HM Customs & Excise (HMCE) should reconsider its decision to spend an extra £249m on its IT overhaul, the National Audit Office (NAO) has warned.
HMCE has seen the cost of the contract, with Fujitsu Services, rise from £500m to £680m, and then in August, by a further £249m, as the service realised it did not have the right systems in place to deliver electronic services fully.
The NAO report said, “Customs will need to revisit the estimated cost of the e-programme in the business case in light of contractual amendments to the PFI contract with Fujitsu.”
Mike Ealand, the chairman of HMCE, will be called to give evidence about the contract to a Parliamentary select committee on 15 December.
An HMCE spokesman said HMCE was formulating a detailed response to the report “in due course”, but defended the extra £249m expenditure.
“The systems and services which we have chosen as part of the extra £249m will give us the flexible systems we need, and will make it easier to link them with other government departments.”
The estimated overall cost savings of the contract are £1.2bn over the life of the 10-year contract, but these will not start until 2005, the report warned. If the savings are achieved they will still be modest when the £929m outlay is considered.
NAO head Sir John Bourn said, “The programme is at the early stage of its development and there is a long way to go to translate the strategy and plans into performance improvements on the ground.
“An IT programme of this magnitude inevitably presents some large risks and our report recommends to Customs how to address these.”
Less than 1% of firms pay their VAT returns electronically, despite HMCE being three years into the contract – a “disappointing” level of take-up, the report said.
Persuading firms to use the electronic service on offer will be a major challenge because paper returns are already “relatively cheap and easy to use”, the NAO said.
Another potential flaw for the IT contract, identified by the report, was the government’s potential integration of HMCE’s systems with those of the Inland Revenue.
The NAO said the systems chosen should be flexible enough to cope with such an integration.