In one of the worst cases of cost-underestimation in the
history of the IT industry, officials at the spycentre GCHQ put the
price of relocating computers at £20m when the true estimate should
have been £450m - a 22-fold increase.By the time the mistake was spotted, the estimate for moving
systems to a new headquarters was comparable to the costs of the
new building itself, according to a report published today from the
House of Commons Public Accounts Committee.
It has also emerged that the board of the government
communications centre accepted the official original estimate of
the IT transition at £20m, although it knew the figure was actually
£41m. Nobody pointed out the mistake at the time.
One of the main reasons for underestimating the cost was that
engineers at GCHQ had calculated on the basis of moving the
hardware - shifting boxes one by one - ignoring the costs of
relocating the technical and communications infrastructure.
This was partly because GCHQ had mostly stand-alone systems and
nobody spotted the complexities of the newly-emerging networking
connections until about two years after the estimate, according to
GCHQ’s evidence to the Public Accounts Committee.
When the Treasury refused to accept the £450m estimate for the
cost of the technical transition to the replacement building, a
lower figure was agreed, at £308m. To help keep costs to the
revised budget, GCHQ will manage its technical transition in
stages, keeping part of the existing site open at Oakley in
Cheltenham until 2012, incurring extra running costs of £43m.
Edward Leigh, chairman of the PAC said, "It is astonishing that
GCHQ did not realise the extent of what would be involved much
sooner, given how critical these systems are to its core
business."
In September 2003, GCHQ moved to new
headquarters which replaced more than 50 buildings at two sites in
Cheltenham, Oakley and Benhall. GCHQ retained responsibility for
moving its systems, largely for security reasons. The main
objective during the transition to the new building was to have no
break in IT service.
The £20m - or £41m - figure was so small and could easily be
absorbed within existing budgets, that the GCHQ board "took its eye
off technical transition at that time and focused only on assessing
the commercial viability of a PFI deal for the building", said
the PAC report.
"GCHQ was unable to explain why the wrong figure of £20m had
been reported to the board. However, we were told that its
directors knew it should have been £41m because they had been
working on it," said the PAC.
The full costs of the technical transition were realised in 1998
when GCHQ was in the midst of 150-man years of work to manage the
millennium bug. Only then did it understand the complexity of the
inter-relationships between its networks and equipment.
By 1999 GCHQ’s new programme director estimated that technical
transition would cost as much as £450m over two years.
"GCHQ acknowledged the failure of its engineers to spot that a
growing degree of networking of systems was going to complicate the
process of doing the technical transition," said the report.
The cost of actually moving the equipment was broadly equivalent
to the original estimates of the box move. What had not been
forecast was the cost of providing new information technology
architecture, which was a very big undertaking, said the PAC.