Monday, May 17, 2010

IT Procurement - Too Messy to Sue

Following my previous post on IT procurement - Too Big to Fail, a new twist has emerged - projects that are too complicated or expensive to hand over to the lawyers.

An HR system for the Metropolitan Police is currently running late and over budget [TimesOnline 17 May 2010, The Register 17 May 2010, via @exmosis.]

Original Plan Current Plan
Cost £38M £48M
Annual Savings £15M £15M
Expected delivery December 2009 Late 2010

Not only is the payback period now gone from 2.5 years to over three years, but the benefits will be delayed by nearly a year - so the true additional cost is not just the extra £10M in cost but nearly £15M in delayed benefits. The system was originally supposed to “generate significant efficiencies to release additional funds for front-line policing”, but on these figures that isn't going to happen until 2014 at the earliest.

Who is to blame for this? According to an anonymous source, “Lawyers have been consulted but the cost of litigation would be greater than the cost of trying to fix it.” Seems hardly any point having procurement contracts at all, if it's too expensive to enforce them.

Payback period is a pretty crude measure of ROI, but it is quite commonly used. Some organizations might have a policy that all projects should have a payback period less than three years. But that creates a temptation for budgets to be deliberately underestimated in order to conform with this policy, only to be reevaluated once the project was too far gone to cancel. That couldn't have happened here, could it?

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