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Granger’s men The multi-billion pound NHS IT outsourcing has attracted praise and vilification. Richard Granger and his advisers are at the centre of one of the world’s biggest and most controversial technology projects. Legal Business met them JAMES LEWIS
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OVERHAULING THE NATIONAL HEALTH Service’s IT systems was never going to be easy. At the outset, Andrew Pinder, the government’s e-envoy, likened the project to putting a man on the moon. Richard Granger was the man charged with this ‘mission impossible’. Allen & Overy and DLA were to become his enforcers. He arrived at the National Programme for IT (NPfIT) in October 2002, on the crest of a wave, having advised Ken Livingstone on the congestion charge; it cemented an already redoubtable reputation for driving through major IT procurement projects. Since then, as director general of NHS IT, he
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Granger, A&O and DLA
> has overseen the successful completion of seven of the NPfIT procurements – almost £6bn worth of IT contracts – in less than 12 months from the invitation to tender in January 2003 (see ‘Man on a Mission’.) Such a demanding brief called for a radical approach, not to mention hardball tactics. These have evoked remarkably strong opinions from everyone involved. The achievement has attracted widespread – though often grudging – admiration. ‘Whatever you think of Richard Granger, he’s one of the most powerful civil servants in the country,’ says Clive Seddon, the head of Masons’ outsourcing group, who could be excused a hint of ruefulness at having missed out on NPfIT-related work entirely. ‘He’s taken this on and he’s delivered what he set out to do. For that he deserves a medal.’ There has also been scathing criticism, which, though all offrecord, Granger may be more aware of than his critics think, as he explains below. One supplier’s legal adviser, who claims to have been ‘steamrollered’ by Granger during the negotiations, resorts to personal sniping in summing up Granger’s approach to the procurement process: ‘He exhibited the worst attributes of the short man.’ When Legal Business met Richard Granger at his office in Whitehall at the end of January, flanked by Laurence Jacobs of Allen & Overy and Richard Bonnar of DLA, we put his
critics’ views to him. Most received very short shrift indeed. He was unperturbed, uncompromising, and unapologetic. Flanked by two of the world’s largest law firms, the NHS master couldn’t look much bigger.
Getting radical Granger signalled his radicalism early. In November 2002, Allen & Overy and DLA were instructed jointly as the legal advisers to the NPfIT. It may be common enough for different firms to advise on discrete aspects of an M&A deal. Calling on two firms to create a joint team on a project of this nature
‘Some of the ill-informed gossip that has occurred in some of the legal trade press is just that. I know the source of the gossip and he should know better.’ Richard Granger, director general, NHS IT
is unprecedented. ‘I was struck by the possibilities of forming a very strong team from two quite distinct firms, both of whom I have seen, in the past, deliver excellent service in the IT space,’ Granger says. ‘The programme that I run is probably the largest civilian IT programme on the planet and I wanted, in all respects, world-class people working on the programme.’ The procurement of these legal services proved controversial. Ten firms were invited to bid – it was one of the most lucrative instructions around. Estimates of total fees billed to date by DLA and A&O range up to £40m – this is less than 0.007% of £66bn – Granger would not confirm such a figure and an NHS spokesman called it ‘over-inflated’. Certainly, though, for these winning firms, the rewards are manifold. Granger’s project puts the NHS in A&O’s top ten clients of 2003, and in DLA’s top five. The resultant experience, influence and publicity will be priceless.
Exclusion blues ‘We ran a procurement process to select legal advisers, which we weren’t obliged to,’ Granger exclaims, slightly exasperated. ‘People may have an expectation that because they’ve been involved in things in the past, or with people in the past, that would mean they’d get an appointment as a reflex. We ran an open procurement process, so just because there’s an association doesn’t mean they’ll get an instruction.’ He rejects any suggestion that his relationship with DLA’s Brian Clark, developed on the congestion charge, explains DLA’s instruction. ‘I had nothing to do with the
MAN ON A MISSION: THE NHS OUTSOURCING TIMELINE The NHS is five times the size of the largest health network in the US. Nothing on this scale had ever been attempted before. But Richard Granger’s not one to hang about.
