Nicholas Montague, chairman of Inland Revenue, has blamed the chaos that accompanied the introduction of new tax credits in April on EDS, the department's main supplier.
Montague told the House of Commons Public Accounts Committee earlier this month, "One thing went wrong - the failure of the systems."
The statement came a week before the Revenue announced that it would replace EDS with Cap Gemini in a £4bn contract to run its systems.
But Computer Weekly has learned that the cause of the problems went far deeper than system failure. Our investigation into the causes of the failure has uncovered the events the led to disaster.
It is, in many ways, a typical IT implementation story: business case uncertainty, specification creep, implementation problems and truncated testing. However, it also had an unmovable deadline and the consequences of failure were highly visible.
The government made the main announcement of new tax credits and committed to their introduction from April 2003. The system was to be built by Inland Revenue's main IT supplier, EDS.
The IT programme was launched. The plan was to get the business case approved by September 2000. The initial intention was for two releases: development of release one to start in October 2000 and go live in January 2003. Development of release two was to start in April 2001 and go live in April 2003.
January - December 2000
There were major policy uncertainties about the way new tax credits would be implemented. By January 2001, there still was not an IT requirement fit for use in starting development.
EDS started building release one but there were still uncertainties about the design of the tax credits and about the business processes to be used. Even so, EDS had to set a requirement and make a start. But it was already six months late.
Focusing on how to succeed with release one despite a compressed timetable meant work on release two started in April 2002 - 12 months late. And the scope of release two increased by about 50% as more complexity was added.
Release one went live on schedule, allowing returned claim forms to be entered on the system. Release one had taken more than 500 man-years of work to develop and implement.
EDS was due to start end-to-end system testing of release two, but could not because the Revenue had not finalised key requirements. About 60 change requests were made after system testing was due to start. A Gateway review by the Office of Government Commerce gave the systems a green light to go live.
Inland Revenue discovered more than 100,000 claims had the wrong national insurance numbers. This was because clerks, presented with someone's name on their screens, had arbitrarily selected the first identity from a list of potential matches.
The Revenue stopped sending out award notices to claimants while mismatches were rectified. The result was that millions of claimants, having heard nothing about the progress of their claims, called the Revenue's phone lines, which subsequently jammed up.
It was critical to rectify the mismatches before going live, so officials and EDS decided to use their test system to do this. As a result the system was held at release one and could not be used for release two performance testing.
Performance testing ran for only four weeks, instead of the planned 12, while the mismatches problem was rectified. Following this testing, Inland Revenue resumed issuing award notices in small volumes.
EDS warned that using the test system to resolve mismatches had increased the chances of problems occurring when the system went live but it did not advise the Revenue to put back the April deadline; nor did the Revenue advise the chancellor to defer the deadline.
The race was on to meet the April deadline.
Release two went live on 8 April. About 1.1 million claims had incomplete information or some other problem that required officials to contact claimants.
Helplines were swamped as people received award notices at the last minute or found they were among the 1.1 million still to be processed. This put extra pressure on the system and it soon emerged that the system was not stable.
Bottlenecks in links between computers had not been identified during testing and the system stopped several times a day. The processing of the 1.1 million outstanding claims was severely disrupted.
Stability of the system was restored on 13 June.
Release three went live without problems after nearly 200 further man-years of effort.
Release four of the tax credits system is due to go live. It is a major release, critical to the renewals of tax credits - but there is no contingency plan to defer the date if testing reveals major flaws in the system or software.