Failed IT project leaves pension body with £23m budget gap

A botched IT project that had no clear business case has left Scotland’s public sector pension body with a £23 million budget gap, the spending watchdog has found.

Caroline Gardner. Picture: Andrew Cowan/Scottish Parliament

The Auditor General for Scotland, Caroline Gardner, said the failed scheme has considerably set back planning at the Scottish Public Pensions Agency (SPPA).

The SPPA runs retirement 
plans for more than 500,000 people, including NHS employees, teachers, firefighters and police officers.

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Its planned IT scheme to integrate pensions administration and payments was meant to save cash and boost efficiency.

The watchdog said the SPPA had awarded the IT contract to outsourcing firm Capita in 2015 despite concerns that its bid was “abnormally low” in terms of overall costs.

It also said the body had set an “unrealistic” 18-month timescale for the completion of the project, which was supposed to save it money by integrating pensions administration and payments.

The project, was shut down in February last year after Capita failed to deliver a working IT system or hit any of its key milestones.

The SPPA spent £6.3m on the project and a further £2.4m extending its IT contracts with existing suppliers when it became clear that the firm would fail to meet its original timetable.

It only managed to recover £700,000 through a legal settlement and now requires a major cash injection after the project resulted in its development plans stalling, the report concluded.

The Audit Scotland report states: “In our judgment, SPPA did not have enough assurances over Capita’s ability to deliver the project before it awarded it the contract.”

When the project was put out to tender in 2014, Capita’s bid was classed as abnormally low under public contract regulations, meaning there were doubts over whether it could be delivered.

But despite this warning, and a recommendation from Scottish Government lawyers that it should ask more “in depth” questions of the firm, the SPPA accepted it anyway.

Ms Gardner said staff turnover at the pensions body had a “major impact” on the failure of the IT project, with the SPPA seeing four changes of chief executive over its lifetime.

She added: “The public sector is under pressure and we are seeing more instances of bodies embarking on IT projects without the necessary staff and assurance arrangements in place to manage them properly.

“In this instance, I found no evidence of a clear business case for a new integrated system, which was pursued at a time when the SPPA was going through significant change.

“The result was a project that failed to provide value for money and has considerably set back the SPPA’s planning.”

The latest debacle follows a failed IT contract for farming payments that starved Scotland’s rural economy of hundreds of millions of pounds three years ago, and continues to cause problems for countryside communities.

Both NHS 24 and Police Scotland have endured IT crises costing the taxpayer millions in recent years.

Scottish Conservative pensions spokesman Bill Bowman said: “This is yet another botched IT contract on the SNP’s watch, and it’s costing the taxpayer millions of pounds.

“The nationalists should have learned lessons from similar failings with farming payments, NHS 24 or even Police Scotland.

“But instead, we have another shambles which is draining the public purse when it can least afford it.”

Scottish Labour MSP James Kelly MSP said: “We now know Derek Mackay is sitting on half a billion pounds of unspent money. It is about time he properly funded Scotland’s public services.”

A Capita spokesman said: “As this report from Audit Scotland says, a range of issues - on both sides of this contract - negatively impacted its delivery. Capita did not make any profit on this contract.”

A Scottish Government spokeswoman said: “The Scottish Government is examining the report and will be reviewing its findings.”