CHILD SUPPORT REFORMIT DEVELOPMENT
The majority of IS/IT services are procured
through the DWP ACCORD IS/IT Framework Agreement. This agreement
was reached after a full and open procurement competition following
an advert in the European Journal and sets out broad terms
and conditions under which future contracts, known as Business
Allocations, shall be awarded. The agreement allows DWP to award
certain IT related business to a small number of service providers
without the need to continually re-compete in the market place.
As a result of the agreement the Affinity consortium
(led by EDS with IBM, PriceWaterhouseCoopers and AT Kearney) were
awarded "Preferred Supplier" status for the development
of IS/IT services.
The Child Support Reforms, CSR, business allocation
was the first such allocation awarded under the ACCORD framework
for the design of a new IT system.
THE CSR BUSINESS
Detailed negotiations regarding the CSR Business
Allocation took place over several months culminating in signature
on 8 August 2000. Throughout this process the DWP had professional
legal and financial advice and guidance. The allocation is fully
compliant with Treasury guidelines and as a result Affinity recover
the cost of the development, subsequent operational costs and
a reasonable return on investment via a series of periodic payment
based on performance. The CSR Business Allocation also took account
of recommendations made by a McCartney (now called Gateway) Review.
2. Legal Protection for the DWP
2.1 Payment on Delivery
The allocation maintains a key principle of
Public Finance Initiatives in that the DWP will not pay any monies
to EDS for the operation of the system until such time as the
system meets agreed criteria and is considered "Live".
As the DWP has yet to make any payments to Affinity
this adversely affects their financial position. At this point
in time EDS would have expected to have recovered some of the
costs of IT development by way of monthly payments for the use
of the new system after it had been implemented. This has not
happened and no payments have been made to them.
2.2 Assurance Points
The business allocation contains a number of
assurance points through which we formally measure progress. Failure
to meet the criteria associated with these requires EDS to develop
and deliver an acceptable recovery plan. Failure to do so could
ultimately result in the DWP terminating the contract. EDS has
presented a re-plan that is being impacted against other business
activities required to implement the reforms.
2.3 Partial Delivery
The CSR business allocation also allows the
Department to agree to the implementation of a reduced set of
functionality (or part of the system) ahead of the delivery of
the full system. This was added as a contingency measure in case
development of particular aspects of the IT service proved problematic.
Had it been involved the level of monthly payment for the use
of the "live" system would have been reduced on a pro
2.4 Liquidated Damages
Liquidated Damages (LDs) are a pre-estimate
of loss that the Department may claim if there is a delay in the
delivery of the IT system and the ensuring provision of services.
There are three business events triggers for
the payment of LDs in the CSR BA, these are:
delay to Migration; and
The level of LDs for each business event was
calculated by the Department prior to the contract negotiations
and limited to the direct costs for the delay. They include the
costs of employing project staff for longer, re-training and re-deployment
of operational staff. They cannot, for legal reasons, include
the value of lost benefits.
The LDs are payable for a period of 13 weeks
from the start of the delay after which the Department are entitled
to terminate the contract should we wish to do so.
2.5 Payment/Performance Regime
As mentioned earlier EDS receives payment only
after the system has gone live and then on a monthly basis thereafter.
Even then payment is subject to a rigorous set of service levels
related to how well the system performs I live operations. If
these performance targets are not met for any reason then the
amount due is reduced depending on the extent of failure. In extreme
cases the payment can be reduced by 70 per cent.
Continued failure to meet agreed service levels
can result in termination if the Department wishes.
2.6 Formal Acceptance
Under current planning assumptions formal acceptance
of the system takes place a full 18 months after the "Go
Live" date. This measure is required because until the system
holds and processes existing cases alongside the new we are not
able to confirm that the system can cope. During this extended
period we are able to terminate for poor performance under better
terms to the Department than would be the case after the system
had been formally accepted.
2.7 Application of these Protections
Currently the Department and EDS remain confident
a that the new IT will be available to support introduction of
the reforms. Detailed planning and impact analyses are taking