The Department of Work and Pensions (DWP) has launched a competition for an ERP system package worth more than £900m – but parliament’s spending watchdog warned it lacks understanding of costs, benefits and risks.
The contact will run for 12 years and is worth up to £933.7m, and will provide software and systems integration services across government departments.
The contract forms part of the government’s “Synergy Programme”, which will bring together the DWP, the Ministry of Justice (MOJ), the Department for the Environment, Food and Rural Affairs and the Home Office to purchase a new IT platform which it said will drive “significant business transformation” across the departments.
It is part of a commitment by central government to update its ERP systems and cut costs through shared services.
However, the Public Accounts Committee (PAC) has warned the ERP package is not fully funded, and lacked an “overarching business case”.
In 2021, the MOJ ditched a £100m ERP scheme, after the government launched its Shared Services Strategy, an initiative which will see functions such as procurement and finance across 17 departments be moved to five service centres.
This new strategy estimated the shared ERP system to cost between £382m and £403m, and was granted £300m of funding to cover the period up to 2024–25.
But the departments estimated they would need an additional £480m after 2025 to deliver the systems. The most recent update to the plan has set the total cost at £933.7m, despite no further funding being allocated to the scheme.
PAC said this was driven by a failure of the departments to develop an “overarching business case”.
The Cabinet Office told PAC it had not produced a business case as it believed “time was of the essence” in terms of both cost opportunities, and that the old systems were coming to the end of their contracts. However, PAC warned this decision had a knock-on impact on the level of funding received, and on the level of buy-in from departments.
PAC additionally noted the scheme lacked quantified benefits, was not monitoring progress of its implementation, and did not have a contingency plan should the strategy encounter problems.
The government has been trying to consolidate its back-office services for two decades to cut costs and improve efficiency, the report noted. However, previous strategies have “failed to deliver”, and currently these back-office services cost the taxpayer over £525m a year.
The PAC said the longer it takes the government to “get on-top of the situation”, the greater the impact this lack of consolidation will have on “effective functioning of government”.
Chair of the committee Meg Hillier (Lab), said: “If the government is looking for efficiency savings in this economic and cost-of-living crisis it should start right at its own door. Delivering back-office functions such as civil service HR, IT and payroll piecemeal are costing the taxpayer over £500 million a year while departments argue with the Treasury over how much more money they need to improve them.
“This money is in fact desperately needed for essential public services, and for public services delivered well and efficiently, with value for the taxpayer the uppermost concern. If this latest strategy to rationalise is to be a success it needs to reduce costs while also freeing up resources from the back-office for our struggling front-line services.”
The DWP declined to comment.