The rise of the captive cloud

• PASC should rescue the good idea of SME competition

from the clutches of G-Cloud

• PASC should look carefully at the way competition is being operated

in G-Cloud

Whitehall misfeasance
The Public Administration Select Committee (PASC) published its report on Government Procurement on 16 July 2013:

The public sector spends £227 billion each year buying a range of goods, services and works, £45 billion of which is spent by Whitehall Departments. The Ministry of Defence alone spends £20 billion a year. By improving the efficiency and effectiveness of procurement, the Government has an opportunity not only to save the taxpayer significant sums of money, but also to drive economic growth. (p.1)

 PASC say that the public is getting poor value for money and that:

There are clear shortcomings in the ability of the Civil Service to run effective and efficient procurement. The Civil Service shows a consistent lack of understanding about how to gather requirements, evaluate supplier capabilities, develop relationships or specify outcomes. (p.3)

This record of misfeasance in public office goes back at least 30 years and shows few signs of improvement:

Whilst we welcome the Government’s initiatives to centralise procurement, we note that progress so far has been painfully slow and sporadic. It is clear from our evidence that this is because, despite the centralising mandate given to the Cabinet Office by a Cabinet Committee, inter-departmental cooperation is poor. (p.4)

At worst, this soap opera is about suppliers charging the biggest number they can think of for poor quality service and about incompetent satraps paying them.

SMEs
What hope is there for the taxpayer that his or her money will stop being wasted?

One source of hope is the plan to give more government contracts to small and medium-sized enterprises (SMEs). They are more innovative than the behemoths who normally have government contracts let to them, and more competition might reduce prices and improve quality:

To help achieve this aspiration, the Cabinet Office has introduced a number of measures to remove barriers facing SMEs seeking to win government contracts. These include a policy to remove “pre-qualification questionnaires from lower value contracts, except where security is a consideration” and “the introduction of Contracts Finder” to allow “unprecedented transparency to the range of opportunities available”. (p.13)

That hope expires one page later.

Duty of care

The G Cloud/Cloudstore Framework The G Cloud/Cloudstore framework provides an online catalogue of ICT services for the UK public sector managed centrally by the Government Procurement Service ... The Government expects that CloudStore will help small and medium-sized businesses to contract directly with the public sector, as it has simplified the requirements for joining this framework. (p.14)

Two ideas are being conflated and PASC have, arguably, fallen for it.

Giving SMEs the chance to win government contracts is one idea. Cloud computing is a separate idea. SMEs being allowed to compete is quite independent of the introduction of cloud computing. And cloud computing is quite independent of SMEs competing – there are huge, non-SME cloud computing service suppliers like Apple and Google and Amazon and Microsoft.

"Cloud computing" means losing control of your data. It is a bad idea. It is an abdication of Whitehall's duty of care.

PASC should rescue the good idea of SME competition from the clutches of G-Cloud.

Competition
And PASC should look carefully at the way competition is being operated in G-Cloud, specifically by the Government Procurement Service and the Government Digital Service, which took over responsibility for G-Cloud on 1 June 2013.

Everyone is or should be conversant with the concept of the captive insurance company. Whitehall have created their own equivalent, in the form of the captive cloud company.

There are 458 suppliers accredited to G-Cloud according to PASC (p.14), many of them long-established SMEs with a track record that bears inspection.

So how did Skyscape, a company only incorporated on 3 May 2011, manage to be accredited by the Government Procurement Service? And how did it win four G-Cloud contracts – with HMRC, the MoD, the Home Office and the Government Digital Service – against the competition of long-established SMEs?

It looks as if Whitehall have created in Skyscape a captive cloud company. Skyscape recruited as its Commercial Director one Nicky Stewart, previously G-Cloud Head of ICT Strategy Delivery at the Cabinet Office, and Whitehall started filling this shell with valuable contracts. That looks like a distortion of the market and the opposite of the proper operation of competition.

Only separate
If Whitehall are allowed by PASC to confuse SME competition with cloud computing, the danger is that public administration will become dependent on the large cloud computing suppliers. Once dependent on them prices will go up, and a new oligopoly of contractors will exert power. Competition will be snuffed out by a cartel and we taxpayers will be back where we started, being fleeced, while the satraps look on with impunity.