Andersen pay no further compensation for IT problems

Andersen Consulting will not be asked for further compensation from the Government despite problems with the National Insurance computer system which have cost the tax payer millions of pounds.

The Government has decided not to seek any further compensation from Andersen Consulting following lengthy delays and problems associated with the new National Insurance computer system.

Dawn Primarolo, the Paymaster General - and Minister responsible for the tax on independent contractors, IR35 - has announced that consultancy giants, Andersen Consulting, need pay no more compensation for the three-year delay in getting the new National Insurance computer system operational.

Ms Primarolo said that Ministers believed it would be neither 'sensible nor cost effective' to seek compensation beyond the £4.1m that Andersen had already paid for late delivery. However, it has been reported that the Contributions Agency have incurred nearly £16m in irrecoverable costs partly as a result of millions of National Insurance records being completed late and £35m has been paid out in compensation to private pension providers and claimants.

Despite expectations that public/private finance projects meant that the private sector carried the risks for late delivery or poor performance, Ms Primarolo is reported to have told MPs that seeking further compensation 'would prejudice the partnership relationship now established between it (Andersen) and the Inland Revenue'.

Peter Holmes, Andersen managing partner for government services, was reported as being delighted at the decision. But the experience of NIRS2 and of other big PFI projects that have had problems, such as the Passport Agency and the immigration computer, meant there are genuine questions to be asked about whether PFI is the appropriate vehicle for IT projects in government.

The projects involved big business change, not just a new piece of kit, he said, 'and they exist in a rapidly changing environment where there are changes of government policy'.

For IT projects 'the PFI does not necessarily lend itself to that sort of flexibility. Indeed it can hamper flexibility. It is not like building a road or a bridge where once you have built it, it is there unchanged for 30 years'.

Editor's Note: Interesting comparison here - as Ms Primarolo has compared knowledge-based contractors to plumbers and carpenters when it comes to IR35 and passing self-employment tests. Maybe Mr Holmes is saying that developing software or cutting edge programming and testing is not like building a road or bridge.