In January, the government published some ‘red lines’ for IT contracts. At the time, Bill Crothers, the government Chief Procurement Officer, described the reasoning behind them. These rules apply to all central government, and should encourage competition whilst delivering value for money for the taxpayer.
We’ve received some questions; so we thought it would be helpful to explain these red lines in more detail.
No IT contract over £100 million in value – unless there is an exceptional reason to do so
When goods and services are bundled together into large contracts, you restrict competition. Only those suppliers who can supply everything requested, and to this scale, can take part. For old-style ICT outsourcing contracts, for example, there are only a handful of suppliers in the world who would bid. It is more effective to start with user needs. Buying particular goods or services separately allows a wider range of suppliers to bid, and helps include suppliers who specialise in those particular services.
If a company has a contract for service provision, it should not also do the service integration for that service
This is the statement that has caused the most discussion and we have been asked to clarify the best way to put this in place.
Service integration is the management of service providers; it makes sure that performance across a portfolio of multi-sourced goods and services meets user needs. This rule means that a company providing service integration should not manage the performance of itself.
Departments need to design their approach to service management around user needs. Government must encourage competition by not purchasing a service and service integration through the same framework.
Some parts of service integration should be done by departments, and there may be occasions when everything can be done in-house. Other departments may combine in-house support for end to end operation and then buy in specific services where needed. For example, these services could be performance monitoring, service desk, or service level reporting. The G-Cloud framework offers many services to support service integration.
No automatic contract extensions
This is the most important of the red lines. If a department extends a contract, it is preventing any competition, and it will likely not be getting the best value for money for the taxpayer. Departments can avoid this by doing the right planning around contract end dates, and by publishing this information. These measures help potential suppliers know when opportunities are available.
There may be cases where extending a contract offers the best value for money. Departments should consider this well in advance with enough time to run a competition if needed.
New hosting contracts will not last for more than 2 years
As technology has improved, hosting has become heavily commoditised; particularly where it is provided as a service. Prices continue to drop to reflect this. Departments should be following government’s cloud first policy. By doing this, they will take advantage of reducing prices by using competition regularly. On GOV.UK, for example, we open the cloud hosting contract to competition on an annual basis (and switched providers last time).
Following best practice
If departments manage their technology effectively and follow the technology code of practice, they will meet these red lines anyway.
If a department breaches one or more red lines, their project will be subject to increased scrutiny. This is to ensure that they will deliver value for money. Contracts which breach these red lines may need extra measures put in place. Examples of these are flexible exit strategies and frequent price comparison checkpoints. Also, mechanisms that enable future technology innovations should be included without penalty or cost.
These rules will be enforced through the spending controls as is usual.
Of course, there will always be exceptional cases. But if departments follow best practice as set out in the service manual, they are unlikely to encounter any problems.
If you have questions or comments, please email Alex from the OCTO team: firstname.lastname@example.org