The UK Government has issued a series of "red lines" to apply to public sector IT contracts aimed at improving value for taxpayers. In a recent press release rather provocatively entitled "Government draws the line on bloated and wasteful IT contracts" Cabinet Office Minister Frances Maude says that his objectives are to encourage competition (particularly from smaller players) and free government from long and inflexible contracts.
Perhaps the most surprising feature of the "red lines" is that "new hosting contracts will not last for more than two years" and cannot be extended without "a compelling case". With any substantial outsourcing this time restriction seems very short. Peter Wainman of our Technology Team comments that
"an arbitrary limit of two years seems out of step with current industry practice on major infrastructure contracts - with a two year limitation, implementation/transition will barely have finished before the parties need to start thinking about re-procurement and exit. While treating infrastructure as a simple commodity à la G-Cloud is laudable in principle, in practice building and implementing infrastructure for major systems is complex (particularly for the public sector, given Cabinet Office's emphasis on separating service towers)".
Separation of system integration from delivery (red line two) makes some sense, but making it mandatory is more difficult to understand. Peter explains;
"advocating the separation of integration from delivery has some merits - avoiding single-supplier lock-in, ensuring the right skills are deployed for each role - but again making this mandatory risks unnecessary increase in cost and complexity for many projects. From our discussions with customers and major suppliers since Cabinet Office's press release, the announcement is being seen as challenging to implement across major projects."
We doubt that these "red lines" will be rigorously policed across the public sector. They may become mandatory for central government procurement, but are more likely to be seen as best practice for other public bodies.
There is a positive note here for smaller providers. The Government is clearly trying to bring about an environment where there are small contracts for which an SME can realistically compete. This policy drive will be supported by legislation later this year, when we expect new regulations implementing an EU Directive on public procurement to come into force. This Directive contains several general measures aimed at opening up public contract opportunities to the smaller supplier.