Govt watchdog slams £1 billion IT failure

The Public Accounts Committee (PAC) has today published its report into the government's failed payment card scheme - which saw £1 billion of taxpayers' money wasted - and pulls no punches.

The project, which aimed to replace a paper-based system for benefits claims with a magnetic strip card, "must rank as one of the biggest IT failures in the public sector", the PAC concluded. It was the "latest and the worst in a long line of public sector IT debacles". And "in view of the Department's [of Works and Pensions] track record on IT, we remain sceptical about its ability to deliver [in future]".

The scheme, started in May 1996 under a Tory administration, was one of the first government projects to be run as a private finance initiative (PFI), in which commerical companies took on some of the risk while delivering a public system. It was in trouble from the start thanks to the complexity of the task, run alongside a modernisation of the Post Office. Over 17 million people were expected to make use of the cards.

Three years later, in May 1999, the (now Labour) government decided to drop the magnetic card scheme at the estimated cost of £1 billion in the write down of assets and delayed reductions in benefits fraud as it was seen to be holding back the essential automation of the Post Office.

While the PAC had already written a report into the collapsed project in January 2000 (published May 2000), it undertook a second report to examine the lessons that could be learnt as the government now looks at different methods for paying benefits.

The report makes three broad conclusions:

• Similar projects need to be very carefully examined for the possible risks. In this case, the government had "underestimated the difficulty of attempting to tackle a huge and complex project". There were also "basic project management failures".
• That the measures introduced in February this year in response to around 25 government IT failures "should go a long way preventing similar failures in future". Now, all new IT projects have to be run through a procurement watchdog - an offshoot of the Treasury called the Office of Government Commerce.
• That management should face up to the possibility of failure and "take prompt decisions to avoid abortive costs". It criticises the government for taking 18 months to decide to end the project.

More specifically, the PAC slammed the government's "inadequate contracting and project management skills"; questioned the logic behind choosing Pathway as the contractor because it was the company willing to take on the most risk when it has come third in nearly all technical criteria; asked why the various parties did not share information on occuring problems; and strongly suggested that one person be responsible for each project - it reports that the "conflicting objectives" of the Dept of Works and Pensions, DTI, Treasury and Post Office caused unnecessary delays and extra costs.

With regard to new plans to create a similar banking service for benefits claims, the PAC remains positive: "In principle, the arrangements... should provide a more modern, efficient and secure method of paying benefits and deliver significant administrative and fraud savings." However, the PAC makes it clear that it expects to be fully consulted so the department can "secure accountability before the arrangements are finalised".

The Secretary of State for Works and Pensions, Alisdair Darling, was called on to explain his department's actions. Darling said he agreed with "a substantial part" of the PAC's conclusions but predictably concentrated on pointing out that the project was started by a Conservative government and criticised PAC chairman Edward Leith for not pointing this out.

So the approach to future IT projects may change, but politicians never shall. ®

Related Link

The PAC report

Related Stories

Govt to run all IT projects through Treasury watchdog
Government cocks up another computer project (list of govt IT cock-ups at bottom)