Poor procurement processes result in £23m bill for Scottish taxpayers.
Procurement processes at the Scottish Public Pensions Agency (SPPA) have come under fire in an audit report which accuses the agency of failing to scrutinise the winning tender for a failed IT project.
The SPPA, which runs retirement plans for over half a million public sector workers, spent more than £6m on a new IT system which the chosen supplier, Capita, was not able to deliver.
The agency had awarded a contract to Capita to integrate pension administration and payment operations into a more efficient system, in order to save long-term costs.
However, Scotland’s public auditors Audit Scotland said the SPPA had failed to apply enough scrutiny to Capita's bid, whose failure ended up costing the taxpayer £23m.
Initially the SPPA spent £6.3m on the project. Terminating the IT scheme meant it had to spend a further £2.4m on extending contracts with existing suppliers.
While it received £700,000 from Capita following the settlement of a legal dispute, it has still been left with a £23m gap in its revenue and capital budget over the next five years because it will be unable to fulfil projections based on having the system up and running.
Caroline Gardner, the auditor general for Scotland, said: "The public sector is under pressure and we are seeing more instances of bodies embarking on IT projects without the necessary staff and assurance arrangements in place to manage them properly.”
Gardner’s report said the SPPA did not prepare a clear business case for its new system and set an unrealistic 18-month timescale for its implementation. The agency failed to adequately scrutinise the winning tender for the project which the audit said was priced abnormally low.
“The result was a project that failed to provide value for money and has considerably set back the SPPA's planning,” Gardner added.
Although officers prepared a paper for senior management in September 2014, outlining three options for providing pension administration and payment services, the paper did not include any analysis of costs and benefits or other financial information.
Meanwhile, leadership changes at the SPPA and among the managers of the project made it more difficult to manage Capita and hold it to account.
Capita itself also came under fire in the audit, accused of not providing a working system and failing to achieve any of the project milestones. The company was described as “a main contributor to the project failure”.