Inland Revenue Matters: IT failures (2)

The role of IT giant EDS features in the highly critical Treasury Select Committee report, 'Inland Revenue Matters', on the conduct of the Inland Revenue and particularly the computer failures relating to the tax credit scheme.

In the second article based on the report, UKTECH looks at failures of the tax credit system which resulted in payment delays for hundreds of thousands of families and the part that the IT system, designed and built by EDS, played in its downfall.

After examining the evidence, including oral reports from Paymaster General Dawn Primarolo and top Revenue Civil Servant Sir Nicholas Montagu, the Committee concluded by recommending that the Revenue should 'pursue vigorously a compensation claim from EDS so that "the additional costs that have been incurred as a result of failure by EDS are not to be borne by the British taxpayer."

The Committee found that the problems which resulted from this system were a 'bolt from the blue' which had not been identified by the testing prior to launch.

The implementation of tax credits

The 2002 Budget introduced two new tax credits for families and those on low incomes which would be paid from April 2003.

• Child Tax Credit, which could go to around 5.75 million families this year;
  
• Working Tax Credit, for about 1.35 million families.

The problems

The Committee had already identified problems which were being experienced by applicants in an earlier report and intended to follow it up with the Inland Revenue. In April 2003, the Paymaster General made a statement to Parliament where she claimed that she was aware of some instances of families who had not received their allowance, she apologised for these difficulties and said that it should be put right within a week.

The Committee had tried to get more precise details of the problems but were told that statistics would be available on a quarterly basis starting in August 2003.

In July 2003, Dawn Primarolo revealed that there had been difficulties resulting in failure to pay or delayed payments to hundreds of thousands of families.

Although the Committee recognised the scale of the undertaking it said that it was clear that some applicants have not received the service from the Inland Revenue that they were entitled to expect.

The helpline

The problems were compounded by the difficulties people experienced with the Revenue's telephone helpline. They had expected to receive up to 10 million calls on its helpline in the period January to March 2003, and for each call to last five minutes on average. But due to a number of factors including unexpected peak times of calls; increased volume of callers queries the problems; media coverage which raised concerns; length of calls because the computer system was not running as quickly or reliably as it should have and repeated hitting of the redial button - all of which contributed to up to two million calls a day - the helpline had been unable to handle the volume of calls anticipated.

The IT system

The IT system implemented by the Revenue's commercial partner EDS was singled out for criticism in the report. EDS has been instrumental in a number of Government projects.

Sir Nicholas Montagu told the Committee: "... we did extensive trials of systems and contingency planning and training of our people in the run-up to the new tax credit. This included extensive testing of computer systems on what is called a 'clone,' which was 50 per cent of the capacity of the actual system.

"When the system started running, we experienced difficulties with it, including slow running. In addition, this was compounded in some cases by people claiming late and getting their claims wrong. [...] it is absolutely my top priority to put this right, and I am personally driving the discussions with EDS, our IT partner, at the very highest level. I talk every week with Michael Jordan, their Chairman and Chief Executive Officer. I got him over here two weeks ago to talk over the issues and see them for himself in person.

"I have made it clear to him that the performance of the IT is unsatisfactory and must be improved urgently. It is undoubtedly the most difficult case that the partnership with EDS has faced. It is standing up to the challenge in this sense; that we are working in close partnership day and night to identify and resolve the problems with the system; and [....] it does look as if this is beginning to pay off. The performance of the system has improved in the last few days."

The Revenue explained that the IT system is component based where a number of different computer systems are joined together and the difficulty is in the flow of data which becomes constricted causing internal queues to build up in the system.

This has affected:

• The stability of the system - staff trying to process claims are thrown out of the transaction requiring them to start again.
  
• The speed of the system - slow response times have resulted in staff waiting much longer than they should to access information they need to process claims or deal with claimants on the helpline.
  
• System availability - the system has to be taken down several times a day to clear the internal queues. As a result, up to four hours a working day has been lost.

Sir Nicholas Montagu confirmed that the IT system had been designed by EDS and told the Committee that it had been extensively trialled and tested before it went into operation. He noted that "all the previous releases had gone like clockwork. To be honest, it has come as a surprise to both us and EDS, after the success of the trial running, that we have the difficulties that we do."

The Revenue confirmed that it had sought to eliminate the risks involved in their plans for further releases of software. But in the light of the problems that had occurred, they "are now looking again in minute detail at all of that."

The Paymaster General, Dawn Primarolo, also discussed the problems. She said: "We need to look very carefully at what happened, what went wrong and what the lessons might be in terms of making sure that the next stage of the tax credits, when we reach it - the renewal process - which is the next release that we will need to look at, does not experience these issues."

EDS and compensation

Regarding compensation, Dawn Primarolo said that if there are circumstances in which people did not receive the service that they were entitled to expect I shall certainly look very closely at that."

The Committee welcomed the Paymaster General's commitment to look very closely and stated that it expected people who had incurred costs as a result of delays or errors due to the Revenue in paying tax credits to be compensated swiftly and in full.

The Committee asked whether EDS would be required to compensate the Revenue for extra costs incurred as a result of the problems experienced with the IT system. Sir Nicholas Montagu said "this is something that we will need to talk to EDS about when we are clear about what the scale of extra costs have been when we look at the scope of the contract and so on. What the Committee has is my undertaking that those discussions will take place."

The Paymaster General confirmed that under the contract with EDS "the Inland Revenue can seek redress to recover additional business costs which are attributable to the failings of the IT services and I certainly would want to see the Department doing that."

Conclusion

The Committee commented on the late recognition of a problem and asked the Revenue to give a full account: "We are extremely concerned that problems of this scale could arise at the last moment without any warning. We expect the Department and EDS, working together, to remedy the problems and establish why the trial tests failed to show potential problems. We expect the Revenue to give us a full account of all the downtimes experienced, their causes, and the corrective measures being taken, together with their costs.

"The Department have little time to learn the necessary lessons to ensure that they will be able to cope next year when the first end-of-year reconciliations and resulting under or overpayments of tax credits are due to be processed.

"EDS are part of the consortium working for the Department for Work and Pensions developing the computer system for the new Pension Credits starting this Autumn. We expect the Revenue to ensure that the Department for Work and Pensions are fully apprised of all the problems the Revenue have experienced with the tax credits IT system. EDS need to demonstrate to the Department for Work and Pensions that the problems experienced with the new tax credits will not recur this autumn.

"We note the evidence from the Revenue and the Paymaster General that they will consider the question of extra costs attributable to the performance of the IT system and explore the question of redress with EDS.

"We believe that the Revenue and Paymaster General have a clear duty to pursue vigorously a compensation claim from EDS. We do not expect the additional costs that have been incurred as a result of failure by EDS to be borne by the British taxpayer."