What Public Procurement Teams Can Learn From the Fujitsu Scandal

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‘Sadly, it’s no surprise,’ said one expert when asked how Fujitsu could be set to win another nationwide IT project from the British Government. Astonishing as it seems, the company at the center of the Post Office scandal is the preferred bidder for the Proof of Age Standards Scheme (PASS). If awarded, the Japanese tech giant will build an age-verification app for alcohol purchases and potentially even electronic voting.

It’s not the first time a major tech vendor has been the focus of a Westminster IT boondoggle. It’s not even the first time for Fujitsu, and experts say the pattern seems destined to repeat.

What can public sector procurement teams do to stop another major IT failure from happening again?

Key Takeaways

  • Despite months of negative front page coverage and a top-rated BBC documentary detailing its role in the Post Office scandal, Fujitsu is once again the front runner for a national public sector technology initiative.
  • It’s just the latest evidence that the British government struggles to manage major IT projects effectively or ensure accountability in vendor contracts.
  • Once a technology firm becomes an approved supplier to HMG and is embedded in projects, the rules make it incredibly difficult to penalize it for poor performance.
  • Public sector procurement teams need to re-think their outsourcing model and re-set the balance of power in contractual relationships.

What Is the British Post Office Scandal?

The full story has been exhaustively told by The Times, Telegraph, and the acclaimed BBC documentary Mr Bates vs The Post Office, so we won’t try to revisit every detail here. Suffice to say it involves a litany of cascading failures — technical, contractual, legal, and ethical — over two decades on both the supplier and buyer sides.

A Quick Summary of the UK Post Office Scandal

In 1999, the UK Post Office installed a system called Horizon to automate accounting processes across 14,000 local Post Office outlets. Created by Fujitsu, Horizon was designed to replace manual, paper-based bookkeeping and make it easier for local branches to submit their monthly financials to Post Office HQ.

But shortly after the rollout, problems arose. Subpostmasters across the country (franchisees who operate the majority of local branches) started experiencing accounting shortfalls. Instead of investigating the problems and fixing them, the Post Office pinned the blame on the postmasters themselves, prosecuting over 900 for theft, fraud, and false accounting. Others were fired or forced into bankruptcy.

Dr. Alice Moore
Dr. Alice Moore, Assistant Professor in Public Management and Public Policy at the University of Birmingham School of Government.

Today, we know the real culprit was the Horizon system itself. From the earliest trials, there were ‘hundreds of bugs.’ Fatally for the subpostmasters, these generated duplicate sales entries, erroneously showing money missing from branch accounts at month’s end.

The Post Office and Fujisu had evidence of Horizon’s failings early on but elected to deny or obfuscate blame — while continuing legal action against the subpostmasters.

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What Went Wrong?

How could such a thing have gone on for so long? A recent blog by the Institute for Government confirms that Westminster contracts are often badly managed.

Citing its own research, the Institute says public bodies tend to employ fewer people to manage technology contracts than their private sector counterparts. Those they do hire have less experience or seniority, making it difficult to hold vendors to account. Without proper oversight, bugs and errors can persist for years.

In an article for The Guardian, Sam Fowles, a barrister who helped overturn the convictions of 39 sub-postmasters in 2021, powerfully captures the enormity of what happened.

The question for public sector procurement teams — or any IT buyer for any large organization — today is: what steps can you take to ensure technology vendors assume responsibility and take fast remedial action when a project goes wrong?

Lessons for UK Public Procurement

One expert watching the Horizon scandal closely is Dr. Alice Moore, Assistant Professor in Public Management and Public Policy at the University of Birmingham. Techopedia asked her what she would advise public sector procurement teams to do differently in future.

  1. Give More Priority to Open Source Technology in IT Procurement

    “The essential problem with government IT contracts is that it’s very difficult to switch suppliers,” Moore says. “The incumbent has all the knowledge about the system and often owns the proprietary technology behind it. Open source helps with that.”

    Shifting to open source would allow competing vendors to see how the system works and put together stronger bids for future contracts. Open source facilitates integration with other systems since different suppliers can understand how the other parts work. That would also allow new suppliers to take over an existing contract without having to rebuild the underlying software or migrate to a new system.

  2. Break up Large IT Contracts into Smaller Components

    Moving to open source can also add flexibility to the way projects are scoped, freeing public bodies to break down large IT contracts into smaller components.

    “A lot of governments, including the UK, have been moving in this direction, but there is still resistance and fear that open source means compromising on security.”

    Moore supports open source as a vehicle for opening up the field of potential suppliers, however, “If it is absolutely essential that the technology be closed source, the government should consider what the risks are of a company owning the technology behind such important public systems.”

  3. Take Sensitive Projects In-House

    “Public sector IT procurement should also use models that focus on building internal capacity and skills,” Moore adds. “The current model is to outsource whole systems or system components, which means the supplier holds all the knowledge and skills needed to run the system.”

    She notes that Westminster has seen some success with models that have in-house teams working alongside specialist contractors with the GOV.UK platform being one often-cited example.

    “This keeps hold of expertise and builds internal teams’ skill sets as they learn from their external colleagues.”

A Balance of Power

On Fujitsu potentially winning the new PASS digital ID contract, Dr. Moore says, “Sadly, it’s not surprising.”

Westminster’s new Procurement Act aims to give the government more powers to exclude suppliers, she says, “but this still only applies in cases of really serious underperformance.”

The bidding process for PASS started before the public outcry about Horizon and before Fujitsu’s promise not to bid for future government contracts while the current government inquiry is ongoing.

“Unless a supplier is excluded at the start of the process, it becomes much more difficult to remove them later on or penalize them for past performance when scoring bids,” Moore says. “It illustrates how difficult it is to take past performance into account in public procurement.”

Balance of power, it seems, is a key consideration going forward. Until a more stringent root and branch update of government procurement practices takes place, IT buyers should consider arrangements that don’t give any one technology vendor too much say.

The Bottom Line

Options like open source could be a way to make that happen. Ignoring the trend of outsourcing altogether and developing more sensitive projects in-house could embed both accountability and added security into new government technology initiatives.

It would also mean keeping vital technology skill sets within agencies and ministries, reducing what can clearly be a dangerous over-dependence on outside suppliers.

FAQs

What happened in the British Post Office scandal?

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Mark De Wolf
Tech Writer
Mark De Wolf
Tech Writer

Mark is a freelance tech journalist covering software, cybersecurity, and SaaS. His work has appeared in Dow Jones, The Telegraph, SC Magazine, Strategy, InfoWorld, Redshift, and The Startup. He graduated from the Ryerson University School of Journalism with honors where he studied under senior reporters from The New York Times, BBC, and Toronto Star, and paid his way through uni as a jobbing advertising copywriter. In addition, Mark has been an external communications advisor for tech startups and scale-ups, supporting them from launch to successful exit. Success stories include SignRequest (acquired by Box), Zeigo (acquired by Schneider Electric), Prevero (acquired…