Services giant EDS has failed to deliver on a key cost-saving commitment to the Driver and Vehicle Licensing Agency (DVLA) nearly two years after implementing a new system for holding vehicle details, Computer Weekly can reveal.
The estimated 30% cost reduction was a key feature of a proposal for the £5m Vehicle System Software (VSS) prepared by EDS in January 1997. The cost saving for the vehicle system changes was due to be delivered "once VSS was implemented" in October 1999, according to EDS.
It was to be measured against the development cost for a previous system which was not millennium-bug compliant.
But a DVLA official said, "The estimated 30% potential reduction has proved difficult in practice to realise."
The DVLA now admits that it underestimated the complexity of the project and did not have experience of the technology.
Nonetheless, officials at the DVLA claim that its service to the public has been improved through VSS. A spokesman said, "EDS is fine-tuning its techniques to improve productivity."
The contract is up for renewal in 2002.
EDS' failure to meet the 30% figure calls into question the effectiveness of cost-saving proposals from suppliers central to many outsourcing deals, experts added.
The case also highlights the need for users to think more carefully about the ability of suppliers to deliver on proposed savings used to justify outsourcing deals.
Last year a report from the National Audit Office (NAO) on EDS' £2.4bn deal with the Inland Revenue warned that it was difficult to prove that the contract has delivered value for money.
There are now concerns that the DVLA may not reap the anticipated financial benefits of the VSS project.
EDS is keen to downplay the issue of potential savings. The outsourcing firm claimed that the potential savings had been impossible to quantify. It added that the new system offered improved speed and flexibility, which outweighed any cost reduction benefits.
The failure to achieve the cost savings will cause further embarrassment for the DVLA over the already troubled VSS implementation, valued at £5m by the NAO. EDS' efforts to build the vehicle system were beset with project management problems almost from the outset.
Originally designed to take over from an existing legacy database which dated back to the mid-1970s, slow progress on VSS meant it was implemented in mid-October 1999, a year later than originally envisaged.
The project was also dogged by difficulties once it was up and running. A report from the NAO earlier this year highlighted vehicle excise duty refunds as the most problematic transaction and identified instances of corrupt data being downloaded from the VSS to the Police National Computer during Christmas 1999. EDS was able to resolve this problem in January 2000.
Officials at the DVLA argue that all the "trouble reports" referred to in the NAO report have now been cleared. A spokesman said, "In common with most systems, there are a small number of vehicle system trouble reports, none of which are critical." These number about 60, which is an acceptable figure given the size and complexity of the system, he said.
Outsourcing experts are now warning that organisations need to be particularly careful when drawing up outsourcing contracts.
Robert Morgan, chief executive of outsourcing consultancy Morgan Chambers, said, "We see this all the time. In 80% of the cases it is the client who is wholly responsible for the savings not being achieved."
This is because they do not have sufficient control mechanisms to cope with changes in the contract, he added. Users need to push for more transparent contracts to prove that the supplier has delivered what has been requested, he said.