Public Procurement as a Tool to Stimulate Innovation: Science and Technology Report

Viscount Hanworth Excerpts

Tuesday 13th September 2011 Grand Committee

[Viscount Hanworth]

My Lords, the report that we consider today addresses some important issues. Successive Governments have had difficulties in procuring goods and services of high scientific or technical content. The committee’s report asks what can be done to improve the situation. It proposes that clear responsibilities for stimulating innovation should be assigned to Ministers and officials, who should be held accountable for this.

One does not have to look far to find startling instances of the problems that the committee is addressing. A current example of the failure of the Government's procurement policies in respect of modern technology is provided by the virtual abandonment by the NHS of its plans to create a centralised computerised system of patient records that would be accessible throughout the service.

The national programme for IT in the NHS was initiated nine years ago. So far, £2.7 billion has been spent on the patients’ records system to no discernible advantage. Several private sector suppliers were engaged, including the American CSC company. This company failed to deliver the bulk of the systems that it was contracted to supply. Instead, it has implemented a large number of interim or stop-gap solutions. These are preponderantly off-the-shelf solutions that the company has in its inventory.

It is doubtful whether the Government can obtain adequate redress from CSC or from BT, which is the other surviving supplier. Several other suppliers have walked away, including Fujitsu in 2008. This is the company that in 1990 absorbed the rump of the British ICL Corporation, which was created in 1968 through a government initiative. In fact, ICL was intended to rival IBM. Notice that the second and third letters of ICL are adjacent in the alphabet to those of IBM.

The defence that the suppliers might offer, if the matter were to come to the courts, is that they were confronted with inappropriate specifications that were subject to revisions so numerous as to make their task incapable of fulfilment. There might be some justification in such an argument but there is a more fundamental issue at stake here.

It is clear that the gains in efficiency that could result from enhancing the computerised records systems in the NHS are considerable. It is almost inevitable that eventually there will be such a facility for instant access to a patient's records from anywhere in the country. However, the advantages of such a system will accrue to the NHS and to the nation as a whole. They should not be expected to accrue to a private supplier; nor, as far as I am aware, is there any intention that they should do so. Therefore, the private supplier has little or no incentive to bear the costs of research and development, for they cannot reap the profits.

A further mismatch between public and commercial interests is occasioned by the nature of a developing technology. The private contractor is bound to seek an engagement that has a definite duration and which will result in profits that are calculable at the outset. The client, which is the NHS in this case, has an ongoing engagement and a need to adapt continuously to changing demands by exploiting evolving technologies. In brief, it needs to rely on its own technical expertise, which must be at a high level.

The IT disaster of the NHS has been analysed in two parliamentary reports, which are readily accessible. One is from the National Audit Office and the other is from the Public Accounts Committee of the House of Commons. This debacle is only the latest in a long line of similar failures from which we might have learnt our lessons. These failures owe much to the decline of the technological and scientific culture in our country. It is almost inevitable that a country that loses its manufacturing base should have difficulty in sustaining its technological competence.

The demise of Britain manufacturing has been hastened by the failure of our export industries, which has been mainly in consequence of the overvaluation of sterling in international currency markets. A contributory factor here has been the hypertrophy of our financial sector, which has led to large inward investments in financial assets and hence to a high demand for sterling.

Britain also has a peculiar social history that has militated against the survival of its scientific and technical competence. The pursuit of science and technology in the 18th and 19th centuries was strongly associated with people of a dissenting and nonconformist tendency. For them, the pursuit of codified technical and scientific knowledge was almost a moral endeavour. The established ruling classes had very different cultural motivations. During my own schooldays, I was keenly aware of the opinion that a gentlemanly education should be based on the classics and the humanities and that it should eschew matters of science and technology. I see that others have had the same experience. Social ambition and a distaste for hard, masochistic studies led many to abandon mathematics and science, as students continue to do today.

The once powerful Civil Service, whose members played leading roles in the process of government procurements, rarely contributes nowadays to any of the Government’s decisions. Those who are in the ascendancy are civil servants who have been trained in the humanities and the social sciences, if they have not been trained to be lawyers, accountants or financiers.

