Select Committee on Public Accounts Third Report


26. The Comptroller and Auditor General reported that cancellation of the project had had serious financial consequences for each of the parties involved. The Department had not secured their planned fraud and administrative savings of over £500 million. In addition, up to £127 million of their investment in a linked computerised Customer Accounting and Payments system might be wasted. Post Office Counters Ltd had written down their investment in automation, by £571 million, because the case for automation had depended so much on the Card and there were doubts whether they would now get sufficient income from automation to recoup the cost. ICL wrote off project development costs of £180 million.[21]

27. The Department accepted that, as a result of slippage and cancellation, they had not achieved planned fraud savings. But the impact had been offset by reductions in fraud achieved through interim measures, including their order book control system, which had saved £68 million in 1999-2000; and, although some of the £270 million cost of the Customer Accounting and Payment package had been wasted, they regarded the major restructuring of these systems as a success. It was a very important basis for improving customer service and improved accounting. It had enabled wider roll-out of bar coding of order books and would be the platform for implementation of Automated Credit Transfer.[22]

28. The Post Office too thought they had got value from the project. They would complete implementation of counter automation across the network by June 2001 at the latest, although they had financed the cost - around £1 billion - partially out of reserves, with Treasury agreement, rather than through charges to the Department for handling benefits using the Benefits Payment Card. This investment would help them maintain the network of post offices at the current size and build a technological future.[23]

29. ICL on the other hand had found the project a bruising experience. In addition to the financial loss, their reputation had suffered.[24]

30. The Department accepted that in such a project the business risk remained with them, and noted that there had been no interruption or inconvenience to any of their customers as a result of delay and cancellation. However, the financial risk had been shared between the parties, and the transfer of part of this risk to the private sector was demonstrated by the loss to ICL.[25]


31. Cancellation of the Benefits Payment Card, at a cost of over £1 billion in lost fraud savings, nugatory expenditure and write-down of assets and costs, must rank as one of the biggest IT failures in the public sector.

32. Both the Department (through its linked project to computerise its Customer Accounting and Payments System) and the Post Office (through its automation project, now nearing completion) claimed to have obtained some value out of the Benefits Payment Card project. But the Customer Accounting and Payments system was a separate, though linked, project, and £127 million of its cost may be wasted. In addition, some £571 million of the Post Office's investment in automation has already been written off.

21  C&AG's report (HC 857, Session 1999-2000) paras 1.9 and 1.30-1.36 Back

22  Qs 62-64, 74-78, 121, 131-132, 157-163 Back

23  Qs 65-72, 129-130, 145-149  Back

24  Qs 66, 79, 164-165 Back

25  Qs 65-66, 79, 102-103 Back

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