35m pounds computer system at DSS fails in trials: Payments to private firm over two-year project suspended. Tony Collins and Tim Kelsey report

THE Department of Social Security has suspended payments to two private-sector contractors on a pounds 35m computer scheme which has failed its initial trials, it was disclosed this week.

The DSS has confirmed that it is witholding payments on the system, designed to make access to statistics easier. One of the contractors, ICL, is the largest information technology supplier to the public sector. The project has taken nearly two years to develop. It is not clear how much has already been spent.

This latest embarrassment coincides with claims made in an independent report that spending on the DSS's Operational Strategy, a scheme to computerise all benefits, is out of control.

When the project was inaugurated in 1982, MPs were told that it would cost just over pounds 713m. The report claims that it is now four times over budget at around pounds 2.6bn. It was the biggest computer scheme of its kind in Europe, and held up as an example of partnership between the public and private sectors.

Public sector mismanagement of computer projects extends well beyond the DSS. There is growing concern about pounds 38m of computer projects at British Rail which appear to be running into trouble. Computer staff say that systems are being introduced too quickly and with inadequate planning. 'New systems for privatisation are being rushed for political reasons,' one senior BR executive said.

Leslie Willcocks, a lecturer in management studies at Oxford University and co-author of the report, Are Major Information Technology Projects Worth the Risk?, says the largest public sector computer debacles, like that at the DSS, are mainly a consequence of poor management.

The DSS, which concedes that the price of the Operational Strategy has risen, blames inflation and changing social security policy. The report claims that it is 'unlikely' that the cost savings DSS computerisation was supposed to produce will ever materialise. Mr Willcocks said: 'Major information technology projects have a habit of failing. Thirty to 40 per cent are runaways in terms of cost and time.'

Examples are worryingly widespread in the public sector. Wessex Regional Health Authority wasted up to pounds 60m on an ambitious IT project which it finally terminated two years ago. The Commons' Public Accounts Committee, the parliamentary watchdog of government expenditure, was subsequently highly critical of the lack of control exercised by NHS management over computer strategy.

The National Audit Office is currently inquiring into a pounds 50m NHS computer scheme called the Hospital Information Support System, which the Department of Health concedes is not appropriate for most hospitals. Both the Ministry of Defence and the Foreign Office have abandoned multi-million pound computer projects.

The Department of Environment roads service in Northern Ireland spent pounds 4m on software and hardware before realising a system did not work. It was, however, forced to spend a further pounds 1m in order to extricate itself from the contract.

The public sector has a particular vulnerability to computer mismanagement: lack of experience. It is often forced to rely on the expertise of external consultants, who may - and often are - responsible for both designing and managing systems. The DSS spends as much on outside consultants and contractors than it does on its 4,000 computer staff.

It is one of Mr Willcocks's contentions that the use of outside consultants can make it less - rather than more - likely that civil servants learn about the particular risks inherent in managing computers so that they do not repeat past mistakes.

The Operational Strategy was a vision of the future, with every benefit office computerised, and every customer enjoying improved, speedier service. But these visions are full of complexities, which unless realised at the start, are prone to disaster. Catharine Griffiths, research fellow at Imperial College, London University, and co-author of the report, said: 'It's about management structure. It is a question of thinking in advance of what could go wrong. With the DSS, for instance, a lot could have been foreseen.'

The private sector is not immune to failure in large computer projects. The most notorious disaster was the attempt to automate the share settlements system at the London Stock Exchange. The project, known as Taurus, was abandoned at a direct cost of around pounds 70m last year.

One survey of 200 organisations in the public and private sectors found 90 per cent of IT projects started over the past decade went over budget; and one-fifth were 'inappropriate'.

Tony Collins is executive editor of Computer Weekly.