IT helps sloppy contract handling cost UK £160m

Nearly £300m of taxpayers money is being squandered on poor management of IT projects and other service contracts, according to a government report.

The report, from the National Audit Office (NAO), blames Whitehall mismanagement of service contracts in IT, facilities management and business process outsourcing for lost potential savings of between £160m and £290m per year.

The chaotic implementation of the Rural Payments Agency computer system, and the subsequent problems with payments to farmers, is flagged as an example of "serious failure of contract management".

The report, published today, found that over the last year central government spent more than £12bn on service contracts - primarily in IT, facilities management and business process outsourcing - about £240m of which was on service contract management.

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Risk management was found to be lacking in many contracts, with 37 per cent of contracts not having a risk register detailing their potential liabilities and 56 per cent not having a contingency plan in place in case of supplier failure.

The report revealed that the Driving Standards Agency is now reviewing its risk management processes following the loss of millions of people's details on a hard disk by a contractor.

A 10-year Home Office deal with Fujitsu Services to provide desktops, remote access, application infrastructure and support needs improvement in planning as well as relationship and performance management, the report says, while a 10-year Land Registry deal to provide IT infrastructure needs improvement in the area of payment incentives.

Other key weaknesses identified include organisations not always allocating appropriate skills and resources to management of their contracts, or giving contract management the priority it deserves.

A third of contract managers were also found to have not deducted payments when a supplier failed to meet targets, even when the agreement entitled them to do so.

Tim Burr, head of the NAO, said in a statement: "Central government spends around £12bn each year on service contracts, many of which are critically important to the delivery of its objectives.

"Improving the way these contracts are managed would not only save money but also improve services and reduce risk."

The report, however, goes on to praise the £870m telecoms deal between the Department for Work and Pensions (DWP) and BT as an example of where senior government managers worked well with the supplier.

To improve management of service contracts, the NAO, working with the Office of Government Commerce, has published a good practice framework.