By Joshua.Chambers

30 Sep 2013

In a Special Report published in CSW on 25 September, we examined 12 major projects: three each from the defence, transport, health, and work & pensions departments. We chose projects of a range of types, and covering the ‘traffic light’ risk spectrum from green to red. The text below covers one of the four departments: click here to read our introduction and methodology.

DWP proportion of GMMP value: 7.5%
Number of major projects: 12

Universal Credit
MPA 2012 rating: Amber-Red

The Universal Credit scheme is one of the biggest changes to the welfare system since 1945. The aim is to combine six benefits – Housing Benefit, Income Support, income-related Employment and Support Allowance, income-related Jobseeker’s Allowance, Working Tax Credit, and Child Tax Credit – into a single benefit, with the aim of reducing complexity, and ensuring that claimants always see their incomes rise if they take a job.

The implementation of Universal Credit is expected to cost £2.4bn up to 2023, and £425m was already spent by April 2013. But the MPA gave the project an Amber-Red rating last year; and when the National Audit Office (NAO) assessed the project earlier this year, it identified a series of problems and concluded that it was not achieving good value for money.

The first problems can be traced back to the planning phase. There was no “detailed blueprint, architecture or target operating model” for implementing Universal Credit until mid-2012, according to the NAO. Instead, the department adopted what it believed was an ‘agile’ project management approach to implementation, but with clear variations from the standard methodology. The NAO says that agile should be used by small teams, while the DWP had a team of over 1,000 people. It also didn’t define how it would monitor progress or document decisions; and while agile is intended for the development of new projects from scratch, Universal Credit had to integrate with existing projects and systems, using existing departmental structures.

Further, the timescale was “far too ambitious,” Dame Anne Begg, chair of the Work and Pensions Select Committee, tells CSW. Pilot schemes – dubbed ‘pathfinders’ – were expected to begin two years after the start of the project, and only four months after the legislation defining Universal Credit was passed. However, the department has previously taken longer than two years just to create one benefit, Begg says, let alone to integrate six.

Consequently, the plan had to be rescheduled in May this year, after the secretary of state decided that the scheme was badly off track and called in the Cabinet Office to help. Some pathfinders have begun, albeit with a more limited remit than initially planned.

IT has also been a serious problem throughout. The DWP has spent £303m on a system that the NAO describes as “inflexible”, and is currently deciding how much of it can be salvaged. The Major Projects Authority has suggested that over £200m-worth may have to be written off. This occurred partly because suppliers were poorly managed, the NAO believes. There was “inadequate financial control over spending,” it says, and there was “no evidence of the department actively managing its supplier contracts”; the NAO added that the department needed to “urgently get a grip” of the issue.

The project has had five senior responsible owners, which hasn’t helped ensure continuity. The NAO also warned of a “fortress mentality” within the programme, and a “culture of good news reporting that limited open discussion of risks and stifled challenge.” This led the department to reject 2012’s report by the Major Projects Authority, which warned that things were going wrong.

The entire project is now uncertain. Rollout of the programme was planned to start in October this year, but has been delayed. Work and pensions secretary Iain Duncan Smith maintains that the project will be completed by 2017, but the prime minister has said that he is not “religious” about that timescale. The department must now persuade the Treasury that the scheme is workable, in order to win approval for its business case and continue to receive funding; and that will mean convincing HMT that this time it will be better managed.

Enabling Retirement Savings Programme
MPA 2012 rating: Amber

The Enabling Retirement Savings Programme (ERSP) is rated amber by the Major Projects Authority, but that doesn’t mean the MPA fears a significant internal failure within the DWP. Instead, it reflects the fact that the programme’s success depends on DWP’s ability to engage, persuade and support a massive number of businesses as they take on a new and potentially costly responsibility.

The ERSP was set up to implement the government’s workplace pension reforms: there is a new duty on employers to enrol their staff into pension schemes, and to contribute towards them. The project began in 2007, and is set to continue until 2018.

In its assessment, the MPA said it will be a challenge to successfully deliver the programme’s objectives over the remaining five years – and Sarah Healey, DWP’s director of private pensions and the project’s SRO, doesn’t argue: “We’ve always rated ourselves as amber because of how risky the programme is,” she says.

