16 April 2014 Item 10 CM/04/14/10

Transcription

1 MEETING: Agenda item and Paper Number Agenda Title Sponsor Author CQC Public Board 16 April 20 Item 10 Oracle License Procurement Eileen Milner Martin Pitcher PURPOSE OF PAPER: Actions required by the Board: The Board is requested to APPROVE the procurement of Oracle database and Data Warehouse licenses. 1. Summary 1.1 CQC employs a number of Oracle software products to deliver business services, including the databases underpinning CRM and On-Line Services (OLS), and tools such as Oracle Business Intelligence Enterprise (OBIEE) used to retrieve, order and present information from the Data Warehouse. 1.2 CRM and the Data Warehouse are intrinsic to CQC s operation and without them the work of the Commission will quickly come to a halt. The Commission is dependent on CRM to efficiently handle the registration process, to schedule and record compliance activity, to record and manage its safeguarding process and to identify and manage enforcement action. CRM also underpins efficient administration for service providers including the recovery of fees. 1.2 These products are licensed via the NHS Oracle Enterprise Wide Agreement (EWA). The NHS Oracle EWA expires on 30 June 20 and will not be renewed. CQC must procure licenses in order to continue to use the software beyond the end of June 20. The licenses are perpetual but will attract an annual support and maintenance charge. 1.3 Procurement of the necessary licenses will commit CQC to one off charges of 1.497M capital and annual recurring charges of 329K pa. If an order can be placed before 30 April one off capital charges will reduce to 1.299M and annual recurring charges to 286K pa. This is a saving of 241K. All figures include VAT. These costs have been included in the CQC budget allocation for 20/ The cost cannot be avoided if CQC is to continue to use CRM and the Data Warehouse beyond 30 June 20. CQC has commenced a strategic review of CRM and the Data Warehouse. However any work that flows from this report will not achieve full momentum until Until then CQC will continue to rely on CRM and the Data Warehouse to underpin its regulatory activities.

2 1.5 The business case has already been approved by our internal Knowledge and Information Strategy Board, the Investment Committee, ET and by DH. 2. Recommendation 2.1 It is recommended that CQC procures the required licenses via the Crown Commercial Service Commoditised IT Hardware & Software (CITHS) Framework. 3. Discussion and Implications 3.1 CQC employs a number of Oracle software products to deliver business services, including the databases underpinning CRM and On-Line Services (OLS), and tools such as Oracle Business Intelligence Enterprise (OBIEE) used to retrieve, order and present information from the Data Warehouse. 3.2 To use these products legally, CQC must be licensed to do so. Historically licensing for the Oracle databases and applications used for CRM, the Data Warehouse and elements of OLS has come from two sources. Some licenses are procured and paid for directly by CQC. The remainder have been licensed via NHS Oracle Enterprise Wide Agreement (EWA). These were centrally funded and effectively free to CQC. The Department of Health (DH) has decided not to extend the NHS EWA and it will expire on 30/6/20. As a result CQC must procure licenses in order to continue to use the software beyond the end of June Funding for the required licensing has been secured and the costs set out in paragraph 3.6 can be met without additional funding. The Business Case considers the procurement options available to CQC and concludes use of the CSS Commodity IT Hardware & Software Framework provides the best fit. 3.4 The project plan included submission of the business case to Investment Committee, ET, the CQC Board and DH for approval during April and May. Late in March DH advised CQC that a further discount is being offered to organisations that sign a contract for licensing by 30 April. CQC has received revised pricing from Oracle that indicates savings in the region of 240K on our original estimate of 1.826M could be achievable. 3.5 CQC has commenced a strategic review of CRM and the Data Warehouse, overseen by the Knowledge and Information Systems Board. If the review recommends a move from CRM or the Data Warehouse a replacement system will take between 18 months and two years to fully implement. Until then CQC will continue to rely on CRM and the Data Warehouse to underpin its regulatory activities. 3.6 Procurement of the necessary licenses will commit CQC to one off charges of 1.497M and annual recurring charges of 329K pa. If an order can be placed before 30 April one off charges will reduce to 1.299M and annual recurring charges to 286K pa. This is a saving of 241K including VAT. These costs have been included in the CQC budget allocation for 20/15.

