Failed IT overhaul leaves Tweedbank agency in need of £28.2m bailout from Scottish Government

The Scottish Public Pensions Agency's Tweedbank headquarters.
The Scottish Public Pensions Agency's Tweedbank headquarters.

Scrapping a bungled IT system overhaul has left one of the biggest employers in the Borders in need of a £28.2m bailout from the public purse.

The Scottish Public Pensions Agency’s Tweedbank headquarters, staffed by more than 300 workers responsible for payouts of £2.25bn-plus a year, needs that cash to balance its books after abandoning what was intended to be a cost-cutting initiative in February this year.

The agency, based at Tweedside Park since relocating from Edinburgh in 2001, handed out a contract initially worth £5.6m but later increased to £6.3m to Capita Employee Solutions in 2015 to develop an integrated administration and payment IT system.

The aim of that replacement system, called PS Pensions and due to have got up and running in March this year, was to improve efficiency and customer service, as well as saving money.

An Audit Scotland report on that failed initiative out now reveals that the agency will need an extra £9.8m from the Scottish Government to plug gaps in its revenue budgets over the next four years.

It will also need £18.4m in capital expenditure – more than three times the initial bill – for a replacement IT system, it says.

A spokesman for Audit Scotland said: “The closure of the project means that the agency has not been able to progress its strategic, business and workforce plans as originally intended.

“This includes its target operating model to deliver future services more efficiently.

“The delay in implementing the target operating model means that planned annual efficiency savings are not achievable.

“As a result, the agency has forecast significant budget gaps and estimates that it requires additional revenue budget of £9.8m between 2019-20 and 2022-23.

“The agency also estimates it needs a total capital allocation of £18.4m from the Scottish Government over the next five years to deliver a replacement project.

“Discussions are currently under way between Capita and the agency over legal responsibility for the failed contract and any potential financial penalty.”

A further Audit Scotland report for auditor general Caroline Gardner will follow next year once any legal proceedings are over.

A spokesperson for the agency said: “We would like to reassure our customers that our focus, as it was throughout this project, is to safeguard services for them.

“This will ensure that pensions continue to be paid on time and that we support scheme members appropriately.

“There is no change in the service that we provide and we will continue to put customers’ needs at the heart of our service delivery and work on business solutions to enhance the customer experience.

“The auditor general has signalled her intention to prepare a report on the PS Pensions project in 2019 once negotiations between the agency and Capita Employee Solutions have concluded.

“For commercial reasons, neither Audit Scotland nor the agency can comment on those negotiations.”