If the government goes to the High Court in its dispute
with services company EDS over the failed introduction of the tax
credits system, its case for compensation is far from
clear-cut.
In the past the government has blamed EDS for the instability of
the systems it built to support the introduction of new tax credits
in April 2003.
Nicholas Montague, former chairman of Inland Revenue, told the
House of Commons' Public Accounts Committee in 2003, "One thing
went wrong: the failure of the systems."
But the cause of the problems went far deeper than system
failure. An investigation by Computer Weekly in 2003 uncovered the
events which led to the disaster.
In November 1999 the government committed to a deadline of April
2003 for the introduction of new tax credits.
The system was to be built by EDS, the main IT supplier to what
was then called Inland Revenue.
By January 2001 there still was no IT requirement fit for use to
start development.
Four months later EDS started building release one of the
system, while there were uncertainties about the design of the tax
credits and about the business processes to be used.
By then the project was already six months late.
A compressed timetable meant work on release two of the system
started in April 2002 - 12 months late. And the scope of the
release increased by about 50% as more complexity was added.
In January 2003, about three months before go-live, the Inland
Revenue discovered that more than 100,000 claims carried the wrong
national insurance numbers.
This was partly because clerks, presented with someone's name on
their screens, had arbitrarily selected the first identity from a
list of potential matches.
The Revenue stopped sending out award notices to claimants while
mismatches were rectified.
One result was that millions of claimants, having heard nothing
about the progress of their claims, called the Revenue's phone
lines, which were jammed.
EDS warned that using the main test system to resolve mismatches
had increased the chances of problems occurring when the system
went live, but it did not formally advise the Revenue to put back
the April deadline for go-live; but neither did the Revenue advise
the chancellor of the exchequer to defer the deadline.
When release two went live on 8 April 2003 about 1.1 million
claims contained incomplete information or some other problem that
required officials to contact claimants. Helplines were swamped as
people called about their claims. This put extra pressure on
systems which were already unstable and stopped working several
times.
The processing of the claims was severely disrupted.
In May 2005 the government announced that 1.9 million people had
been overpaid nearly £2bn in tax credits.
About £600m was due to administrative and computer problems,
said the Paymaster General, Dawn Primarolo. Some of this money was
considered to be unrecoverable, and the recovery of the remainder
added considerably to the administrative burden.
Culture of denial >>
Honesty is key >>