DWP Digital overspent by £60m in six months - here's how it got back on track

Halfway through its 2016/17 financial year, the Department for Work and Pensions (DWP) digital team had spent £60m over budget, a freedom of information (FoI) request submitted by Computer Weekly has revealed.

As of the end of September 2016, DWP Digital had spent £454.9m against a year-to-date budget of £395.6m. The annual budget for the division was £844.1m. In a department renowned for fiscal probity, a 15% overspend would have caused concern.

It certainly caused a bit of a storm for some.

The next month, Computer Weekly heard from multiple sources that hundreds of IT contractors had been let go at short notice, amid rumours of a significant overspend. DWP later released figures showing the number of IT contractors in use last year fell from 652 to 359 by November.

Those sources said they had been given figures of around £200m during internal staff briefings from senior DWP Digital leaders – a number strongly denied by DWP at the time; denials acknowledged and reported by Computer Weekly. Senior figures in government IT – outside of DWP – subsequently told Computer Weekly privately they had heard of a similar number.

The figures released under FoI prove for the first time that DWP Digital was indeed over budget at the time – the department continues to vehemently insist it “does not recognise” the amount quoted by our sources at the time, and points to the fact that by the end of the year, the digital spend was back on track.

“We operated within our departmental budget for the 2016/17 financial year and plan our spending accordingly,” said a DWP spokesperson.

So what happened?

DWP is both a behemoth of, and a bellwether for, government IT. As such, it has been responsible for some of the biggest historic IT disasters – the Child Support Agency and the early stages of Universal Credit spring to mind. But it is also responsible for the smooth running of many of the largest and most critical IT systems in the UK public sector, including the government’s main citizen database, relied upon by other Whitehall departments as well as local authorities.

In recent years, DWP has famously fallen out with the Government Digital Service (GDS), subsequently (and unsuccessfully) tried to have GDS broken up, and since played its part in attempts to repair that relationship.

GDS is now run by an ex-DWP man, Kevin Cunnington, and he took several of his DWP lieutenants with him to become part of the GDS leadership team.

Cunnington’s departure from DWP in the summer of 2016 led to a major reorganisation. He had been responsible for the Business Transformation team, while director general for digital technology Mayank Prakash looked after what was then the DWP Technology division. Prakash and Cunnington were known to have a difficult working relationship, according to knowledgeable insiders, so the reorganisation was likely to have been to everyone’s benefit.

When Cunnington moved to take over GDS, parts of his transformation team were merged with the technology team to form DWP Digital, effective from 1 September 2016, with Prakash in charge. However, the final details of the merger took time to resolve – and to be reflected in the departmental accounts.

In November last year, Labour’s then shadow digital minister Louise Haigh submitted a series of parliamentary questions (PQs) to DWP, which revealed the digital year-to-date spend as at 30 September 2016 was £516.8m, against a full-year budget of £1,032m.

That’s £62m higher than the spending now confirmed by the FoI data, against £188m more annual budget. The discrepancy between those November figures and the latest FoI figures arise from subsequent changes as the details of the DWP Digital merger were sorted out. DWP said the PQ numbers were correct at the time.

The £60m half-year overspend, as finally accounted for, was clawed back through “commercial opportunities” – the details of which DWP would not reveal, due to commercial confidentiality.

“Commercial opportunities” can often be a government IT codeword for renegotiating large supplier contracts. For example, DWP has been slowly disaggregating a huge, monolithic outsourcing deal with Hewlett-Packard Enterprise – about half of its 1,000-plus applications have already been taken out of that contract, according to James Barton, head of delivery leadership at DWP Digital, speaking at an event in London in April 2017.

When the Universal Credit (UC) programme was “reset” in 2013, it was seen as a basket case, and held up as an example of government IT failing to learn the lessons of past mistakes. While the project still has challenges to overcome, the new UC digital service is rolling out nationwide with few significant reported problems. Under Prakash, DWP is moving to the cloud, and digitally overhauling many of its most critical systems. Progress is being made.

MPs have in the past repeatedly criticised DWP over a “lack of transparency”, a “veil of secrecy” and a “culture of good news”. Greater openness about its digital progress and spending can only be a good thing.

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