3 Problems with UC implementation
and IT development
The NAO's
assessment
34. As has been noted, the NAO report published in
September 2013 identified serious weaknesses in the way that DWP
had managed the UC programme to date. It recommended that DWP
show that it had done the following by the end of 2013:
· Produced a realistic plan with clear programme
objectives, linked to policy design and service requirements.
· Used a management approach that allows
policy experts, operational teams and systems developers to work
together.
· Established effective governance processes
and structures.
· Tightened its financial management and
control over spending.
· Reassessed its existing programmes and
capabilities in light of the experience on Universal Credit.[31]
35. The Secretary of State's view when the NAO report
was published was that the problems it highlighted were "historical".[32]
He told us in December that "every one" of the NAO recommendations
had already been implemented. He said that, although he "fully
agreed" with what the NAO report said, there had been very
little that was "new" in its findings because "most
of that evidence came, I felt, from our internal reports".[33]However,
much of the information in the NAO report was new to us, as DWP
had chosen not to share the findings of its internal reviews with
us.
IT expenditure and the "twin
track" approach
The IT write-off ("impairment")
36. The NAO report found that, in May 2013, DWP had
identified the need to write off £34 million (17%) of the
costs of the IT assets developed for UC which had been found to
be no longer useable.[34]As
set out above, the delay in publishing the DWP Annual Report &
Accounts (ARA) 2012-13 arose from the prolonged negotiations between
DWP and the NAO about the amount of this write-off. We were informed
on 9 December, the day of our evidence session on the ARA, that
the write-off would amount to £40.1 million out of total
UC IT assets valued at £196.1 million.[35]
37. The Secretary of State's view when we challenged
him about this waste of public money was: "there is always
a sense [...] that only governments fail on IT. That is not exactly
the case—the reality is that many [private sector organisations]
[...] write off almost 30-40% of their IT developments".[36]
38. DWP revealed at the evidence session on 9 December
that, in addition to the write-off, £91 million of the remaining
assets would now be "written down" (or amortised) in
five years (by March 2018) rather than the usual 15 years. DWP
explained that the shorter write-down period was due to IT assets
now being recognised as having a shorter life than other assets.
The Director General for Finance told us:
I would argue that the way in which we had set
our accounting policies previously to write down software code
over a 15year period was almost certainly too long and one
of the things that we are discussing with the NAO separately is
the way in which we apply accounting policies towards software
code as we go forward.[37]
39. The report by the Comptroller and Auditor General(C&AG—the
Head of the NAO) on the DWP Accounts for 2012-13, which includes
commentary on UC IT expenditure, was not available to us when
we questioned the DWP witnesses on 9 Decemberbecause the ARA which
it accompanied was not published until the following day (see
Chapter 5 for further details).In his report, the C&AG took
a different view about this shorter writing-down period.He regarded
this adjustment in the treatment of the IT assets as "a major
change" which had arisen "owing to the considerable
reduction in their expected useful life"; and pointed out
that it would treble the annual amortisation of these IT assets
from £6.1 million to £18.2 million a year.He said: "The
underlying issue [...] is that the Department has written off
£40.1 million on assets it will now never use and spent a
further £91 million on assets that will support only a limited
service for 5 years, with clear consequences for public value".[38]
Digital (or "end-state")
solution
40. One of the key changes which we discussed with
DWP witnesses in the December and February evidence sessions was
the new "digital solution" for UC which will eventually
replace the IT system currently in use for the Pathfinder. DWP
plans to migrate from the current UC software being used in the
Pathfinder to a replacement digital system by the end of 2017.[39]It
is therefore pursuing a "twin track" approach of continuing
to use the existing IT in the Pathfinder while the more permanent
digital solution is developed.
