The NAO's most serious criticism of any IT-based project?

At a press conference yesterday, senior officials at the National Audit Office made some of the most serious criticisms anyone at the NAO has made about an IT-based programme.

Philip Gibby, a mild-mannered Director at the NAO, said yesterday there had been “scant regard for the proper management of public funds”.

Could a government auditor have a more serious criticism of an IT-based project or programme? Gibby yesterday could not think of one.

He and some of his senior colleagues were talking not about the NPfIT, or the Home Office’s C-Nomis project, but a scheme to pay farmers a single subsidy, replacing separate subsidies, called the Single Payment Scheme.

At one level it’s simple: payments need to be made to only about 116,000 farmers. Gibby conceded that it’s small enough a scheme for payments to be recorded on a spreadsheet. It’s not as if the system needs to make payments to millions of benefit claimants.

But the system could hardly be more complex in practice, said the NAO.

At the centre of the scheme are several “cumbersome” integrated systems, largely based on Oracle, which were built by Accenture and other contractors, to an inflexible timetable, and which were based on a complex design put forward by the Rural Payments Agency and its (supposedly) overseeing department, Defra, the Department for Environment, Food and Rural Affairs.

These IT systems, which work out how much farmers should be paid, went live in 2005, disastrously.

Since then there have been two reports by the NAO on the Single Payment Scheme.

To Gibby’s frustration – which he expressed repeatedly yesterday – the NAO has needed to revisit the subject again. Today’s NAO report is the result.

This is a summary of the NAO’s latest findings:

–    The IT system has cost £350m, a more than four-fold increase on the original estimate of £75.8m in 2003. 

– The Rural Payments Agency has paid Accenture £84m in the last two years alone. The Agency had given the Public Accounts Committee a figure of £36m for the forecast spend with Accenture over the same period.

– The Agency has 100 Accenture contractors working at its offices full time, each one costing an average of £200,000 in 2008/9. That means that every Accenture contractor costs more than the Prime Minister’s salary (after taking the PM’s expenses into account)  

 –     Inaccurate data in the system is so embedded that under and overpayments to farmers have become commonplace. The NAO has had to qualify the accounts of the Rural Payments Agency because it cannot be sure how much the Agency is overpaying farmers. The system still makes overpayments routinely.

–    Changes to the IT system – including to Oracle source code – have gone unrecorded, which may make it impossible for any new suppliers or contractors to take over existing support contracts

–    This means the Agency is locked into its IT suppliers and may have to pay whatever they charge for contract renewals.

–    The NAO made no comment when I asked yesterday whether IT suppliers have Defra and RPA [Rural Payments Agency] over a barrel.
–    The NAO wants the £350m system at the Rural Payments Agency replaced although it has been live for only four years. But it won’t be easy replacing it. Accurate payments to farmers must be made electronically or the government can be fined up to £1.6bn by the EU – so the existing system must be kept until there’s a replacement.

–    The complexity of the system and the contracts, and particularly the blurred responsibilities, means that if the system collapses and farmers go unpaid, there’s nobody to seek redress from, even if the EU fines the government.

–    Most serious of all, the Rural Payments Agency continues to give its lead department, Defra, inaccurately positive reports on the progress of the scheme. In the six months up to March 2009, the Rural Payments Agency awarded itself praise for meeting nearly all of its targets. It categorised thirteen out of 15 assessments on meeting relevant targets at “green” and two at “amber”. Yet, in the Agency’s internal, unpublished Risk Register, seven out of the top ten risks were put at “red”, and three at “amber”. [My comment: if civil servants don’t get the truth from other civil servants, what hope is there for ministers and Parliament?]

–    Defra passed its positive reports on the strong administration of the Single Payment Scheme to ministers who were told, wrongly, that targets were being met.

–    The RPA has given repeated assurances to the Public Accounts Committee that good progress was being made on sorting out the problems. These have proved to be incorrect, said the NAO.

–    The cost of processing each claim under the Single Payment Scheme is about £1,700 – six times the cost of processing each claim in Scotland which has a different system.

–    One farmer received a claim to repay £33,228 in February 2009 – without any notice. When he queried it he received what he said were pages of baffling calculations. In the end the Rural Payments Agency admitted it had made a mistake and said the farmer didn’t owe anything.

–    Some claims by farmers have had more than a dozen validations – all of them wrong.  


These were some of the comments made yesterday by the NAO’s Philip Gibby:

“The original problem with all of this stems from the fact that they tried to rush in a very complicated system to a very tight timeframe.”

“There is a frustration we have had to come back to this for a third time.”

“We are reporting now because I am not satisfied with the progress they have made.  We have major concerns. We do feel strongly. It [the Single Payments Scheme] is not offering value for money.”

“There are major problems with the IT system. It was brought in as a task based System…Each time a farmer put in a claim different people worked on the claim and it would all come together and the farmer would get paid. That didn’t work. They have tried to shift it over to a case-based approach whereby each person in the Agency takes on a case and deals with it from start to finish.”

“The problem is that we estimate they have spent up to £350m on it which is a considerable sum of money – £130m in the last two years. It is a complex, bespoke system as well as an expensive one.”

“About a third of the changes [to the payments part of the system] have been very invasive and going into the source code. The problem is that you become very dependent on the contractors you have got to keep the system up and running…It will be difficult to move away from existing contractors.”

“[IT] support contracts for the scheme are coming to an end – 29 of the 54 support contracts end this year. On another 16 contracts they did not know when they would end.”

“The risk is that if they [support contracts end] and they are not replaced, and it is difficult to get other companies in to deal with it because of the bespoke nature of the system, it increases the risk that this [the IT system] is going to become obsolete.”

“We want them to look at the cost of an alternative system. We cannot say switch it off now and get the cheque book out because the European Union requires you to use the system to make payments. You have to have a system. But there’s a limited shelf life for this system. It’s time to develop another one which will enable you to switch over to that one instead.”

“We are frustrated which is reflected in the tone of the report. When we did the second report our feeling was that they [RPA] were on top of the problems. But they are not.

“They have gone through 56% of records without a proper management oversight, without a proper strategy, without keeping a record of changes they were making. We flagged this up a while ago and it hasn’t been properly addressed.

“It has now got to stage where we have had to qualify the accounts. It [the system] is still generating overpayments of, we estimate, about £25m in the past year. Until it’s sorted these mistakes will continue to be made.”

“This is about proper use of public funds. The Permanent Secretary and the Chief Executive are the accounting officers who are responsible for the organisations.”

Officials from Defra and the Rural Payments Agency are to be questioned by the Public Accounts Committee on 26 October.


NAO urges Defra agency to replace £350m system that’s only 4 years old –

Today’s NAO report – NAO website

Defra is wasting millions – Lib Dem Les Bonner’s website