Stormont: 'Rings run around civil servants' over contracts

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Image caption,
Stormont's Public Accounts Committee investigated the handling of online services contracts with BT

Officials at the Department of Finance displayed "a culture of indifference" about protecting public money, a Stormont committee has said.

The Public Accounts Committee (PAC) investigated the department's handling of online services contracts with BT.

It found that contract extensions increased payments to the company by more than £120m.

The department said additional sums paid to the telecoms giant were for additional services and projects.

It added that they all were individually assessed as being value for money.

The contracts related to online services - NI Direct and LandWeb - which were designed to bring "digital transformation" to the Northern Ireland Civil Service.

LandWeb is a site that provides professional bodies with online access to Land Registry records.

The report suggested that BT "ran rings around civil servants".

BT said it was "proud of its record in delivering more than 35 new digitised services and processing 22 million digital transactions - more than double the original targets".

It added: "Despite the increased costs from additional services BT was asked to provide, independent consultants concluded that contract costs were below market average and within market range."

'So what?' response

The PAC report said contract extensions meant the executive "increased its payments to BT by over £120m, more than double the original contracted values".

Its members held the view that "when it came to protecting public money, there was a culture of indifference".

"This was epitomised when the NIAO [Northern Ireland Audit Office] queried significant overruns on the contract and were met with a 'so what?' response," it said.

"It was evident to the committee that Department of Finance staff involved with these contracts did not have the necessary commercial skills or experience to negotiate the best deal for citizens or to manage contracts."

The committee identified that in the LandWeb project, the department did not secure open book accounting, meaning greater transparency on the part of BT.

Its report said that, as a result, the department had no idea what profits were being made by a supplier and was therefore "negotiating blindly".

"Equally damning was the discovery that, in relation to the NI Direct contract, where open book accounting was secured, contract management procedures did not extend to routinely examining BT's books.

"Therefore, Department of Finance had little idea of BT profit margins and the committee was concerned these could be large."

Image source, PA
Image caption,
The Department of Finance had little idea of BT profit margins, the committee said

Committee chair, DUP MLA William Humphrey, said members were "shocked at the inadequate negotiation and management of these two contracts".

"One thing that really stood out for us was the number of times these contracts were rolled over, to the benefit of BT," said Mr Humphrey.

"In the case of NI Direct, the department misunderstood the terms of the contract and was forced to extend it for three years as a result of failing to put alternative delivery mechanisms in place."

The Department of Finance said it was "committed to protecting the public purse and ensuring staff have the necessary commercial skills to manage contracts and negotiate the best deal for citizens".

The BT contract funded a contact centre, developed 13 major applications, two major consultancy contracts and had cross-cutting applications across various central government departments, it said.

Progress made

Work is already under way on implementing the PAC recommendations, which covers historical contracts dating back to 1999 and 2012.

The PAC report acknowledged the progress the department had made, including more effective management of contract expiry dates, expenditure levels and a reduction in the number of direct-award contracts.

The department added: "The £120m figure cited by the PAC does not take account of the effect of inflation, especially on the LandWeb contract.

"The estimated value of the contract for the core LandWeb services in 1999 prices was £46m and the cost to date of those services, when adjusted to 1999 prices, is just under £45m."

A BT spokesperson said the reports recognised significant progress made in digitising Northern Ireland's public services and the successful delivery of the LandWeb system.

They also said that a "separate independent review into the LandWeb contract said that it provided value for money as well as delivering a fully functional and consistent IT service" and that "additional discounts, the set up of an Innovation fund and technology upgrades were made by BT".

"In negotiating an additional two-year extension agreement (2019-2021), BT gave a 30% discount on total monthly transactional charges," they added.

"The five-year contract extension also includes a 35% reduction in cost from the original contract and BT has committed to providing the authority with options for benchmarking and open book accounting.

"BT will continue to work in partnership with government to deliver the extension of the Landweb contract until July 2026 to best serve Northern Ireland's needs."