41. This change was madeas part of the new delivery
approach proposed by Howard Shiplee, the UC Senior Responsible
Officer, following the "reset" of the programme in February
to May 2013. It was approved by the Ministerial Oversight Group
in November 2013. By the time of our evidence session in February,
DWP had renamed this approach as the "end-state solution".[40]
42. Mr Shiplee explained in December that the digital
solution was essentially an "open source", web-based
approach. It was cheaper to build and use "because you do
not have to pay large licence fees for it." This option had
not been available in 2011 when UC development began, but rapid
developments in technology had now made it possible. He also made
clear that the original "digital by default" approach,
which would require the vast majority of claimants to manage their
claims and report changes of circumstances online, was no longer
"a sensible or appropriate solution" because of the
security risks. He argued that "no one is using a totally
online approach" when dealing with dispensing large sums
of money.[41]
43. The end-state solution will initially deliver
UC to 100 people, after whichthe results will be assessed and
decisions made on whether to extend the service to more claimants.The
Secretary of State explained in February that, when it was working
effectively, it would be expanded to 1,000 claimant households,
then to 10,000 and then extended nationally. However, the Permanent
Secretary acknowledged then that "we are still many months
away from having a system that can do 100 people".[42]
44. The estimated cost of the digital solution to
November 2014 is £25-£32 million.At the same time, the
Department will spend £37-£58 million on existing IT
to increase functionality so that UC can be extended to couples
and families as part of the Pathfinder during 2014.[43]It
is not yet known how much will be allocated for the end-state
solution after November 2014. The C&AG said that "these
are considerable sums [...] in a programme where there are significant
levels of technical, cost and timetable uncertainty". He
also highlighted DWP's own acknowledgement that "there remains
uncertainty regarding the useful economic life of the UC software
pending the development of an alternative digital solution."
45. The C&AGnoted that, at this early stage,
"there are uncertainties over the exact nature of the digital
solution". In particular, it is not clear:
· How it will work
· When it will be ready
· How much it will cost
· Who will do the work to develop and build
it.
He also emphasised that "without clear and effective
management, in the future the Department may also find it needs
to impair some of these new digital assets".[44]The
Permanent Secretary's view was that "it is not surprising
that the National Audit Office describe it as uncertain. It is
uncertain, but that is what we are working through."[45]
46. The C&AG has also reiterated the view set
out in the September 2013 NAO report on UC that, in order to achieve
value for money in UC development, which it has not done to date,
DWP needs to "learn the lessons of past failures". Specifically,
he said that DWP needed to:
· Properly commission and manage IT development.
· Exercise effective financial control over
the programme.
· Set realistic expectations for the timescale
for delivery.[46]
IT support for UC development
47. The "reset" of the UC IT programme
and the move to developing the digital/end-state solution included
increased involvement of staff from the Government Digital Service
(GDS) which is part of the Cabinet Office, and greater oversight
of the project by the Cabinet Office.[47]
DWP indicated in January 2014 that three DWP IT officials and
five GDS officials were working on the "digital solution".[48]There
were press reportsin early January that GDS was accelerating its
withdrawal from the UC project because of divisions between the
Cabinet Office and DWP about the approach to the IT solution.
Thisindicated that the Cabinet Office's preference had been toscrap
the existing UC IT and start afresh, rather than pursuing the
twin-track approach.[49]Rt
Hon Francis Maude MP, the Minister for the Cabinet Office, was
also reported as describing implementation of Universal Credit
as "pretty lamentable" and saying that it was "very
regrettable" that so much money had been wasted due to mistakes
in the IT in the first two years of development.[50]
The Secretary of State told us that the press reports were "ludicrous"
and that the position was that:
The Cabinet Office are still supporting and assisting
us, but it was always very clear they would be handing over to
us as we take over. The Department will run this themselves, but
the Cabinet Office will remain, as I have made clear on a number
of occasions, close to this project and still act as advisers
and support us throughout the whole process, which is what their
role is.[51]
48. Howard Shipleetold us that "we are actively
bringing in our own people, who will start to replace the GDS
people, so we are doing it ourselves".[52]
DWP has estimated that it will need to recruit 50 IT specialists
to carry out the work on the digital solution.[53]
The Permanent Secretary noted that "this entire system assumes
you have your own people doing it; that is necessary if you are
going to run an online presence". He said that Kevin Cunnington,
who joined DWP in October 2013 as the new Director General for
Digital Change, had"already acquired some people" although
at the moment they were "in the tens [...] not hundreds"
and that the programme would have to "grow a lot before it
completes". He said that the staff would have to be "in-house
and we have to make sure that we can afford them within the constraints
that we are used to." The Secretary of State believed that
developing the new system using in-house expertise was ultimately
a cheaper option than paying external providers.[54]
49. It is regrettable that £40 million has
been wasted on IT software for UC that now has no use. The useful
life of IT on which a further £90 million has been spent
has been reduced from 15 to 5 years. DWP's view is that this is
a normal feature of IT development, including in the private sector.
