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Horizon – Robert Colvile Investigates and Fujitsu Owns Up

Coming back to the Post Office Horizon scandal, last week at the long-running enquiry into the events, Fujitsu finally apologised and owned up to their contribution to the terrible events. The firm has now promised to make substantial contributions to the payments which should go to the affected sub-postmasters shortly, we hope.

As the BBC reported, “The boss of Fujitsu’s European arm says it has “clearly let society down, and the sub-postmasters down” for its role in the Post Office scandal.

Paul Patterson admitted there were “bugs, errors and defects” with the Horizon software “right from the very start”.  Mr Patterson also reiterated the firm’s apology for its part in the scandal.

Some of the Post Office staff involved in prosecuting the sub-postmasters came over at the enquiry as being both stupid and vindictive, enjoying their role as the “bad guys”. Clearly, the Post Office saw a role for nasty, vicious people in this case.

Then, in the Sunday Times today, Robert Colvile has written an excellent article about the history of the Horizon software. I was also surprised and pleased to find that he quoted from my book, Bad Buying, within his article. He reviewed the book (pretty positively) when it came out in 2020.  My quote is nothing to do with Horizon though – Colvile uses another story of mine to demonstrate general issues with contract management in the public sector.

But he makes a connection that I had missed (and I should have spotted). Horizon started with an ICL project, “Pathway”,  working with the then Department of Social Security back in the 1990s to automate benefits payment. I was actually Procurement Director at the DSS for part of the time this pretty lousy programme was running! But I had not realised it morphed into Horizon, and along the way the failing ICL got acquired by Fujitsu.  

When I joined the DSS, in 1995, I was not exactly welcomed by the people running that programme. I was struggling to get any traction with the programme leadership. So I asked my boss whether I should push harder to get involved. “Do you have plenty of other things to do”, he asked me. Yes, I replied, loads of stuff. “In that case, I think I would leave that programme alone”, he advised. He knew it was a dog and was saving me from failure by association.

That was when the Minister Peter Lilley stood up at the Tory Party conference and showed off the “benefits payment card”. It wasn’t real of course – there never was a working benefits payments card. His was mocked up in his hotel suite the night before by his aides, I was told.

I followed the Horizon case from the beginning and I thought I wrote about it on Spend Matters many years ago but I can’t find the article now, so maybe I just thought about covering the case. I do remember my internal debate about whether to include the story in my Bad Buying book, but it was complex, unfinished and subject to ongoing legal action, so I decided not to, unfortunately perhaps. Although I don’t think my book would have had any effect compared to the TV programme.

Let’s just hope now that the compensation gets sorted out quickly for those affected. And I’ll come back to another issue which Colvile comments on, the question of why Fujitsu has continued to win government contracts since the Horizon affair became public. That takes us into some interesting questions about public procurement regulations, so I’ll save that for another day.

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Horizon Scandal – Post Office and Fujitsu Should Be Ashamed of Themselves

On ITV this week, there has been a dramatisation of the Post Office Horizon scandal – “Mr Bates versus the Post Office”. It has got very good reviews but in all honesty was hard to watch. Toby Jones was brilliant as usual but it was tough even as a veiwer as innocent sub-postmasters were sent to prison with their lives ruined because of the evil (and I don’t use that word lightly) behaviour of senior staff at the Post Office and Fujitsu.  There is also a documentary in ITV which I haven’t watched yet but will.

I wrote about this almost three years ago – the article is below. It all still applies. But what has become more obvious as the investigation into Horizon continues is that the guilty people in those two organisations were motivated by in a sense relatively minor considerations. It wasn’t exactly life and death for them.

They wanted to protect their bonuses, they didn’t want to make their own jobs a  little more difficult, or admit that they might have made some errors. More junior staff just didn’t want to make a fuss, I suspect. Frankly, if they had come clean and said “look, the Fujitsu system is flawed, so maybe it is not the sub-postmasters fault”, then it would not really have been that big a deal. But out of greed, laziness and apathy, they were happy to see other lives destroyed.

