Project Management Institute

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IN APRIL 2005, HM Revenue & Customs (HMRC), the result of the merger of two U.K. government departments, Inland Revenue and HM Customs and Excise, inherited a problem. In November 1999, Inland Revenue had signed a contract with U.S.-based EDS to build and operate a computer system to handle all information pertaining to tax credits granted to British families.

Inland Revenues had worked with IT outsourcing partner EDS since 1994 and, early on, it was a successful partnership. Their collaboration implementing the Trial Usability Maturity Process (TRUMP) project was an acclaimed model for how large organizations can improve software by applying user centered design.

EDS's software for HMRC was supposed to self-adjust, calculating tax credits based on changes in a family's income rather than estimating based on the previous year's information. In late 2002, a gateway review noted that a large amount of work remained within a tight schedule, yet the date remained unchanged.

In January 2003, the team missed another chance to get back on track when Inland Revenue discovered 100,000 records with mismatched information. When the department tried to patch the corrupt data, EDS warned that resolving discrepancies on the test build could cause problems on the final build. Again, no attempt was made to reschedule the go-live.

“This is another example of a project trapped between growing complexity and time pressure, resulting in the abuse of testing and debugging cycles as dispensable time reserves,” says Oliver F. Lehmann, vice president of professional education for PMI's Troubled Projects Specific Interest Group. “Organizational convolutions formed an additional millstone for the project team.” Reportedly, the system requirements were specified so far behind schedule that final system development started 12 months late—with a scope that was 50 percent more complex.


After 8 April 2003, when the full system had gone live, Inland Revenue identified 1.1 million claimants’ data as inconsistent. While HMRC staff tried to resolve the problem, a growing number of edgy claimants forced the organization's help desk staff to further burden a computer system that wasn't working reliably.

The good relationship between the agency and EDS expired along with the contract, and a competitive bidding process followed. In December 2003, Inland Revenue selected Capgemini Ernst & Young, France-based Capgemini, as its service contractor but, because of its contract with EDS, the company did not take over until 1 July 2004. Of the lingering trouble, a spokesman for Inland Revenue says, “This is all historical. Capgemini is our supplier now and the system is up and running.”

However, in May and June 2005, reports from the Parliamentary Ombudsman and the Citizens Advice Bureau disclosed that nearly 1.9 million families were overpaid by £1.9 billion (US$3.3 billon) and more than 800,000 families were underpaid by nearly £500 million (US$0.9 billion)—an error rate of 44 percent. “The department should concentrate on ensuring data quality and system performance,” Mr. Lehmann says. “They should improve their project quality management and maintain a culture of openness when things go wrong.”

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