DVLA paid double its estimate for IT

THE DVLA paid £33m to change its IT supplier – nearly twice as much as the estimated cost, we can reveal.

Now, although the Swansea agency’s new chief executive has told staff he has renegotiated the terms of the current computer contract, some believe that is shutting the stable door after the horse has bolted.

Last week we told how workers at the DVLA, which is responsible for licensing all drivers and vehicles in the UK, had taken generous severance packages and then come back to work at the agency as consultants paid up to £800 a day. The matter is now the subject of a review.

After our story we were contacted by another DVLA whistle-blower, who told us about a major IT contract called Pact, which the DVLA signed in 2002. The contract’s expensive repercussions have lasted until today.

The whistle-blower told us: “The Office of Government Commerce warned the former chief executive and board that they were not satisfied the Pact contract could show it could achieve value for money, but the DVLA went ahead anyway.

“The new chief executive Noel Shanahan, who took over at the beginning of this year, has just written to staff to say he has managed to renegotiate that contract in some small ways, but it is shutting the stable door.

“If you review the DVLA annual report after the contract was let, you’ll see that the DVLA paid £33m just to transfer their IT systems from EDS to IBM/Fujitsu, including £5.6m to reorganise the [DVLA] IT department.”

As well as the item in the DVLA’s annual report, the way the IT deal was handled has been strongly criticised by the House of Commons’ Transport Committee.

In a report, the committee said: “An outline of some of the spending decisions taken by the Driver and Vehicle Licensing Agency was included in the previous section on administration costs.

“The largest item here was the £33m transition costs for a new partnership deal with IBM and Fujitsu to develop agency services.

“We were told: ‘Business Plan forecasts for 2002-03 were prepared well before negotiations with suppliers had been concluded, so there was a range of expectations relating to the different possible outcomes. The range estimate for transition was between £13m and £29m. From this the agency used a lower quartile estimate of £17m for the purposes of the Business Plan’.

“The final transition cost was £33m, nearly twice as much as budgeted.”

The Department [of Transport] set out the main reasons for the excess over the original estimate. The excess came about through extra preparation work with the new suppliers before the transition (£5m), the extra costs of “change management” and “complementary professional services” that were outside the range of the original contract (£5.8m), the extensions of the contract with the original supplier to ensure the DVLA had a viable fall back in case the transition was not initially successful (£5m).

“Each of these decisions may have been correct, but we are concerned that the original estimate was so inadequate. Realistic estimates must be used for planning purposes; it cannot be acceptable to use a lower quartile estimate for budgeting purposes when there is so much uncertainty about outcomes.

“The executive agencies and non-departmental public bodies spend very large sums of public money. We are concerned that the department does not have a firm grip on expenditure or accounting, either centrally or through its agencies.”

A DVLA spokesman said: “The current IT supplier contract was awarded in 2002 as one of the first IT partnership agreements in Government, and as such was subject to scrutiny and approval.

“Earlier this year we took advantage of a contractual opportunity to re-negotiate the contract delivering best commercial terms.”

The spokesman said the DVLA was not prepared to release the text of Mr Shanahan’s letter to staff without IBM’s approval.