Auditors found the Scottish Public Pensions Agency (SPPA) had failed to provide a clear business case for its plan to integrate its pension administration and payment operations, which faltered when Capita, the company chosen to deliver the project, was unable to provide a working system.
The pensions body was criticised in a report from the Auditor General of Scotland, released yesterday, for its failure to provide adequate scrutiny of Capita’s “abnormally low” bid for the work and for the “unrealistic” timeframe set for delivery of the project.
The agency, which runs retirement plans for over 500,000 people including health workers, teachers and police officers, spent £6.3m on the scheme to make its processes more efficient and to achieve long-term savings.
A further £2.4m had to be spent after the project was scrapped to extend the contracts of existing suppliers.
Although the body had received £0.7m from Capita last year following the conclusion of a legal process, the failure of the project meant it had been unable to progress its strategic, business and workforce plans as originally intended, the report found.
As a result, it would require capital allocations from the Scottish Government of £13.6m over the next five years to achieve its aims, as well as an additional £9.8m in its revenue budget to cover unrealised efficiency savings.
Auditors said the churn of personnel at the top of the agency, which has seen the appointment of multiple chief executives and senior responsible officers over the last four years, had undermined its ability to challenge Capita at key stages of the project.
“[The agency] did not adequately scrutinise Capita’s tender prior to awarding it the contract, in spite of it being identified as an abnormally low-cost submission,” the report said.
In addition, the body’s failure to extend its existing pension administration arrangements, which were due to expire in March 2017, left it with only 18 months to develop and implement a new integrated system.
“This was a high-risk approach with an unrealistic timetable,” it added.
Caroline Gardner, the Auditor General for Scotland, said that more and more bodies were embarking on IT projects without the necessary staff and assurance arrangements in place to manage them properly.
“In this instance, I found no evidence of a clear business case for a new integrated system, which was pursued at a time when the SPPA was going through significant change,” she said.
“The result was a project that failed to provide value for money and has considerably set back the SPPA's planning."
A Scottish Government spokesperson said the SPPA was already taking steps to improve how contracts were managed.
“While the report raises important issues, there has been, and will be, no disruption to pension services,” she said.
“The Scottish Government is examining the report and will be reviewing its findings.”
A Capita spokesperson said the report made clear that a range of issues, on both sides of the contract, had negatively impacted its delivery. Capita had made no profit on the contract, he added.
A Scottish Government spokesperson said the SPPA was already taking steps to improve how contracts were managed.
“While the report raises important issues, there has been, and will be, no disruption to pension services,” she said.
“The Scottish Government is examining the report and will be reviewing its findings.”
