Skip to content
  • Blog
  • 17th Jan 2024

Learning from Fujitsu: The importance of procurement reform

Since the airing of the ITV drama Mr Bates v Post Office, the public outrage at the criminalisation of hundreds of innocent people has naturally focused on the Post Office’s leadership and long running political inaction.

Attention then turned to Fujitsu, the company responsible for the Horizon IT system that was riddled with “bugs, errors and defects” and not fit for purpose. There are very serious questions facing Fujitsu about not just the errors themselves, but also their conduct throughout this whole scandal. 

There is incredulity that despite Fujitsu’s huge failures, it continued to be awarded government contracts again and again. Sadly this is not surprising and I saw for myself in government that contractors could ‘fail upwards’ with very limited accountability.

In 2010, I headed the Behavioural Insights Team – the ‘Nudge Unit’ – embedded within David Cameron’s  government. We split our time between No 10 and the Cabinet Office. This meant doing joint work but across two different IT systems. The No. 10 system was so secure that sometimes basic tasks like accessing websites or opening documents was tedious and difficult. But the Fujitsu-built Cabinet Office system was a whole other level of nightmare.

Its security keys and boot-up time were so long that Steve Kelly, the government’s then Chief Operating Officer would scribble tweets, read the papers and walk around the office in the half an hour it took to boot up the system. Francis Maude, the Cabinet Office Minister at the time, was so exasperated with the system he refused to use it altogether.

Eventually the system was dumped and litigation ensued. Cabinet Office staff were delighted to see the system go. Yet at the same time Fujitsu’s system was being decommissioned by the Cabinet Office another government department bought precisely the same system.

How can that be? Incredibly, government procurement rules prevented departments from telling each other about their experiences with a particular company or IT system. Partly drawing on EU law and principles, procurement processes were designed to draw a veil over a company’s past performance with the intention that new bidders could compete more equally with large, established providers. 

Although well intentioned in theory, in reality there were serious and obvious downsides. The veiling of past performance is precisely why a company like Fujitsu was able to fail without consequence, not just in rural Post Offices but also at the very heart of government, winning contracts again and again for systems that didn’t work or, in the case of Horizon, caused real and irreversible harm.

This was by no means limited to Fujitsu. While in government, BIT ran a survey of government buyers of IT equipment and pooled their collective experience into a rating of systems, suppliers and hardware. We collated these ratings against any other data we could scrape together, such as delays in delivery or complaints. In essence, we built a prototype ‘Tripadvisor’ or ‘Which?’ for government buyers of IT. Although some of these contracts were worth hundreds of millions of pounds, we found huge differences in ratings, with some of the biggest suppliers performing poorly. We shared this valuable data directly with the Procurement Minister: surely they would want to know this information as soon as possible? After all, at any given moment, central government is spending billions on new services. 

We sat in front of a Minister with a print-out of the table of ratings – but we had to blank the names out. Opposite us sat the government’s legal adviser. Was the Minister allowed to see the ratings?

The Minister was emphatic – show him. The lawyer was uneasy, but reluctantly decided it was OK, so  long as the information was then used directly by government buyers. We showed the Minister the redacted list. He judged the political risk of not knowing as greater than the legal risk of knowing (and being challenged that he had brought this knowledge to bear on a specific bid).

This lack of oversight and accountability, caused by rules that were originally intended to  make markets more open and fair, ended up hampering the effectiveness of day to day government and wasting taxpayer money. It allowed providers to get away with poor performance, whilst shareholders profited. 

But this year, I’m hopeful things can change. BIT and others – including from that meeting with the Procurement Minister – spent years championing for reform. Last October a new Procurement Act passed into law. Coming into force later this year, one of its key provisions enables past performance to be taken into account.

It will seem amazing to people that this small piece of common sense, learning from the experiences of others when we choose which hotel to stay in, where to eat or (less reliably) what to buy, will only now be part of government decision-making. It is just one of many examples where rules and regulations don’t take into account how people actually behave, and then fail to support  good decision-making or market functioning.

Fujitsu’s bosses can expect a tough time in front of the public inquiry next week. But the more subtle failure in procurement and market design that sits behind the Horizon IT system scandal – and echoed in parts of pandemic contracting – also merits attention. This scrutiny should now include whether the new procurement reforms actually get used and work.

Although, this will be of little comfort to the post-masters still battling for justice, hopefully this reform will be one small step to preventing this happening again. In well-functioning markets, major failings should be met with major commercial consequences, ensuring that bad companies and products are squeezed out, while good companies and products take market share. This is critical for productivity and economic growth and, as the Horizon case shows, for wellbeing, livelihoods and in some cases even lives..

David Halpern is President of BIT