Taxpayers lose in sale of software

10th September 1999 at 01:00
In a special TES investigation, Chris Johnston reveals how private

fortunes were made from a system developed with public money BEDFORDSHIRE could, in theory, be a wealthy council by now. After all, it was there that, back in the mid-1980s, the computer software was developed which now carries out the administrative drudgery in nine out of 10 school offices.

SIMS, the School Information Management System, is a multi-million pound business. But Bedfordshire no longer owns SIMS. Instead the software, the School Information Management System, is in the hands of education giants Capita, as are several of Bedfordshire's former staff.

The episode has angered and baffled many in the county who can't understand how a prize asset was apparently sold off so cheaply. But those most closely involved with SIMS say the fault lies with Bedfordshire which, like other public-sector bodies, has proved unable or unwilling to develop business.

SIMS was born in 198283, when Philip Neal, then a teacher at Lea Manor high school in Luton, wrote a program allowing teachers to produce computerised pupil reports.

Bedfordshire then developed the scheme using thousands of pounds of its own money. By 1984 it was running a seven-school pilot project and by July 1986, every upper and high school in the county was using the system.

The system had a crucial commercial advantage in being the first in the schools' market and attracted much interest from other local authorities.

Yet by May 1988, Bedfordshire appeared to have lost control. A separate company called SIMS Ltd was registered at Companies House - with four of Bedfordshire's employees as directors: Neal, Hugh Carr-Archer (deputy head of Neal's school), Andrew Rayment (deputy head at another Bedfordshire school) and Geoffrey Wainwright (deputy chief education officer).

Just how the assets came to be passed to SIMS Ltd is unclear. But Bedfordshire eventually emerged with only pound;1 million cash, although the additional software and maintenance services are said by now to have been worth another pound;1m. The county says the deal was approved by the district auditor.

SIMS meanwhile is now worth many times that. Even in 1994 when the business was re-sold to the Capita group, SIMS was valued at pound;10m and boasted a turnover of pound;13.5m. The previous four owners - former Bedfordshire employees - became very rich.

Tony Callaghan, the National Association of Schoolmasters Union of Women Teachers executive member for Bedfordshire, has branded the episode a "disgrace". A member of the council's education committee when SIMS became a private company, he told The TES: "It seems amazing to me that this was allowed to happen. I was always amazed that there wasn't a full and

thorough investigation. I would like to see an investigation to see if any of that money can be retrieved and paid into the coffers of the county council, which funded the original operation."

That view is shared by local MP Margaret Moran, the member for Luton South. She said: "It must have been clear that there were some direct conflicts of interest here, using council resources to effectively set up a private business.

"We are constantly being told that Bedfordshire hasn't got enough money and I am constantly going to the Government to beg for money. Here, on the other hand, we find that they have effectively missed the chance to make several millions of pounds by not having basic nous."

Needless to say, this is not how the owners of SIMS see it. They argue that Bedfordshire was unwilling or unable to develop the system on a proper commercial footing and that it is only the privatisation of the business that allowed it to succeed.

A source close to the original directors who bought the firm from Bedfordshire spoke to The TES (the former directors are bound by a confidentiality clause in the deal with Bedfordshire).

He said that Philip Neal did all the programming for SIMS in his own time at evenings and weekends - albeit on a local authority computer - and did not feel that the council had a claim to ownership of the programs. He also received royalties of 7.5 per cent of SIMS income.

The source said that those developing the system had asked the council in about 1986 for more funding, but this request had been rejected. To keep the project alive, it was necessary to move it out of council control.

John Warwick, manager of Capita Education Services, was a maths and computer adviser with Bedfordshire who was involved with the development of SIMS. He rose to become assistant chief education officer before joining Capita.

Rejecting the suggestion that the council could have profited if it retained control of SIMS, Mr Warwick said local authorities were not expected to be entrepreneurial.

"Trying to make a comparison in terms of what the package was when the intellectual property rights were bought by SIMS and when Capita bought it is like comparing chalk with cheese," he said.

Another member of the Bedfordshire team, John Tizard, the leader of the Labour group on the council when SIMS Ltd was set up, joined Neal and Warwick as an employee of Capita earlier this year.

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