The Government is considering fining Andersen Consulting over its failure to clear a backlog in the National Insurance Recording System (Nirs2).
Computer Weekly learned of the threat to Andersen from the Inland Revenue this week. It follows social security minister Jeff Rooker's parliamentary written answer earlier this month in which he stated, "83,000 pensioners... are still affected by current and past Nirs2 computer problems".
This is down from the 170,000 backlog of a year ago, but ministers said it would be at least the end of the year before the backlog is cleared.
Andersen, which has already paid £3.9m in compensation for delays in 1997 and 1998, refused to comment on the threat beyond saying it was committed to making Nirs2 work.
Andersen Consulting has still not delivered full functionality on the Nirs2 system.
Staff dealing with pensioners who have contracted out of Serps, the State Earning Related Pension Scheme, are still having to do manual calculations to assess the correct amount of benefit.
Rooker said Andersen has promised this part of the system will go live in March.
Andersen won the Nirs2 contract in May 1995 by bidding £100m less than its competitors. The firm said that it would bear the costs of developing the system, which it would then market elsewhere.
The company said this was still the aim but no contracts had yet been signed.
In May 1999 the Inland Revenue took charge of the Nirs2 project, from the Department of Social Security, after a stabilisation and recovery programme had been agreed.
An Inland Revenue representative said, "Since the Inland Revenue took responsibility for the Nirs2 system the highest priority has been to get stabilisation and recovery making progress. Significant progress has been made.
"The plan is continually reviewed to ensure that we are addressing priority areas," the representative added.
However, the Inland Revenue said neither it nor its predecessors had laid down specific milestones or key performance indicators for Andersen to clear outstanding cases.