Four key developments: the electronic booking system; electronic transmission of prescriptions; an integrated care records service; and an underpinning IT infrastructure
5 SEPTEMBER 2002 Granger appointed director general of NHS Information Technology with responsibility for implementing the National Programme for IT (NPfIT)
NOVEMBER 2002 A&O and DLA win joint instruction to advise NPfIT
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8 OCTOBER 2003 What: NPfIT award contract to set
up NHS electronic booking system Which supplier won it: SchlumbergerSema How much it’s worth: £64.5m What it does: Electronic booking enables patients to choose the hospital they want to attend at a date and time to suit them at the point of referral to hospital by GP Implemented by: December 2005 Who advised supplier: In-house (Vincent Phillips)
8 DECEMBER 2003 What: NPfIT announces contracts to run NHS care records service. Two contracts awarded to the local service providers (LSP). One in the North East, the other in London Which supplier won it: BT (care records); Accenture (North East); and BT (London) How much it’s worth: £620m (care records); £1,099m (North
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Granger: having two firms meant the best people were constantly at hand
procurement of legal services,’ Granger says emphatically. ‘The Department of Health’s finance directorate ran it. I had no involvement in scoring, decisions or interviews at all. The in-housers ran the procurement, so some of the ill-informed gossip that has occurred in some of the legal trade press is just that. I know the source of the gossip and he should know better, especially given his association with several high-profile public sector IT disasters… alleged.’ Granger clearly stands no messing. Neither does Granger make any bones about wanting tight control over the project and his team – indeed, this was enough to put off some of the firms invited to bid. ‘We had terms and conditions that certain of those tendering found unpalatable,’ he admits. ‘I wanted intervention rights in the event of non-performance. We had a position on PI that was less favourable than usual. There was something on liability that’s not as soft as usual. If there are some
East); and £996m (London). What it does: Care records service provides all 50 million NHS patients with an individual electronic record, making information about patients mobile for the first time. LSPs provide systems to access and use the service and IT support at a local level in the North East and London regions Implemented by: Late 2004
bad losers out there then that’s unfortunate for them.’
Two tribes Probably the most important condition was a readiness to work closely with another firm. A&O’s Laurence Jacobs and DLA’s Richard Bonnar were willing to give it a go. ‘We felt that there was plenty for both firms,’ Bonnar explains. ‘Rather than squabble over individual pieces of work, which wasn’t in the interests of the programme, the work should be spread around fairly so that both firms were carrying the load. If you look at the number of procurements, both firms have contributed the same amount of personnel. There were five LSP [local service
Who advised supplier: Bird & Bird (care records) CMS Cameron McKenna (North East); and Bird & Bird (London) 23 DECEMBER 2003 What: Two contracts awarded to the LSPs. One in the North West (NW) and West Midlands (WM) region, and one in the Eastern region
provider] procurements for example. Laurence’s team has done three of those. My team has done two, and handled the two NASP procurements.’ Once A&O and DLA were on board, Granger had very definite views on how to get the best out of them. Whether it’s suppliers of IT or of legal services, he dislikes having all his eggs in one basket. One phrase he likes is ‘maintenance of a contestable framework’. ‘Having two firms has kept both very focused on the quality of the people that they brought on to the job,’ Granger says. ‘If you look at the services we’re buying for the NHS, the local service provider structure we’ve got has five companies with the country divided up, and in the event of non-performance we can transfer capacity from one contractor to another. I think that is a good structure to have with professional services firms working client-side as well.’
