Examination of witnesses (Questions 100
- 119)
WEDNESDAY 1 APRIL 1998
MR J MORTIMER,
Treasury Officer of Accounts, further examined.
100. It is September, is it? I thought you
said November.
(Mr Trevelyan) We will report before the statutory
deadline which is in November. We should report under Treasury
rules by 31 August. We will be late against administrative deadlines,
but we will be within our statutory deadline. That is what I have
set as the target for the agency and we expect to obtain all the
resource necessary to achieve it.
101. May I now press ahead with some perhaps
less positive questions, some quick questions? If it were not
for the BSE crisis would I be right to say that you would not
have recommended the decision to move towards implementation on
1 May 1996 because of the inherent complexity of integrating these
three systems?
(Mr Trevelyan) Mr Jenkins was the chairman of
the project board at the time and I think it is fairer to ask
him to answer that question.
(Mr Jenkins) Certainly BSE was one of the factors
taken into account but it would be fair to say that was not the
sole reason. Based on the information we had at the period of
going live we felt that it was acceptable to go forward.
102. You would have done it anyway.
(Mr Jenkins) We would have gone forward without
BSE although that was one of the factors which was taken into
account.
103. Would you say that the BSE crisis was
a critical factor in the errors which have been focused in on
by this Committee or do you think it is just another background
noise?
(Mr Jenkins) In so far as it has increased the
level of transaction and activity, it has clearly added to the
situation.
104. I got slightly lost. Can you remind
me of the cumulative cost of consultancy, of implementation of
all these stages plus the post-implementation corrective work
when you combine Oracle and KPMG? It might require a certain amount
of mental arithmetic but you have a few people behind you.
(Mr Jenkins) I have some figures here. Phases
1 and 2 cost some £6.6 million. Phase 3 came to some £3.46
million.
105. About ten.
(Mr Jenkins) From May 1996 until March 1998 there
is an added cost of some £900,000.
106. About £11 million on consultancy
is the answer, is it?
(Mr Jenkins) That is right.
107. Unless I misheard you said you only
employed five accountants in house. Did I mishear you? Is that
right?
(Mr Jenkins) Certainly there were five contract
accountants dealing with the resolution of the reconciliation
activities.
108. You have five accountants in house
when you combine expenditure and income dealing with £7 billion,
then you spent £11 million on consultants, is that right?
Is that the way you managed the business?
(Mr Jenkins) May I clarify the figures first?
The £900,000 I quoted was a combination for the contract
accountants.
109. £300,000 was KPMG and £430,000
was in house so £10.5 million.
(Mr Jenkins) And some £400,000 of the £900,000
was planned routine maintenance. As with any project, we had to
put money into our forward planning for general enhancements.
110. With hindsight, if you had only spent
£5 million on consultancy and you had another £5 million
to play with and you could get a load of accountants—perhaps
you could actually have poached them from the NAO, who knows—do
you not think you would have provided better value and effectiveness
for the taxpayer? It seems absolutely ridiculous that you just
have a handful of accountants and a few career civil servants
running this. What I am surprised about is that there is not greater
error given the complexity of integrating three systems with a
backdrop of BSE.
(Mr Jenkins) Just to clarify the facts, within
the agency we have five accountants who are full-time civil servants.
We have employed five additional contract accounts from October
to assist with the situation.
111. You have ten accountants of whom five
are in house and five are outside and the five outside cost £10
million, or have I got that wrong?
(Mr Trevelyan) Phases 1 to 3 is an exercise from
the beginning of this decade so the £11 million is spread
over from 1991 through to 1998. We are talking about a major spend
but a major spend over a long period of time.
Mr Davies: Ten years,
five consultant accountants, £10 million. Is that it? Good
value. I think you have come off lightly. My own thoughts would
be that you should think very carefully about perhaps investing
more money internally and saving more money overall to provide
better systems internally.
Mr Hope
112. May I pick up one point of detail about
the decision to go live which is mentioned in paragraph 23? What
I do not understand about the paragraph there is that it appears
that you had feedback from users which made you delay the go live
date for a month from 1 April to 1 May. Was that not warning enough
to suggest that it was about to go badly wrong and that really
you should not just have delayed it by a month but perhaps realised
that there were significant problems that then became very apparent
as soon as you did go live?
(Mr Trevelyan) The information available to us
which was causing us concern in April was about the capability
of the system to produce reports later on in the year and none
of the operating difficulties, the go-slows which we faced within
a couple of months, had surfaced. Mr Jenkins was chairing the
project team at the time and if you want to investigate his state
of mind, he is the best person to address yourself to.
(Mr Jenkins) Clearly we looked at a whole range
of activities. The three main areas which caused us to pause in
April were that initially we were finding that the payment processing
from our accounts payable system potentially led to duplicate
payments. By April we thought the position had been resolved but
I required a longer period of time to confirm that was not in
fact a risk. In that one month following that was confirmed as
no longer being a risk. That was the key area for deferring the
go live date. There was also some routine return information.
The accounting system is only one part of our agency computer
system. We have individual IT systems for the individual CAP schemes
and for the operational areas to operate there is a requirement
for the information to flow back. They have the return files and
therefore the information of payments. In April not all that information
was available correctly. We felt it was necessary to defer that
as well and in the month following that was corrected. The third
area was that in one or two specific areas it was felt that further
testing would be necessary just to give us that extra bit of confidence
which occurred and in that following month that information was
confirmed. One month later we felt the key areas for withholding
had been resolved and the issues highlighted in paragraph 24,
other than the recognition that we did not have all the routine
information returns, were not available or the other information
was not known at that stage.
113. Did you have any external advice to
the project team when you made that decision based on that assessment
or did you make that decision without external advice?
(Mr Jenkins) We had a formal project board which
I chaired. We had the Chief Accountant present, we had all the
operational users there, we had the users within the Finance Division,
we had our computer services expert, we had our audit people present
and the consultants were also present.
114. Who were the consultants at that time?
(Mr Jenkins) At that stage it was KPMG.
115. KPMG were involved.
(Mr Jenkins) Were present to provide advice to
the project board.
116. And their advice was to go live on
1 May.
(Mr Jenkins) They recognised the situation as
the rest of the project board did that it would be acceptable
to go live, yes.
117. They did recommend going live on 1
May.
(Mr Jenkins) The whole project board accepted
that decision, yes.
118. KPMG were involved in the phase 3 stage
from that period. Is that correct? They were involved in phases
1 and 2 as independent advisers or is that when you brought them
in? I want to know when they came onto the scene.
(Mr Jenkins) They were not involved in phases
1 and 2; other firms of consultants were involved then.
119. That was only Oracle then.
(Mr Jenkins) We went out to open tender on the
decision to use consultants for phase 3 and KPMG succeeded in
that open tender.
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