The Outsourcing Party - Essay Example

Case Study 4: Why Do Public Sector Projects Fail?

Question 1

Failure of National Program for IT

The National Program for IT (NPfIT) is not different from the contracting fiascos that have preceded it. The project failed to achieve its objectives due to the implementation of a poorly thought system for revolutionizing National Health Service. The Medical Training Application Service (MTAS) intended to expedite the reorganization of the training as well as the application of 30,000 doctors but suffered irredeemable flaws (Guah, 2009). The National Audit Office (2011) reported that the initiative for transforming public sector technology could not withstand security breaches among other malfunctions caused by 52 defects in the system.

NPfIT breakdown follows the failure of Child Support Agency, which cost thousands of families’ money that could have facilitated investment in other areas of the economy. The CSA project demonstrates a systemic failure within the government due to the inability to evaluate and demand responsibility from the suppliers (Syal, 2013). Loss of money for the families adds to the poor efforts by the public sector in reducing contracting failures that have become common and expensive for the taxpayers. Failure to learn and apply lessons from the past failures increases the cost that amounts to least £480 billion in a year.

Lorenzo is another case of public sector’s failure to undertake projects to completion. NHS intended to use the system to store data for 220 trusts at a cost of £3.1 billion (Syal, 2013). However, The Department of Health reported that the service would cover 22 trusts only by the time of the finalization of the contract. Failure of government projects shows a lack of proper accountability and management structures, which contribute to the failure of the projects. In addition, the public sector shows poor negotiating capability that shapes the contractual obligations of the suppliers. The sector does not launch a legal challenge to reclaim the lost public funds.

Question 2

Increased use of outsourcing in NPfIT as an approach for contracting suppliers has noteworthy benefits and risks:

Benefits of outsourcing

Institutions achieve administrative efficiency by using an outsourcing approach to undertake public initiatives (Alonso, Clifton, and Díaz-Fuentes, 2013). Budget pressures compel the national government to seek private suppliers or contractors, which reduces the risks of experiencing problems while managing the project. NPfIT was among the technology-based initiatives intended to transform the NHS platforms for delivering service to the doctors and patients. An outsourced IT system gave the government a platform for addressing the inefficiencies experienced in the training and registration of doctors. The ability to realize the efficiency goals depends on the implementation of proper control and responsibility structures.

In addition, outsourcing provides top-notch technical expertise for the public sector (McIvor, 2009). Lack of an in-house expertise may necessitate procurement of private services to meet the administrative demand for good quality. Accessibility to the technical expertise provides assurance needed in meeting the specific needs of the target population. NPfIT created a chance for the government to work with private contract suppliers. Despite suffering 52 defects, the MTAS and CSA are among systems that have utilized expertise, which the government does not employ within the NHS chain organizational structure. NHS aimed to realize excellence by outsourcing genuine suppliers from the private sector.

Moreover, outsourcing provides financial salvation, which helps in implementing a project at a lower cost than the budgeted expenditure (Drennan and McConnell, 2007). Public sectors grapple with diverse cost channels and high spending demands. Each department requires a comprehensive budget to meets its yearly objectives, which may result in a strangled budget. NPfIT platform enabled the government to seek a supplier at only £10billion to create a new way of reaching out to doctors through proper training as well prompt registration (Great Britain Parliament, 2011). While the program did not realize the financial salvation intended, availability of outsourced supplier at the stated cost provided an effective way of saving taxpayers’ money. However, the outsourcing approach has risks considering the failure of NPfIT project.

Risks of Outsourcing

Systemic failures are common in outsourced projects. The failure undermines the value that the suppliers aim to deliver after implementation (Drennan and McConnell, 2007). Outsourced suppliers may fail to deliver adequate services within the framework set by the commission body. The unsuccessful launch of NHS database system shows the systemic failures of outsourcing consultancy and technical expertise. The government lost public confidence by failing to constitute proper outsourcing arrangements and management. An internal audit process by the National Audit Office (2011) established weak control by central government over the suppliers. The outsourcing party did not meet the needs and risk associated with the NPfIT.