Spirit of co-operation As you’d expect, A&O’s Jacobs baulks at any suggestion that internecine competition is the motivator for him and his team. He emphasises the two firms’ co-operative approaches. ‘Our motto was “two firms, one team”,’ he insists. ‘That’s something that all three of us have preached. I’d emphasise that the reason this has worked is not competitive environment. It has, rather, been trust and mutual respect. Richard Granger is not saying that the way to get the best out of us was to have the constant threat that if one of us wasn’t good, the other one would get the work.’ At this point, Granger interjects: ‘I do believe it made the firms more diligent about
Which supplier won it: CSC (NW and WM); and Accenture (Eastern) How much it’s worth: £973m (NW and WM); and £934m (Eastern) What it does: Provides systems to access and use the service and IT support at a local level in the NW,WM, and Eastern regions Implemented by: Late 2004 Who advised supplier: CSC inhouse
26 JANUARY 2004 What: NPfIT awards final contract to run NHS care records service Which supplier won it: Fujitsu How much it’s worth: £896m What it does: Provides systems to access and use the service and IT support at a local level in the southern region Implemented by: Late 2004 Who advised supplier: Baker & McKenzie
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‘The agreements contain a lot of essential protections because we are talking about critical clinical services. To have anything less would have been unsatisfactory for everyone, including patients.’ Laurence Jacobs, Allen & Overy
> the calibre of resource and the net result is better than if I’d just gone with one firm.’ The co-operative venture worked for Granger, and he didn’t exercise his right to intervene. ‘There has been a degree of convergence,’ Granger says. ‘You cannot discern the provenance of the people within my project team in Leeds. There’s been no obvious distinction. The teams have been mixed on many tasks and there’s been no disconnect, no internecine warfare. What we continue to get is one plus one equals three.’ Such glowing praise may surprise those who had pegged the A&O-DLA relationship as a mismatch. Numerous London outsourcing partners and commentators have been less than complimentary about DLA’s role in the partnership. ‘A&O does the brainwork and DLA does the grunt work,’ is one of the more insulting – not to say inaccurate – appraisals that’s often parroted. Granger draws a metaphor that illustrates his take on the relationship. ‘In
GRANGERISMS On suggestions that the procurement wasted time, clocking up unnecessary fees: ‘We’ve avoided the preferred bidder fantasy episode where you think you’ve got a contract and a deal and then you’ve got to negotiate it. This is beloved of some of the advisory professions. I’ve been involved in preferred bidder stages that have gone on for a year. So we just haven’t done that at all. The preferred bidder stage wastes time.’ On not being popular: ‘We’ve run a procurement process that is at variance from processes in the past that in some cases have favoured the supplier rather than the purchaser. There may be a bit of a shock there. We never set out to be popular with the losers. That was not a mission statement for 2003.’
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they’re co-dependent. We have the same creative fusion from our legal resource.’ He also reserves particular praise for DLA’s Brian Clark who put the first contract through – covering e-booking – under the new terms and conditions. This is something that Granger describes as ‘a massive task’. He adds: ‘He worked for six months on that without a break, and that established a new high watermark in terms of the standards that the public sector expects for post-PFI contracts. It was the benchmark for all the subsequent procurements.’ Granger is not wholly uncritical of his legal team, though. He noted that the legal profession is yet to master the intense Jacobs: competition is not a driving force for A&O project environment. ‘It tends to have the ability to do an awful lot of burst activity the procurement, there’s a and then have a lot of dwell time before the creative fusion occurring next burst. What we’ve had over the last between, for example, year is procurement after procurement, Accenture (one of the world’s relentless, back-to-back, and that’s placed most prestigious IT and services an enormous stress on people.’ companies) and I-soft (a midRichard Bonnar concedes that some scale software company) and partners, and particularly those with a corporate background, might underestimate the challenges of the project environOn the tight timescale: ment. ‘I was a corporate lawyer ‘There has been a suggestion that time was king. I once so I know what it’s like. manage large programmes and I’m trading cost, time, You do your overnight complescope, and risk. But if you look at our decision before tion and then rest for a bit and Christmas not to appoint on the Southern LSP you can get on with the next deal. This see that there is a point beyond which we will not go. was like a corporate completion There’s been a suggestion that we would appoint every day for seven months. It regardless, but we appointed on the right basis.’ was immense, especially from the back-end of August to the On the solicitor’s role: end of the year.’ Jacobs adds: ‘The traditional role played by solicitors in drafting ‘We delivered it and I think we contracts is moribund. The legal industry is moving delivered it well. I don’t think into a space whereby clients expect to have people we could reasonably have who understand our business issues rather than predicted how intense it was people who are able to give us two cute ways to draft going to be. What we both did something. These guys have been right in the core of was brought on resource. the team solving complex problems.’ Perhaps we could have brought that on earlier.’