3 4. Conclusion and Next Steps 4.1 CQC relies heavily on CRM and the Data Warehouse to deliver its objectives and will continue to do so for some time to come. Not licensing these products beyond June 20 isn t a realistic option. The recommendation of the project team is that the licenses required should be procured via the CCS Commodity IT Hardware and Software Framework. 4.2 Subject to the agreement of the Board the project a competitive procurement will take place. An order will be placed with the successful bidder under the framework. Appendices Appendix 1 Oracle Licensing Business Case Name: Martin Pitcher Title: Head of ICT Live Services Date: 9 April 20

4 Appendix 1 BUSINESS CASE FOR ORACLE LICENCE PROCUREMENT INTRODUCTION... 6 BACKGROUND... 6 WHAT IS THE AIM OF THIS BUSINESS CASE?... 6 WHAT ARE THE APPRAISAL TESTS FOR EACH OPTION?... 7 STRATEGIC CASE... 7 WHAT IS THE STRATEGIC NEED FOR ORACLE LICENCES?... 7 SCOPE OF THIS BUSINESS CASE... 8 ECONOMIC AND COMMERCIAL CASE... 8 OPTIONS... 8 WHICH PROCUREMENT OPTIONS HAVE BEEN IDENTIFIED?... 8 WHAT IS THE STRATEGIC FIT OF EACH OPTION?... 9 WHAT IS THE FEASIBILITY OF PROCURING AND IMPLEMENTING THESE OPTIONS?.. 9 WHAT ARE THE RISKS ASSOCIATED WITH THE OPTIONS? WHAT IS THE TOTAL ECONOMIC COSTS OF THE OPTION? WHAT ARE THE BENEFITS OF THE PREFERRED OPTION? COMMERCIAL PROCUREMENT FINANCE CASE AFFORDABILITY ACHIEVABILITY CONCLUSION RECOMMENDATIONS NEXT STEPS... RACIE RECORD R esponsible: A ccountable: C onsulted: I nformed: E ndorsed: Mike Holderness, IT Services Manager Kostas Spanos, Project Manager Fahrel Faulkner, Senior Commercial Business Partner Glyn Barker, Investment Appraisal Manager Martin Pitcher, Head of ICT Live Services Paul Oliver, Head of ISD Kate Olver, Programme Manager Sakou Nkrumah, Architect CQC Investment Committee Knowledge and Information Strategy Board (tbc) DOCUMENT VERIFICATION VE DATE REASON FOR PREPARED CHECKED APPROVED

5 R ISSUE /02/20 Review of draft Kostas Spanos /02/20 Draft Revision Mike Holderness /03/20 Draft Revision Fahrel Faulkner /03/20 Draft Revision Glyn Barker /03/20 Draft Revision Mike Holderness /03/20 Draft Revision Fahrel Faulkner /03/20 Inclusion of Finances /04/20 Discussion with Martin Pitcher Glyn barker Glyn Barker Mike Holderness /04/20 Final draft Martin Pitcher ET Item 10 Project Team Investment Committee /04/20 Final Martin Pitcher CQC Board

6 INTRODUCTION BACKGROUND 1. CQC employs a number of Oracle software products to deliver business services, such as the databases underpinning CRM and On-Line Services (OLS), and tools such as Oracle Business Intelligence Enterprise (OBIEE) used to retrieve, order and present information from the Data Warehouse. 2. To use these products legally, CQC must be licensed to do so. Since 2004, the Commission (along with the NHS, Department of Health (DH) and other Arm s Length Bodies) has been able to use licences provided under an Enterprise Wide Agreement (EWA) between Oracle and NHS Connecting for Health (NHS CfH). The EWA centralised charges for the licensing of some specific Oracle products, including Oracle data base and OBIEE and therefore made them effectively free for the Commission to use. 3. The licenses we are seeking to purchase are for the Data Warehouse and the database that underpins the CRM application, which is already licensed. The strategic review of CRM will not be completed in time for the decision required for purchase in this paper. 4. The Oracle / NHS CfH EWA ends on 30th June On 13 January 20 a paper was submitted to the Investment Committee (IC) to endorse the establishment of a project team to procure Oracle database and OBIEE licences. The creation of the project team was approved. 6. The project team has worked with suppliers to create an inventory of the licences required and ensure these are aligned to the physical system configuration and size. The project team also seek to obtain the necessary financial and governance approvals. 7. This business case will be presented to the IC on 4 April 20 and, if approved, will be submitted to the Department of Health and ET for final approval. WHAT IS THE AIM OF THIS BUSINESS CASE? 8. The aim of this business case is to support the procurement by setting out the options appraisal which underpins the procurement. 9. The financial and economic costs identified in this business case are estimates based on the competitive bids received by suppliers and CQC s budgeted costs for the use of its own resources (mainly staff time). The

