16 March 2009 | Rebecca Ellinor

The programme of procurement at the Identity & Passport Service is one of the largest civil government IT projects. Rebecca Ellinor speaks to the man responsible, Bill Crothers

It won't be long before an identity card containing a chip full of information about us is nestled in our wallets, next to bank, loyalty and membership cards.

And, despite the objections of those who consider it an infringement of their privacy, the ID cards will link through to a register that holds unique biometric data used to prove our ages, open bank accounts and travel in Europe without a passport.

Work by the commercial team at the Identity & Passport Service (an executive agency of the Home Office) will affect us all.

The National Identity Scheme (NIS) is one of the largest civil IT procurement programmes in UK government, and commercial director Bill Crothers is responsible for overseeing the purchase of everything it requires. He is relishing it. "To be out shopping with a couple of billion in your pocket on something that's really important is just fantastic."

That's not all. In addition to producing, marketing and selling identity cards, his organisation is handling the renewal of around a dozen material contracts and a major transformation to move to an online business. This will enable most applications to be handled via the web, which will help improve the service and reduce costs.

"There are a lot of changes, all of which are a major disturbance to this organisation that for ten years has been in a steady state - and that's brilliant. It's a truly interesting place to be."

Avoiding disaster

It's also immense and contentious. So what approach is Crothers taking? How will he prevent it turning into a high-profile government IT disaster and what about the security concerns? IPS is simultaneously running

a number of massive procurement projects (see box opposite) for the design and production of passports, ID cards, application and enrolment services and the matching and storage of biometric data. It has already awarded a smaller scale deal (£18 million over four years) to Thales to produce the capability for the first ID cards. These will be for workers at Manchester and London City airports and members of the public who volunteer to be early adopters.

"There will be ID cards on the street from, let me be conservative, the final quarter of 2009. That's a busy year," says Crothers, who joined IPS in April 2007.

Although his background is not in procurement he has experience of complicated change programmes, including some in the public sector at Accenture.

While Crothers was awaiting his security clearance to join IPS, he examined why huge government projects often falter. He studied reports on complex business transformations from the Public Accounts Committee and National Audit Office, drew on his own experience and visited other projects, including T5, to analyse what does and doesn't work.

"James Hall, the IPS chief executive, always says: 'If we're going to make mistakes, I'd like them to be new mistakes.' So it's a lot of learning from elsewhere."

Nine principles

His assessment of the causes of failure includes behaviour and misalignment of goals, not technology.

"Big, complicated IT programmes often go wrong, including in government, and that's a fact. I don't think it's the technology, it's that people don't get on. It's not the physics and the sums, it's the behaviours."

This conclusion has influenced his entire approach to suppliers and the way IPS, as a client, behaves.

To address this problem Crothers has set out nine principles to drive the approach of the IPS commercial team. These are:

• Transparency: sharing information and intentions where appropriate • Predictability: building mutual trust by meeting obligations • Delivering NIS goals, with responsibility shared across its 'Strategic Supplier Group' and agencies • Driving whole scheme value - ensuring all are focused on the value of the NIS not just one contract • Being responsive to change • Prioritising value over cost • Cooperation and competition • Industry best practice • Payment by results.

His SRM strategy is three-pronged. It explains how buyers and suppliers should work together, how suppliers should cooperate, and puts the financial mechanisms in place to drive that behaviour. Since all the work is too big for one provider, IPS has a framework of five main suppliers or 'systems integrators' (SIs) who form its Strategic Supplier Group (SSG): Thales, IBM, CSC, Fujitsu and EDS. It meets with senior representatives from the bidders every month and has a framework board, so it can update them on its thinking. Crothers says the relationship so far is sophisticated and mature.

"There's a spectrum for managing suppliers: at one end is the 'beat them up with a big stick' approach. It doesn't work. All that happens is they feel bad, they make less money and you don't get the A team.

"The other end is laissez-faire. It's slack and everybody feels good because they think the relationship's fantastic. Probably they're making a super normal profit and it's not value for money."

He says the right place is in the middle - a positive, constructive relationship with "tangible commercial mechanisms". "It's not just 'play good together guys' but 'if you play good together you get money and if you don't play nice there's a sanction, which is let's just call it off'."

As reported (News, 22 January), suppliers who demonstrate bad behaviour could be fired. Crothers says while it's not unusual for buyers and suppliers who partner to define good behaviour, making it contractual is new. It has agreed with its framework suppliers what good conduct looks like and laid this down in a 'partnering handbook'.

"If a party is not behaving as we wish, a sanction we have - and this would be an extreme sanction - is to terminate the relationship."

He says since each of the SIs are natural competitors, IPS has put mechanisms in place to get them to cooperate.

