Select Committee on Public Accounts Twenty-Third Report

2 The cost of technical transition

8. Although technical transition was excluded from the scope of the PFI deal, the building design had to be integrated with the technical transition plans to ensure there would be no break in GCHQ's service to its customers. In 1997 GCHQ's best estimate for technical transition, based on a piece by piece move of its systems—the so called box move—was £41 million. However, this was reported to GCHQ's Board as only £20 million.[17] Because this figure was so small and could easily be absorbed within existing budgets, the GCHQ Board took its eye off technical transition at that time and focused only on assessing the commercial viability of a PFI deal for the building.[18]

9. GCHQ was unable to explain why the wrong figure of £20 million had been reported to the Board. However, we were told that its Directors knew it should have been £41 million because they had been working on it. But with either figure the project appeared to be all about building costs and, although there was a Director of Technology on the Board, it was not for a couple of years before the realistic, high costs of technical transition were articulated.[19]

10. In 1998 GCHQ had started to consider the impact that reaching year 2000 would have on the integrity of its computer systems. It diverted 150 man years effort to carry out this work.[20] It was only during this work that GCHQ first realised the complexity of the inter-relationships between its networks and equipment. In the light of this realisation GCHQ's new programme director reviewed the position and in 1999 it was estimated that technical transition would cost as much as £450 million over two years.[21]

11. GCHQ acknowledged the failure of its engineers to spot that a growing degree of networking of systems was going to complicate the process of doing the technical transition. The immediate predecessor plan to the new building had been for a new computer hall and that had been planned on the same simple box move. But that simple plan was carried into the new building and it was some time before anybody stood back and said this would not work because of the degree of networking.[22]

12. The cost of actually moving the equipment was broadly equivalent to the original costing of the box move. What had not been forecast was the cost of providing new information technology architecture, which was a very big undertaking. In that sense part of technical transition was an upgrade of existing systems. GCHQ considered that it was arguably easier and cheaper to do it in the new computer hall than it would have been on the old site. It was a very large sum of money but GCHQ considered it represented good value.[23] The additional costs had provided GCHQ with a 21st century system and proper management tools for the future development of that system.[24]

13. The Treasury would not fund the whole of the £450 million over two years but are contributing an extra £216 million to a revised budget of £308 million over the first five years. In order to keep within the revised budget GCHQ is having to keep part of one of its existing sites at Oakley open until 2012 with extra running costs of £43 million.[25] The first five years of technical transition would also require some 978 man years of GCHQ's own in-house staff effort at a cost of between £30 million and £40 million.[26] Retaining Oakley did not accord with GCHQ's original intention for all of GCHQ's Cheltenham staff to be on one site. The number of people left behind at Oakley to run the IT would be down to about 200 within a few years. The great majority, 90% of the 4,500 staff, would be working in the one new building which GCHQ considered would provide the desired opportunities for better teamwork.[27]

17   C&AG's Report, para 4.2 Back

18   Qq 83-86 Back

19   Qq 69-72 Back

20   Qq 22-23 Back

21   C&AG's Report, para 4.7 Back

22   Q 3 Back

23   Qq 63-65 Back

24   Q13 Back

25   C&AG's Report, para 4.9 Back

26   Q 4 Back

27   Q 9 Back

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