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Background to version 2 of the OGC model ICT services agreement & guidance

1. POLICY BACKGROUND

1.1 In July 2003, HM Treasury published its review of the Private Finance Initiative - "PFI: meeting the investment challenge" – in which it stated that "the Government will now adopt a presumption against PFI in future IT projects". Additionally, OGC were tasked to develop new guidance to address the issues arising from the application of PFI to IT and hence specifically to ensure that the guidance provided for:

1.1.1 appropriate levels of flexibility;

1.1.2 optimal risk transfer to achieve value for money, given the lack of available third party finance;

1.1.3 better handling of integration risk;

1.1.4 a more considered approach to the ownership of IT assets; and

1.1.5 due consideration of the capital and operational constraints of the private sector.

1.2 The new guidance which emerged following a period of consultation with both public and private sectors took many of the successful features of the service-based focus of PFI but sought to rebalance the payment profile to improve value for money. Specifically the new approach aimed to allow pre-service payments to minimise the high costs of internal financing whilst adding protections for the Authority in the event that the delivered service failed to perform.

1.3 For further discussion and explanation of the new guidance please see Guidance Note 1 (Key Commercial Principles) for an overview of the post-PFI commercial model for ICT projects and Guidance Note 2 (Payment, Affordability and Asset Management) for a detailed description of the issues relevant to developing a payment mechanism under that model.

2. PUBLISHED GUIDANCE SINCE 2004

2.1 The new Guidance for output-based ICT service agreements was launched in Spring 2004 with various modifications to the standard PFI provisions – many of which were linked directly of indirectly to the new payment model. The associated model Terms & Conditions ("Model Ts & Cs") - incorporating further embedded guidance - was published in November 2004 and this, together with the previously published guidance, is now referred to as "Version 1".

2.2 Since the publication of this guidance, it has been used widely across UK public sector ICT procurement and in response to requests from various users of the guidance, OGC commissioned work in 2005 to develop the drafting and guidance for the set of Schedules relating to the Model Ts & Cs'. A further consultation exercise was undertaken on early drafts of the new material to obtain and take into account the views of stakeholders from government and industry.

2.3 In the course of planning the publication of Version 2 it was also decided that much of the issue-specific guidance that had been created in 2004 would be more usefully relocated alongside the drafting to which it related. Hence when Version 2 of the guidance was published in September 2006 it had evolved into a full Model Agreement (Ts & Cs and Schedules) with embedded guidance as well as a short series of Guidance Notes on cross-issue topics.

2.4 Following further rounds of consultation, seeking to address issues of concern and feedback from the use of the guidance, further versions of the guidance were issued in June 2007 (version2.1) and May 2008 (version 2.2). A further update (version 2.2.1) was implemented in July 2008 to coincide with the government's decision to mandate the security provisions for all ICT service contracts.

 

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