Gov IT write-off: Universal Credit system flushes £34m down toilet

The UK's spending watchdog has scolded the Department for Work and Pensions for so far wasting £34m of taxpayer money on its botched attempt to implement a one-dole-to-rule-them-all IT system.

In a stinging rebuke of the government's handling of Universal Credit, the National Audit Office concluded that the DWP, which is led by Cabinet minister Iain Duncan Smith, had failed to secure value for money in the early stages of the project.

The NAO said that the DWP, which oversees benefits handouts to Brits, had been "overly ambitious in both the timetable and scope of the programme."

It added:

The Department took risks to try to meet the short timescale and used a new project management approach [agile] which it had never before used on a programme of this size and complexity.

It was unable to explain how it originally decided on its ambitious plans or evaluated their feasibility. Given the tight timescale, unfamiliar project management approach and lack of a detailed plan, it was critical that the Department should have good progress information and effective controls. In practice the Department did not have any adequate measures of progress.

In early 2013, the Department was forced to stop work on its plans for national roll-out and reassess its options for the future. The programme still has potential to create significant benefits for society, but the Department must scale back its delivery ambition and set out realistic plans.

Earlier this week, Universal Credit chief Howard Shiplee moved to distance himself from the project's recent failures under previous bosses by proclaiming that he was confident that the DWP was "now back on course and the challenges are being handled," after he parked it for 100 days to "reset" the detested programme.

The NAO's report, which looks at the implementation of Universal Credit up to April this year, said that £425m had been spent on the overall project at that point.

It found that the DWP had been forced, in May this year, to write-off £34m of its new IT assets.

Shiplee is expected to conduct a further impairment review of the entire programme, the NAO noted. As of April 2013, the DWP had spent £303m on contracts for designing and developing IT systems supplied by four main providers: HP, IBM, Accenture and BT.

Meanwhile, according to the DWP's December 2012 biz case for UC, the planned IT investment during the current spending review period up to 2015 had ballooned 60 per cent to £637m from £396m in May 2011.

At the end of July, only four job centres were taking just 1,000 claims from Brits as part of the DWP's pathfinder tests to see how well the UC system functions.

The NAO, which blamed IT woes for hampering the entire implementation of the Universal Credit programme, said in its report:

The scope of the pathfinder is narrower than originally planned, covers only the simplest new claims and includes limited IT functionality. Some processes require intervention by staff, limiting the scalability of the pathfinder model without further IT investment.

It added:

The current programme team is developing new plans for Universal Credit. Our experience of major programmes supported by IT suggests that the Department will need to revise the programme’s timing and scope, particularly around online transactions and automation. It is unlikely that Universal Credit will be as simple or cheap to administer as originally intended. Delays to roll-out will reduce the expected benefits of reform.

It found that the IT system that had been developed was incapable of spotting potentially fraudulent claims. Instead the DWP was ludicrously having to rely on manual checks on claims and payments.

"Such checks will not be feasible or adequate once the system is running nationally," the NAO said.

A £25m identity market being developed by the government to allow third-party providers to offer services to Brits to access public services online is also yet to be tested by the DWP – even though it has been previously viewed as a critical tenet of the Universal Credit system.

Duncan Smith has repeatedly insisted – despite the delays brought on by the botched implementation of Universal Credit – that it will be fully operational by 2017.

But today the government's spending watchdog urged a serious rethink of that deadline by stating that the self-imposed completion date was likely to "increase risks by requiring the rapid migration of a large volume of claimants".

In the past year alone, the NAO said that chief responsibility for Universal Credit had changed hands a staggering five times. It concluded that "the Department has particularly lacked IT expertise and senior leadership, with frequent changes in senior management".

The spending regulator's boss Amyas Morse said that "the programme suffered from weak management, ineffective control and poor governance".

Shiplee will now be tasked with putting the disaster behind him by learning from the early setbacks and having realistic plans and strong discipline in place, Morse added.

Over the course of the next 10 years, the implementation of Universal Credit is estimated to cost £2.4bn. Spending is capped at £2bn up to the end of the current Parliament in 2015.

Public Accounts Committee chair Margaret Hodge attacked the DWP's poor record on building the new benefits system, saying:

Confusion and poor management at the highest levels have already resulted in delays and at least £34m wasted on developing IT. If the Department doesn’t get its act together, we could be on course for yet another catastrophic government IT failure.

But Duncan Smith's department defended its work to date on the project, pointing out that the report had failed to address the DWP's "progress on the IT challenge, the latest plans for expansion from October, or the fact that we brought in two of the country’s leading project management experts to lead UC".

It added that it was on track and within budget to deliver Universal Credit by 2017 and said: "Under this new leadership we are making real progress and we have a plan in place that is achievable and safe."

The NAO has recommended that the DWP confronts the challenges ahead by confirming supporting systems’ design, revising the business case, and seeking Treasury budget and Cabinet Office IT spending approval by the end of this year.

Of course, it stopped short of suggesting a ministerial reshuffle as such a recommendation is outside of its remit. But one can't help but think that Duncan Smith will be the latest and most high-profile victim of the Universal Credit catastrophe. Over to you, Mr Cameron. ®