The Ministry of Justice (MoJ) has written off £56 million in IT costs after abandoning its shared services programme.
The project centred around plans to set up a single Enterprise Resource Planning (ERP) system for HR, finance, procurement, transactions and payroll.
In 2011 the MoJ awarded Steria a five year, £20 million contract to develop the ERP system with Oracle e-Business Suite R12 serving as the common operating platform. The system was originally due to go live in spring 2013 for roughly 80,000 users.
Two other suppliers- Accenture and Savvis- also won contracts under the shared services programme, for cloud computing services, systems integration and an IT service desk.
However the department has now admitted that over half of the approximately £100 million spent on the programme so far will have to be written off.
According to the MoJ’s 2013/14 accounts published last week: “Due to the decision to move to an outsourced solution, certain elements of in-house programme expenditure constitute redundant development expenditure which is of minimal use to expected future developments…the Shared Services constructive loss recognised in 2013-14 is £56.3m.”
A spokesperson said: “The £56.3m was mainly staffing and contract costs - we put an end to this spend when we cancelled the contracts in 2013.”
He added: “The majority of our investment has gone on £60m of assets and infrastructure which can be used by the new shared services scheme. Once in place this scheme will save the taxpayer millions of pounds a year.”
In its overview report of the department published last year, the National Audit Office (NAO) warned that there may be further losses down the line.
The spending watchdog said: “We anticipate that there may be further losses in 2013-14 as the revised scope of the project, and the potential to re-use development work performed to date, becomes clearer.”
This write-off is a result of the project being abandoned in favour of outsourcing the MoJ’s back-office services to Shared Services Connected Limited (SSCL), a joint venture between the Cabinet Office and Steria, the same supplier it originally contracted to deliver an ERP platform.
The decision was taken by the MoJ board earlier this month, with implementation due to start in the autumn.
The MoJ decided to abandon the project to avoid duplication when they discovered that the Cabinet Office was planning to implement a similar scheme, according to a spokesperson.
However it is understood that the SSCL venture will not be using any of the development work done by Steria for the MoJ so far.
MoJ employees are on strike today over the plans, which the Public and Commercial Services (PCS) union says will result in the closure of three offices and 500 job losses.
The department blamed complex contracts and poor governance for the wastage.
The annual accounts report said: “The programme has endured significant time and cost pressures to complete the original solution under the initial framework design and a combination of complex contractual arrangements and weaknesses in programme governance has resulted in poorer value for money.”
The programme was given a ‘red’ rating by the Major Projects Authority in its annual review published in May, meaning the project’s successful delivery “appears to be unachievable”, with “major issues…which at this stage do not appear to be manageable or resolvable”.