7 final costs will be confirmed prior to awarding the contract to successful bidder. 10. This business case follows HM Treasury Green Book guidance on option appraisal and considers the strategic fit, options, procurement, affordability and achievability of procuring these Oracle licences. It follows the five case Business Case structure, but because it is a one-off purchase, a project management case has not been included. WHAT ARE THE APPRAISAL TESTS FOR EACH OPTION? 11. Options are assessed according to the following four stepped criteria: Strategic fit linked to CQC s Strategy Feasibility of implementation Feasibility of procurement Total cost STRATEGIC CASE WHAT IS THE STRATEGIC NEED FOR ORACLE LICENCES? 12. As the current Oracle / NHS CfH EWA ends on 30th June 20, from 1st July 20, to continue to use these Oracle products legally, CQC must make an initial capital purchase of the licences themselves and commence on-going yearly (revenue) renewal of support and maintenance. 13. Without procuring sufficient licences, from 1st July 20 CQC would be in breach of copyright law and would be potentially liable to the following penalties: Ordered to immediately stop all use and operation of CRM To recommence operation of CRM, Oracle could require CQC to pay reinstatement charges of 150% of the full undiscounted list price for the licences; a potential charge of 7.6 million capital and 1.7 million per year revenue. Any breach in contract would damage CQC s reputation as a result of using unlicensed software.. CRM is intrinsic to CQC s operation and without it the work of the Commission will quickly come to a halt. The Commission is dependent on CRM to efficiently handle the registration process, to schedule and record compliance activity, to record and manage its safeguarding process and to identify and manage enforcement action. CRM also underpins efficient administration for service providers including the recovery of fees. 15. The continued use of the CRM system is therefore essential if CQC is to maintain the continuity of its regulatory activities (registration, compliance and enforcement). Failure to do so will mean that:

8 CQC will not be able to ensure a comprehensive regulatory regime across the health and social care sectors CQC will not be able to maintain the effectiveness of its regulatory risk management and compliance and enforcement activities in both sectors CQC cannot meet its statutory duties under the Health and Social Care Act (2008). SCOPE OF THIS BUSINESS CASE 16. This business case concerns the capital procurement of Oracle Database Technology licences and Oracle Business Intelligence Enterprise Edition licences, as well as the on-going purchase of support and maintenance of these licences which is an annual revenue expense. 17. As the long-term requirement for OLS is not clear, the project team considered an option to purchase 12 month term licences rather than fully owned licences for the OLS pre-production and production instances. This option was rejected on the following grounds: A fixed term of 12 months would introduce risk whereby CQC may either find that there is a long-term requirement for OLS or CQC might not succeed in decommissioning OLS by the end of the licence term, requiring the purchase of a further licence. Term licences disappear at the end of their term whereas fully owned licences remain CQC assets and can be reassigned and reused. The likely direction of CRM growth is upwards and fully owned licences that may be no longer required for OLS can be utilised on an enhanced CRM. Term licences do not attract any discounts and while providing a small capital saving there was a larger corresponding increase in the revenue element. ECONOMIC AND COMMERCIAL CASE OPTIONS 18. Given the essential requirement of these licences, not renewing them is clearly not an option. Therefore the options themselves breakdown in to the best procurement route. This is determined using the four criteria detailed in paragraph 11. The economic and commercial cases of the overall Business Case are considered together. WHICH PROCUREMENT OPTIONS HAVE BEEN IDENTIFIED? 19. The following procurement options have been identified:

9 20. OPTION 1. Commoditised IT Hardware & Software (CITHS) (Ref Number RM721 - Lot 3). This is a Crown Commercial Service framework agreement that provides public bodies with access to a range of commodity hardware and software products including software licensing. The framework expires on 31 October 20, includes nine software resellers and margins are capped at a maximum of 2%. 21. OPTION 2. The same as option 1 with the variation that, following discussions between Oracle and Crown Commercial Service on behalf of the Department of Health, a substantial discount of 240,000 is available on orders placed by the 30th April OPTION 3. Procure direct from Oracle. The Regulation of the Public Procurement Regulations 2006 allows organisations to buy direct from a vendor provided certain conditions are met. WHAT IS THE STRATEGIC FIT OF EACH OPTION? 23. The strategic fit of the options is the degree to which they support delivery and achievement of CQC's Strategy and statutory regulatory duties under the Health and Social Care Act (2008). The two tests of Strategic Fit are: Service continuity to support CQC's business critical regulatory processes. Capacity to support development of the CRM system for CQC's Strategy 24. All options meet these criteria. WHAT IS THE FEASIBILITY OF PROCURING AND IMPLEMENTING THESE OPTIONS? 25. The options are detailed in the table below Option OPTION 1: CCS Framework Commoditised IT Hardware & Software (CITHS) (Ref Number RM721 - Lot 3) Feasibility test Option 1 is feasible as it is a fully compliant framework owned by the CCS for Central Government and ALB s. This framework is a good fit for the procurement as it is intended to include purchase of licenses. CCS have confirmed that the suppliers on the framework have access to the pricing available under the MoU with Oracle. CCS has recently (31/01/20) concluded to extend the CITHS framework for a maximum period of eight months to 31 October 20 to ensure departments have a continued route to market for their common IT needs whilst the new procurement frameworks are being developed.