Furthermore, outsourcing may increase financial costs instead of reducing the budgeted expenditure. The costs implications are rampant in the public sector where the susceptibility to wastage of public resources is high (Alonso, Clifton, and Díaz-Fuentes, 2013). The loss of taxpayer confidence, organization’s reputation and overall discontent with NPfIT was the highlight of the outsourced IT project. The situation became worse when NAO reported a loss £10billion by the close of 2012 fiscal year (Great Britain Parliament, 2011). The project demonstrates the need for outsourcing by thinking through the delivery process and problems that may arise in the execution process.

Question 3

Projects in the public sector fail due to a variety of reasons, which include:

Unclear roles and responsibilities may contribute to the failure of projects (James, Rosenhead, and Taylor, 2013). The commissioning bodies and the contractor may fail to include clear responsibilities for the management as well as the implementation of the project. The failure of NPfIT was due the unclear contractual obligations between the government and the supplier (National Audit Office, 2011). The public sector did not anticipate the reorganization of IT structure that impeded the achievement of reforms in the NHS departments.

In addition, projects fail due to lack of competition among suppliers. The tendering process should accommodate all varied contracts who present different perspectives for undertaking the project. According to Morris, Pinto, and Söderlund (2011, p.141) Organizations that outsource a single supplier may not achieve the strategic objectives such as quality. Poor tendering structure gives undue advantage to an unscrupulous vendor particularly in the public sector. While there were quality suppliers in the NHS database projects, the public sector did not give them a viable platform to present their tenders. The process would have given the government a wider range of choice, which could meet the expectations of the end users.

The inefficient way of tracking and documenting the progress of a project may result in failure (Wingate, 2015). The oversight role of the project manager should be visible, which should exemplify the strategic objective of the project. Institutions fail to track milestones and document the progress impede the process of achieving the expectations as well as maximizing resources. The Department of Health did not envision a contractual obligation to report the progress of NPfIT (National Audit Office, 2011). The procedure would have unraveled areas of improvement and further innovations, particularly in MTAS and CSA.

Conversely, a breakdown in the project lifecycle may impede the achievement of the set objectives and result to failure. A project requires continuity that to sustain sense and the balance dictated by the contract (James, Rosenhead, and Taylor, 2013). In addition, the program should create room for efficient dispute resolution particularly in the public sector where bureaucracies are common. The government did not envision a continuous program when contracting a vendor for NPfIT (Syal, 2013). The intelligent client evaded the provisions of the contract and gained absolute control over the project that became the worst contracting fiasco in the history of the NHS.

Additionally, disregarding the warning signs leads to project failure. Projects give certain warning signs when they are on the verge of failure (Robinson, 2010). Managers and sponsors fail to take appropriate action to save the project. The endeavor of the NPfIT went down the drain when the suppliers and the government failed to take precaution when MTAS suffered tow security breaches. Supposedly, Patricia Hewitt might have foreseen the possibility of failure, which led to her resignation before the completion of the technology initiative.

Question 4

The following clear steps may help to reduce the risk or project failure:

• Keeping inventory

Designing an inventory for the project helps in identifying risks at various stages. The inventory should encompass internal and external factors that increase the risk of failure in each given project (Milosevic, Martinelli, and Waddell, 2009). Internal risks such as assumption failures, changes in resources and availability of sponsors should sustain the progress of the program. Conversely, external factors such as company and technological changes may help in creating a new methodology for the project (Morris, Pinto, and Söderlund, 2011). The government should have classified all the risks after the occurrence of two security breaches at MTAS. The inventory could have assisted in capturing other possible risks associated with NPfIT.