"Let's say we've got two suppliers delivering something. Typically what one supplier delivers doesn't have any value to us, it's only when you add things together that it has value and meaning. "The contractual arrangement works like this: supplier A does what we want, that's a fee. Supplier B does the same, that's a fee. When it comes together and works in total as we want they will each get an extra fee at our discretion. That's providing a financial incentive for them to cooperate. "I've seen arrangements where one supplier has been struggling, another is successful and just stands back. It's not unusual to have arrangements in place to get people to cooperate but it's normally by lists of agreed principles that are pretty weak. We've put hard, tangible commercial mechanisms in place."

Financial arrangements

Another element of his approach is pricing. "It is a behavioural tool. If you have a fixed price deal the behaviour that's incentivised is for the supplier to reduce the cost and give as little as possible and for the client to specify as much as he can. We're not going to have fixed price because it screws up behaviours."

Instead IPS is using a target cost incentive fee (TCIF). "This approach is common in defence, not uncommon in construction and was an element of T5 that went well," he says. "Whenever we set a price with a supplier it's open book. We can see their cost and profit and we've a target cost and they have a target profit.

"If the costs rise their profit will fall. So the more we pay the less they'll earn and vice-versa. If costs go up - and it might be our fault if they do - we'll each be motivated to get them down.

"So we've aligned the goals and then you get the behaviours." He points out a fixed price requires a clear specification and there are elements of the project that will change.

"It doesn't mean we don't know what we want, but policy evolves over time and the technology will evolve." He also believes in paying for results. "Whenever a supplier is making good profit there's a correlation with good service. That's a supplier-centric view. But people don't want to go on a job that has a bad name, so you don't get the best people. If it's the shining star you get the best and we need the best because what we're doing is tough."

Crothers has also been "recruiting like billy-o" for programme managers, architects, commercial and technical staff. While it's tough to find senior people with experience of similar large-scale projects, he believes it is great place for civil servants to gain it.

"This is one of the best games in town if you're into procurement, supplier management and large-scale IT development.

"Managing one contract which is £500 million is tough. Managing four of them in parallel is exciting. So we have to be at the top of our game."

More info: Procurement schedule

Passport application and enrolment capabilities: A deal worth around £500 million over 10 years. In December the IPS shortlisted two suppliers, CSC and Fujitsu. It hopes to move to the contract stage next month.

The National Biometric Identity Store: This covers biometric matching and storage services - fingerprints and faces. Thales and IBM are shortlisted. It is also expected to move to the contract stage next month. The deal is about £300-£400 million over 10 years.

Passport design and production: Currently being done by a company in the north of England. That contract expires in October 2010, so IPS needs to award the replacement deal this summer to allow a one-year lead-time to build the manufacturing capability. In this case it's not procuring from the framework of five suppliers because the nature of the service is different. It is worth around £700-£800 million.

Card design and production: The manufacture of the card itself. IPS shortlisted Fujitsu, IBM and Thales in December. It plans to go from three to two bidders shortly and then go to contract this summer.

More info: key terms - Identity Card Act

The decision to introduce a national identity scheme was announced in the Queen's Speech in May 2005. It received royal assent, becoming law, on 30 March 2006.

National Identity Scheme (NIS) A secure system of personal identification for adults living in the UK. Its cornerstone is the introduction of national ID cards for UK and European Economic Area residents over the age of 16. Each ID card will be unique and combine the cardholder's biometric data with their checked and confirmed identity details.

The Identity and Passport Service (IPS)

Established as an executive agency of the Home Office on 1 April 2006, it provides passport services and in the future, as part of the National Identity Scheme, ID cards for British and Irish nationals and foreign nationals resident in the UK.

More info: security

Security is "at the heart" of everything IPS is doing, says Crothers: "There are two reasons for ID cards. One which is talked about so much is convenience, making it easy. The other is security, which from the get-go has been absolutely drilled into us.

"We're very conscious our database will be a target for the malicious and mischievous. If you're a computer student anywhere in the world it would be a feather in your cap to break the system." IPS's executive director and security team focus on this area.

"I don't want to be complacent but it's so embedded," adds Crother.

When the Home Office experienced a data loss problem last year, many other deals were examined for security integrity. Crothers says IPS contracts came out top in terms of security and the mechanisms in place.

"We have random and regular audits of our suppliers. We get the security officers to visit our suppliers and we've been talking to all of the bidders about security, which is a key criteria in the selection process. It's just constant. Of course, saying that, you can never guarantee."

IPS staff cannot save information to removeable media (such as CDs or memory sticks) and it has strict procedures for its passport database supplier.

In addition, the security level for staff is very high, which means it sometimes takes two or three months to get new recruits - temporary or permanent - through the door. Occasionally IPS needs to move data around. When that occurs it consults the information commissioner about its procedures and follows a detailed protocol.

Furthermore, recruitment is under way for an independent ID card commissioner who will act as a watchdog and champion public interest.

SMmar2009