They should be ashamed of themselves and I am still expecting that at some point, Fujitsu as well as the Post Office is going to be on the hook for a lot of money.  The firm certainly should be held to account for their role in this. Anyway, here is my original article.  

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Many of the Bad Buying stories featured here or in my book have an element of levity to them. Some are decidedly humorous even. But sometimes there is a case where it is impossible to feel anything other than horror, anger and amazement at the behaviour of the parties involved.

The case of the Post Office, their postmasters and the Fujitsu Horizon IT system is a case in point. Last month, 39 people had their criminal convictions quashed in the High Court, the latest in a series of legal cases which have finally ended up clearing these individuals and exposing the appalling actions of Fujitsu and the Post Office.

Without going through all the details, the Horizon system appeared to show discrepancies in the finances of Post Office branches. That was blamed on the people running those branches – they were accused of stealing money or at best mismanaging post office funds. Many of those accused dipped into their own pockets to make up the supposed shortfalls. Eventually, the Post Office prosecuted hundreds of post office managers for theft – many went to prison. Some were ostracised by friends and neighbours; at least one committed suicide.

And all the way through this the Post Office and Fujitsu insisted that the Horizon system could not be wrong.  But eventually, after investigations and court actions, it became clear that the system was flawed and could well make the errors that led to the numbers not adding up. Even then the Post Office keep fighting for years, putting the postmasters through more pain.

There is a chapter in my book which is all about “believing the supplier”, and how Bad Buying can result from exactly that. That seems to have been one problem here. The Post Office initially at least believed Fujitsu when the supplier said the system was foolproof. No doubt there were careers and sales bonuses on the line for senior Fujitsu staff. Then when the integrity of the technology was called into doubt, we saw greed, fear, arrogance and stupidity from Post Office management, who refused to admit they might have been wrong. Instead, they continued to harass and prosecute innocent people, failing to take responsibility until the very end. 

So Bad Buying on the Post Office side, a poor product from Fujitsu and morally bankrupt behaviour from many of those involved on both sides of the supplier/buyer relationship. Fujitsu witnesses were also made to look stupid in court as they defended their system. Indeed, as Computer Weekly reported, after a 2019 hearing, “The Director of Public Prosecutions (DPP) has referred information to the police relating to a High Court Judge’s concerns about the accuracy of evidence given by Fujitsu staff in criminal trials”.

The least the firm – along with the Post Office itself – can do now is offer a large sum of money to compensate those affected. (Fujitsu has continued to win huge government contracts, by the way). There may be charges of “malicious prosecutions” to be brought against Post Office executives too.

Well done to Alan Bates, the postmaster who initially took on the Post Office,  Computer Weekly and Tony Collins, the first to pursue the technology aspect of the story, and to Private Eye magazine which regularly investigated and reported on the whole affair over the years. It’s a lot more than simply bad buying and the story of another dodgy IT system of course – and it all adds up to one of the most distressing stories about corporate behaviour that I’ve heard in a long time.

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Mone Moans, But Still PPE Questions to be Answered

Over the holiday period, we heard a lot more about the case of Medpro, the firm that is being taken to court by the UK’s Department of Health and Social Care over the supply of PPE, gowns in particular, which allegedly turned out to be unfit for purpose. The beneficiaries of this, the high profile Michelle Mone, a member of the House of Lords, and her husband Doug Barrowman, produced a documentary arguing their side of the case, and gave an interview on the BBC. This came after the couple had originally denied publicly that Medpro was anything to do with them, with Mone lying to the press and then getting lawyers to issue threatening letters to various publications.

The general response to all this new self-generated publicity was not very favourable for the couple. The interview was called a “car crash” and was likened to the Duke of York’s famous “I was at Pizza Hut and I don’t sweat” interview with Emily Maitlis in 2019. There are some questions though which still need answering on the government’s side of the story.

