Conclusions and recommendations
The implementation of the e-programme
1. Customs' e-programme, although at an early
stage, is an innovative step forward in using new technology to
deliver better quality public services, streamline current processes,
and achieve savings.
Taxpayers should be able to deal as efficiently as possible with
Customs in a way which integrates with their business systems.
2. It is unsatisfactory that Customs has
so far spent over £100 million on its e-programme without
a rigorous business case and that Customs is still not confident
that its business case reflects the likely benefit to cost ratio
for the programme. Customs original
estimate in October 2002 of the financial benefits of £4
billion was not rigorous and they reduced it to £1.2 billion
in November 2003, cutting the expected benefit to cost ratio for
the programme from 12:1 to around 4:1. This could fall further
once the detailed analysis of financial benefits and costs is
completed. Customs should now complete a full business case, including
all the e-programme costs and supported by sensitivity analyses
of benefits and cost. It should specify the benefits, and formulate
plans including dates for realising them.
3. Customs needs to manage the risks that
the costs of the programme will be higher than expected, that
take-up of e-services will be low and the benefits from the programme
will be delayed. To provide early warning
on these risks, Customs should track actual results against forward
projections of the costs and the savings expected from improved
compliance and efficiencies. These projections should distinguish
between compliance improvements expected from the e-programme
and those from the VAT strategy.
4. In implementing the initial stages of the
e-programme Customs has not followed good practice in managing
aspects of the programme, for example by:
poor control over the commissioning and management
of consultancy contracts;
not using sensitivity analysis in evaluating the
business case; and
not appointing early enough a senior responsible
owner for the overall e-programme.
Customs has tightened controls over the management
of consultants and is applying the Office of Government Commerce
gateway review process to all new IT projects to ensure compliance
with recommended practice. It intends to implement new electronic
services only if the project has successfully passed through the
gateway process.
5. Customs does not have a comprehensive
contingency plan to address the risk of IT system failure and
its impact on service availability and on the take-up of e-services.
It is developing recovery plans for each service under the PFI
contract with Fujitsu, which should be brought together into a
contingency plan to provide continuity of service in the event
of IT system failure. The plan should set out the responsibilities
of the Department and the contractor and the events that would
trigger their implementation.
The e-VAT service
6. Customs has made slow progress in providing
an e-VAT service. It
introduced an electronic VAT return in March 2000 but with little
success. After a series of delays it planned a new pilot
e-VAT service from January 2004 with a full service in July 2004,
although work had yet to be completed on incentives to promote
take-up. Before rolling out a full service to its customers, Customs
should construct a proper pilot to test the new e-VAT service
and evaluate the results using appropriate evaluative methodologies
to test that the service functions as intended and it can cope
with the potential demand.
7. There was very low take up of the first
electronic VAT return service because it did not offer businesses
any tangible benefits. Instead they
found the paper based system easier to use. Customs should research
the market to establish the likely demand for new services from
different customer groups and address business concerns about
security, accessibility and usability. It might for example examine
with large VAT traders the benefits of using the new service,
say how to make an electronic VAT return in its guidance to new
and small businesses; and encourage software manufacturers to
include the e-VAT return in future releases of their accounting
software, so businesses could integrate the service into their
business systems.
8. Customs is only now considering a strategy
to achieve the 50% level of take-up (some 700,000 businesses)
needed in the new e-VAT service to make it viable.
Customs is also considering whether to compel certain sizes of
business to submit VAT returns electronically. Before launching
a full service Customs needs a firm assessment of the benefits
that can be achieved for the Department and for businesses from
the e-VAT service, and assurance that the required levels of take-up
can be achieved. Before resorting to compulsion, Customs should
be offering a good quality service which a high proportion of
businesses are willing to use. Compulsion should not be used to
impose an inferior service.
The PFI contract with Fujitsu
9. The cost of the PFI contract has increased
from £500 million to £929 million due partly to a rise
in the volume of Customs' work since the contract was signed in
1999 and partly to new requirements brought about by the e-programme.
Retendering the contract
would have given better assurance on the value for money of the
revised contract, but would also have put at risk existing revenue
and the expected benefits of the e-programme which Customs estimated
to be nearly £1 billion. Whether Customs struck the right
balance in making this judgement is hard to determine while many
of the expected benefits remain to be demonstrated.
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