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Mixed Fortunes For Government Contracting

September 12, 2008

The press yesterday carried three stories that revealed mixed fortunes in Government and Federal contracting. A major project success in the UK was counter-balanced by two examples of where things can go wrong if governance fails.

Public sector projects are rarely highlighted for their success, so it is good to see that a major contract to transform the UK’s employment and social security offices has been commpleted on time and under budget.

The $3.5bn project ran for 5 years and merged 1,500 separate offices into a streamlined 800 Jobcentres. It has been hailed by the UK parliament’s public spending watchdog.

The elements that generated success are not complex, but are frequently missing or compromised. They were: 

  • Leadership was consistent throughout the project. Changes in leadership are frequently associated with failure.
  • Project teams were appointed and sustained throughout the progam. They brought extensive experience to the task.
  • The project took guidance and drew heavily on materials and advice on past big projects from the National Audit office and Office of Government Commerce.

Moving across the Atlantic, the long-running saga of a $35 billion contract for flight refuelling aircraft shows no sign of ending. Despite the apparent threat to national security that on-going delay implies, the US Government decided to make no decision on progressing this award, leaving the in-coming administration wth the problem.

This story began in 2002, when a contract awarded to Boeing unravelled followign exposure of improper practices during the award phase (actions which resulted in imprisonment for both Boeing and Government pesonnel). Subsequent competition resulted in a major win for EADS and their US partner, Northrop. But now it was the turn of Boeing to cry foul – and to whip up nationalistic fervor among politicians with claims of job losses and decisions contrary to the national interest. 

Will the EADS contract be re-affirmed? Will the bidding process be re-opened? Despite promises to reach resolution before November’s election, yesterday’s announcement revealed there will be even more delay – and meantime, the US Airforce continues to operate with a seriously outdated fleet of re-fuelling aicraft.

Another sad example of the extent to which politics can so often get in the way of good governance.

Back in the UK, the stream of Government embarrassments over data loss claimed a victim when PA Consulting had a three year contract terminated because of its falure “to live up to contractual obligations”. An employee had ignored security rules by downloading data to a memory stick which was then lost.

The Government is reviewing other, more lucrative contracts with PA and some other private sector providers. However, a series of incidents have revealed the challenges of maintaining control over sensitive data. And as an Opposition spokesman observed: “It is not good enough to claim that the clauses in the contract were robust, and pass the buck to a consultancy that (the Minister’s) department hired and was responsible for supervising.”

In other words, many of these hard-fought contract clauses offer no more than a worst-case scenario fall-back. They do nothing significant to recover a bad situation. As with so many instances of failure, the real issue is increasingly the inadequacy of governance procedures to encourage and oversee performance related to complex risk issues. Perhaps if we were all less focused on imposing rigid terms, inflexible rules and compliance, we might spend more time discussing and designing robust and shared responses to risk and creating innovative approaches to performance monitoring and management. Just as this problem has in large measure been created by modern technology, it seems likely that technology will play a major part in its resolution.

For PA Consulting, the blemish on reputation will prove far more damaging than the withdrawal of a specific contract. Certainly, future business for PA and other service providers is likely to depend on their ability to demonstrate far more robust capabilities in data protection and security. All contract negotiators can expect increased emphasis on these aspects of contracting. Will we respond by more entrenched battles in the negotiation, or by developing reliable solutions and associated commitments?

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