Whilst we understand that delivering UC is very complex, and that
the development of any major new IT system will inevitably suffer
setbacks, it is concerning that it took so long for DWP to acknowledge
openly that there were such serious problems and to make the necessary
switch to a different approach. There also remains a deeply concerninglack
of clarity about what the new digital or "end-state solution"
for UC IT means in practice. The NAO's view is that these "uncertainties"
include: how it will work; when it will be ready; how much it
will cost; and who will do the work to develop and build it.
50. DWP is now pursuing a twin-track approach
to UC IT. This means that further money (£37-£58 million)
will be spent on the existing IT system in the Pathfinder so that
it can be extended to couples and families during 2014. At the
same time, DWP is funding the development of the end-state solution.
Some £25-£32 million has been allocated for this to
November 2014, and presumably it will cost much more as the programme
continues, although no figures for this expenditure are yet available.
51. The end-state solution will first be tested
on 100 claimants and DWP is still some way from being in a position
to take this small step. Although we agree with an incremental
approach, there is a difference between sensible caution and a
snail's pace. It will only be possible to prove that the end-state
solution will work for themillionsof households which will eventually
claim UC when the IT can be tested at scale.
52. At the outset of the UC project, DWP assured
us, Parliament and the public that this scheme would be able to
avoid the problems of previous government IT projects. It is crucial
that future reports and updates use clear, plain-English explanations
of the plans and outcomes, so that we can judge whether this is
the case.
53. We recommend that, in response to this Report,
DWP provide more details about what the end-state solution for
UC IT means in practical terms. It should also set out its latest
estimate of:
· the costs of developing the end-state
solution beyond November 2014, including the separate costs of
employing additional in-house IT specialists; and of contracts
with external consultants and IT providers; and
· when the end-state solution will be
ready to test on the first 100 claimant households; when and how
it will be extended to a more representative number of claimants;
and when it is expected to be fully implemented.
We also recommend that, in light of the small
number of claimants currently receiving Universal Credit and the
slow progress, DWP consider again whether it would not be more
effective, and represent better value for public money, to focus
solely on the end-state solution and abandon the twin-track approach.
31 NAO Report, Summary, para 25 Back
32
HC Deb 5 September 2013, col 470 Back
33
Oral evidence taken on 9 December 2013, Q77 Back
34
NAO Report, Summary, para 14 Back
35
Letter to the Chair from the Secretary of State for Work and Pensions,
9 December 2013 Back
36
Oral evidence taken on 9 December 2013, HC 867,Q64 Back
37
Oral evidence taken on 9 December 2013, HC 867, Q26 Back
38
Report by Comptroller & Auditor General (C&AG) on the
DWP Annual Report and Accounts 2012-13, paras 10 and 14. (Hereafter
"Report by the C&AG") and Statement on the Report by the C&AG
on the DWP Annual Report and Accounts 2012-13, 10 December 2013 Back
39
DWP Annual Report and Accounts 2012-13, para 11 and Notes on the
Accounts, 16d Back
40
Oral evidence taken on 3 February 2014, Q210 Back
41
Oral evidence taken on 9 December 2013, HC 867, Qq27-31 confirmed
that access via smartphones would be part of the digital solution.ecause
it is quite clear they do need to Back
42
Oral evidence taken on 3 February 2014, Qq209-210 and Q213 Back
43
Report by the C&AG, paras 13-15. See also HC Deb 13 January
2014, cols 454-5w Back
44
Report by the C&AG, paras 11, 13 and 16 Back
45
Oral evidence taken on 3 February 2014, Q213 Back
46
Report by the C&AG,, para 16 Back
47
HC Deb, 10 July 2013, cols 21-22 WS Back
48
HC Deb 13 January 2014, cols 454-5w Back
49
"Flagship benefits scheme faces more delays after rift",
The Guardian, 8 January 2014 Back
50
"Francis Maude: Implementation of Universal Credit was "pretty lamentable",
Daily Telegraph 8 January 2014 Back
51
Oral evidence taken on 3 February 2014, Qq222-223 Back
52
Oral evidence taken on 9 December 2013, HC 867, Q117 Back
53
HC Deb 13 January 2014, cols 454-5w Back
54
Oral evidence taken on 3 February 2014, QQ217-219 Back
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