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Granger becomes quite emotional when talking about his team and what it’s achieved. ‘Working on big projects that change the face of the country lasts for your lifetime,’ he opines. ‘You never lose the relationships formed when you’ve done that with people. It is a life-changing experience when you work on a project like this. The NHS is unique – it defines part of what is Britain – a health service that is free at the point of demand to everybody.’
Tough talking This strength of feeling, and near-messianic zeal, informs Granger’s approach to negotiations. Suppliers and their advisers have expressed serious frustration that, rather than being party to negotiations, they were being dictated to. ‘It’s been a shock to some of the advisers that the NHS is deadly serious about getting absolutely top quality services at a commodity price,’ Granger explains. ‘Some of those people who showed up for negotiations in Leeds are used to being in the driving seat. Here they’re not: the NHS is in the driving seat on this procurement.’ He makes no apology for taking full advantage of this shift in power; A&O and DLA were, in large part, enforcers of the new dynamic. One partner describes them as: ‘A brick wall. A very expensive brick wall.’ Granger rejects this completely. ‘We had a substantial negotiation process. We moved our position on a number of things. We also put in place a number of carrots,’ he asserts. And Jacobs picks up the theme. ‘The agreements contain a lot of essential protections because we are talking about critical clinical services,’ he explains. ‘To have anything less would have been unsatisfactory for everyone, including patients. There are also a number of incentives for effective performance as part of the cluster arrangement, which means successful suppliers can provide other services within their cluster.’ Those are the carrots, but there were also sticks. Much attention has been focused on the amount of risk that NPfIT is pushing onto suppliers. Some, Lockheed Martin for example, found this so unpalatable that they simply walked away. ‘It’s fine to get the best price on the best terms if you’re buying a car,’ says one disgruntled partner. ‘But it makes no sense if you are trying to develop the co-operative relationship that is
Bonnar: work is evenly spread between both firms
essential for implementing complex IT systems.’ Granger is bluntly critical of suppliers’ advisers taking this position. ‘People were turning up with their legal advisers and explaining that there was no way they could accommodate termination without compensation in the event of non-performance. Try and explain that to a taxpayer. There’s been an education process that’s been quite brutal for some people. To roll up at the end of the summer saying it’s a shock that we’re doing what we said we were going to in January is remiss of them. I’m not going to preside over a situation where hundreds of millions of pounds are spent on things that don’t work.’
delivered. We’ve got away from that piece of irrationality. Some of the advisers who were upset about that didn’t smell the coffee soon enough. Frankly, they didn’t do their clients any good because they were advising them not to agree to things that will be standard OGC [Office of Government Commerce] terms and conditions for IT contracts in the public sector.’ The issue of legal fees is obviously a sensitive one for a man who sees one of his key roles as protecting taxpayers’ interests. So how did the legal spend compare with his initial costing? ‘Under budget,’ he states unequivocally. ‘Sorry about that. If you look at the cost of legal support, which peaked at about 40 people for around £6bn-worth of contract, you will find the most efficient use of lawyers on an IT procurement ever. Contrast that with the way the NHS has purchased IT previously. A situation where you would have teams of between five and ten people working intermittently for between 24 to 36 months, to buy a system for one to nine hospitals at a contract value of £5m-10m, and the legal bill could be up to 10% of eventual contract value. On this one it’s point zero zero something percent. It is infinitesimally small.’ Though Richard Granger is a seriously demanding client, he clearly has no doubt that he has received value for money. ‘We’ve achieved what we set out to this year,’ he enthuses. ‘As we look to 2004, the stage is set for us to achieve rollout of e-booking from summer 2004. That’s about 18 months from commencement of procurement to going live. That is exceptional.’ It’s one point to which few can take exception. LB james.lewis@legalease.co.uk
Bill of health Granger rejects any suggestion that his tactics wasted time and clocked up excessive legal fees. Instead he lays blame at the doors of suppliers and their advisers. ‘If they had done what they were told to start with, it wouldn’t have. There were lawyers acting for suppliers who thought they would protect their clients’ interests by refusing to agree to what are now standard arrangements in the NHS. Like not paying for things that aren’t
‘Rather than squabble over individual pieces of work, the work should be spread around fairly so that both firms carry the burden.’ Richard Bonnar, DLA
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