• Evaluation of the identified risks

Evaluating all the risks identified at different project stages reduces their impact on the success of the venture (Kendrick, 2009). Teamwork is an important element of the evaluation process where groups consider the numbers, the degree of stress and overall impact each risk would have on the execution of the project. Project managers should come up with an evaluation framework to enable teams to come up with precise values and changes needed for the identified risks. Melton and Iles-Smith (2009, p. 235) argues that each risk should determine the direction of the project because it demands constitution of new procedures, resources, and policies. NHS could have conducted an evaluation to assess the future damage in case of a security breach or resignation of a team member such as Patrick Hewitt.

• Prioritizing

Determining the degree of risk for each risk may help to make priorities in terms of resources, sponsorship, workforce, and budgetary measures. The risks dictate a clearer vision for the projects particularly in the public sector where the expectations of the public are high. According to Wirick (2011), prioritizing on the compelling risks helps the project to make prompt decisions because the needed revision must not impair the timeline and overall project deliverables. NPfIT could have succeeded if the government and the private vendor considered changing accountability structures in the contract considering the impact of working with unclear responsibilities.

• Undertaking control and mitigation

Prioritization identifies controllable risks, which demand prompt mitigation from necessary factions such as sponsorship or project management. Involvement of the project’s key stakeholders comes in handy in mitigating the risks as well as decision-making that sustains the progressive cycle of the program (Melton and Iles-Smith, 2009). The Department of Health should have envisioned a special control and mitigation framework when MTAS and CSA showed warning signs. The security breaches and breakdowns were within the control of the vendor and the government.

Question 5

Application of COBIT Methodology

COBIT provides supports for project managers guided by its framework of IT governance and management (ISACA, 2012). The government and outsourced vendor could have used the methodology to bridge the gaps technical gaps that emerged after the launch of MTAS. COBIT could have provided the directions needed in the control of the risks such as unfair treatment of the junior during the reorganization of training and application process. The control framework dictated by COBIT sustains the integrity of the information system, which must relate to all the aspects of the business framework. NPfIT should have mitigated the catastrophes, and low taxpayer confidence had the NHS constituted a robust control framework from the beginning. The project could have met the expectations of the public by considering important parameters and contract provisions encompassed in the initiative.

COBIT could have expedited planning and organization of the IT framework for NHS. The methodology provides eleven control objectives that specify how commission body and vendors should create an effective IT strategy (Cater-Steel, 2009). The model specifies the determination of proper technology and implementation of an appropriate support framework. Planning and organization could have prompted the government to institute a well-thought plan to help in the procurement of the NHS database system. The COBIT procedure would have helped in the consideration of other contracting approaches besides outsourcing. An organization must follow the eleven objectives encompassed in the COBIT methodology to reduce errors, costs and sustain the innovation intended to solve problems within the NHS organizational structure.

In addition, the methodology could have assisted the government in the acquisition and implementation processes. COBIT provides a strategic and tactical tool for the execution of a well-thought IT model (De Haes and Van Grembergen, 2015). The control objectives related to acquisition and implementation ensures that an organization procures an appropriate IT infrastructure as well as applications. The process could have invoked the element of realism that lacked in the NHS technology project. The large scale of NPfIT project dictated an acquisition and implementation of a model that aligned with the parameters of the initiative as well as the contract provisions. Effective management of team roles throughout the project lifecycle was critical considering their impact on the acquisition and implementation of the plan.

Question 6

Other Relevant methodologies for public sector projects

Six Sigma methodology and Information Technology Information Library (ITIL) are other models developed to solve the same IT governance discrepancies as COBIT methodology. Six Sigma and ITIL provide an operational focus in any project management process by giving institutions a reference tool for understanding capabilities, standards, and expectations in projects particularly in the public sector (Schwalbe, 2013). The two methodologies add value by creating a balance between risk and return aspects of any IT investment project.

