the whole system.
Otherwise, this gravy train of incompetent contractors delivering failure and vendor lock-in will continue, resulting in poorer services for the rest of us poor fools.
This is another sign of corruption in the public sector. The wage scales are artificially kept below the market rates, to so that departments cannot actually find anyone competent to do anything in-house, but it is totally fine to hire a supplier and pay them over the market for the same labour.
It's gotten worse after IR35 changes that limited competition.
Ideally it should be as you say - things should be developed in house and cowboys like Fujitsu should be looking for work elsewhere.
at the mercy of the big contractors
but this (while absolutely no excuse) is the case in any business and public sector that's consolidated enough, the internets, railways, energy supplies, etc. Now we're in the process of oursourcing health services and the education is the next juicy bit. Ironically (?) the public (tax payers) ultimately pay through the nose, either because it's run by a horrible wasteful and inefficient 'public' institutions, or because it's run by a less (?) wasteful and less (?) inefficient corporations that screw you how they want and any way they want, once you let those pimps into your parlour.
There is an easier explanation for Fujitsu's access to government in the i newspaper today
[1]Fujitsu’s chief lobbyist during the fallout from the Horizon scandal is also the co-founder of a leading right-wing pressure group of Tory MPs
"Clark Vasey, who has been Fujitsu UK’s head of corporate affairs since 2014, is the director and founder of the Blue Collar Conservatives group, which he set up with the now “minister for common sense” Esther McVey in 2012.
Mr Vasey stood for election in Workington in Cumbria in 2017 as a Conservative Party candidate, but lost"
[1] https://inews.co.uk/news/fujitsu-lobbyist-post-office-scandal-tory-pressure-group-mps-2846557?ico=most_popular
Time for legislation
It's past time for legislation to effectively control the almost incestuous conduct so frequently seen around government IT contracts.
Budgets should be baked into the contract and legally enforceable (if you SAY you'll do it for £x then that is what you get and if you got your costs wrong, tough luck!)
Likewise timescales (with a reasonable allowance for unexpected issues) should be legally binding with significant penalties for failure.
Contingency funds should likewise be baked into the contract and similarly legally enforced, to a maximum of 20% of the total contract value.
Any company which fails to deliver on time & on budget should be legally barred from tendering for all future government contracts for a minimum of 12 months.
Repeated failures to deliver should see companies legally barred from tendering for at least 10 years.
Any company who's system is shown to be unreliable/inaccurate/unfit for purpose should be banned permanently from all government work and required to pay compensation, in full, to everyone adversely impacted by the system concerned.
Only when there are real, enforceable penalties for such unacceptable behavior which directly hit the bottom line of the culprits will we see an improvement.
It's not corruption, it's ideology
The problem is a government, a political cast, a generation of managers who believe privatisation in general and outsourcing in particular is a good thing.
As fir privatisation that went well sewage in the rivers, monumental electricity bills and buying all your gas from Putin.
Outsourcing having Benn on both sides of the deal Nealy always ends in a long drawn out expensive mess.
The whole country needs re-education to try and forget this failed ideology.
They don't
"How governments become addicted to suppliers like Fujitsu"
Its laziness and "the boys club". So they'll pick the person that bids the lowest sometimes, if not most times, they'll ignore people who are in the tender process who point out flaws because "We just want to get this done" or "Its fine, we know them, its fine". Then once in the door and in fact before that, they visit site in their expensive cars, brief cases and firm (why is that needed) handshakes with the fake laughing, much like the character Phil in the IT crowd, series 4, episode 1, Jen The Fredo.
They'll all pat each other on the back, make sexiest jokes in the process and be awarded a contract. During their contract, that will be shit and issues will arise. The engineers will point all these out then a mass e-mail will go out by the exec team and specifically the person who "project managed" the contract stating "There are NO issues with the current software/application/hardware. I politely request there is no discussion of any issues in front of customers/staff and that any tickets raised are processed in a timely manor, again highlight to the end user that this is a one off issue". Rinse and repeat until the engineers dealing with it get fed up a leave. Looking back a year later finding out said "project manager" was promoted and that everyone still hates the new app.
Then a new contract will come up and "the boys club" will just fudge it to allow the existing company to get it so they don't have to bother with all the tender shit again.
Don't forget NPfIT
Did we ever find out how much Fujitsu were paid when they lost the contract?