  • Why is this the only legal case that the government appears to be pursuing? There have definitely been other examples of quality issues, and cases of firms that look at least as dodgy as Medpro winning major PPE contracts. Is there a logic to this or has the government chosen to pursue Medpro because of Mone’s profile, know there would be more publicity given her involvement and that would show the authorities were taking action?
  • Mone claims that she has an email from an official on the PPE team saying, “the gowns have been approved by technical”.  But that seems to be pre-delivery so the approval was before anyone had seen the actual delivered product, which seems odd. Maybe there were samples? But the gowns were apparently inspected by Uniserve, the logistics provider appointed by the government, from July 2020 in China.  And £122 million was paid out in the summer of 2020 for the gowns, which would usually suggest the buyer is content with what has been delivered. 
  • The government says that random testing in April 2022 found that 54 of the 60 randomly selected Medpro gowns weren’t sterile. But that is almost two years after delivery. Even if those tests were accurate, Medpro lawyers may argue that the gowns might have become unsterile in the intervening almost two years, perhaps because of sub-optimal storage conditions?
  • As a buyer, if I have inspected the goods, told the supplier they meet my specification, and handed over the payment as per the contract, then it is pretty unusual, and very difficult to go back a year or two later and say, “hang on a minute, I’ve had another look and I don’t like that stuff I bought from you after all”. In my experience, the supplier would be likely either to laugh or (if they valued my business) say something vaguely sympathetic such as, “Peter, you said it was fine – you must appreciate we can’t really do anything at this stage, terribly sorry”.

However, the fact that Mone lied about her and Barrowman’s involvement and personal gains from the deal is a major issue working against them. There is also the question of alleged bribery. This has been part of the investigation, but there has been no hint as to who it was that Medpro might have  bribed. Their political contacts? PPE procurement people? Other officials?  Flows of money are usually relatively easy to check, unless it is literally £50 notes in a brown envelope, so that’s still an  interesting unanswered question.

In any case, this is likely to be a big story through 2024, not least because Labour will emphasise “Tory sleaze” when it comes to the UK election. Labour has also promised to appoint a “covid corruption commissioner” to look into PPE contracts, so this story will no doubt run and run.

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Competition in Public Procurement – Thoughts on the PAC Report

The UK House of Commons Public Accounts Committee (PAC) published a report last week titled “Competition in Public Procurement”.  It’s a shame that the report came out so close to Christmas and in the middle of Gaza, the Covid inquiry, Conservative Party meltdown and general office party debauchery. That meant it got less publicity than it should have, because it contains some important analysis and recommendations. It is also very relevant because 2024 is going to be the most important year for public procurement in ages, with new regulations and (probably) a new government too.

The PAC usually takes reports from the National Audit Office as their starting point and this is no exception. NAO published “Competition in public procurement – lessons learned” in August and we covered it here. But this PAC report does pick up on some other issues, such as the need to transition to the new procurement regulations in October 2024.

“We are concerned that the government may not have sufficiently considered the time, money, and resources required to provide the commercial capabilities to successfully implement the Procurement Act 2023”, says the PAC.

But the heart of the report questions (as NAO did) whether the UK government is getting value for money (VFM) from procurement spend, in particular by using competition effectively.  One of the core issues here is the lack of good data around public procurement which means “government is unable to evaluate competitive trends, understand how effectively markets are open to small and medium enterprises (SMEs) and other companies outside government’s strategic suppliers, or set out clear directions and guidance for contracting authorities”.

That is a fair comment, and it appears that there is less competition in public procurement than there was a few years ago, which is a worry. But I do struggle a bit with the concept that better data will allow you to judge VFM. All of us who have worked in procurement know how difficult it is to absolutely KNOW that the contract or deal we have done is the best we could have achieved or even that it is genuinely good VFM. More data in itself does not necessarily help in that.

What you can do is look at the inputs into procurement activity as a proxy for getting the right outputs. That is why aspects such as having the right processes, policies, systems, trained and capable people, strong competition and so on are so important. We can make some assumptions that if you get all that right, you probably will get good value out of the other end.

On that note, the report picks up on the growth in use of frameworks in recent years. Now frameworks do have a valid role to play, but as the PAC says, “the Government Commercial Function has not provided sufficient guidance to address the potential risks to competitive benefits”.  Used wrongly, frameworks can contribute to closed or competitive markets, and provide a route for buyers to simply choose their favoured suppliers without real competition. That may be done for different reasons.

