Benefit office U-turn on IT deals

Department opts for a small-is-beautiful approach to IT contracts following strategy review.

Department opts for a small-is-beautiful approach to IT contracts following strategy review.

The Department for Work and Pensions is planning fundamental changes in how it buys and manages IT projects after a series of disasters involving multimillionpound contracts. It is also drawing up plans for new IT deals that could be worth more than £600m.

Computer Weekly has learned that the DWP wants to prevent failures by arranging smaller contracts with more suppliers, reducing the scope, duration and complexity of individual projects, and avoiding the Private Finance Initiative as a source of funding.

If this approach is adopted by other departments it could reduce the risk of government IT disasters, experts believe. But the DWP's move towards "bite-sized" contracts is in stark contrast to the approach taken by some other Whitehall departments.

The Department of Health, for instance, plans to award a series of IT contracts that may be worth more than £1bn each over 10 years, and the Inland Revenue is preparing an IT outsourcing deal worth more than £3bn with one consortium.

The DWP has issued a "prior information notice" declaring that it may place IT contracts worth more than £600m.

Suppliers say the new deals could make the DWP less reliant on its current main IT contractors, which include the Affinity consortium, comprising EDS, IBM, PricewaterhouseCoopers and A T Kearney.

The DWP signed an "Accord" contract with the Affinity consortium worth more than £1bn in 2000, under the Private Finance Initiative, to help to provide the "next generation of IS/IT systems and services to underpin the [DWP's] modernisation agenda".

EDS has declined to comment on the DWP's policy change.

It remains unclear whether the department's review of its IT strategy will mean changes to existing contracts.

Asked whether the Accord contracts would be affected by plans to change the way it buys IT, a DWP spokesperson initially said, "We are considering our contractual arrangements as a result of the update to our IS/IT strategy." But after further questions about the implications for the contract the DWP appeared to back-track and said Accord PFI contracts are "not being reviewed as a matter of course".

Computer Weekly understands, however, that the DWP has come under pressure from the Treasury to review PFI contracts, including those awarded to EDS under Accord.

Many PFI deals in central government have failed or have terminated prematurely. The DWP has itself suffered from a series of high-profile IT failures. When it was the Department of Social Security it lost £6m in a project to computerise the administration of welfare benefits. A second similar project, Operational Strategy, cost more than three times its original declared budget of £713m.

In 1999, the DWP was a partner in the failed £1bn Pathway project which was supposed to provide a benefits card for claimants. More recent DWP projects, such as an IT upgrade at the Child Support Agency, have run into trouble.

To manage its new IT strategy, the DWP has recruited senior IT specialists from the private sector, including Rob Westcott, previously chief information officer with General Motors.

The DWP spokesperson said, "We have updated our IS/IT strategy in line with evidence from change programmes across the economy that show the benefits of focusing on more frequent, smaller incremental improvements to our IT [and] reducing the scope, duration and complexity of individual projects."

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