Is the post office scandal the UK’s biggest compliance failure ever?

From supplier onboarding missteps to ineffective ongoing monitoring to a lack of due diligence, the list of compliance errors in this story is very, very long

The Post Office scandal is quickly gaining a reputation as one of the UK’s largest miscarriages of justice. For nearly 15 years, the UK Post Office went after operators of sub-post offices across the country, accusing them of committing theft, fraud and false accounting. Many of these sub-postmasters – over 700 were wrongfully prosecuted – were imprisoned, lost their livelihoods or faced bankruptcy. There are four suicides attributed to this scandal.

How did it go so wrong? The Post Office relied on its supplier, Fujitsu, and its Horizon IT system for which the Post Office had contracted to digitise social benefits payments. 

This was a complicated move to a digital system and the lack of regulation over the supplier and the seemingly inordinate power Fujitsu had to control not only the system but also the information led to the Post Office digging itself deeper and deeper into a scandal. The Post Office fully depended on Fujitsu’s expertise and ultimately protected that supplier relationship at all costs – even at the expense of going after their sub-postmasters. 

The “bugginess” of Horizon’s system was apparent from its implementation, but Fujitsu’s supplier contract apparently motivated it to work quickly and there was not much oversight, or technical knowledge, from the Post Office to provide effective ongoing monitoring. Once the system was fully built, replacing Fujitsu would be incredibly costly and disrupt the entire Post Office system. 

With real oversight, the inaccuracies and glitches of the Horizon IT system could have been spotted and identified as system-wide problems, and not the users’ faults. 

The role played by Fujitsu in the scandal is being explored in upcoming government hearings. Downing Street has stated that the firm would be legally or financially accountable if the inquiry determines it is at fault in the Horizon scandal.

But the Prime Minister’s spokesman did not specify that the government would stop awarding contracts to the company. It was noted that a company’s conduct is an element that is considered part of the procurement process. 

The UK government’s relationship with Fujitsu is substantial, complex and difficult to untangle. The company still has billions of pounds worth of contracts with the government, including the contract for the Post Office Horizon system, and even if it could legally break those contracts, building those systems again could be incredibly expensive.

It is still unclear exactly what the fallout for government suppliers will be, and companies with government contracts will watch these government proceedings closely. What is becoming increasingly apparent – and will be scrutinised – is how the contract between Fujitsu and the Post Office was structured and the lack of due diligence conducted. 

The government has tried to extricate itself from other complex supplier contracts without much success. In 2008, the NHS tried to end one of Fujitsu’s contracts. It ended up in a lawsuit that Fujitsu won. Fujitsu was also involved in the NHS national programme for IT. This £12 billion contract was largely abandoned in 2011, a few years later, due to costs, technical difficulties, delays and contractual disputes. In 2014, HMRC tried to end its £8 billion contract with Capgemini for the UK’s tax collection system. Transferring the contract to new suppliers would cost them £700 million. Capgemini is still the supplier. HMRC even ended up extending the contract to at least 2025.

In a significant coda to this story, Fujitsu’s contract with the Post Office was recently extended until 2025, reaching a lifetime value of £2.4bn.
For more on this case, check out this podcast.

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