  1. “Reasonably good” reasons – “we’re in a real hurry and I know this firm can meet our needs”
  2. “Poor reasons – “We’re short-staffed, I just don’t have the resource to run a proper competition”
  3. Or REALLY bad reasons “I’ve been unofficially promised a job with this software firm / consultancy when I leave the civil service so it’s worth my while keeping them happy now”.

The PAC does make the fundamental mistake of bleating on about SMEs (small firms). It really is about time we had a proper, rigorous review of the idea that supporting SMEs is the right policy. Why not minority owned firms, or social enterprises and charities, or innovative start-ups, or local firms? The supporting SME policy has in any case failed to deliver against its objectives for a decade now, so for goodness sake, let’s take a proper look at it.

If Labour does win the election next year, there are radical steps it could take and a review of the SME policy would be one. But abolishing Crown Commercial Services would be another. CCS has many successes and positives, but it does inevitably support the idea of central contracts and frameworks, many of which are fundamentally anti-competitive. Then all the little buyers around the country are encouraged to use them, because they don’t have the skills or time to do procurement properly themselves.

The PAC report says this. “While we acknowledge that government has made progress to professionalise the commercial function at the centre, we are concerned that it has not sufficiently prioritised the need to develop that expertise across government, to ensure the successful implementation of the Procurement Act”.

I think that is a fair point. If Labour is serious about devolution, then it will be interesting to see if that strategic thrust is applied to procurement as well as to other policies and approaches. If so, Labour will need to spread the expertise that has been increasingly concentrated in Cabinet Office, break up large national frameworks, drive more competition, encourage a wider range of firms into the public sector supply base, and get more procurement expertise to the front line.  Will that happen? I have my doubts, but we’ll see.

Anyway, the PAC report is worth 20 minutes of your time over the festive period. Enjoy… and happy Christmas! 

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A Bad Buying Play in One Act

(Peter is sitting at his computer, shopping on Amazon. The CEO, Shirley, enters his office).

Hi Peter, how’s that big project going?  I’m pleased to see that you’re taking personal responsibility for it, as our Head of Procurement. It’s an important project for us.

  • Thanks Shirley, yes, I’m on top of it I think.

So the CFO told me that we’ve started making payments to the service provider?

  • Yes, indeed. We paid them around £140 million last year.

OK, so what are they delivering now? How’s it going?

  • Well, nothing yet, that was just to get them on board really, get their co-operation, and help them get set up, you know what I mean.

Not sure I do really … so when do we expect to actually start getting some services from them? Soon I hope.

  • Well, we don’t know to be honest. I mean, they’ve pushed back on the specification in one area. Apparently we wanted them to do something that might be outside international law. So we’ve still debating that.

But we won’t spend any more until this is sorted?

  • Well actually, there was another £100 million we paid in April. Sorry, didn’t I mention that before?  

So that’s £240 million and nothing to show for it. Are you are absolutely sure they will actually deliver the services?

  • Well no, we might still change our minds. Or they might raise more issues. Or that legal issue could get in the way. But don’t worry, we’ve agreed we’ll only pay another £50 million next year. So that’s good news…

Well, thanks for explaining. I’ve got something for you (she hands Peter an envelope).

It’s your P45. £290 million, for nothing. It’s a disgrace and frankly – you’re useless.  Security will escort you out.

Yes, it is spot the analogy time. I do have some strong views on the refugee issue in the UK and more widely, because I see bigger problems ahead driven by climate and other developments that will increase the flow of refugees further. I’m not a “let them all in” person by any means. But keeping the politics out of it, the handling of the Rwanda issue by the UK government is just sheer incompetence. It is a huge waste of money from a government that has made huge wastes of money its speciality. It is truly dreadful.

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My Sad Story of Sausage-Related Buyer’s Remorse

The Manchester Christmas Market has moved from the spacious Albert Square, which is being dug up, to several different pedestrian streets around the centre. That works well in the sense that different streets have different themes – so one is mainly eating places, one has stalls selling craft-type items and so on.

