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Rural payments problems led to 40% increase in costs, says NAO report

Inappropriate behaviour and too much focus on IT procurement led to rural payments programme costs spiralling to 40% over budget, says National Audit Office report

The rural payments programme was dogged by spiralling costs, senior level bickering and poor and dysfunctional leadership, a National Audit Office (NAO) report has found.

The report, which reviewed the rural payments programme run by the Government Digital Service (GDS), the Department for Environment, Food and Rural Affairs (Defra) and the Rural Payments Agency (RPA), found that the programme was plagued by changes in leadership, confusion and “inappropriate behaviour” among senior leadership.

Costs of the project have spiralled from an initial £154m to £215m, 40% over the original budget, according to the revised business case submitted to HM Treasury in September 2015.

Meg Hillier, chair of the Public Accounts Committee, said the programme will “cost far more, but deliver far less than was originally planned, and incur millions of pounds’ worth of avoidable penalties”.

“This is not a good deal for the taxpayer or for farmers,” she said.

The rural payments digital service aimed to use Gov.uk’s Verify, an online identity verification scheme, to process claims for European Union (EU) subsidy payments to farmers.

The system, hailed as one of the government’s flagship “digital by default” services, went live in late 2014, despite failing its readiness assessment by GDS. However, farmers began reporting problems with the system, saying it was slow and difficult to use.

One of the issues was with Verify, the government’s system for users to prove their identity online to securely access digital public services, which was not ready for widespread use by farmers, and as no alternative was initially put in place, users had to register by phoning up the RPA helpline.

In March 2015, the government was forced to make a U-turn on the project and resort to pen and paper, following problems with the IT system, which in return added direct costs of between £3m and £4m.

“By March 2015, when the online application system was withdrawn, there was limited functionality in other components of the system,” the NAO report said.

“They were not fully integrated, development of links to legacy systems required to make payments had ceased, accounting and payment systems had been deprioritised and delayed, and there were other significant technical issues and problems with land data.”

Integration problems

The programme is one of the first large-scale projects to follow GDS’s latest guidelines on moving spend on large government projects away from large single-supplier contracts, and focus on small to medium-sized enterprises (SMEs) in a multiple-contractor approach.

This meant Defra was expected to provide systems integration skills to bring the different elements together.

However, the report said the department had limited experience of managing a group of smaller suppliers on a large IT programme and “did not have the necessary skills in-house and did not know how to obtain them”. The programme failed to recruit the necessary skills, which was a “central cause of the failure”.

The NAO report also found that none of the functionalities meant to be delivered by external suppliers were fully delivered.

For instance, Kainos, which is delivering the customer portal part of the programme, has not delivered its core functionality as “customers cannot yet access or manage accurate land data and cannot submit claims” due to the core rules engine, delivered by another supplier, Abaco, not being successfully integrated with the portal.

Poor leadership and lack of communication

It added that over the course of the programme, which began in 2012, the project had four different senior responsible officers and each one changed the priorities of the programme, leading to disruption and lack of clarity.

“There were deep rifts between the programme leaders at many stages of the programme’s history. These went beyond the healthy tension that could be expected in a multi-organisational programme, not only hindering progress, but also impacting on staff morale and stress,” the report said.

It added that some senior people interviewed by the NAO said they found it “almost impossible to work together at times”.

There were also challenges in sharing information between RPA and GDS staff in the programme, which once went so far that the secretary of state had to intervene for information to be released from RPA to GDS staff.

“[Defra and GDS] have repeatedly failed to get the basics right. There is no clear vision, numerous changes in direction and governance, poor leadership and ineffective risk management,” said Hillier.

“The department’s vision for the programme focused on procuring an IT system, rather than aspiring to wider organisational transformation to deliver further efficiencies,” the report said.

A government spokesperson said that the Common Agricultural Policy (CAP) was “widely acknowledged as the most complex ever and a new IT system was needed to handle this additional complexity and to make claiming as simple as possible for farmers”.

“While there was a problem with one part of the online interface that enabled farmers to put data directly into rural payments, the system has always worked and has successfully started making accurate payments to thousands of farmers on the very first day of the payment window,” said the spokesperson. 

“The rural payments system will be further improved in 2016 to make it easier for farmers to apply for their CAP payments.”

Read more about the rural payments programme

The NAO report also found that officials “felt inhibited from raising their concerns” on the programme, for fear of being seen as “not on board” with it, and issues escalated to the programme board were often not followed up.

Amyas Morse, head of the NAO, said the organisations have not been able to work together “effectively” to deliver the programme and there are serious lessons to be learnt by all parties involved.

This means costs have increased and systems functionality has not improved at the rate expected, either in the back office or the user-facing front end. This does not represent value for money at this stage,” said Morse. 

“One consequence of this is that the department faces difficulties paying farmers accurately and at the earliest opportunity. While the department is making progress towards its target of paying Basic Payment Scheme (BPS) claims for the majority of farmers in December, significant challenges remain for the programme.”

GDS also came under criticism in the report, which said it did not provide the support the department needed.

The report said the department had sought guidance on best practice for agile governance from GDS in 2013, but that guidance wasn’t published until June 2014.

“GDS provided limited continuity and insufficient insight into how to adopt agile on this scale,” the report said.

 Too much focus on IT

The report also criticised the business case for the system itself, which focused too much on the IT system procurement and too little on “delivering the service more widely”.

“The department did not develop a suitable operating model until January 2015 – nearly two years after the outline business case had been approved. The target operating model developed in the early stages was a single-page reference document that only described the high-level design principles of the proposed IT system,” the report said.

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