MPs question financial transparency around government IT project cancellation

The government’s transparency and accounting accuracy around cancelled IT projects has been brought into question by the National Audit Office.

While over £1 billion worth of contracts are due to be stopped or de-scoped as part of the government’s spending cuts, cost savings may not in reality reflect that figure, the NAO has suggested.

In a report published today, the NAO warned that the government had often omitted in its public predictions the contracted costs of stopping projects early. “Savings may not take account of the costs of cancellation,” it said.

It also signalled a warning that when projects are cancelled, money that is saved could simply be shifted to other projects.

There were also other concerns around the way costs were allocated and the resultant ‘savings’, the NAO added. It said that costs in some cases “are not cash releasing as cancelled projects may not have agreed funding”.

The comments come as the NAO issued a report into the operations of the Efficiency and Reform Group, an operation within the Cabinet Office that is charged with managing public sector efficiency and cost accountability.

The Efficiency and Reform Group’s short-term priority was to help government bodies live within budgets that were reduced by £6.2 billion in 2010-11, by applying measures on government spending, the NAO noted.

Key early actions by the Group included introducing central controls on information and communications technology (ICT) contracts and reviewing 300 major projects.

A savings forecast from project cancellation across the board – not only IT – is £402 million for 2010-11. The abolition of ID cards will play a part in this total, although the exact amount from that cancellation was not detailed.

The report also warns that the efficiency drive may have been counterproductive in some areas, explaining that "key initiatives may have been delayed or harmed by the freeze on consultants".

The Efficiency and Reform Group still needed to address several key issues within government, the NAO said, including a lack of “sufficient professional procurement specialists”, poor procurement information, a duplication of administrative effort, unnecessary tendering at significant cost, and the different prices paid by departments for the same goods.

The group said the government would experiment with different procurement systems designed to reduce buying costs during the course of the year.

This would address a variety of areas including IT commodities, stationery, consultants, travel, printing and advertising. With IT, new systems would be trialled from September this year.

There will also be a move towards procurement centralisation, which will require the government to "put in place contracts and any necessary supporting technology to enable all departments to buy at the best price", the report said.

The report also highlighted that current data systems "do not provide clear and up to date information on procurement across government on a consistent basis".

As a result, the Efficiency and Reform Group is developing proposals for the development and operation of a "data warehouse" to electronically collect relevant spend data from suppliers and departments.

Copyright © 2011 IDG Communications, Inc.

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