I was there last week for the HCSA (NHS procurement) conference where I was speaking, and I had a wander around the market when I arrived on Monday night. The big question of course was – what should I eat? Fully loaded Patatas Bravas from the El Gato Negro stall, right outside that restaurant? A large slab of pizza? The special Christmas Parma from Parmogeddon (!), including chicken parma, chips, gravy, stuffing balls and pigs in blankets? 

I spent a good 20 minutes looking around the market, but given the Germanic origins of these markets, I finally settled on Bratwurst with onions in a roll from The Witch House. And it was delicious. A roughly nine-inch (22cm) sausage, very tasty, and £7.50 which didn’t seem cheap but wasn’t too ridiculous.  (OK, I confess, I has some patatas bravas as well…)

I headed off back towards my hotel, taking a different route, and not 100 metres from my Bratwurst stall, I came across another selling similar products. Except… this one was offering half-metre Bratwursts – in larger rolls of course – for £7! Literally more than twice as much sausage for a slightly lower price!

I was devastated. After my extensive market research, tramping the streets on a very cold night, I had missed the key supplier that could have met my needs in an optimal value for money fashion, if I had just spent a few more minutes looking around. Or maybe if I had conducted my research in a more structured manner I could have discovered my nirvana – perhaps I could have got a list of all the sausage sellers and actually checked them all out before making my choice?  

Now clearly, I don’t know how good the larger sausages were. My selection seemed very good quality, and perhaps the giant competitor was not up to that standard. A good procurement person would of course ask that question, and might wonder how the seller could offer such a low price per metre compared to the competition. But as I walked back to my hotel, I was definitely suffering from a bit of buyer’s remorse.

So, based on my sad but true story, what can we learn from this particular bit of sausage-related Bad Buying?  One key learning is that it is hard to know sometimes just how much market and supplier research is necessary to support and inform a good buying decision. We can’t spend as much time on that as we might sometimes like – clearly, it would be silly to spend hours researching  a £7 sausage purchase. But if there is anything to be taken from this, it is perhaps the point about structuring the research. My random walking did help me make a decision; but doing a little bit of planning, and using some information that was available to me, would have led to a better decision.

And going back to my previous existence at Spend Matters, I wonder whether procurement people sometimes choose procurement technology solutions in a similar way to my decision – a bit of a random walk around the first available products they find. So if you are in the market for a solution, do carry out some structured research, don’t just wander blindly around the many available products. Because if you do, you might just end up with the nine-inch sausage instead of the eighteen-inch.   

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Sheffield Container Park Failure – Classic Bad Buying

Sheffield Council has been dysfunctional for some time, and will always be remembered as the council that decided thousands of mature trees would be destroyed in order to make pavements safer, or something like that.

There has been considerable “churn” at both elected councillor and senior officer level in recent years too, which doesn’t help, and the council is now in an “no overall control” state in terms of political leadership. But the Sheffield Fargate container park failure is not really “political” – it appears to be simply an example of what was very bad buying and probably even worse project management.

The controversial complex which was supposed to include shops, bars and entertainment failed due to poor decision making and a lack of governance, an internal audit report has found. The container park was intended as a pop-up space for stalls and shops but was beset by delays and criticism.  The £500,000 project opened in October 2022, but closed just three months later after a host of issues and lack of interest from traders and locals.

The “Head of Service” appears to be the individual who should carry most of the blame here, being responsible for the project. They “did not have dedicated specialist skills, support and resource. The Council’s specialist project management teams were not fully or formally involved, but only called upon using an ‘ad-hoc’ approach”.  It is not clear why specialist project managers weren’t involved but one cause seems to have been a rush to “get it done” to take advantage of various time-limited post-covid grants.

But I have to say, procurement does not seem to have covered itself in glory either.  There was no formal procurement manual in place explaining the desired process to users, for a start. Then the function carried out research on other container parks to try and identify potential suppliers who might be interested in developing the Sheffield park. A list was provided to the project owner as a potential tender list.

“However, when the suppliers on this list were approached it was found that they were management companies for the container parks, not the initial developers. No response came from those who were approached”. So not the best piece of market and supplier research I’ve ever come across…

This left just one supplier in the running, a firm that was already speaking to the Head of Service. They duly won the contract without any competitive tendering.  Lack of competition is of course a fundamental driver and predictor of poor performance and bad buying. “Though procurement was signed off at the correct level, there was no evidence to demonstrate that it was robust or complete to result in an informed decision-making process”.  

