Select Committee on Work and Pensions First Report


2  The Government's response to our recommendations

4. The DWP states in its accompanying note that it has "taken on board all the Committee's observations and recommendations in the final Report."[5] More specifically, it has included in that Report:

  • additional information on total project costs (Annex B, paragraph 9);
  • details of the timing and sequence of events in 2008 (Annex D);
  • more information on risks (Annex E);
  • a redraft of the section on maximum liability (paragraphs 26-29); and
  • additional information on the value for money analysis of the alternative courses of action (paragraphs 19-23).

5. The DWP has also undertaken to make a number of amendments to Departmental guidance on Section 82 Reports:

  • To reflect the Committee's recommendation that in any future uses of the Section 82 procedure the Work and Pensions Committee is given at least four sitting weeks notice of the Government's intention to prepare a Report, as well as, if possible, a period of six sitting weeks to conduct its scrutiny;
  • To ensure that additional contextual information is provided in future Section 82 Reports, as it was on this occasion;
  • To reflect the Committee's recommendation that a memorandum to the Committee and the Public Accounts Committee should be produced alongside the final out-turn Report; and
  • To ensure that the National Audit Office is asked in future to examine the reasonableness of the cost estimates included in the Section 82 Report.

6. We welcome the inclusion in the final Section 82 Report of the additional information we requested in our first Report and the undertakings the DWP has made to improve the Departmental guidance on the use of Section 82. We ask for copies of that guidance, as amended, to be made available to the Committee.

External validation

7. We recommended that the DWP should ask the NAO to examine the reasonableness of the cost estimates that form part of the Section 82 Report.[6] We were pleased to see in the DWP's accompanying note that this had been done, and we received a separate memorandum from the National Audit Office setting out its views, which we are publishing with this Report.[7]

8. The Comptroller and Auditor General has conducted a thorough study of the DWP's proposals given the time available, and we are very grateful for the speed with which this has been done. He noted:[8]

"Within the current timescale it has not been possible to undertake a full examination of the expenditure proposals. Instead my examination covered the process by which the various types of data were obtained and compiled to provide a high level cost model, and the risk analysis of its assumptions performed by the Department".

9. The conclusion of the Comptroller and Auditor General was "that the cost estimate, prepared by the Department for the purposes of Section 82, falls towards the higher end of a range of possible outcomes but is not unreasonable given the degree of uncertainty inherent in the early stages of a major IT project."[9]

10. We are grateful for the work conducted by the NAO in response to our recommendation that it should have a role in examining the reasonableness of the cost estimates included in Section 82 Reports. We trust that in future the DWP will allow more time for the Comptroller and Auditor General to perform his examination.

11. We were surprised to see that while an updated table of likely expenditure under Section 82 was provided by the Department to the NAO (dated 10 November 2006),[10] this was not included in the final Report laid before the House of Commons by the DWP eleven days later.[11] The information supplied to the NAO updates the likely maximum expenditure falling under Section 82 to £30.42 million, down from the £31.25 million figure which appears in both the draft and final DWP Section 82 Reports. While, as the NAO note points out, the maximum of £31.25 million still stands,[12] the line in paragraph 12 of the DWP's final Section 82 Report which states that "The above figures reflect the Department's best current estimate for the required expenditure" is evidently incorrect.

12. We are disappointed that the DWP has not included its most recent cost estimates in the final version of the Section 82 Report laid before the House of Commons and urge Ministers to make the position clear when they present the Report. There must be no doubt as to the amount of expenditure the House of Commons is being asked to authorise under the Section 82 procedure.

13. Furthermore, the expected total project cost listed in the final Report, £295 million,[13] is also out of date, according to the NAO memorandum, which states that "As at 10 November 2006, the Department's current estimate is that the Employment and Support Allowance Phase 1 project will cost £318.6 million in total."[14] Later in the report the NAO comments "Taking a cautious view, the Department has estimated that IT development costs could increase by as much as 40% (some £80 million, in total, of which around £11 million could possibly fall in the Section 82 period). This is in addition to the 8% increase in the total estimated project costs since the original Section 82 Report."[15]

Value for Money analysis

14. We expressed disappointment in our first Report on this Section 82 request that the Department had "not attempted to support this case with a value for money analysis of the alternative courses of action."[16] The DWP has included an additional section in its final Report, which acknowledges the Committee's concerns but concludes "The Department remains unable to provide precise value for money analysis for the same reason given to the Work and Pensions Select Committee and currently untested elements of the Employment and Support Allowance programme are extremely difficult to quantify at the present time."[17] We remain of the opinion that this part of the DWP's final Section 82 Report, in particular paragraph 23, is weak and believe that more detailed information should be included in future Section 82 Reports.


5   Appendix 1, para 10 Back

6   Work and Pensions Committee, Fifth Report of Session 2005-06, Power to incur expenditure under Section 82 of the Welfare Reform and Pensions Act 1999: new Employment and Support Allowance IT System, HC (2005-06) 1648, para 28 Back

7   Appendix 2 Back

8   Appendix 2, para 2 Back

9   Appendix 2, para 16 Back

10   Appendix 2, para 5 Back

11   Welfare Reform: Report by the Secretary of State for Work and Pensions under Section 82 of the Welfare Reform and Pensions Act 1999, HC (2006-07) 39, para 11 Back

12   Appendix 2, para 5 Back

13   Welfare Reform: Report by the Secretary of State for Work and Pensions under Section 82 of the Welfare Reform and Pensions Act 1999, HC (2006-07) 39, Annex B, para 9 Back

14   Appendix 2, para 5 Back

15   Appendix 2, para 14 Back

16   Work and Pensions Committee, Fifth Report of Session 2005-06, Power to incur expenditure under Section 82 of the Welfare Reform and Pensions Act 1999: new Employment and Support Allowance IT System, HC (2005-06) 1648, para 50 Back

17   Welfare Reform: Report by the Secretary of State for Work and Pensions under Section 82 of the Welfare Reform and Pensions Act 1999, HC (2006-07) 39, para 23 Back


 
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