10 OPTION 2 Option Feasibility test As for Option 1 except for the fact that placing of the order by 30 April will yield a substantial discount of 240,000. This is the recommended option. OPTION 3. Procure direct from Oracle using Regulation of the Public Procurement Regulations Although public sector organisations can potentially rely on Regulation to buy direct in practice this option carries significant risks. The procurement route is novel and untested. It carries the risk that suppliers could challenge the decision and have it set aside under the Remedies Directive. The procurement team has taken advice from Legal Services and CCS. Both advise that CQC would need to be able to evidence that there was no other option and that the test set by the regulation was met. Although this would potentially provide a saving of up to 33K over Option 1 there would be a delay whilst the evidence required was gathered. 26. Option 3 is not recommended on the grounds of feasibility, but its risks are considered further to fully understand the reason for its rejection. WHAT ARE THE RISKS ASSOCIATED WITH THE OPTIONS? 27. The main risks associated with option 1 and 2 are: Risk of delay in obtaining the appropriate approvals and procuring the licence agreements by 30th June 20. Risk of service continuity in support of the CRM system for CQC s Strategy ness processes. 28. How will the risks be managed? CQC s IT Service and Procurement Teams are responsible for maintaining a risk register within the Finance and Corporate Services Directorate. The IT service risk register is reviewed regularly within the Finance and Corporate Services Directorate and risks are managed in accordance with CQC s risk management framework Any high level IT Service risks are reported to the programme board and can be escalated to the Executive Team. 29. A risk assessment of the main risks has identified that:

11 The risk of delay in seeking the appropriate approval and procuring the licences by 30th June 20 is low and can be managed but the impact is high. The procurement project is still within the timescales and running to plan but needs to be closely monitored. The risk of service continuity in support of CQC s regulatory business is low but again the impact is high and given this risk is dependent on the above risk. The same also applies i.e. the procurement project is still within the timescales and running to plan but needs to be closely monitored. Option 1 and 2 will involve obtaining quotations as part of the procurement exercise and will need to seek the appropriate approvals as part of the internal and external governance process. Therefore close monitoring of the procurement project plan is crucial to ensure the procurement is delivered on time. 30. The main risks associated with option 3 are: The time delay that will result from the need to demonstrate a robust evidence base to support the decision to rely on regulation. The risk of litigation costs if challenged by other providers. 31. How will the risks be managed? The main problem is that managing one risk increases the problem with the other. So managing the risk of litigation will increase the likelihood of failing to procure the licenses in time. Procuring the licenses within the required timescales means reducing the evidence base, which increases the chance of challenge and the CQC s exposure in being able to defend it. 32. A risk assessment of the above shows management of one major risk precludes management of the other and so makes this a very difficult option to manage. WHAT IS THE TOTAL ECONOMIC COSTS OF THE OPTION? 33. All options have been costed in line with investment appraisal techniques. All costs in this section exclude VAT. 34. The costs of the three options are shown in the table below. Total Project Costs Total Options '000 '000 '000 '000 Option 1 1, ,074 Option 2 1, ,798 Option 3 1, ,031

12 The next table show costs after applying discounted cash flow techniques. Project Costs - Net Present Value Total Options '000 '000 '000 '000 Option 1-1, ,046 Option 2-1, ,774 Option 3-1, , More detailed costs for each project are shown in Annex 3. Both tables show that Option 2, offering the discount, is the cheapest and is our best option. 36. Option 2 as the cheapest option, with the discount available until 30 April is the preferred option. However if this is not achievable, then it is recommended that we continue on the same procurement route with Option 1. Option 1 is only slightly more expensive than Option 3, but does not carry the same risk (described in paragraph 30) in terms of either delay or challenge. These risks have not been costed, but the act in mitigating them is clearly considerably higher than the expected difference in costs shown of 33,000. Plus, as detailed, it is not possible to manage both risks, meaning that Option 3 will either be very expensive or likely to fail on timescale. WHAT ARE THE BENEFITS OF THE PREFERRED OPTION? 37. The benefits are that Therefore Suppliers are contractually committed to a capped margin. A compliant route to resellers who can provide the levels of discounts negotiated via central deals. 38. The benefits have not been quantified. The essential requirement of needing the licenses in order to run our systems is the over-riding necessity of this case. COMMERCIAL PROCUREMENT 39. CQC's procurement team will conduct a further competition via the CITHS framework Lot 3 and receive bids from pre-approved suppliers. FINANCE CASE AFFORDABILITY

