29 January 2003
A national standard IT system for magistrates’ courts has been under development for over ten years but is still not complete, Sir John Bourn, head of the National Audit Office, reported to Parliament today. The cost of the project has increased substantially since a PFI deal was signed in 1998.
IT systems in magistrates’ courts have been inadequate for many years. Current systems do not allow information to be shared electronically with other courts and electronic information transfer to other enforcement agencies is piecemeal. After two failed projects in the early 1990s, the Lord Chancellor’s Department decided in 1996 to procure a PFI contract for a national standard IT system called Libra.
The Department recognises that the design of a best business process model should normally come before seeking an IT solution. The Department decided, however, to support and improve the efficiency of existing processes rather than redesign the processes in parallel with the development of the new IT system.
By the end of the procurement there was effectively only one formal bidder, which meant that the Department was unable to maintain competitive tension throughout the procurement process. When ICL (now Fujitsu Services) was chosen as the preferred bidder in July 1998, its bid was £146 million (over 11 years) but this rose to £184 million (over 10.5 years) by the time the contract was signed in December 1998. The contract was renegotiated twice. On the first occasion this was on the grounds that ICL had overestimated revenues and underestimated costs and that without additional funding it would be unable to continue with the contract. In May 2000 a price of £319 million was agreed for a new 14.5 year contract.
On the second occasion ICL and the Department entered into further renegotiations of the contract in October 2001 but could not reach agreement for ICL to continue with the whole project. ICL was in breach of the contract because it had been unable to deliver the core application to the first site by July 2001. But the Department did not terminate the contract because it considered that this would have triggered potentially costly litigation and counter claims from ICL, and would have jeopardised the timely delivery of much needed improvements to IT systems in magistrates’ courts.
In July 2002, after considering the options available, the Department signed a variation to the contract with ICL to deliver only the national IT infrastructure and office automation facilities, including a number of enhancements, at a price of £232 million for an 8.5 year contract. The Department expects in January 2003 to sign a separate contract with STL to provide the core software application to support court work. A systems integrator will then be appointed towards the end of 2003 to roll out and run the application. The cost of these contracts is estimated at £86 million, bringing the total cost to £318 million over 8.5 years.
The equivalent contract cost of the current proposal over 14.5 years is estimated to be £557 million. This figure cannot be directly compared with the contract cost of £319 million for the contract agreed in May 2000 as the new agreement includes the provision of a greater number of PCs and other enhancements.
"There are a number of lessons that other departments can learn from the problems that the Lord Chancellor’s Department has experienced with the Libra project. Departments should take it as a warning sign that their proposed PFI projects may not be workable if few bidders show initial interest and others withdraw as the procurement process continues. In a single tender situation, Departments need to take special care to safeguard value for money, for example by developing a should cost model to assess the reasonableness of a bid. Up to date contingency plans should be in place on all major contracts so that there is a fallback position if and when a contract goes wrong."
Sir John Bourn, 29 January 2003