Paragraph 28 is noted. I propose we move on to paragraph 29. Paragraph 29 of the Report of the Comptroller and Auditor General reads:
In my 1996 Report, in response to concerns raised by me, it was indicated that a new computerised accounting system was being developed to be in place by late 1998 which would help to improve procedures to prevent duplicate payments and to provide more effective controls. As the system did not materialise during 1998 I reviewed the position in detail and the following outlines the progress of the project and the difficulties that have arisen.
Since 1994, the Department has been planning to introduce a new accounts system. Following tendering, an external consultancy firm was appointed to produce a tender document, specifying the requirements of this system. Work commenced in January 1996 and the tender document was issued in July 1996. The evaluation of tenders was completed in February 1997. Based on the technical assessmentof the tenders, including demonstrat-ions/assurances from the suppliers, the Department and the consultants concluded that one product provided the best fit to the Department's requirements. The proposal was rated significantly ahead of both of the other main proposals and was rated highly for coping with the Department's requirements for cash and accrual accounting. The tender evaluation report listed one of the product's risks as a lack of experience with cash and commitment accounting. The conclusion was that there was no risk-free approach to implementing a new computerised accounting system but, in this instance, the product appeared to carry the least risk in both the short and medium term. The contract for the implementation of the system was awarded in June 1997 at a cost of £1.128m.
The project implementation was overseen by a Project Board, chaired by the Secretary General and comprising representatives from the Department, the Department of Finance, the consultants and the contractor. Phase 1 to cover the core accounting system (general ledger, payments systems), a central client database and aspects of a debtors ledger/cash receipts system was initially due for implementation by March 1998. Phase 2 providing for the implementation of a fixed asset system, a purchasing system and the full debtors ledger/cash receipts system was due by October 1998. During the Autumn of 1997, there were certain delays in project implementation. The Project Board noted the main reasons why the project had slipped were insufficient resources, lack of clear methodology and a lack of effectiveness and cohesion between the Department/contractor management teams, and under-scoping of change management. Following a project review, a revised project plan was approved by the Project Board in December 1997.
Phase 1 was re-scheduled for implementation by August 1998, later changed to September 1998. The revised plan included a change in the implementation methodology. The Department's detailed requirements were to be specified through 'process scripts', for which the software would then be configured. The revised project plan also envisaged a substantial input of external consultancy resources, which were put in place in early 1998. The additional costs of the new revised project plan would be of the order of £1-£1.1m or more.
In the June/July 1998 period, it became clear that it would not be possible for the contractor to deliver the full range of the envisaged configured software. The software which was delivered did not meet the Department's requirements, especially in relation to government cash accounting. This requirement had been specified in the tender document and the contractor had provided assurances that the system could meet the requirement. In light of the conclusion reached following testing, concerning the delivered software, the Project Board concluded, in early August 1998, that it would not be safe to proceed with project implementation in September and this decision was communicated to the EU Commission and the contractor.
In October 1998, the contractor indicated that it believed that an upgrade of the product could address all of the Department's requirements, including the ability to cater for cash accounting. It was agreed that this would be formally assessed through a feasibility study. On 1 February 1999, the contractor delivered a presentation to the Department on the proposed solution to the problems encountered. The proposed solution was examined by a Departmental Evaluation Group who, in February 1999, stated that the contractor's report, presentation and demonstration only reflected an outline of the proposed solution and that the solution was not yet built. Thus, the recommendation was based on an outline solution that could not be demonstrated fully. The group recommended that the technical solution should be pursued as it appeared to provide a solution to the Department's requirements, including cash accounting. However, the project should only be restarted when the expressed reservations had been satisfactorily addressed.
The Department sent its detailed conclusion to the contractor in March 1999. This noted that the major risks to the restart of the project appeared to be (a) lack of agreement on contract/cost issues, and (b) lack of agreement on the implementation plan and project structure. The new implementation date would be in the year 2000.
By July 1999 the following costs of £3.2m* were incurred:
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Payments under the contract
Fee to contractor for additional services under separate contracts
Further costs by contractor (under dispute)
4 separate projects by the external consultant firm including £110,000 for necessary consultancy services to support the project while on hold from September 1998/February 1999
Estimated Departmental staff costs for project work
Once the decision to postpone the implementation date was taken, the Department commenced an urgent programme to ensure that the existing accounts system was appropriately amended for compliance with Year 2000. The estimate of total staff costs in connection with this work from August 1998 to January 2000 is £318,000.
The principal findings in the certifying accountants report of 31 January 1999 on the 1998 FEOGA Accounts recognised the new accounts system as a major strategic issue.
The EU Commission had indicated that it would be obliged to reconsider the accreditation status of the Department, in the event of the project not proceeding satisfactorily.
As the project was not on target, I sought the views of the Accounting Officer who informed me that:
* The current situation regarding the main contract is that outline agreement has been reached with the supplier for the completion of the project. This outline agreement has focused on the time frame within which the project should be completed, the project plan, the resources required and the cost. Discussions on the contractual arrangements to give effect to the outline agreement reached are taking place and it is hoped that they will be concluded soon. Assuming these discussions are brought to a successful conclusion, the intention is to re-start the project as soon as possible thereafter.
* The proposed implementation for the re-start project has been the subject of detailed planning arrangements. The upgrade proposed has functionality which deals with government cash accounting and assurances have been received that should meet the Department's requirements. The detailed work plan agreed with the contractor for delivery of the system software includes milestones for key deliverables, which will be reviewed during project implementation. Plans for the necessary testing, training and change management within the Department are also in hand. Subject to a rapid resolution of current contract discussions and project re-start shortly afterwards, it is envisaged that the system will be functioning in the second half of 2000.
* In regard to resources, particular attention has been paid to ensuring that the resources allocated to the project, from both the contractor and the Department, are adequate in terms of skills and numbers. Resources allocation will be kept under close review during implementation, taking account of the deliverables/milestones necessary to meet the target delivery dates. Where specialised skill deficits exist within the Department team, it is intended to use additional consultancy resources. Use of these resources will be kept to the necessary minimum.
* The Department has increased the number of its management staff allocated to the project. The project will continue to be monitored by a Project Board, chaired by the Secretary General, which meets on a monthly basis. The Board consists of senior users within the Department, representatives of the Department of Finance and the contractor. Below the Project Board level, review meetings between the Department and contractor Project teams are scheduled on a weekly basis.
* The additional consultancy costs were, to a large degree, due to the fact that the Department did not have the specialised resources required.
* The estimated final cost to the completion of the project will be determined by the outcome of the current discussions.
* In the absence of a figure for an estimated final cost of completion, it is not currently possible to provide an estimate of the cost which resulted from the failure to implement on time the contract as originally contracted for.
* The Department is satisfied that it maintained adequate control over the project. The tender process, and the resulting evaluation of offers, was rigorous and exhaustive. Following appointment of the contractors, the Department was not satisfied with the implementation methodology and requested a review which led to some changes in approach. In addition to the Project Board, three sub-project boards, chaired by an Assistant Secretary, also met on a monthly basis. From the Department's perspective, the major reason for the failure to implement on time was that the version of the software delivered by the contractor did not meet the Department's requirements, especially in the area of government cash accounting. This only became evident late in the project implementation, given that the software was delivered on a phased basis and that the earlier delivery of software appeared to meet theDepartment's transaction processing requirements.