DWP to spend further £90m on Universal Credit IT system

The Department for Work and Pensions (DWP) is to spend a further £90m on enhancing the heavily criticised IT system developed for Universal Credit – much of which will eventually be thrown away.

But the new “twin-track” approach to the project - which involves developing a new digital system largely in-house with little or no contribution from the existing IT contractors - is budgeted to cut the overall IT costs by £135m.

The figures are revealed in the latest draft Universal Credit business case, excerpts of which have been seen by Computer Weekly.

The document shows that the total IT investment cost for the government’s flagship welfare reform programme is expected to be £535m – down from the £670m forecast in a previous business case in late 2012.

The largest element of that cost is £397m for the existing system– the previous total of £670m was entirely attributed to this element of the project – with £307m of that figure already spent.

“Costs reflect actuals of £307m and future expenditure of £90m to cover the stabilisation of the existing live service in Pathfinder, development of the service to accept claims from couples in Spring 2014, families in later 2014 and tax credit claimants in Jan [stet] 2015,” said the draft business case document.

The department admitted in December last year that it was writing off £40.1m of the IT work already completed on Universal Credit, with a further £91m to be written off over a five-year period instead of 15 years as previously planned. This means that by the time Universal Credit is fully rolled out in 2017/2018, at least £131.1m of the planned £397m IT spend on the current system will have been thrown away.

Most of the overall decrease in budget appears to come from the change in approach that sees a new “end-state” digital solution being developed in parallel with enhancements to the existing system, which is currently being used to support the Pathfinder trials for Universal Credit. 

As revealed by Computer Weekly earlier this week, the four big IT suppliers working on the existing system – HP, Accenture, IBM and BT – will have “significantly less” involvement in the digital system, with in-house DWP resources preferred.

Building the “end-state solution” will cost £106m based on the latest assessments, according to the business case document. That figure includes external IT costs of £69m and the in-house “Design and Build” team at £37m.

A further £32m has been allocated to build a new security solution, after DWP decided it needed more functionality than it expects to have from the Identity Assurance (IDA) programme being developed by the Government Digital Service – although IDA will be used as a part of the wider solution for Universal Credit.

The “end-state” system will be used for the full roll-out of Universal Credit by the end of 2017, with some of the existing Pathfinder software being reused - but much of it thrown away.

The DWP has yet to provide more details on how much of that £397m spending will be reused, beyond the figures announced previously.

Elsewhere in the draft business case, it refers to assessing “the likely significant reuse between the two [systems]” but it is unclear if the phrase means that a significant proportion of the existing system will be reused, or if it refers to certain items of significant functionality.

Work and pensions secretary Iain Duncan Smith told MPs last month that the existing IT work – which has cost £307m - had so far produced an asset worth £152m on the DWP accounts.

“The asset we now own to take Universal Credit forward is worth £152m to government. It is not just about write-offs, the government owns assets that will deliver Universal Credit,” he told the Work and Pensions Select Committee.

However, the National Audit Office’s (NAO) subsequent report into the DWP’s 2012/13 accounts questioned the value for money that had been achieved.

“The Department has to date not achieved value for the money it has incurred in the development of Universal Credit, and to do so in future it will need to learn the lessons of past failures,” said NAO chief Amyas Morse.

At a hearing of the Public Accounts Committee in September 2013, Norma Wood, interim director general of the Cabinet Office Major Projects Authority, told MPs that much of the existing Universal Credit IT was “not fit for purpose” and unlikely to be reusable in a full roll-out.

The draft business case, identified in the document as version 3.01 and dated 18 December 2013, has been produced to support approval for further funding at meetings to take place in DWP later this month and with the Treasury in March. The document said a further version will be produced in mid-January, stressing the current release is only a draft.