Then there seems to have been a lack of control in terms of payments to this supplier. There was no implementation plan so milestones were unclear, and the main contractor was not monitored in a structured or regular manner through the installation process.   Some of the report is redacted so we don’t get to see everything but comments such as this don’t fill you with confidence.  “…more worryingly formal financial and contractor monitoring throughout the work was poor or non-existent, furthermore, no risk management was in place”.  Indeed, the auditors were unable to test whether everything procured and paid for was actually received, which is pretty shocking and a very basic failure.

Invoices appeared to have been paid without proper authorisation, and whilst there is no evidence of anything criminal here, the lack of competition and then controls does mean that the risk of fraud or corruption was not at all managed. The budget of some £300K ended up as an actual spend £500K and certainly, the Head of Service should never be allowed near a budget again. 

Anyway, there were problems with the installation including safety issues and only the ground floor could be opened – and that was ten months late, opening in October 2022 rather than the Jan/February plan. And just three months later, the development was closed.

So, various points to note and learn from here. Procurement must make sure budget holders know what the rules are. Procurement also needs to make sure they understand what they are buying when they conduct market and supplier research. Competition is always a Good Thing. Project management is a skill – use professionals. Controls on payments and clear deliverables for suppliers are fundamental and must not be neglected no matter how “urgent” the work is.   

Sorry to Sheffield taxpayers (including my sister…) but the only good news here is that this is yet another interesting case study for my Bad Buying module when I lecture at Skema Business School next year…

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US Government Takes Down Procurement Fraudster

This story from the Homeland Security Today website dates from a couple of months ago, but it is an interesting procurement fraud case, as it does not involve any internal participants – it is a purely supplier-based fraud. Whilst that is certainly far from unique, it is probably not as common as those driven by internal staff or through collusion between internal and external players.

In this case, Cory Collin Fitzgerald Sanders, age 39, of Hagerstown, Maryland, was sentenced to 45 months in federal prison, followed by three years of supervised release, for wire fraud, false claims, and making and using a false document in connection with his companies’ performance on federal contracts. He also had to pay around $200,000 in fines and restitution.

The offences related to his two telecoms firms between 2015 and 2020.  The charges were pretty wide ranging but generally related to contracts with federal agencies that required his firms, Sandtech or Cycorp Technologies, to provide new telecommunications equipment which was still under manufacturers’ warranty. 

He contracted to supply new equipment, but then actually provided second hand, or non-warranted equipment instead. He claimed to have accreditation from the OEMs (original manufacturers) that would protect his customers when in fact he didn’t. He also was not authorized to provide certain IT services to the federal government, but represented to government officials that he was. It sounds like he invoiced in a fraudulent manner too, getting the agencies to pay for “deficient or non-existent performance”.

“Mr. Sanders deserves to be held fully accountable for his actions to defraud the U.S. Government by routinely providing telecommunications equipment that did not meet contract specifications and submitting false documentation in an attempt to cover up his scheme,” said Special Agent in Charge Greg Gross. 

The US government does seem pretty hot on prosecuting dodgy suppliers, more so than I’ve seen generally in the UK, for instance. In this case, a prison sentence of 45 months again feels more severe than “white collar criminals” tend to get in the UK. That’s a good disincentive for others who might be tempted to commit fraud, of course.

So what can procurement people and others do to protect their organisations against this sort of fraud? There are a few potential risk mitigation steps.  Firstly, checking out the credentials of any new supplier (and their directors) is important. And take up references wherever possible. Maybe that would not have stopped Sanders – but it certainly makes it harder to create new firms for fraudulent purposes.

Another obvious point is that goods delivered, whatever they are, should be checked to make sure they align with what was contracted for. And don’t assume that any accreditations and certifications are genuine – documents and emails can be forged. It is better to go back to the source if you can  – you could go back down the supply chain and check with the OEM that a distributor really is properly accredited, for instance.

