The Rural Payments Agency should replace a £350 million IT system, which has been in operation for only four years, the government's public spending watchdog said today.
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The cost of the main IT system at the Rural Payments Agency has risen to more than four times the original estimate of £75.8m, the National Audit Office has revealed.
Today's report contains some of the most serious criticisms the NAO has ever made of a government department. The over-complicated IT system has contributed to failings at Defra's Rural Payments Agency.
The report reveals that the Rural Payments Agency, which is part of the Department for Environment Food and Rural Affairs (DEFRA), is paying for 100 contractors from the system's main supplier Accenture at an average cost to taxpayers of £200,000 each last year - more than the Prime Minister's salary.
The Agency's single payment system is so complex and "cumbersome", because of customisation which includes changes to Oracle's source code, that the Rural Payments Agency may be locked into Accenture and other IT suppliers, at least in the short term, the NAO warns.
When 29 of 54 support contracts expire at the end of this year the Rural Payments Agency cannot be sure the system will remain fully supported - or at what cost.
If the system crashes and farmers fail to be paid under the Single Payment Scheme, the UK government could face EU fines of up to £1.6bn.
But it's unclear whether the Agency could seek redress from any suppliers. "In view of the heavy customisation of the systems we were unable to gain sufficient assurance over what redress would be available for any potential system failures in future", says the NAO report.
Extra costs of £680m to administer the Single Payment Scheme for farmers shows "scant regard by the Department [Defra] and its Agency [Rural Payments Agency] for the proper management of public funds".
Philip Gibby, the NAO's Director of Defra value-for-money studies, said yesterday of the Rural Payments Agency's IT system: "It's time to find an alternative...There has been no other way of administering the payments. But enough is enough. They [the Rural Payments Agency] have spent £350m on it; they are going to continue spending a lot on it and there is a risk of obsolescence."
The NAO found that ministers were given "green light" progress reports while the Agency's internal risk assessments were at "red". Over optimistic reports to ministers continued even after officials conceded to MPs that they had been over-optimistic in their reporting of the Agency's problems.
The NAO said: "Contractual relations with the main contractor Accenture appear to have improved. The Agency has nevertheless spent £84m on the firm's services in the last two years there are over 100 Accenture contractors working full time for the Agency, most of them based permanently in the Agency's offices. The average cost of these contractors was over £200,000 per person in 2008/9."
Accenture said in a statement to Computer Weekly: "Our original contract was for £64m, but it was anticipated at the time the contract was signed that after the EU harmonization requirements were issued, the RPA [Rural Payments Agency] and Accenture would work together to determine the scope of work needed to meet those requirements. That is exactly what we did. We have delivered on the revised contract with the RPA, according to scope, on time and on budget."
"Our hourly rates are market relevant and competitive and were agreed to by the RPA. This was reported by the NAO in their report in 2007. " it said.
MPs on the Public Accounts Committee will question officials from Defra and the Rural Payments Agency on the NAO report later this month.
Richard Bacon, a member of the Public Accounts Committee, said: "After all this time since the problems first emerged, Defra and the Rural Payments Agency are still not properly addressing some of the most basic inadequacies." He added that the cost of administering payments to farmers under the Single Payment Scheme is £1,743 per claim, which is more than six times higher than the cost in Scotland where it is £285 per claim.
Full report: IT Projects blog