Select Committee on Business and Enterprise Thirteenth Report

2  The Companies House Information Processing System (CHIPS)

14. The Companies House Information Processing System (CHIPS) replaces Companies House's 20 year old electronic processing system (STEM); its aims are to: provide greater flexibility to develop electronic services; simplify the process for customers; extend the hours of service availability; deliver efficiencies to reduce costs for the customer; and provide a base for the implementation of the Companies Act 2006.[23]

15. The programme started in April 2001 and was due to be completed in April 2005 but it was only finally implemented in February 2008. The project was originally outsourced to a private sector company but in 2004 it was brought back in-house. Companies House said that this was because it was concerned with "increasing cost and changing requirements".[24] Mr Jones told us that the discussions on the scale and scope between the third party supplier and Companies House "led to a breakdown in that working relationship" and it was this which caused the work to be brought back in-house.[25] Moreover he explained that the Companies Act 2006 was not responsible for changes to scope or the scale of the project and that it was "completely irrelevant" to the discussions between Companies House and the supplier as the CHIPS system was "simply to replace the existing STEM system".[26]

16. Bringing the project in-house meant that £12.1 million of expenditure was written off, representing the entire value of the contracted work before February 2005. Mr Jones told us that, although "that work was not wasted" as "it was preparatory work leading up to what was then the development of the system in-house", very little of it had added value to the system as it works now and so "should not be forming part of the carrying value of the new system".[27]

17. Although the submissions from 7side and the Association of Company Registration Agents Limited recognised that delays to CHIPS had been far from ideal, they were sympathetic to Companies House's position. The Association of Company Registration Agents Limited said that:

    it would have been much more regrettable if the new systems had been introduced before they were properly ready. The costs to the commercial world of a Companies House that fails to function properly, or which has not fully thought through the complexities of what it is trying to do, enormously outweigh the additional costs of getting the new systems right.[28]

18. The main concern expressed about CHIPS came from dissemination agents. Dissemination agents buy data in bulk from Companies House, add detail to it and then sell it on. Bisnode, a Europe-wide group of business information companies, complained that the dissemination agents had not been consulted on the project:

    Companies House did not focus on DAs [dissemination agents] and re-users when planning the implementation [of CHIPS], and thereby only provided a smooth service to Companies House' direct users.[29]

They were particularly concerned about the timing of bulk data file deliveries. Before CHIPS was implemented bulk data files were delivered between 12 a.m. and 2 a.m.; since the system has been in place the files are being delivered between 5 a.m. and 7 a.m. Bisnode said that "the impact of this will be that our clients will receive the data later."[30] Companies House told us:

    Some of the bulk data products are currently being delivered a few hours later than was previously the case. We are looking at our options for tuning the new system to improve this.[31]

Companies House also informed us that other bulk image files were being delivered nearly 24 hours earlier than was previously the case.[32] A further concern for Bisnode was that, as of 20 March, users had not received the "mortgage" product[33] that Companies House offered to dissemination agents, since the system went live on 25 February. Companies House said that:

    We have experienced a number of short-term difficulties with the bulk data products following the implementation of CHIPS. Most of these were resolved within two weeks of CHIPS going live, although some issues with the bulk supply of mortgage data persisted until the month of April. We work closely with our bulk customers on an ongoing basis on a range of issues. This included keeping them up to date on the action that we were taking to resolve these problems.[34]

19. We are concerned that there were initial teething problems with Companies House Information Processing System (CHIPS) which resulted in a deterioration of some services to dissemination agents. We trust that all services are now of a similar or higher standard to that offered before the rollout. IT systems should result in an improvement of service to all customers: we would be concerned if that were not the case.

Companies Act 2006

20. The Companies Act 2006, which is intended to give companies greater flexibility in the way they operate, received Royal Assent on 8 November 2006. In order to implement it there have had to be substantial changes to Companies House's systems and processes. Companies House told us that although by October/November 2007 considerable progress had been made in ensuring that it was ready for the new Act, it was not confident that it would be ready by the target implementation date of October 2008. Mr Jones said that there was:

Companies House advised the then Minister for Competitiveness, Stephen Timms, of the risks that were evident from the analysis and he made an announcement to the House by Written Statement on 7 November 2007 that the commencement date of part of the Act would be delayed until 1 October 2009. BERR hoped that by announcing the delay to implementation early, costs to business would be minimised.[36] Mr Dart made clear that these delays, caused by delays to CHIPS, would only affect a small part of the Companies Act:

    most of the key de-regulatory benefits, the benefits which show up in the bottom line for companies, that save them money in their administrative costs, have already been delivered or will be delivered by October 2008.[37]

21. 7side, the only organisation to comment on the delay in their submission, told us:

    we fully understand the complexities and issues they [Companies House] are faced with and in our view it is better to delay the implementation rather than bring in legislation that will clearly cause issues and disruption all round.[38]

22. The delay to the Companies House Information Processing System (CHIPS) has resulted in delays in bringing parts of the Companies Act 2006 into force. This is disappointing and the large amount of public money wasted on the original contract is deplorable. Nonetheless we believe Companies House and BERR were right to postpone commencement of these sections of the Act, rather than to press ahead and risk disrupting thousands of businesses if implementation proved impossible.

23   Ev 28 (Companies House) para 29 Back

24   Ev 28 (Companies House) para 26 Back

25   Q 45 Back

26   Q 46 Back

27   Q 49 Back

28   Ev 17 (Association of Company Registration Agents) Back

29   Ev 20 (Bisnode) Back

30   Ev 18 (Bisnode) Back

31   Ev 31 (Companies House) Back

32   Ev 31 (Companies House) Back

33   Companies registered in England and Wales sometimes create a mortgage or charge that must be registered. If so, they must deliver details of it, together with any document creating or giving evidence of it, to the Registrar of Companies. Back

34   Ev 33 (Companies House) Back

35   Q 53 Back

36   Ev 34 (Companies House) Back

37   Q 56 Back

38   Ev 42 (7side) Back

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