So the usual safeguards against procurement fraud come into play again – and you can get the full list of mitigating actions and plenty of good advice on avoiding fraud and corruption in the Bad Buying book of course!

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Babylon’s Burning… the Story of the Failed “AI” Health App

The Sunday Times has really got into its investigations recently, and after its excellent expose of the UK’s HS2 rail programme, last week it looked at another issue with a definite “Bad Buying” angle.

Babylon Health, set up in 2013, was going to revolutionise healthcare. Ali Parsa, the founder, is a serial entrepreneur whose previous venture, Circle Holdings, also had some issues (he stepped down from Circle before he set up Babylon). Circle ran Hinchingbrooke Hospital in England, the first fully outsourced hospital. Initially, it seemed to go well, and Parsa was a highly visible cheerleader for the operation, but after a couple of years, Circle pulled out leaving the NHS to pick up the pieces.

But with Babylon, Parsa seemed to have a real product that could benefit everybody. It was an AI powered diagnostic platform that could tell you what health problem you had after a short online consultation. The “app” scored better than doctors on medical tests, Parsa claimed, and could provide excellent diagnosis and care at a fraction of the current cost. For the permanently hard up health services in the UK and US, it seemed too good to be true – and of course it was. However, Parsa used political connections to win business, as the Times reported. Between 2015 and 2022, the company had 22 meetings with government ministers.

“Babylon’s deals with the NHS, which saw it receive at least £22 million over the past three years alone and helped it to woo investors, were in part due its links with the Conservative Party and the backing of Hancock, the health secretary from 2018 to 2021. The Tories received more than £250,000 in donations from individuals and companies with stakes in Babylon Healthcare, including Hancock, whose failed Tory leadership bid in 2019 received £10,000.”

However, the newspaper’s investigation found high-pressure sales techniques and some claims for the product that were simply false. For example, at the Royal College of Physicians in 2018, Parsa showed how Babylon’s AI used a phone’s camera to analyse the facial expression of a female patient to pick up subtle cues that a doctor might miss. This is how the Times describes it.

“This is a real consultation,” Parsa said on stage. “This is what we have built. None of this is a show.”

It was a show. The facial-analysis tool, a prop for a demo, never made it to market. The “patient” in the video was an executive assistant at Babylon… This sleight of hand was a small example of a culture fixated on form over substance, a trait common in Silicon Valley but dangerous in healthcare.” 

Indeed, the much vaunted AI was little more than a decision tree written in Excel based on doctors’ knowledge. Soon, sceptics began testing it and found that it could easily mistake a heart attack for a less serious panic attack, or an ingrowing toenail for gout. I remember various people on Twitter talking about how dangerous it was and calling out Babylon as a con.

But the firm managed to raise $1.2 billion from investors between 2013 and a stock market float in 2021, and at one point Babylon was valued at some $4.2 billion. But after that float, some badly judged deals started affecting the firm’s finances, just as more expert voices also pointed out the technical failings. For instance, the Royal Wolverhampton NHS Trust signed a ten-year deal for a digital-first GP service that would allow patients to use Babylon’s digital tools. But Babylon cancelled the contract in 2022, saying it just could not afford to invest in the service.

Finally in August this year, the firm collapsed into administration and the remnants were picked up by a couple of trade buyers. Parsa has pretty much disappeared, as has most of his own fortune.

It all reminds me a little of the Theranos scandal – the fake blood testing equipment launched by Elizbeth Holmes (who is now in a US jail). Babylon was not as fake as that, and Parsa is not accused of wrongdoing, but the principal of something that everyone wanted to work, but really was built on sand, is the same. And there is also FOMO – the “fear of missing out”. This is an extract from the Bad Buying book section on Theranos.

“Buying failure come into this because retailer Walgreen’s spent $140 million with Theranos over seven years, hosting around 40 blood-testing centres in their stores. They got very little benefit from that and recovered some $30 million after a lawsuit and settlement following the eventual disclosure of the issues.  Amazingly, as Bad Blood reports, Walgreens’s own laboratory consultant, Kevin Hunter, had seen early on that something wasn’t right with Theranos. But the executive in charge of the programme at Walgreen’s said that the firm should pursue the pilot because of the risk that CVS, their big competitor, would beat them to a Theranos deal.

