IT delays cost HMRC £33m
Tax & pensions system plagued by issues
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The National Audit Office (NAO) says that delays to a single tax and pensions system cost HM Revenue and Customs £33m in procurement costs.
In a report (pdf) published on 20 July 2010, the accounting watchdog says that difficulties with the National Insurance and PAYE Service system led to it being deferred twice before it was completed in April 2010.
In addition to the cost hike, its late introduction left the department unable to realise £55m of planned efficiency savings during 2008-09 and 2009-10.
The system has now been rolled out to 650 locations, 23 business units and 28,500 staff. But since April there have been further problems with the quality of employment data and the operation of the new service.
They include a backlog of seven million potential over- and underpayments of tax, and the generation of incorrect employment records because of the system's inability to match some end of year returns to existing records.
The NAO has called on the department to review its systems for capturing and processing data and to look at standards for data quality submitted by employers.
In 2008 the NAO reported that HMRC needed to improve its debt management, but its latest findings reveal that the department's ability to improve is constrained by IT limitations.
The new report says that HMRC's core debt management system supports a number of functions, and that the integrated design makes it difficult to separate certain functions to manage customer contact flexibly. It offers only limited capability to analyse debtor behaviour and prioritise interventions.
In 2009-10 HMRC paid £27.3bn in tax credits. It estimates that, based on 2008-09 awards, error and fraud resulted in incorrect payments of between £1.95bn and £2.27bn.
However, the NAO reports that in 2009-10 the department launched a new strategy for reducing fraud and error. This included comparing tax credit data to other systems and targeting areas such as income discrepancies.
The new approach has produced positive results, says the NAO, and in 2009-10 error and fraud worth £356m was identified.
Amyas Morse, head of the National Audit Office, said: "The administration of tax in 2009-10 by HM Revenue and Customs has been influenced by three broader issues: the recession, which has increased the value of tax debt to be recovered; the pressure on the department to streamline its processes; and the effectiveness of its information systems.
"Those systems need to be developed so they improve the department's ability to monitor and assess the targeting and performance of its debt collection campaigns and to design future interventions in the areas of greatest risk."
This article was originally published at Kable.
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COMMENTS
But that doesn't matter
Because the penalty clauses in the contract recovered the costs from the suppliers*. What do you mean, there weren't any penalty clauses?
* Or, more likely, it was down to HMRC's terminal inability to reach a firm decision.
Re: Backhanders
Ross, backhanders aren't necessarily the issue per se.
The key reason these projects always fail is because the civil service have a vested interest in their failure. HMRC have no competition, and so no amount of inefficiency will drive it under. That being the case efficiency drives have no benefits for the senior civil servants who run things and for whom the only direct result of effective cost saving is a smaller empire and fewer minions.
Because of this, and because the people in charge have no interest in successful project completion, the rules of any public sector IT project change with such blurring regularity that any participants who didn't understand the game beforehand soon realise that by accepting a constantly changing scope they'll get open-ended work at an hourly billing rate with no need to deploy their best resources.
In return for that the quid pro quo is that when everything goes wrong the consultancy firms will take the lion's share of the blame in the unlikely event that anyone ever actually notices that the project isn't going to plan. No story I've ever seen asks questions about the procurement process or the actual workings of the civil service and, if anything, their empires grow as a result of the project.
I don't rule out the possibility of backhanders, but they certainly aren't necessary to explain why public sector IT projects so consistently fail or why the same companies that screw them up are routinely re-employed.
Change of purpose
From the article the issue appears to be backwards compatibility with old data formats. It;s an age old problem - you have a system, you put data into it, then something changes so you need to record extra information, but the database doesn't really cater for it so you start kludging e.g. recording it in general areas like memos etc.
Trouble is not everyone records the data in exactly the same way. Then you get a replacement system that can handle the new data, but how the hell do you migrate 20m peoples records to the new system when the new data isn't uniform?
I agree with Aristotle above that relying on Crapita / Fujitsu / EDS to do the job properly is ridiculous. The "solutions" they provide and the costs they charge are both a joke. I've been harping on for what seems like ever to break such contracts down into units and have smaller UK IT firms tender for them which would provide better results and better value for money. However, no matter who produces the software, if it's job changes substantially it still needs a re-write. The speed that happens, and the change management leading up to that are both vital, and in this case are the job of HMRC management who apparently failed. I imagine it's the front line staff who are taking the abuse for it too.
The Gov really needs to look at IT procurement - they could save hundreds of millions if they stopped taking bribes from EDS / Fujitsu etc.
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