UK government procurement questioned after Post Office scandal

While faults with Fujitsu's Horizon IT system had been known for years, the government continued to award major contracts to the company.

The scandal over the UK Post Office's failed Horizon computer system is raising questions about government procurement practices.

Back in the late 90s, the Post Office introduced a new computer system, Horizon, developed by Japan's Fujitsu and designed to handle accounting and stock-taking at the country's thousands of post offices.

However, sub-post office operators soon started finding discrepancies in the figures, which the Post Office claimed were their responsibility. Thousands were accused of taking money, with more than 700 prosecuted for fraud or false accounting between 1999 and 2015, in what has been described as one of the country's greatest-ever miscarriages of justice. In 2019, a group of these victims won a high court case, as a result of which their convictions were ruled wrongful, with the fault placed squarely at the door of the Horizon system.

However, despite promises that those wrongfully convicted would receive £600,000 each in compensation, the money has been slow to appear, and it's only since the airing of a television drama on the topic this week that the scandal has received widespread public attention. The government is now urgently considering ways of speeding up the process of overturning victims' convictions and allowing them to access compensation.

Questions remain

But many questions remain. Most notably, not only has nobody at either the Post Office or at Fujitsu been held accountable, but Fujitsu is continuing to benefit from its contract.

Last April, for example, the company was given £16.5 million under the Horizon contract to help with the migration of certain IT functions to a new supplier – a move that never took place. And in November last year, it was awarded a further £36 million to keep the Horizon system running until 2025.

To be fair, Horizon can't be scrapped overnight and needs support as long as it's in place. But Fujitsu has also – long after the problems with Horizon were identified – been winning government contracts across the board in recent years.

Most recently, the Environment Agency extended its contract with Fujitsu to handle flood alerts until December next year, at a cost of a further £2 million.

The company is also working on a new UK emergency alert system for mobile phones and tablets under a contract awarded in 2022. And last year, it won a £140,000 contract from the Ministry of Defence and a deal for a digital transformation project at the Financial Conduct Authority. The company also has £1 billion worth of deals with HM Revenue & Customs.

Given the fact that the Horizon scandal has already dragged on for years, there have been repeated questions over whether the company should have continued to be such a major player in government IT.

In too deep

In 2022, Baroness Ludford challenged the repeated contracts awarded to the company, asking: "How is a business-as-usual approach on the award of contracts before the official Post Office inquiry concludes prudent?"

And when the flood warning contract was awarded last year, MP and former sub-postmaster Duncan Baker said it was a 'kick in the teeth' for the Post Office victims.

The problem seems to be that the UK government has been simply in too far with Fujitsu to pull out. When, in 2022, the company was awarded a further £48 million for its 30-year contract for the Police National Computer, Home Office minister Lord Sharpe said there were “no viable alternative solutions.”

And trying to pull away from Fujitsu has proved expensive in the past. In 2008, the NHS terminated a contract with the company to digitize patient records in the South of England – leading to a £700 million lawsuit from the company that is believed to have resulted in a substantial financial settlement.

There are now calls for Fujitsu to take some of the responsibility for the Post Office scandal, with the government saying it will be held legally and financially responsible if found to have been at fault.

Conservative member of Parliament David Davis has told the BBC that the government should suspend the awarding of any new contracts to Fujitsu.

However, Prime Minister Rishi Sunak has said that any such move should depend on the outcome of the independent inquiry into Horizon.

"Once the full facts have been established by the inquiry, we will make further judgments but it’s important we allow that process to take place," his spokesperson told ITV.

The inquiry has already dragged on for two and a half years and isn't set to conclude until later this year. But it will, one hopes, help to put a spotlight on what led to so many contracts being awarded to the company in the first place – and why, given that there have been so many red flags from the start.