The first risk is that “it’s a capacity challenge for the [pensions] industry: the number of employers that need to enrol next year is very high.” DWP will need to be supporting and working with industry to ensure success. Meanwhile, says Healey, the National Employment Savings Trust (NEST) – the dedicated pension scheme established by government as part of the project – has created tools that make it easy for employees to enrol staff, and worked with the external suppliers that manage employers’ payroll systems to ensure compatibility with them.

The second risk is that employees don’t enrol because employers fail to communicate the benefits of pension schemes. While “large employers have been able to do really good communications with their staff, and manage the process really well,” says Healey, next summer the programme starts working with medium-sized employers, and these “simply don’t have the same capacity as very large employers. We need to be really clear that we’re going to help them with that.”

Supporting these organisations could be tricky, however, because “it’s a very devolved programme: we are influencing pension providers, employers, intermediate services, rather than government delivering directly,” she says. “We are not the people who can make this happen.” The department therefore has to be in constant contact with the Pensions Regulator, private companies and the NEST. Fortunately, DWP was able to persuade the Cabinet Office to approve its spending on communications, Healey points out, “partly because the case for auto-enrolment is so strong.”

The biggest problems that DWP has encountered so far were rooted in a failure to communicate with the organisations that run payroll systems right from the start, Healey says, but that’s “something the programme has got under control” as it develops its plans to work with medium-sized companies. The next big challenge, she believes, will come in 2015, when the scheme will work with small businesses.

The DWP is already planning for those 2015 hurdles, Healey explains, even as it gears up for the medium-sized businesses’ deadline next year. “It’s very important to start early,” she says, and “because new employers are going through the scheme every month, we can learn from their experiences and change what we’re doing in response.” There are risks ahead, but Healey believes the scheme is on track, and is confident of success.

Central Payment System
MPA 2012 rating: Green

As coalition ministers and the Cabinet Office’s new-generation digital gurus wonder why the last government was so attached to vast, monolithic IT schemes bought from a handful of massive system integrators, they should consider the story of the Central Payment System. The project was completed last year, on time and to budget, and now underpins the Department for Work and Pensions’ payments systems and payroll.

“It’s not one of the government’s most exciting projects, but I’d argue that it’s one of the most important that [government has] had,” says Mike Driver, DWP finance director. “The reason for that starts with money: we put £135bn a year through the Central Payment System, which is roughly 20% of public expenditure.” Given the vast sums involved, it was absolutely vital that the system would work well and not be vulnerable to fraud.

Back in 2008, when the project to create the Central Payment System began, DWP’s payments system was “ageing, complex and disparate,” Driver says. “We had limited business continuity. Our payment arrangements and our accounting structures were not integrated, and we were putting around £100bn of public money through our legacy systems… We were more exposed [to risk] than we should have been.”

The project to replace these systems used an off-the-shelf system created by Oracle, which was then adjusted to meet DWP’s needs and installed by a second supplier, HP. “I think external providers can be criticised, but in this area we’ve had a good relationship,” Driver says.

The most important thing for DWP was to be absolutely clear on the department’s requirements before starting the project, and then checking at the end of each delivery phase that the system met those requirements. “Making sure we’ve got it right before we launch is absolutely crucial. If there are errors of two or three per cent, we’re talking about tens of millions of pounds,” Driver says. This meant that there was no scope for ‘agile’ development, under which projects adapt and failures are quickly corrected through iterative development.

Of course, it hasn’t all been smooth sailing: the project that began in 2008 was in fact a re-launch of an earlier Central Payment System project. “We took a pause to make sure that we’d got the right definition of precisely what we wanted to build, and made sure we had effectively joined the payments side and the accounting side,” Driver says. The system doesn’t only have to be secure, but also has to make it easy for DWP to properly account for each payment made.

The system was received by DWP staff in 2011, and there was an implementation period between April 2011 and August 2012. System rollout was staggered so that small improvements could be made and staff trained to use it. For example, a ‘large print’ facility was included, to meet guidance from the Royal National Institute of Blind People.

Since then, there have been two upgrades: one allowing for emergency payments to be made safely by the system; and the second to plug in the Universal Credit IT system, and to integrate other recent welfare reforms such as the Personal Independence Payment.

DWP is very satisfied with the end result, Driver says. By June, the system had processed 1.1bn payments with a value of over £205bn, and it has 35,000 users in 900 locations. Now the department is looking to see whether other government organisations would be interested in making use of the system.

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