There are important lessons for all Government departments in the continuing saga of the Inland Revenue’s new National Insurance computer system (NIRS 2).National Audit Office head Sir John Bourn says that the potential for major legislative change should be considered as a risk at the outset, when major contracts are being awarded, and the flexibility to accommodate this written in to such deals.
A 76 million pound contract with Anderson Consulting (now Accenture) in 1995 had to be radically extended with the same company, after significant changes to pensions and national insurance legislation was proposed in 1998.
The extra cost is likely be between 70 million and 144 million pounds, depending on how much development work the Inland Revenue eventually order.
One of the reasons for sticking with Accenture was a 44 million pound cost of breaking the contract, which effectively ruled out the option of using alternative suppliers for the new development work.
The NAO says that, in the end, the extra deal with Accenture has provided good value for money, but it advises that in future all Departments should consider whether contracts should include specific mechanisms to deal with major enhancements. It also suggests that bidders could be invited during the initial tendering process to propose a separate pricing structure for major enhancements.