ITIL helps in the definition of project management and support processes (Gao and Rusu, 2015). Although ITIL offers a lower governance and control framework than COBIT, it ensures that organizations align their operations with the contract provisions and initiative parameters. Managers or suppliers can exploit the principles of ITIL to understand the link between a project and the deliverables. The transition planning and support in the NPfIT program should have sought the guidance of ITIL to understand the complexity of tendering as well as implementing a large IT network. Understanding the value and the viability of the IT framework in meeting the needs of the NHS would have reduced the limitations experienced in the project. ITIL ensures that all the aspects of project management align with the deliverables stipulated in the project lifecycle (Kerzner, 2010). In addition, ITIL complements project management skills by specifying the standards of services in the implementation of an IT-based project.

On the other hand, Six Sigma principles dictate execution of improvement plans, prioritization of risks, and overall alignment with the goals of the project. The methodology further encompasses work statements, techniques for scheduling among other details that pertain project management. The model provides tools for measurement, analysis, improvement, and control, which helps in sustaining the stability of the project (Schwalbe, 2013). NPfIT lacked proper improvement plans from government and the outsourced vendor. The government should have focused on end user interests, which are the main components of Six Sigma framework. In addition, the methodology could have helped in instituting quality control initiatives, which lacked in the development of NPfIT. The procedure would have reduced the undue influence of the private vendor and possibly guide in the designation of accountability measures.

Reference List

Alonso, J., Clifton, J. and Díaz-Fuentes, D., 2013. Did New Public Management Matter? An empirical analysis of the outsourcing and decentralization effects on public sector size. Public Management Review, 17(5), pp.643-660.

Cater-Steel, A., 2009. Information technology governance and service management. Hershey: Information Science Reference.

De Haes, S. and Van Grembergen, W., 2015. COBIT as a Framework for IT Assurance. Management for Professionals, 1(1), pp.129-149.

Drennan, L. and McConnell, A., 2007. Risk and crisis management in the public sector. London: Routledge.

Gao, S. and Rusu, L., 2015. Modern techniques for successful IT project management. Hershey, PA: IGI Global.

Great Britain Parliament, 2011. The national programme for IT in the NHS. London: Stationery Office.

Guah, M., 2009. Managing very large IT projects in businesses and organizations. Hershey, PA: Information Science Reference.

ISACA, 2012. COBIT 5: Enabling Processes. Illinois: Rolling Meadows, ISACA.

James, V., Rosenhead, R. and Taylor, P., 2013. Strategies for Project Sponsorship. London: Management Concepts Press.

Kendrick, T., 2009. Identifying and managing project risk. New York: AMACON.

Kerzner, H., 2010. Project management best practices. Hoboken, N.J.: John Wiley & Sons.

McIvor, R., 2009. A study of performance measurement in the outsourcing decision. Oxford: CIMA.

Melton, T. and Iles-Smith, P., 2009. Managing project delivery. Amsterdam: Butterworth-Heinemann.

Milosevic, D., Martinelli, R. and Waddell, J., 2009. Program Management for Improved Business Results. Hoboken: John Wiley & Sons.

Morris, P., Pinto, J. and Söderlund, J., 2011. The Oxford handbook of project management. Oxford: Oxford University Press.

National Audit Office, 2011. The National Programme for IT in the NHS: an update on the delivery of detailed care records systems - National Audit Office (NAO). [online] National Audit Office. Available at: <https://www.nao.org.uk/report/the-national-programme-for-it-in-the-nhs-an-update-on-the-delivery-of-detailed-care-records-systems/>.

Robinson, H., 2010. Governance & knowledge management for public-private partnerships. Chichester, U.K.: Wiley-Blackwell.

Schwalbe, K., 2013. Information technology project management. Boston, MA: Cengage Learning.

Syal, R., 2013. Abandoned NHS IT system has cost £10bn so far. [online] the Guardian. Available at: <https://www.theguardian.com/society/2013/sep/18/nhs-records-system-10bn>.

Wingate, L., 2015. Project management for research and development. Boca Raton: CRC Press/Taylor & Francis.

Wirick, D., 2011. Public-Sector Project Management. New York: Wiley.