Managing PFI contracts
108. Our review of HMRC's performance
in 2007-08 highlights a number of areas in which PFI contractors
appear to be delivering substandard outputs, notably in the areas
of buildings maintenance and IT provision.
109. With regard to buildings maintenance,
we noted that accidents in the quarter up to March 2008 numbered
151, an increase of over 30% on the previous year.
The Department appealed to previously inadequate recording systems
and they assured us that there had not been "a material increase
The Department informed us that they had become more demanding
of the PFI provider of building maintenance, Mapeley. Mr Hartnett
We are constantly in discussions
with Mapeley about service and about health and safety issues,
and have become more demanding as demanding as we should
have been in the past, but more demanding now.
110. We recommend that the Government
ensure the performance against agreed targets by PFI contractors
is published within Departmental Annual Reports in order to enable
clearer scrutiny of these recipients of public funds.
111. In respect of IT provision, the review of
HMRC's performance in 2007-08 highlighted two areas of failing:
non-payment to Child Trust Fund recipients; and the widespread
systems crash of 31 January 2008.
112. We were disappointed to note the disclosure
in the HMRC accounts
that 50,000 children born in 2006-07, and eligible for the additional
£250 Child Trust Fund payment, had not received these payments
as at the end of 2008-09, an error which amounts to £12.5m
unpaid endowments. In July 2008, then Economic Secretary to the
Treasury, Kitty Ussher, told us that a further 80,000 children
had not received payments due to them.
Mr Hartnett assured us that the Department had engaged with its
IT suppliers to "fix that and to look generally at the system
of software for the Child Trust Fund".
He further noted that:
We [HMRC] have already received some compensation
for IT issues. We are heavily engaged with our IT contractor about
performance issues and tomorrow I will be asking to see the chief
executive again because there is something else that we are concerned
113. The second major failure for HMRC was the
system crash on 31 January 2008 which affected those trying to
meet the deadline for tax submissions for the 2006-07 tax year.
Mr Hartnett offered an explanation for this failure:
We got to the bottom of the January 2008 systems
crash. The system had had its platform changed without really
adequate examination of the risk of that. It will not surprise
you that we have done some very vigorous discussions with our
IT provider around that issue and we have examined the whole of
that system again to make sure, we believe, that it will not happen
114. We recommend that HMRC
reviews the contracts with its IT provider in the light of the
very serious errors which have recently occurred and seeks financial
compensation where appropriate. We regard it as wholly unsatisfactory
that people entitled to Child Trust Fund payments should not have
received them owing to the poor performance of an IT contractor.
We seek assurances that the contracts drawn up with the PFI companies
adequately allow for appropriate compensation to the taxpayer
in the event of serious performance shortcomings.
Performance of HMRC IT systems
115. When HMRC's IT system is unable to cope
and clerical intervention is required, an 'open case' is created.
We note that the number of "open" tax cases reported
by HMRC is 16.2 million, a figure 5.7 million in excess of the
Department's own target of 10.5 million by the end of 2007-08.
In attempting to justify so high a number, Mr Clasper told us
The current systems were built a long, long time
ago on a regional basis. Because they were built on a regional
basis and the systems do not talk to each otherand this
is not recent history; this goes back decadesthen people
who have multiple sources of income might well be in two different
regional offices which cannot be correlated by the automatic system.
That creates the open cases. That has been going on for a long,
long time. The problem, as David has just highlighted, is people's
employment patterns have changed: they change jobs more often;
people have multiple pensions, for example. We basically have
our legacy systems for structural issue. We are going to solve
it by combining all of the systems and making them talk to each
other. The only piece of the problem that has been created by
what you might describe as the failure but I would have termed
a prudent delay, is the fact that the new system has been delayed
a year in coming into operation
We would have less of
a backlog if we had been able to execute the new system on time.
116. Mr Clasper further assured us that "Once
we have got the new system in place, we need to develop a plan
to clear that backlog and we have to do it in a way in which we
do not add to any pressures on the staff that would result in
the motivation issues that we talked of earlier".
117. We note that the introduction
of HMRC's new IT system has been delayed by a year. We accept
that postponing the 'go live' date until testing is complete is
prudent. HMRC should publish the performance targets for the new
system in terms of reduced open cases and other measures so that
we may better monitor its effectiveness.