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By Steve Ranger, 16 December 2008 15:39

NEWS

The Department for Transport (DfT) has been accused of "stupendous incompetence" in its implementation of a shared services centre that aimed to save £57m but will now cost the taxpayer £81m.

The DfT planned to cut costs by building the Shared Service Centre in Swansea to provide human resources, payroll and finance support services to its agencies and the central department.

But a report by the House of Commons Public Accounts Committee (PAC) said the project was mismanaged: "There are three ways in which implementation can fail: through delay in introducing planned developments; increased cost; or by providing poorer services. The DfT 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."

Edward Leigh MP, chairman of the committee, was even more direct in his criticism. He said: "The 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."

He added: "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."

The PAC said the DfT was too optimistic in planning to introduce shared services within one year and in hoping all its agencies could use the system by April 2008. In practice, the first two agencies did not start using shared services until April 2007 and so far only the central department and two of its seven agencies are using the centre.

The PAC said the department's planning and management have been "extremely poor". It added: "This case is one of the worst this committee has seen and responsibility for these serious weaknesses rests firmly with some of its top officials."

The committee said in an attempt to meet its original timetable, the DfT took shortcuts which then caused problems.

The department was advised by its consultants that it could achieve initial implementation within one year if it built shared services on existing systems in the Driver and Vehicle Licensing Agency, and used an existing contract with IBM, rather than go out to competitive tender.

But the PAC said if the department had tested the market in this way, it would have needed to specify its requirements with more precision. This approach would, in turn, have provided it with a much better understanding of its needs and helped to reduce the subsequent risks.

The department reduced the main testing period from the recommended minimum of two months to two weeks to compensate for the slippage in other elements of the project. Reduced testing meant the system was not stable when it was turned on.

When the first two agencies began using shared services in April 2007, all further system upgrades and additional remedial testing had to be conducted on the live system because the department had removed a critical testing environment from its technical requirement in order to save money.

The lack of this testing facility also caused system crashes as some software changes failed when loaded onto the live system.

The department originally estimated the total cost of setting up the programme would be £55m, with gross savings (before costs) of £112m up to March 2015 - giving a net benefit of £57m. But the DfT now estimates the programme will cost £121m and produce benefits of £40m - a net cost to the taxpayer of £81m.

The PAC said: "To secure proper accountability, the department must define and communicate clearly the incentives for success and the penalties for failure in projects such as this, including the expectation of the termination of employment contracts and naming those responsible."

A Department for Transport spokesperson said the department "recognises" the problems which this project has encountered and said there "have been consequences" for some of the staff involved.

But the spokesperson added: "It is important to remember that all of the costs in the report are estimated projections to 2015. We are committed to finding additional savings over this period, to improve value for money. We are also pursuing additional uses of the system, which are expected to generate further savings, so reducing the estimated net cost reported by the committee. Progress is being made in stabilising the current system in the meantime."