Great damage was done to Britain’s scientific and technological heritage throughout the 1980s and beyond. Numerous factors contributed to this, but it was the demise of the Government’s scientific establishments that deserves particular attention in the present context. These establishments had served Britain’s industry before, during and after the Second World War. When some of their original research agendas had been fulfilled or were abandoned, new purposes were not found for them. Their disbandment was justified by the doctrine of privatisation.

Among the victims that come very readily to my mind are the Post Office Research Station at Dollis Hill, the Royal Aircraft Establishment at Farnborough, the National Gas Turbine Research Establishment at Pyestock, the Atomic Energy Research Establishment at Harwell and the Road Research Laboratory at Crowthorne. The ICL Corporation, although not a government research establishment, could be counted among these. The list can be extended to include a wide variety of medical, veterinary and agricultural research establishments, some of which survived in a severely curtailed state. The scientific research institutes that best survived the onslaught were those that adhered closely to the UK universities. Nevertheless, during the period in question they were subject to a famine of research funding.

More recently, the research assessment exercises to which they are subject have had the perverse effect of limiting their interactions with industry. The assessments are based upon research published in academic journals, and research that has immediate commercial and industrial applications cannot be published in this manner.

During the period in question, the doctrine of outsourcing was widely propagated. It proposed that organisations should concentrate on their core activities, which are the things that they do best, and that they should assign other functions that had hitherto been performed in-house to external providers possessed of specialised expertise.

A requirement of outsourcing is that there must be sufficient in-house expertise in order properly to assess the need for outside assistance and to assess the quality of whatever assistance is on offer. Moreover, given the requisite in-house expertise, outsourcing may become unnecessary. It is clear that, in the case of the procurement of computer systems by the NHS, and in other cases I could have cited, there has been insufficient in-house expertise to inform the organisation of the opportunities and of the limits of the available technology and to predict how it might evolve. Instead, grandiose wish lists were created, which have become weighty and impenetrable documents once they have been made to conform to the nostrums of European Union contract law.

The managers of the NHS have been outsmarted and bamboozled by the commercial IT providers to such an extent that they have found that they have no redress against the manifest failures to fulfil the contracts. The organisation has lacked the technical expertise that might have informed and guided the endeavour and that might have averted the disaster. The Public Accounts Committee report attributed much of the blame for the debacle to the senior management of the NHS, including its chief executive, who did not fully discharge his responsibility for the oversight of the project. This criticism is in line with the recommendations of the Science and Technology Committee report, which proposes that there should be clear lines of responsibility at a senior level for the management of technology, as well as enhanced accountability. However, I fear that this misses the point to some extent. What is required is a technical and scientific intelligence that should be widely distributed throughout the organisation.

Some of us have witnessed outstanding examples of the successful management of technology. They were provided by many of the government research establishments that no longer exist. In the main, these organisations were characterised by a lively technical discourse and a remarkable intellectual democracy that allowed intelligent and inventive ideas to be propagated rapidly throughout the organisations, regardless of where they had originated. In most respects they were the antithesis of the modern top-down organisations that nowadays predominate in our public sector. Such managerial structures have been created in response to the demands of politicians, who have required clear lines of command to enable public organisations to respond rapidly to political initiatives. However, politicians are not well placed to assess the opportunities and limits of available technologies or to predict how they might evolve.

The problems that have been dramatically illustrated by the debacle of the NHS programme could be overcome by strengthening the scientific civil service and recapturing some of the ethos of the erstwhile government research establishments. Groups of computer scientists located within the relevant departments could be relied upon to co-operate across departments in ways that rival commercial suppliers are not able to do. There are some well known and striking examples of how co-operation among widely dispersed computer scientists can achieve results that are markedly superior to the results of scientists and technicians working under the direction of commercial organisations. The Linux operating system is a prime example, as is Wikipedia.

Of course, the virtues of technical co-operation are not confined to computer scientists. They characterise much of the scientific and technical culture that our country has lost, and we urgently need to rekindle that culture.