DWP writes off £34m of IT costs as NAO slams Universal Credit

The National Audit Office (NAO) has released a damning report into the progress of the Department for Work and Pensions’ (DWP) flagship welfare reform project, Universal Credit.

Universal Credit, according to the report, has been badly managed and has failed to deliver against its rollout targets, with DWP now unsure how much of its current IT will be viable for a national rollout. The department has also had to write off £34 million of new IT assets, the equivalent of 17 percent of IT assets that have been built so far.

Amyas Morse, head of the NAO, said: “The department’s plans for Universal Credit were driven by an ambitious timescale, and this led to the adoption of a systems development approach new to the department.

“The relatively high risk trajectory was not, however, matched by an appropriate management approach. Instead, the programme suffered from weak management, ineffective control and poor governance.”

Universal Credit aims to merge benefits such as jobseeker’s allowance, income support, housing benefit, child tax credit, and working credit. The IT system supporting it will require real-time data on the earnings of every adult, from a new Pay as You Earn (PAYE) system being developed by HM Revenue & Customs (HMRC).

DWP plans to spend £2.4 billion to implement Universal Credit up to April 2023 and has spent £425 million up to April 2013. Most spending so far (£303 million) has been on contracts for designing and developing IT systems. However, to date there have been a number of suspected problems with delivery.

Going backwards

It was originally intended that the system would take a ‘digital by default’ approach, with almost all of the claims and processes being carried out online. However, the NAO report now claims that DWP is having to reassess this and may have to introduce more manual processes into the system.

So far Universal Credit has only been rolled out to four ‘pathfinder’ areas – where the system is being tested. DWP recently said that “the pathfinder exercise has shown that the IT system works underpinned by the Real Time Information system” – but the NAO office highlights that of the five main processes underpinning Universal Credit, only two are currently being carried out by the IT system.

Universal Credit intends to automate online data capture for new claims, calculation of gross income, calculation of net income, back office integration and payments for claimants. At present calculation of gross income, net income and back-office integration are all still manual processes.

Computerworld UK was informed earlier this year that Jobcentre staff were having to carry out calculations using spreadsheets, despite the introduction of Universal Credit at pathfinder sites.

Currently the IT systems lack the ability to identify potentially fraudulent claims, which rely on multiple manual checks on claims and payments – this is not considered feasible once the programme is running nationally.


Meanwhile, the NAO found that the IT that has been developed so far cannot support scaling up of the programme– i.e. hundreds of millions of pounds have been spent on IT systems that may not be able to be used for a national system.

By late 2012, DWP had largely stopped developing systems for national rollout and concentrated most of its efforts on preparing short-term solutions for the pathfinder exercise.

The report states: “The scope of the pathfinder is narrower than originally planned, covers only the simplest new claims and includes limited IT functionality. Some processes require intervention by staff, limiting the scalability of the pathfinder model without further investment.”

Pressing the reset button

In February, the head of the Major Projects Authority, David Pitchford, was brought on board by DWP as a ‘temporary lead’ for Universal Credit. It has now come to light that Pitchford was hired to conduct a review of Universal Credit, which led to a 12-week ‘reset’ of the programme.

The reset team included DWP, Cabinet Office, and Government Digital Service (GDS) staff, who developed an “extensive set of materials as part of a blueprint covering design and implementation, and detailed ninety-nine recommendations”.

The Universal Credit team, under the leadership of newly appointed leader Howard Shiplee, is now conducting a ‘100-day planning period’, which will end at the end of September. DWP will then submit a new business case to HM Treasury and ask for ministerial sign-off for delivery plans in late 2013.

According to the NAO, DWP is unable to continue with its ‘ambitious plans’ for national rollout by 2017 until it has agreed the future service design and IT architecture for Universal Credit. It suggested that the department “may also decide to scale back the complexity and ambition of its plans”. For example, it may decide to reduce the number of online services.

However, by reducing the extent to which business processes are automated or online will inevitably increase the need for manual intervention, therefore limiting the benefits of rolling out Universal Credit.

The report states: “The pathfinder lacks a complete security solution. Claimants cannot make changes in circumstances online. This increases the need for manual work as changes must be made by telephone.

“The pathfinders also require more staff intervention than planned, because of reduced automation and links between systems.

“It is unlikely that Universal Credit will be as simple or cheap to administer as originally intended.”

The NAO also found that the current technical architecture is of ‘limited extensibility’ – connections between components of the design are ‘hardwired’, so that any changes to the system would require ‘rewiring’.

Furthermore, any remedial work to make the IT assets ‘good’ could further increase DWP’s IT budget, which has already increased by 61 percent (£241 million) between its May 2011 and December 2012 plans.

Poor management

DWP had planned to use a pure agile approach to project management, but, according to the NAO, a lack of familiarity with agile and the fact that no government programme of this size had used it before, meant that the governance style was unsuccessful and hindered development.

For example, DWP was trying to use agile when trying to integrate Universal Credit with existing systems that used a waterfall approach to managing changes. It eventually changed ts approach to Agile 2.0 in January 2012, which is an ‘evolution’ of the former agile approach and is designed to try to work better with existing waterfall approaches.

However, this has fallen by the wayside and since the ‘reset’, DWP has not used an agile approach to manage the programme.

Meanwhile, NAO highlights that the source of many of DWP’s problems has been “the absence of a detailed view of how Universal Credit is meant to work” – this is despite this issue having been raised repeatedly in 2012.

It also claims that there is no evidence that the department has actively managed its supplier contracts and that it has exercised poor financial control over the programme. The primary suppliers supporting the Universal Credit programme are IBM, HP, Accenture and BT.

“The review found several weaknesses including poor information about the basis for supplier invoices, payments being made without adequate checks and inadequate governance and oversight over who approved spending,” said the NAO.

Yet, despite the obstacles encountered so far, the NAO was optimistic about the future of Universal Credit.

“Universal Credit could well go on to achieve considerable benefits if the department learns from these early setbacks and puts realistic plans and strong discipline in place for its future rollout,” said Morse.

Meanwhile, Universal Credit’s chief, Howard Shiplee, pre-empting negative coverage of the NAO’s report, wrote in the Daily Telegraph yesterday: “I am confident we are now back on course and the challenges are being handled.”

Copyright © 2013 IDG Communications, Inc.

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