New rules for IT contracts will ensure maximum value for taxpayers.

The government has published “red lines” for its IT contracts to ensure maximum taxpayer value, the Minister for the Cabinet Office Francis Maude announced today. The new rules have been published to encourage competition in the sector, and free the government from longstanding inflexible contracts with IT providers.

The new rules are aimed at encouraging the widest possible range of suppliers to compete for public sector technology contracts and ensure the government acts as an intelligent customer. Smarter purchasing realised savings of £3.8 billion in 2012 to 2013 alone; and a tighter grip on IT spending, along with progress on the digitisation of services, saved a further £500 million. Better procurement is central to the government’s wider commercial reform plans to strip out wasteful spend and harness the government’s buying power to get the best deal for the taxpayer.

The “red lines” published today state that:

  • no IT contract will be allowed over £100 million in value – unless there is an exceptional reason to do so, smaller contracts mean competition from the widest possible range of suppliers
  • companies with a contract for service provision will not be allowed to provide system integration in the same part of government
  • there will be no automatic contract extensions; the government won’t extend existing contracts unless there is a compelling case
  • new hosting contracts will not last for more than 2 years

Minister for the Cabinet Office Francis Maude said:

Big IT and big failure have stalked government for too long; that is why this government is radically rethinking the way it does business. We are creating a more competitive and open market for technology that opens up opportunity for big and small firms. These red lines will ensure the government gets the best technology at the best price and we will be unashamedly militant about enforcing them to provide value for hard-working taxpayers.

The government has made good progress in opening up government business to smaller suppliers. More than a third of the companies on a new procurement framework for building digital public services have never done business with government before. The suppliers that have won the opportunity to secure contracts with the public sector through this framework also include a high proportion – 84% – of SMEs.

Separately, the Office of Fair Trading (OFT) has announced it is reviewing the sector, engaging directly with relevant parties including IT suppliers, central and local government and other public sector organisations, trade bodies, academics and business organisations.

Liam Maxwell, Chief Technology Officer adds:

To create the efficient and responsive services that the public demands, government must have access to the most innovative, most cost-effective digital solutions. That means going to the widest range of suppliers, and giving ourselves every opportunity to renegotiate and reassess contacts. It rarely makes sense to simply extend a contract based on yesterday’s technology and prices and these red lines make clear that we are doing business in a different way.

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