IT practices face tougher T&Cs and less work

The increased focus on public sector work by many of the UK’s IT teams over the past few years is reaching a critical next stage. The Office of Government Commerce’s (OCG) new guidance for IT procurement, entitled ‘Decision Map for Procurement’, was published in December. Later this month, the terms and conditions for future Government IT projects should also be published. The chances are they will impose a much higher standard on suppliers.

The OGC’s principal adviser is DLA. The terms and conditions adopted by the firm’s client are expected to be based on those drafted by DLA for the mammoth NHS IT project, on which it is advising with Allen & Overy.

The NHS project, under the direction of director general Richard Granger, set a new standard for toughness. They included, for example, termination rights without compensation in the event of non-performance. To many impartial observers that would seem eminently sensible, but to many in the IT industry it was a shock to the system.

“Having a bigger stick to beat the supplier with doesn’t necessarily mean the project will result in a better deal for the user,” says Logica CMG’s general counsel Laurence Guedes. “You have to have ownership on both sides. It’s about who is best able to manage the risk.

Well, this is second guessing, of course, but it would appear that the OGC is preparing to demand more rigour from its IT suppliers in the future. And for the lawyers advising them, that will mean more banging of heads against the proverbial brick wall until they accept the more stringent conditions on behalf of their clients.

As one IT partner said: “If the more rigorous approach transfers over to the OGC via the terms and conditions, it will become the new industry standard. I believe Granger has done a good job for the tax payer and, personally, I think it’s to be applauded. Legal advisers will probably just have to put up with it.”

The catalyst for the OGC review was the decision last year to drop the PFI guidance following a succession of disastrous PFI IT projects. “Following the announcement in July [2003] that the Government’s approach to IT procurement would be based on a presumption against PFI,” said an OGC statement, “OGC has produced guidance to help departments decide on the best strategy for procurement of IT.”

The statement goes on to say: “Suppliers are likely to benefit from the new consistency of approach the guidance proposes.”

OGC chief executive Peter Gershon added: “We expect this guidance to help Government departments improve their strategic approach to procurement. Used appropriately, it will increase their chances of success in IT projects.”

In fact, the guidance notes themselves have been largely well received by IT partners specialising in Government work. But according to one well-known public sector-focused IT partner: “There is a battle going on in the OGC over what the new terms and conditions should look like.”

If, as industry is expecting, a new benchmark is to be established within Government, it is fairly certain to raise the bar higher for the IT industry.

In a related issue, the OGC review is expected to lead to a focus on fewer, but bigger projects. As one IT partner puts it: “The OGC review is all about cost savings and economies of scale.”

It may create the opportunity to fold several IT projects by numerous Government departments into each other, to secure the benefits of bulk purchasing.

If so, this would not only save money, it would also create some interesting procurement issues. The current procurement regulations require each Government department to advertise a project formally.

As Masons IT partner David Isaac points out: “A large number of Government departments will want to take advantage of the new and improved IT and other contracts that are presently being negotiated. This makes sense from a value for money and service delivery point of view. However, the procurement issues will need to be considered quite carefully, especially for contracts that have already been advertised under the procurement regulations.”

For law firms, the procurement problems may be dwarfed by the reduced levels of work brought about by increased bulk purchasing. Central Government IT projects are currently awarded to firms on its
L-Cat panel (see box, above, for panel members). The aim of the panel is to provide Government organisations with a simplified means of procuring external legal services from a variety of firms.

If, as expected, the OGC review recommends bundled up projects, the pickings for those panel firms may not be so rich. With Gershon about to stand down as head of the OGC, his review may turn out to be a dubious parting gift to lawyers.

NB: DLA appears to pop up everywhere when IT is mentioned these days. A team from the firm, headed by technology partner Mark Crichard, has just completed another mega portion of the NHS National Programme for IT.

The Department for Health has awarded BT a £530m contract to procure, integrate and manage networking services for the New National Network (known as N3) for the NHS.

It is believed to be the first of its kind, though presumably Crichard wasn’t being ironic when he said: “The ground-breaking contract needed to be sufficiently flexible so as to meet the changing demands of the programme and technology going forward.

The L-Cat panel for IT, telecoms and e-commerce
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Bird & Bird
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