Again, buyers wanted to believe that something was real, even in the face of mounting evidence that it wasn’t. This relates back to comments around believing the supplier … it is easy for a naïve or gullible buyer to be sucked into believing what the supplier wants them to believe.

Suppliers will take advantage of this tendency – whether it is the relatively innocent “yes, we can install this new IT system in six months” or the more dangerous “this equipment will find hidden bombs”.  And FOMO – the fear of missing out to the competition – is something else suppliers will use, and that can lead to bad decisions.  It’s not just physical goods either. The top consulting firm selling its latest “strategy toolkit” will mention that the potential client’s biggest rival is also very interested”.

One day, there is little doubt that a real AI-powered system will be really useful in the world of medical diagnoses. So maybe Parsa was just ahead of his time?  But that is two of his “innovative” businesses that have cost health services time and money without much benefit in return. So I’d be very careful next time he announces he has a great idea…

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We Need a Review of HS2

Last week the Sunday Times ran an expose of the UK’s HS2 rail project. The programme is being severely curtailed now due to massive over spending against the budget.

Over several pages, the Times laid out a culture of overspending and bad financial forecasting, with those who tried to point out the problems often forced out or removed if contractors. The accusation is that senior managers knew that budgets were unrealistic but covered up the facts for as long as possible. Presumably that was to keep their lucrative jobs, and keep ministers happy. The thinking may have been that If the programme got to a certain point, then it could not be cancelled.

There was more in yesterday’s edition of the Sunday Times, including an interview with Stephen Cresswell, one of the whistleblowers.

This first phase was expected to cost £21 billion and yet his calculations suggested a fairer assessment was £30 billion — a huge discrepancy. “There were problems with the way the figures had been calculated and it was likely to cost an awful lot more,” he says. “I did the calculations pointing this out but I was told to concentrate my efforts on something else.”

Unfortunately this good piece of reporting did not get much discussion on national TV news certainly, perhaps unsurprisingly given the disaster unfolding in Israel and Gaza.  The report did say that the internal audit function at HS2 is looking into the allegations – but that isn’t good enough. We really need a detailed external review of what happened in HS2, to understand that specific case but more importantly, to see what lessons can be learnt that apply to other large capital programmes in the UK.  Maybe that is best done by the National Audit Office, although several ex-employees have written to the SFO (Serious Fraud Office) accusing HS2 of mismanagement of public funds, so maybe this will all turn more “criminal”. 

If no action is taken quickly, then we will have to see if Labour will have the appetite for driving a review if they do form the next government. After all, it was Labour and Lord Adonis, then Transport Minister, who kicked off HS2 and Adonis was a non-exec of HS2 for some years. But we really do need a review. We can’t allow huge expenditures where the people involved and responsible are pursuing their own goals rather than the taxpayers’ best interests. As Cresswell put it: “Costs, risks, timescales and benefits are being manipulated to suit individuals or organisational goals rather than the public interest”.

Another interesting point the Sunday Times highlighted last week is that Ministers appear to have lied to Parliament – or at best “misled” the house. Chirs Grayling was one, but a junior Minister is also accused.

“ On June 7, 2019, Cook sent a first draft of his report to Grayling. It suggested HS2 was billions of pounds over budget and years behind schedule.….  In July, the minister for transport, Nusrat Ghani, fielded questions during a Westminster Hall debate on HS2 before the Commons final vote on the bill to approve the Birmingham to Crewe phase two leg.  She said: “I stand here to state confidently that the budget is £55.7 billion and that the timetable is 2026 and 2033.” She repeated her assurances five days later, during the third reading debate in the Commons.

An FOI request exposed that she had been told 3 months earlier that the programme would breach its budget – so doesn’t that sound like lying to Parliament?  

It was good to see the shadow Chancellor, Rachel Reeves, announcing that a “covid corruption commissioner” will look into PPE procurement during the pandemic and the waste of billions of public money. In terms of waste, HS2 is at least on that scale, so surely that also deserves a very thorough and independent look at what happened there?

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