A cost to the public purse

The House of Commons watchdog has criticised Andersen Consulting's Nirs2 deal, while the supplier denies the accusations made by...

The House of Commons watchdog has criticised Andersen Consulting's Nirs2 deal, while the supplier denies the accusations made by the Public Accounts Committee. Hazel Ward investigates

The influential House of Commons Public Accounts Committee (PAC), and its chairman, David Davis, last week warned the Government that it risks being held to ransom by its IT suppliers.

In the PAC's report on benefit fraud and the troubled National Insurance computer - Nirs2 - the select committee warned ministers they must "look again at the balance of benefits and risks underpinning decisions on ownership of intellectual property rights in major government systems".

In 1995, Andersen Con- sulting won the contract for the Nirs2 system by bidding £100m less than its competitors, but it kept the intellectual property rights to the system, which it valued at £100m.

Under the terms of the contract, Andersen was to take over the existing Nirs system and build a replacement for which it would take responsibility until the end of 2004.

If the Government subsequently wanted to change supplier, the rights would then have to be purchased from Andersen.

The committee said the Government had failed to consider the implications of allowing the intellectual property rights for Nirs2 to stay in Andersen's hands.

The PAC urged the Inland Revenue to seek joint ownership of intellectual property rights for such systems to enable it to continue to use the system after the contract ends.

"In our view the Inland Revenue should look again at the balance of benefits and risks underpinning decisions on ownership of intellectual property rights in major government systems."

As Geraint Davies, Labour MP and committee member, pointed out during the hearing, "In some senses, Andersen has got us over a barrel due to hopeless negotiation by the Inland Revenue.

"It strikes me that Andersen Consulting comes along, claims it can do this system for less money than it actually can, quicker than it actually can do it and shares some of these costs, but ends up owning the intellectual property which it can test on the back of the taxpayers' problems and then export that product to South America... and make a lot of money out of [the system]."

The contract was the first awarded under the Government's much-touted Private Finance Initiative (PFI), a measure designed to shift all risks and cost of late delivery, or poor performance, from the public sector to the private sector.

However, since the system went live in July 1998, it has been beset with problems and delays, which, to date, have cost the public purse some £38m in compensation to pension companies, more than £2m in compensation to the public, and a further £14.1m to clear the backlogs.

With the number of outstanding problems down to 550, from over 4,000, the Revenue said it was confident the system would reach a "steady state" by April 2001.

"Progress continues to be made in business recovery, following delays caused by earlier problems. A plan has been agreed with Andersen Consulting for delivery of the small amount of non-priority functionality that remains outstanding," the Revenue said.

The Revenue admitted that that some 128,000 pension cases were waiting to be reviewed, as a result of problems with Nirs2, although it was possible that many cases would not require alteration.

t National Insurance Fund 1998-99 and Wider Issues of Fraud and Error in Benefits Paid by the Department of Social Security, Public Accounts Committee, HC 350 9.

Managing the problems raised in Nirs2 development

Status date Cumulative no No. of probs Cumulative no. No. of probs No. of probs
  of probs raised remaining open of probs closed opened in the period closed in the period
31/12/98 1,919 1,589 330 N/A N/A
31/03/99 3,277 2,138 1,139 1,358 809
30/06/99 3,885 2,202 1,683 608 544
30/09/99 4,265 1,111 3,154 380 1,473
31/1/00 4,382 833 3,549 117 395
Source: PAC

Read more on IT risk management

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

SearchCIO

SearchSecurity

SearchNetworking

SearchDataCenter

SearchDataManagement

Close