Arbitration should not be a cloak

A couple of years ago I heard the prime minister publicly promise to make the UK government the most transparent in the world. Credit where it is due: the current administration has opened up a lot of small stuff; asking local councils to publish all items of spending over £500, for example.

But when it comes to matters involving tens or hundreds of millions, old habits die hard. Two particularly shocking examples are the secrecy surrounding the cancellation of two mega IT projects inherited from the Labour government.

Today we learned that the taxpayer has been hit with a bill for £224m for the cancelled the ‘e-borders’ contract with defence and IT firm Raytheon Systems; this followed reports last month of a £700m settlement in favour of IT giant Fujitsu over a cancelled NHS computerisation contract. 

Both disputes are of immense public importance yet are shrouded in secrecy because of the arbitration procedure chosen to resolve them. The Fujitsu contract was one of half a dozen rushed deals placed under the ill-fated National Programme for IT in the NHS. In retrospect, it was not surprising that Fujitsu failed to fulfil its side of the contract, which for technical and political reasons was impossible (I’ll spare Gazette readers the details; if anyone is really interested, please get in touch).

I also believe the incoming coalition was right in deciding that NHS computerisation was better managed from the bottom up than by billion-pound contracts imposed from the centre. It cancelled the contract, and Fujitsu complained.

I believe the taxpayer deserves to know how we ended up in this mess, if only to avoid repeating the mistake. However all the Department of Health would say today of the matter is: ‘Fujitsu is an important supplier of IT services to the government. The government does not comment on contractual disputes with suppliers.’

E-borders is an even bigger scandal. The idea of the project was to keep better tabs on people entering the UK and cut illegal immigration by requiring travellers to supply personal details before beginning their journeys. As I wrote in a national newspaper in 2009, the original conception was unworkable and almost certainly illegal.

The following year the incoming coalition government cancelled the contract with Raytheon and has since quietly conceded that it can do little legally or practically to require several large categories of travellers - Eurotunnel shuttle passengers and people crossing the Northern Ireland border, for a start - to submit ‘advance passenger information’. (Let’s not even begin thinking about how the system would cope with an independent Scotland.)

Like Fujitsu, Raytheon kicked up a fuss and the dispute went to arbitration. Yesterday the home secretary revealed that the process had concluded. The tribunal passed no verdict on whether Raytheon had defaulted but concluded that ‘the processes used in reaching a decision and carrying out the termination were flawed’.

At least in this case we know the damage to the taxpayer: £50m in damages, £9.6m for disputed contract change notices, £126m for assets acquired through the contract and £38m in interest. However as the chairman of the Commons Home Affairs Select Committee has pointed out, we have not seen a copy of the original contract, or details of how the old UK Border Agency mismanaged the termination.

On the face of it, submitting government contractual disputes to arbitration rather than an open courtroom battle sounds a grown-up approach and presumably saves a fortune in advocacy fees. As a result, these disputes hardly ever get to court – in fact few get in to the public domain at all.

While it would be an absurd waste of public money for every such ruction to be played out in the Rolls Building, there are times when public exposure trumps the need for expedient settlement. A government committed to being the world’s most transparent should bear that in mind. 

Michael Cross is Gazette news editor