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stopping the waste of money on outsourced Gov IT contracts

Comment 3rd July 2010

Presently we 'outsource' Gov department IT services to people like IBM,Fujitsu,EDS ect and we use a 'Business Model' called time and materials to price these contracts. This means we pay for the 'time' a person spends doing the work at a cetain rate depending on there level of expertise. Whilst this seems to be a good idea the business model is WRONG as, due to sheer incompetance,  this only works for full time employee's of the company we employ (IBM etc). Where we are losing MILLIONS of pounds over a 3-5 year contract is with the 'consultants' that are employed by the company (I have put consultants in quotes because 95% of these people are IT contractors). What happens at the prsent moment is that there is a skills gap identified and it is then filled with some of these contractors and the outsourced company pays them and charges the Goverment Dept at the rate they would pay for them if they were an employee under the terms of the contract. This, typically, means that there is a 400 – 500% markup on the monies charged to the Gov and the monies paid to these contractors. An example of this would be the DVLA and IBM. At the DVLA a senior manager is charged out at approx £2500 – £3000 per day but, if this person is a contract resource, they would be paid approx £400 – £500 per day. This means that IBM are making approx £2000 per day per contractor. This should then be multiplied by the amount of contractors on site (around 100 or so) and this figure then becomes £200,000 per day!!! All that IBM did was to phone a recruitment agency up and ask for CV's with certain skills and the agency sends them, IBM interview them and then employ them. This is £1,000,000 per week for picking up a phone!!!. All we need to do is 2 things.

1. Make sure that the contracts between IBM (in this example) and the DVLA states that ANY contract staff employed on the job will be paid directly by the DVLA thereby saving the markup that IBM have and..

2. We would save even more money if the government had it's own recruitment agency as this would save on commission fee's across ALL gov depts and could also be self financing as it would be able to supply contractors to all of the IT market and charge a legitimate commission on any none Gov contractors.


As you can see the above idea could/would save the taxpayer millions of pounds but, as I have tried to get various people to listen including writing to George Osborne himself, I dont envisage anything being done about it so can only assume the talk about reform etc doesn't actually spread to big upsetting big business'ssuch as IBM so will assume that this mail wont even be responded to.



Paul Hafiz

Why does this matter?

We would save millions of pounds and have more control ove the outsourced IT contracts that we spend Billions of pounds on.

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