Report on Transport Department project

16 December 2008

Public Accounts Committee report on the Department for Transport's project to share services and cut costs.

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"The Department for Transport (DfT) planned and implemented its shared corporate services project with stupendous incompetence. This is one of the worst cases of project management seen by this Committee.

"The plan was for the central part of the DfT and its seven agencies to be sharing services by April 2008. The Department knew that it was pushing things with such a tight timetable but, without robust challenge to such a risky strategy, ploughed on confidently. The result was lamentable. The underlying computer system was inadequately procured and tested, resulting in an unstable setup when it was switched on. DfT staff do not trust the system which is hardly surprising when we hear that on occasion it took to issuing messages in German. So far only the central department and two of its agencies are using it.

"Remember that this was an efficiency drive aimed at saving £57 million by 2015. It now looks like the taxpayer will have to stump up £81 million to pay for it.

"The senior managers responsible for this failure, as in the case of other recent large-scale project failures to come before this Committee, have not been properly held to account.

"The DfT must now work to deliver a functioning system which provides benefits and which its users trust. The Department must also overhaul its project management capabilities, closely examining the expertise of its project managers, setting up systems for subjecting future plans to rigorous challenge and, crucially, establishing incentives to officials for success and penalties for failure."

Mr Leigh was speaking as the Committee published its 57th Report of this Session which, on the basis of evidence from the Department for Transport (the Department), examined the Department’s management of the Shared Service Programme’s implementation, the increasing overall cost to the taxpayer, and the poor performance of the shared service system.

The Cabinet Office has estimated that central and local government could save about £1.4 billion annually through greater sharing of corporate services. To achieve these potential savings, Departments need to implement shared services projects effectively and efficiently. There are three ways in which implementation can fail: through delay in introducing planned developments; increased cost; or by providing poorer services. The Department has suffered all three in implementing its shared services project. Yet, despite the extent of mismanagement in this case, no individuals have been dismissed or been properly held to account.

The Department was overly optimistic in planning to introduce shared services within one year and for all its agencies to use the system by April 2008. In practice, the first two agencies did not start using shared services until April 2007 and, to date, only the central Department and two of the Department’s seven agencies are using the Shared Service Centre. In an attempt to meet its original timetable, the Department took shortcuts which subsequently caused problems. For example, it did not subject its IT support arrangements to full competitive tender, specify its requirements precisely enough or manage its suppliers sufficiently closely. It also reduced the time available for testing which meant that the system was unstable when it was switched on.

The Department initially estimated that it would cost £55 million to set up the Programme and that the benefits over the first 10 years would be £112 million, yielding a net benefit of £57 million. Current forecasts show that the Programme will cost £121 million, benefits over the first 10 years will be £40 million and the net cost to the Department will be £81 million.

Users of the system have little confidence in its abilities and the Department’s performance indicators show a very poor and variable level of performance for the whole of the first year of operations. In some cases the service is worse than that previously provided.

Successful projects are run by experienced project managers, but the Department failed to provide that expertise for its shared services project. The Accounting Officer gave us his personal commitment to turning this project around, pointing to potential savings from adding routine procurement to the Shared Service Centre. The feasibility and costs of doing this have not yet been established and so these benefits remain speculative. The Committee will return to this project to establish what progress has been made in ameliorating the loss to the taxpayer.

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