1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Home Office (the Department), Tata Consultancy Service (TCS) and the Disclosure and Barring Service (DBS).
2.DBS is an arms length body, sponsored by the Home Office, that operates a safeguarding service to help employers decide who should work with children or vulnerable adults. The service includes: disclosure certificates (sometimes called “DBS checks”) which show safeguarding information such as criminal records; an update service that lets employers check whether a certificate is up-to-date; and a barring service which checks whether people are on government lists of people deemed unsuitable to work with children or vulnerable adults. The safeguarding service is widely used by organisations such as schools and care homes who work with children or vulnerable adults. DBS aims to cover its costs by charging fees for disclosure certificates and the update service. Such fees are often paid for by the employer, and are waived if the person being checked works as a volunteer.
3.DBS was created in 2012 as part of a programme launched by the Home Office to modernise and improve safeguarding. DBS was created by merging the two organisations which previously undertook safeguarding functions—the Criminal Records Bureau and the Independent Safeguarding Authority. In addition to the merger and modernising the way safeguarding operates, the Home Office sought to launch a new product (the update service) which would make it easier for the individuals being checked to move jobs using a digitally available portable disclosure certificate. The update service was also expected to be cheaper for DBS which, along with savings from modernisation would reduce the costs of running DBS—savings which could be passed on to users either directly as price reductions, or indirectly through a shift of demand from repeated purchases of disclosure certificates to the update service. As well as benefiting individuals and employers, this was expected to benefit the taxpayer because employers (who are mostly publicly-funded bodies in the public sector) often pay for certificates and the update service was expected to be cheaper.
4.In 2012, DBS was created and a contract was signed with Tata Consultancy Services (TCS) to design, build and run a new IT system that would modernise DBS’s services. The programme was delayed from the start and DBS had to extend its contract with its previous supplier, Capita, by two years. The modernisation of DBS is now over four years late. In 2012, the Home Office planned that DBS would have moved to modernised IT by March 2014 with further modernisation completed by June 2014. As at April 2018, not all modernisation is complete, a delay of over four years. In 2012, the Home Office forecast DBS’s total cost would be £656 million (1 December 2012 to 31 March 2019), whereas DBS’s current forecast is for costs to be £885 million. This increase of £229 million is due to delays in transition from Capita to TCS, delays implementing the modernisation service and changes to demand for DBS’s service. DBS told us that two thirds of the cost increase is due to changes in demand and the rest is due to other factors, including the cost of delay.
5.Modernisation seems unlikely to be completed before the contract with TCS ends in March 2019. TCS has modernised only parts of DBS’s service, including barring lists and basic disclosures but DBS currently has no date agreed with TCS for when further modernisation will be completed, and there is now just one year left before the TCS contract is due to end in March 2019. The Home Office and DBS told us that the contract could be extended but that this would depend on a satisfactory outcome of current negotiations with TCS.
6.DBS and its contractor TCS are negotiating to agree who and what caused the delays and to agree a new timetable for when modernisation may be completed. With negotiations ongoing, no-one was prepared to offer us a new forecast for when modernisation might be completed. TCS told us that in “about a month’s time we should have a view of when the remainder of the modernisation will be delivered” but were not able to explain when that might be, or if it would be before the contract was due to end in March 2019. The Home Office was less sure, saying it could take “some time” to get to an agreement that would last. But both the Home Office and TCS felt the problems could be solved once the negotiations had completed.
7.The Home Office and TCS now accept that, when the contract was signed in 2012, no-one had a good enough understanding of what it would take to make the programme successful. The contract as agreed specifies 450 requirements for business processes and 1,350 requirements for the IT system, but only an outline timetable which has proved over-ambitious with insufficient consideration of the risk involved.
8.TCS said that it bid because it wanted to modernise and transform a public service and told us that it still believed the programme was deliverable, but we questioned whether TCS had done enough to assist its customer (the Home Office, and then DBS) in setting a realistic timetable or understanding the risk and complexity in the project. The contract was let using a version of competitive dialogue to allow bidders to discuss and refine the requirements before submitting a final bid. However, TCS told us that when bidding it did not properly understand the complexity of the contract yet accepted the requirements as defined by the Home Office. Despite the delays, TCS has never advised the Home Office to pause the programme and the approach adopted was an old-fashioned ‘big-bang’ approach rather than splitting the task into smaller, manageable, pieces from the outset.
9.The issues on this project reminded us of what has gone wrong on the Home Office’s attempts to upgrade the Emergency Services Network, and we asked the Home Office how well it was managing these large IT contracts. The Home Office told us that only the DBS and ESN programmes were in trouble and acknowledged that both programmes exhibited an underestimation of complexity, a lack of understanding of risk, poor planning and a need to better manage the needs and expectations of different stakeholders and customers. The Home Office told us that it has tried to improve its project management skills and that it has strengthened and simplified governance of major projects. But we are concerned to see the same issues occurring and do not have confidence that there are no other Home Office programmes suffering from the same problems.
10.TCS was contracted to help deliver a business case that included taking over DBS’s IT and business processes, modernising them, and then running the service for five years. The contract was structured so that only 3% of the Home Office’s payment to TCS was directly related to completion of modernisation. The other 97% is linked to the demand for TCS’s services through a ‘ticket price’ for the disclosure certificates and update service, together referred to as transactions. This means that the vast majority of payments to TCS are dependent on the demand for DBS’s services rather than on completion of modernisation. The contract is therefore primarily an outsourcing contract whereas the Home Office’s business case emphasised the completion of modernisation. DBS told us that, in hindsight, the emphasis in the business case should have been different. In our view it is the overall approach to contract pricing that is at fault here rather than the emphasis of the business case.
11.The Home Office told us that it had hoped to transfer risk to TCS by reducing the ticket price in the contract three years after transition. The Home Office told us it hoped that this would incentivise TCS to complete modernisation more quickly as the unmodernised service would be more expensive for TCS to run. However, modernisation is currently running over four years late.
12.The contract allowed TCS to make a 22% profit margin, higher than the 20% that Home Office told us was allowed in the contract with Capita that preceded the TCS contract. TCS told us that it had continued to make a profit of 3% until March 2017, and that while it was now beginning to make a loss this was a preliminary position that may change as a result of the negotiations with DBS.
1 Report by the Comptroller and Auditor General, , Session 2017–18, HC 715, 1 February 2018
2 , page 4, paras 2–3, paras 1.1, 2.2–2.8
3 , page 4, paras 2–3, page 6, para 1, paras 2.1, 2.6, 4.6–4.8
4 Qq 49,80, 128, , para 3.13
5 , page 4 paras 2–4, page 7 para 5
6 , page 7, para 10, para 4.2
7 Qq 45–49
8 Qq 26–56, 102, 105–112, , page 7, para 6
9 Q 130
10 Qq 104, 106
11 Qq 104, 131, 136
12 Qq 80, 128; , para 3.8
13 Qq 91, 93–94
14 , para 3.3
15 Qq 91–94; , Figure 6, note 2
16 Q 133
17 Qq 134–136
18 , paras 3.7–3.9
19 Qq 69–72
20 Qq 69–71, 118
21 , page 7, para 5
22 Correspondence, , 27 March 2018
23 Q 118
Published: 25 May 2018