13 40. The estimated costs of the contract can be met from the existing CQC budget envelope. No additional funding is required. ACHIEVABILITY 41. The action proposed in this business case is one of procurement, there is no subsequent action required to deploy or implement the licences being sought. This is a paper exercise which will place on record with Oracle that CQC has purchased the licences that it is legally required to hold in order to utilise CRM, On-Line Services and OBIEE. 42. As such, it is perfectly achievable for CQC to approve this business case in time for the project team to seek any necessary further approvals from Department of Health and to complete the procurement before 1st July 20. CONCLUSION 43. Option 2 is the preferred option because it is: Feasible, Affordable, Offers a key discount, and Avoids the risks of option 3 It is within CQC s budget plans that accompany its Strategy for It is also achievable within CQC s existing budget for Option 2 provides CQC with a risk free compliant procurement route of obtaining the Oracle and OBIEE licences. 45. Option 2 represents a substantial saving of 240,927 so this is preferred over Option 3. Annex 1 Plan A sets out the timetable for us to realise this discount. 46. If the project does not achieve approval by the 23 rd April 20, then we recommend Option 1. Please refer to Annex 2 Plan B for this timetable RECOMMENDATIONS 47. CQC should proceed with option 2 and seek to procure the Oracle and OBIEE licences via the Commodities IT Hardware and Software Framework, reverting to Option 1 if the timescales for Option 2 cannot be met.

14 48. Subject to approval CQC will undertake a further competition exercise and will seek to procure licences from a reseller offering the most economic advantageous offer. NEXT STEPS 49. This full business case will be presented to the CQC Board on 16 April The business case has already been approved by our internal Knowledge and Information Strategy Board, the Investment Committee, ET and by DH. 51. Subject to sign-off by the Department of Health our chief executive, David Behan will sign-off the procurement and a new licence agreement for Oracle products will be awarded before the end of June 20.

15 Annex 1 Plan A STAGE ACTIVITY START DATE 15 March END DATE 31 March Pre ITT Develop Business Case and Project Board to approve and sign off Business Case. ITQ Develop Invitation to Quote & issue to bidders. 5 April 12 April ITQ The date by which CQC must receive the bidder s 15 April 17 April Response response to the ITQ. ITQ The period during which the Bids are assessed by the 22 April 25 Apr Evaluation Evaluators Licence The period during which papers are sent to IC/ET/Board 5 April 23 Apr Award to approve licence award to preferred bidder and debrief unsuccessful bidders. Place Order Place order to preferred bidder 24 April Annex 2 Plan B 29 April STAGE ACTIVITY START DATE Pre ITT Develop Business Case and Project Board to approve and sign off Business Case. 15 March ITQ Develop Invitation to Quote & issue to bidders. April ITQ The date by which CQC must receive the bidder s 25 April Response response to the ITQ. ITQ The period during which the Bids are assessed by the 12 May Evaluation Evaluators Licence The period during which papers are sent to 11 April Award IC/ET/Board to approve licence award to preferred bidder and debrief unsuccessful bidders. Place Order Place order to preferred bidder 23 May END DATE 10 April 24 April 9 May 16 May 21 May 31 May Annex 3 INVESTMENT APPRAISAL

16 Option Capital Costs Total Description '000 '000 '000 '000 Procurement of Licences 1, ,223 Total Capital Cost 1, ,223 Revenue Costs Total Description '000 '000 '000 '000 Annual Support Margin Total Operating Cost Total cost 1, ,074 NPV -1, ,046 Cumulative NPV -1,522-1,788-2,046 Option Capital Costs Total Description '000 '000 '000 '000 Procurement of Licences 1, ,061 Total Capital Cost 1, ,061 Revenue Costs Total Description '000 '000 '000 '000 Annual Support Margin Total Operating Cost Total cost 1, ,798 NPV -1, ,774 Cumulative NPV -1,321-1,552-1,774 Option Capital Costs Total Description '000 '000 '000 '000 Procurement of Licences 1, ,199 Total Capital Cost 1, ,199 Revenue Costs Total Description '000 '000 '000 '000 Annual Support Margin Total Operating Cost Total cost 1, ,031 NPV -1, ,004 Cumulative NPV -1,492-1,752-2,004 Item 10