Whitehall wakes up to IT project failures

You decide to trust the implementation of your new IT system to a large, experienced supplier, and agree a fixed price for the work that both sides are happy with.

But before the system is halfway to completion, the original budget has been reached and estimates for the final bill are more than double the sum agreed.

Hardly a recipe for customer satisfaction. But this was exactly the situation the UK government faced in March. A 10-year, £1bn contract with EDS to upgrade hardware and communications infrastructure at 600 tax offices around the UK had already cost £1.04bn, and was predicted to rise to nearly double, £2.4bn, by the project's end in 2004.

IT project cock-up stories such as this prompted a report by Cabinet Office minister Ian McCartney last week. The study, Successful IT: Modernising Government in Action, contains 30 recommendations for improving public sector IT projects, including plans to appoint someone to oversee each project and adopting a modular approach to each development.

"There has been no sense of clarity about government objectives and no agreement about each partner's role in each project. We have to instil a concept of performance. It's a bit like a 'not me guv' situation," says McCartney.

Suppliers in the dock
The Cabinet Office points to suppliers submitting "unrealistic bids" as a major source of overspend, but does accept some of the responsibility. It recommends implementing a peer review system for users to assess a project's development at regular intervals, and explain how their requirements have changed since inception. Coupled with completing a chunk of development work and then pausing for breath before mounting the next push, the public sector may have begun to understand big project management realities.

"Systems integrators often have to bid on a set price based on a sketchy set of requirements. As the client develops a better understanding of what they are trying to achieve, the scope of the project increases. That's when you get the problem of spiralling costs," says Peter Murrison, systems integration manager with project management software vendor Artemis. He adds that government often does not know its own objectives.

The report also recommends the appointment of a senior, responsible owner, likely to be a senior civil servant, to ensure that a supplier delivers each stage successfully and to budget. It also suggests strengthening the pre-contract stage so that suppliers produce a detailed plan, including timescales, before any deal is agreed.

"The focus should be on better accuracy of the estimation process, using better tools to measure how long it is going to take. This enables you to get better control of changes that normally screw up such long-term projects," says Alistair Henderson-Begg, director of consulting at outsourcer TBI Europe. Its customers include British Aerospace and Glaxo Wellcome.

He claims that more than 80 per cent of software development projects are either delivered late, over budget - or both.

From bad to worse
Before private sector managers afford themselves a smug smirk of satisfaction, they should ponder their own navels. With PricewaterhouseCoopers' consultancy arm predicting that ebusiness will form part of every client project by 2001, the problem looks set to escalate.

Implementing immature technologies inevitably means accepting that there are few, if any, historical references. It takes a brave IT manager to state with any confidence that a project's objectives will be achieved on time and to budget in such uncertain circumstances.

Coinciding with the government's proposals, a National Audit Office (NAO) report gave a glowing review to the work carried out to date on a £635m contract between Siemens Business Services and the Post Office subsidiary, National Savings. It calls on organisations to employ consultants as intelligent customers.

Whether McCartney's report will get government IT projects on track is doubtful. While it identified lack of skilled in-house staff as being a major contributory factor, he faces cultural resistance in Whitehall, unfamiliar with paying top-dollar salaries. While skills may not come cheap, failure comes at a much higher, and visible, price.

• Guidelines, taken from Successful IT: Modernising Government in Action and the NAO's report on Siemens Business Services' contract with National Savings are summarised (see box below).

Big IT project tips

• ensure that contracts can be terminated if targets aren't hit
• make sure that contracts reflect changes likely to occur over time
• send out a properly constructed invitation to tender, to minimise confusion over project objectives and reduce the chances of 'scope creep'
• appoint a senior figure to oversee each project
• roll out a development in clearly defined modules, assessing progress at each juncture
• mirror an outsourcers' project team with in-house personnel
• treat an IT project as part of the business process, not an end in itself, by looking at how it impacts existing work patterns
• employ intelligent customers, from outside the organisation, to monitor a project's development.