Computerised payroll systems failed during the 2001 census, causing thousands of field staff who collected census forms to be paid several weeks late and leading to overpayments of £500,000.
The National Audit Office (NAO) report highlighted other problems, including the overwhelming of the census helpline; the fact that a consultancy was appointed in breach of the rules; and delays in capturing data from census forms by contractor Lockheed Martin.
Claims and counter-claims about this are "still under discussion", the NAO revealed.
The probe showed that the former Government Computer Centre at Chessington - now Chessington ADP - slashed nearly £900,000 off its initial bid in order to undercut Capita's £1.5m rival tender.
MP Systems, which provided payroll software for the 1991 Census, failed with its cheaper offer of £600,000 but was paid £22,000 compensation for "wasted effort" in preparing its bid, the NAO said.
In addition, Vogue, the main procurement consultancy, which rated the Chessington bid "marginally better" than Capita, was appointed on single tender by the census director in breach of the rules.
He was a former colleague of Vogue's principal consultant - both had worked for the IT services agency of the Department of Social Security, the NAO report said.
Problems processing census management and field staff pay lead to 17,000 staff receiving their money two weeks late, and 6,000 being paid more than four weeks late. These 23,000 people were paid compensation totalling more than £250,000.
The need to make interim payments manually saw 3,000 staff overpaid a total of £500,000 - only 30% of which has so far been recovered.
It took 50 Office of National Statistics staff three months to clear up the mess at a cost of £300,000, but because of legal advice that Chessington might have a counter-claim for the error rate on claim forms, no attempt was made to claim compensation from the contractor.
An Office of National Statistics review of Vogue's work, finding it "excellent", but revised the contract, paying the company £1m from £1.9m.
Lockheed Martin's failures involved staff being unable to key in coding data at the required rate and in the speed of accessing data. Eventually the information from the census was made available five weeks late.