This part examines how the Department addresses the potential risks to value for money in awarding new work to EDS.
2.1 The Inland Revenue is a large and complex organisation which carries out a wide range of tasks, many of which are interrelated and/or closely governed by legislation. The Department's information technology systems reflect this size and complexity and are an integral part of the operation of the UK taxation system. They are subject to continual change and development - to respond to Government initiatives and budget changes, to enable the Department to improve its operations, to take advantage of improving technology and to deal with technological challenges such as the millennium threat and the obsolescence of software and hardware.
2.2 The Department's current projections indicate that 26 per cent of the forecast revenue expenditure (currently £533 million) will be spent on new work. The new information technology systems developed by EDS are central to the efficient and effective operation of the Inland Revenue both now and in the future. In securing optimum value from EDS for the £533 million spend on new work, it is crucial that the Department ensures that the technical solutions procured from EDS offer the most efficient, effective, and economic means of supporting its business requirements.
2.3 For any organisation, effective procurement of information technology depends on a number of factors including:
■ a correct understanding and precise definition of the business requirement;
■ clear specification of the appropriate technical solution and identification of the optimal route for delivering the solution;
■ rigorous evaluation of proposed solutions before approval; and
■ control of software development so that a quality solution is produced in a timely and efficient manner.
2.4 In this Part of the report we examine the Department's procedures for commissioning new work from EDS and assess whether they minimise potential risks to securing value for money.